THE UNIVERSITY OF TEXAS SYSTEM BOARD OF REGENTS

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					   T HE U NIVERSITY                                 OF        T EXAS S YSTEM

                                  ANNUAL FINANCIAL REPORT
                                                           PRIMARY FINANCIAL STATEMENTS




                                                            FISCAL YEAR 2010




The University of Texas at Arlington  The University of Texas at Austin  The University of Texas at
Brownsville  The University of Texas at Dallas  The University of Texas at El Paso  The University of
Texas – Pan American  The University of Texas of the Permian Basin  The University of Texas at San
Antonio  The University of Texas at Tyler  The University of Texas Southwestern Medical Center at
Dallas  The University of Texas Medical Branch at Galveston  The University of Texas Health Science
Center at Houston  The University of Texas Health Science Center at San Antonio  The University of
Texas M. D. Anderson Cancer Center  The University of Texas Health Science Center at Tyler  The
University of Texas System Administration
                THE UNIVERSITY OF TEXAS SYSTEM
                      BOARD OF REGENTS
                                      As of August 31, 2010

                                               Officers
                                    Colleen McHugh, Chairman
                                  Paul L. Foster, Vice Chairman
                                 Janiece Longoria, Vice Chairman
                   Francie A. Frederick, General Counsel to the Board of Regents


                                              Members

                             Terms scheduled to expire February 1, 2011*

  Brenda Pejovich                                                                              Dallas
  Janiece Longoria                                                                           Houston
  Colleen McHugh                                                                        Corpus Christi

                             Terms scheduled to expire February 1, 2013*

  James D. Dannenbaum                                                                          Houston
  Paul L. Foster                                                                               El Paso
  Printice L. Gary                                                                              Dallas

                             Terms scheduled to expire February 1, 2015*

  R. Steven “Steve” Hicks                                                                       Austin
  Wm. Eugene “Gene” Powell                                                                 San Antonio
  Robert L. Stillwell                                                                          Houston

                               Term scheduled to expire May 31, 2011*

  Kyle J. Kalkwarf (Student Regent)                       U. T. Health Science Center at San Antonio


*Each Regent’s term expires when a successor has been appointed, qualified, and taken the oath of office.
 The Student Regent serves a one-year term.
                       THE UNIVERSITY OF TEXAS SYSTEM
                      SENIOR ADMINISTRATIVE OFFICIALS
                               As of August 31, 2010

                                            ********


Francisco G. Cigarroa, M.D., Chancellor

Scott C. Kelley, Executive Vice Chancellor for Business Affairs

David B. Prior, Executive Vice Chancellor for Academic Affairs

Kenneth I. Shine, M.D., Executive Vice Chancellor for Health Affairs

Philip Aldridge, Vice Chancellor for Finance and Business Development

Tonya Moten Brown, Vice Chancellor for Administration

Barry D. Burgdorf, Vice Chancellor and General Counsel

Barry McBee, Vice Chancellor for Governmental Relations

Keith McDowell, Vice Chancellor for Research and Technology Transfer

Randa S. Safady, Vice Chancellor for External Relations

William H. Shute, Vice Chancellor for Federal Relations

Amy Shaw Thomas, Vice Chancellor and Counsel for Health Affairs

Sandra K. Woodley, Vice Chancellor for Strategic Initiatives

Bruce E. Zimmerman, Chief Executive Officer and Chief Investment Officer–UTIMCO

Cathy Iberg, President and Deputy Chief Investment Officer–UTIMCO



                                            ********
                                 THE UNIVERSITY OF TEXAS SYSTEM
                                 Management’s Discussion and Analysis
                                       For the Year Ended August 31, 2010
                                                   (Unaudited)

                                               INTRODUCTION

The University of Texas System (the System) was established by the Texas Constitution of 1876. In 1881, Austin
was designated the site of the main academic campus and Galveston as the location of the medical branch. The
University of Texas (UT) at Austin opened in 1883, and eight years later, the John Sealy Hospital in Galveston
(now a part of the Medical Branch at Galveston) established a program for university-trained medical
professionals. In addition to the original academic campus located in Austin, the System now includes eight
additional academic campuses in Arlington, Dallas, El Paso, Odessa, San Antonio, Tyler, Brownsville and
Edinburg. Health institutions for medical education and research have expanded beyond the original Galveston
medical campus to include M. D. Anderson Cancer Center, Southwestern Medical Center at Dallas, and Health
Science Centers at Houston, San Antonio and Tyler.

The System’s fifteen institutions are, collectively, one of the nation’s largest educational enterprises. They
provide instruction and learning opportunities to over 202,000 undergraduate, graduate and professional school
students from a wide range of social, ethnic, cultural and economic backgrounds. The System is governed by a
nine-member Board of Regents appointed by the Governor of Texas and confirmed by the Texas Senate. Three
members are appointed every odd-numbered year for six-year terms. In addition, the Governor appoints a student
Regent for a one-year term.

           OVERVIEW OF THE FINANCIAL STATEMENTS AND FINANCIAL ANALYSIS

The objective of Management’s Discussion and Analysis (MD&A) is to provide an overview of the financial
position and activities of the System for the year ended August 31, 2010, with selected comparative information
for the years ended August 31, 2009 and 2008. The MD&A was prepared by management and should be read in
conjunction with the accompanying financial statements and notes. The emphasis of discussion about these
financial statements will focus on the current year data. Unless otherwise indicated, years in this MD&A refer to
the fiscal years ended August 31. The System’s consolidated financial report includes three primary financial
statements: the balance sheet; the statement of revenues, expenses and changes in net assets; and the statement of
cash flows. The financial statements of the System have been prepared in accordance with accounting principles
generally accepted in the United States of America as prescribed by the Governmental Accounting Standards
Board (GASB).

                                          FINANCIAL HIGHLIGHTS

   In the fall of 2009, the System’s enrollment increased 3.7% to 202,240 students. The System’s academic
    institutions enroll 38.0% of the State’s public college students, and the System’s health-related institutions
    enroll 65.8% of the students attending the State’s public health institutions. On March 26, 2008, the Board of
    Regents approved a motion to limit tuition and fee increases to a maximum of 4.95%, or $150 per semester,
    whichever is greater, for full-time resident undergraduate students for each of academic years 2008-2009 and
    2009-2010. A 3.9% increase in student semester credit hours at the academic institutions along with limited
    tuition and fee increases contributed to the increase of net tuition and fees of $82.1 million in 2010, or 7.4%.
    The plans approved by the System’s Board of Regents include setting aside the statutorily required portion of
    at least 20% of new tuition revenues for financial aid programs, as well as a variety of ways that students can
    take advantage of special discounts in tuition rates. The approved plans also include pricing incentives to
    encourage students to graduate on time by taking more semester credit hours in each term they are enrolled.

   Net patient care revenues increased $387.6 million in 2010, or 9.4%, as a result of an increase in patient
    volumes and higher rates. Hurricane Ike, which made landfall on September 13, 2008, caused a significant
    business disruption in 2009 at UT Medical Branch at Galveston. This resulted in the reduced patient care
    revenue as hospital and clinic operations were suspended for a period of time. Restoration of operations
    began to be realized mid 2009 and continue today.

   As a result of improved market conditions in 2010, net investment income, excluding the change in fair value
    of investments, increased $2.7 billion, from a negative $1.3 billion in 2009 to a positive $1.4 billion in 2010
    (Table 3). The net increase in fair value of investments was a positive $1.5 billion in 2010, as compared to a
    negative $1.3 billion in 2009 (Table 3), an increase of $2.8 billion. These realized and unrealized gains were
    the largest contributor to the total increase in net assets of $2.7 billion during 2010.

   Investments in capital asset additions were $1.7 billion in 2010, of which $1.3 billion consisted of new
    projects under construction. Major capital projects completed in 2010 include:

           The Medical Arts and Research Center at UT Health Science Center at San Antonio, $98.6 million;
           the South Campus Research Building III at UT M.D. Anderson Cancer Center, $81.7 million;
           the Research Park Complex at UT Health Science Center Houston, $76.1 million;
           the Hal C. Weaver Power Plant Annex at UT at Austin, $44.8 million;
           the UTMB Specialty Care Center at Victory Lakes at UT Medical Branch at Galveston, $44.0
            million;
           the Math, Science & Engineering Teaching Center at UT at Dallas, $30.5 million;
           the Biotechnology Development Complex at UT Southwestern Medical Center at Dallas, $29.5
            million;
           the Central Receiving Building at UT at Austin, $28.3 million; and
           the Student Services Building at UT at Dallas, $24.4 million.

The Balance Sheet
The balance sheet presents the assets and deferred outflows (assets), liabilities and deferred inflows (liabilities)
and net assets of the System as of the end of the year. This is a point-in-time financial presentation of the
financial status as of August 31, 2010, with comparative information for the previous years. The balance sheet
presents information in current and noncurrent format for both assets and liabilities. The net assets section
presents assets less liabilities. Over time, increases or decreases in net assets are one indicator of the
improvement or decline of the System’s financial health when considered with nonfinancial factors such as
enrollment, patient levels, and the condition of facilities. A summarized comparison of the System’s balance
sheets at August 31, 2010, 2009 and 2008 follows:

        Table 1
                                                                                Restated
                                                                   2010          2009               2008
      Assets and Deferred Outflows:                                           ($ in millions)
      Current assets                                          $    5,576.6        5,005.2           5,260.7
      Noncurrent investments                                      23,356.5       20,920.6          25,127.9
      Other noncurrent assets and deferred outflows                  477.6          360.5             281.9
      Capital assets, net                                         11,008.0       10,130.7           9,300.1
               Total assets and deferred outflows                 40,418.7       36,417.0          39,970.6

      Liabilities and Deferred Inflows:
      Current liabilities                                          5,903.6        6,112.4           7,405.7
      Noncurrent liabilities and deferred inflows                  7,808.1        6,248.9           4,947.3
               Total liabilities and deferred inflows             13,711.7       12,361.3          12,353.0

      Net Assets:
      Invested in capital assets, net of related debt              4,630.8        4,475.1           4,492.6
      Restricted                                                  19,119.0       17,197.0          20,377.6
      Unrestricted                                                 2,957.2        2,383.6           2,747.4
               Net assets                                         26,707.0       24,055.7          27,617.6

               Liabilities, deferred inflows and net assets   $   40,418.7       36,417.0          39,970.6
Assets and Deferred Outflows (Table 1)
Assets increased $4.0 billion, or 11%, in 2010 primarily due to financial market conditions and strong investment
performance at The University of Texas Investment Management Company resulting in significant realized and
unrealized gains in the System’s investments and new investments in capital assets mentioned above.

Current Assets
Current assets consist primarily of cash and cash equivalents; securities lending collateral; various student,
patient, gift and investment trades receivables; and student notes receivable. The System’s current assets
increased $571.4 million, or 11%, in 2010 primarily as a result of M. D. Anderson’s matching gift funds which
were invested in the Long Term Fund on September 1, 2010. In 2007, T. Boone Pickens gave M. D. Anderson
$50 million with the stipulation that the institution had 25 years to grow the funds to $500 million. In 2010,
M. D. Anderson transferred funds sufficient to meet the gift requirement and created a quasi-endowment to use
for the future benefit of the institution. UT Southwestern Medical Center at Dallas received a corresponding $50
million with the same stipulations and is in the process of raising the matching funds.

Noncurrent Investments
Noncurrent investments include permanent endowments, funds functioning as endowments, annuity and life
income funds and other investments. These assets increased $2.4 billion in 2010 due to realized gains and
increases in the fair value of investments. Included in permanent endowments is the fair value of investments in
the Permanent University Fund (PUF) including the PUF lands. The fair value of the PUF lands at August 31,
2010 was $1.5 billion, a $272.6 million increase from the prior year due to increased oil and gas prices from 2009.
Also included are investment derivative instruments of $3.8 million as a result of implementing GASB 53 in 2010
as discussed below.

Other Noncurrent Assets and Deferred Outflows
GASB Statement No. 53, Accounting and Financial Reporting for Derivative Instruments, effective in 2010,
requires derivative instruments to be reported at fair value. Changes in fair value for effective hedges that are
achieved with derivative instruments are to be reported as deferred inflows and deferred outflows in the statement
of net assets. Derivative instruments that either do not meet the criteria for an effective hedge or are associated
with investments that are already reported at fair value are to be classified as investment derivative instruments.
Changes in fair value of investment derivative instruments are reported as net increase (decrease) in fair value of
investments, a component of investment revenue. The System booked a hedging derivative liability of $205.2
million with an offsetting deferred outflow in 2010 and a restatement to hedging derivative liabilities and deferred
outflows of $93.5 million as of August 31, 2009. The System also booked investment derivative instruments of
$3.8 million with a decrease in fair market value of $26.6 million in 2010 and a restatement to investment
derivative instruments of $30.4 million with a corresponding increase in fair value of investments as of August
31, 2009.

Capital Assets
The development and renewal of its capital assets is one of the critical factors in continuing the System’s quality
academic, health and research programs. The System continues to implement its $7.9 billion capital improvement
program to upgrade its facilities and address planned growth in patient care and student enrollment. Capital
additions totaled $1.7 billion in 2010, of which $1.3 billion consisted of new projects under construction. These
capital additions were comprised of replacement, renovation, and new construction of academic, research and
health care facilities, as well as significant investments in equipment.

In 2010, the System implemented GASB Statement No. 51, Accounting and Financial Reporting for Intangible
Assets, addressing accounting and financial reporting for intangible assets, including easements, water rights,
timber rights, patents, trademarks, and computer software. Implementation of GASB 51 did not have a significant
impact on the System’s net assets as the System was already applying Statement of Position 98-1 (SOP 98-1),
Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. Computer software is
the biggest component of UT System’s intangible assets. Under guidance from SOP 98-1, the System previously
capitalized $495.6 million of software which was reclassified during 2010 from equipment to intangible assets.
During 2010, the System placed an additional $82.2 million of computer software in service.
In 2009, UT Medical Branch at Galveston sustained significant physical damage as a result of Hurricane Ike
which resulted in a permanent impairment of capital assets for UT Medical Branch at Galveston of $82.3 million,
partially offset by $66.4 million of insurance recoveries during 2009, for a net impairment of capital assets of
$15.9 million for 2009. The System did not have any impairment losses for the year ended August 31, 2010.

Liabilities and Deferred Inflows (Table 1)
Liabilities increased $1.3 billion, or 11%, due to new debt issued to fund investment in capital assets and
an increase in the other postemployment benefit liability. The Systems liabilities primarily consist of
current liabilities, bonds and notes payable, other postemployment benefits, amounts due to the Texas
A&M University System, other liabilities, and hedging derivative liabilities associated with negative fair
values of hedging derivative instruments.

Current Liabilities
Current liabilities consist primarily of accounts payable and accrued liabilities, investment trades payable,
securities lending obligations, deferred revenues, current portion of employee compensable leave, commercial
paper notes and the current portion of bonds payable. The System’s current liabilities decreased $208.8 million in
2010 primarily due to a decrease in Revenue Financing System (RFS) commercial paper notes outstanding.

Bonds and Notes Payable
Bonds payable relating to financing of current and prior years’ construction needs were the largest portion of the
System’s liabilities and totaled $6.4 billion and $5.5 billion at August 31, 2010 and 2009, respectively. All bonds
continue to reflect the highest uninsured “Aaa” and “AAA” credit ratings from the three major bond-rating
agencies. During 2010, the System issued $1.6 billion of new bonds to current refund $607.8 million outstanding
RFS commercial paper notes and $250.0 million outstanding PUF commercial paper notes, and to advance refund
$393.7 million outstanding RFS bonds. Additionally, $4.3 million of RFS bonds were optionally redeemed and
$297.8 million of RFS bonds proceeds were used to provide new money to finance the costs of campus
improvements.

Of the $1.6 billion of bonds issued during 2010, $766.2 million were Build America Bonds. The American
Recovery and Reinvestment Act of 2009 created Build America Bonds to stimulate the economy. The federal
government provides a subsidy equal to 35% of the interest payments on Build America Bonds. During 2010, the
System reported $12.4 million of Build America Bond subsidy revenues.

Notes and loans payable decreased $395.1 million in 2010. These notes are issued periodically to provide interim
financing for capital improvements and to finance the acquisition of capital equipment. The System typically
refunds a portion of these outstanding notes through the issuance of long-term debt to provide permanent
financing for projects.

For additional information concerning capital assets and related debt activities, see Notes 5, 8, 9, 10 and 12 to the
consolidated financial statements.

Other Postemployment Benefits Liability
In accordance with GASB Statement 45, Accounting and Financial Reporting by Employers for Postemployment
Benefits Other than Pensions (OPEB), the System reported a net OPEB obligation liability of $1.3 billion for
2010, and $841 million for 2009. GASB 45 requires accrual-based measurement and recognition of OPEB
expenses, such as retiree medical and dental costs, over the employees’ years of service, along with the related
liability. Pursuant to GASB 45, the System has accrued the liability and is recognizing it over a 30 year period so
that the increase in the liabilities does not occur all in one year. The System is not required to fund the OPEB
liability; instead, the difference between the OPEB cost and the System’s contributions to the plan will increase
the unfunded actuarial accrued liability. For the year ended August 31, 2010, the System’s annual OPEB cost was
$571.7 million. Employer contributions for 2010 were $117.0 million, resulting in an increase in net OPEB
obligation of $454.7 million in 2010. The System’s total unfunded actuarial accrued liability was $5.7 billion as
of August 31, 2010. For additional information concerning the OPEB liability, see Note 7 to the consolidated
financial statements.
Liability to the Texas A&M University System
In accordance with the provisions set forth in Article 7, Section 18 of the Texas Constitution, the System recorded
a liability to the Texas A&M University System (TAMUS) of $611.9 million and $577.1 million at
August 31, 2010 and 2009, respectively, for future amounts due to TAMUS from the PUF to cover principal on
outstanding PUF bonds and notes issued by TAMUS. This liability is reported as current and noncurrent
interfund payable on the balance sheet.

Other Liabilities
Other significant liabilities for the System include deferred revenues of $1.1 billion and $1.0 billion for 2010 and
2009, respectively; accounts payable of $737.4 million and $772.9 million for 2010 and 2009, respectively; assets
held for others of $669.1 million and $643.8 million for 2010 and 2009, respectively; securities lending
obligations of $468.4 million and $381.7 million for 2010 and 2009, respectively; employee compensable leave of
$441.0 million and $435.1 million for 2010 and 2009, respectively; salaries payable of $394.2 million and $378.3
million for 2010 and 2009, respectively; and payables related to investment trades of $99.7 million and $205.8
million for the same two periods.

Hedging Derivative Liability
Due to the implementation of GASB 53 in 2010, the System booked a hedging derivative liability of $205.2
million with an offsetting deferred outflow in 2010 and a restatement to hedging derivative liabilities and deferred
outflows of $93.5 million as of August 31, 2009.

Net Assets (Table 2)
Net assets represent the residual interest in the System’s assets after liabilities are deducted. The following table
summarizes the composition of net assets at August 31, 2010, 2009 and 2008:

                  Table 2
                                                                     Restated
                                                   2010               2009                 2008
                Net assets:                                        ($ in millions)
                Invested in capital assets,
                   net of related debt        $    4,630.8            4,475.1             4,492.6
                Restricted:
                   Nonexpendable                  10,939.8           10,224.5            10,186.3
                   Expendable                      8,179.2            6,972.5            10,191.3
                Total restricted                  19,119.0           17,197.0            20,377.6
                Unrestricted                       2,957.2            2,383.6             2,747.4
                   Total net assets           $   26,707.0           24,055.7            27,617.6

Invested in Capital Assets, Net of Related Debt
Net assets invested in capital assets, net of related debt represents the System’s capital assets, net of accumulated
depreciation and outstanding debt obligations attributable to the acquisition, construction or improvement of those
assets. The $155.7 million increase in invested in capital assets, net of related debt, in 2010 resulted primarily
from a net increase in capital assets of $1.5 billion offset by an increase in related debt of $529.6 million and an
increase in accumulated depreciation of $663.9 million. As stated previously under Financial Highlights, net
assets increased by $2.7 billion in 2010.

Restricted Net Assets
Restricted net assets primarily include the System’s permanent endowment funds subject to externally imposed
restrictions governing their use. The System’s permanent endowment funds include the PUF, which supports
both the System and the Texas A&M University System. Per the Texas Constitution, distributions from the PUF
must not be less than the amount needed to pay the principal and interest due on PUF bonds and notes. The
System’s permanent endowment funds also include the Permanent Health Fund Endowments (PHF) established in
1999 from tobacco-related litigation funds received from the Texas State Legislature. A portion of the PHF was
established for the benefit of the System’s health-related institutions, as well as for the Texas A&M University
Health Science Center, the University of North Texas Health Science Center at Fort Worth, the Texas Tech
University Health Science Center and Baylor College of Medicine. The corpus of the PHF is restricted by statute
to remain intact, and the earnings from the funds are required to be utilized for public health activities such as
medical research, health education and treatment programs. The final component of the System’s endowment
funds includes donor restricted endowments, the income of which is used to fund various academic endeavors in
accordance with the donors’ wishes. These funds may be invested in the System’s Long Term Fund or they may
be separately invested (see Note 4 to the consolidated financial statements for additional information).

Restricted Nonexpendable Net Assets
As of August 31, 2010 and 2009, restricted nonexpendable net assets include $7.1 billion and $6.5 billion,
respectively, of the PUF corpus, $820 million for both years of the PHF corpus, and $3.0 billion and $2.9 billion,
respectively, of other endowments’ corpus. Restricted nonexpendable net assets increased by $715.3 million to
$10.9 billion in 2010, resulting from new gifts and the increase in the corpus of the PUF.

Restricted Expendable Net Assets
PUF appreciation consists of the market value of all investments in excess of the corpus, including oil and gas
reserves. Although appreciation related to the PUF is included in the restricted, expendable line item, it should be
noted that the Texas Constitution provides that the UT System Board of Regents shall determine the amount of
distributions to the Available University Fund (AUF), in an amount not to exceed 7% of the average net fair value
of investment assets, except as necessary to pay debt service on PUF bonds and notes. Additionally, the UT
System Board of Regents must determine the amount of distributions to the AUF in a manner intended to provide
the AUF with a stable and predictable stream of annual distributions and to maintain, over time, the purchasing
power of PUF investments and annual distributions to the AUF. Therefore, although technically the appreciation
attributable to the PUF is expendable, the UT System Board of Regent’s must adhere to the Texas Constitution as
discussed further in Note 4 to the consolidated financial statements.

As of August 31, 2010, restricted expendable net assets include $4.6 billion of the PUF appreciation, $85.4
million of PHF appreciation, $1.5 billion of other endowments’ appreciation, $243.4 million of restricted funds
functioning as endowments, restricted contract and grant and loan funds of $1.5 billion, funds restricted to support
cancer treatment and programs that benefit public health of $91.1 million, and bond proceeds for capital projects
of $111.4 million.

Unrestricted Net Assets
Although unrestricted net assets are not subject to externally imposed stipulations, substantially all of the
System’s unrestricted net assets have been committed for various future operating budgets related to academic,
patient, and research programs and initiatives, as well as capital projects. Unrestricted net assets of $3.0 billion
also include funds functioning as endowments of $688.1 million. As mentioned previously, the System also
booked a restatement to investment derivative instruments of $30.4 million with a corresponding increase in fair
value of investments as of August 31, 2009 as a result of the implementation of GASB 53.

2009 Highlights - Balance Sheet
As a result of capital market volatility in 2009, net investment income, excluding the decrease in fair value of
investments, declined by $1.3 billion. The net decrease in fair value of investments was an additional $1.3 billion
in 2009. These realized and unrealized losses were the biggest contributor to the total decrease in net assets of
$3.6 billion during 2009. In addition, the System reported an OPEB liability of $841.0 million for 2009, an
increase of $418.3 million.
The Statement of Revenues, Expenses and Changes in Net Assets
The statement of revenues, expenses and changes in net assets details the changes in total net assets as presented
on the balance sheet. The statement presents both operating and nonoperating revenues and expenses for the
System. The following table summarizes the System’s revenues, expenses and changes in net assets for the years
ended August 31, 2010, 2009 and 2008:

    Table 3
                                                                                    Restated
                                                                 2010                2009               2008
  Operating revenues:                                                           ($ in millions)
  Net student tuition and fees                           $       1,186.4             1,104.3           1,024.0
  Sponsored programs                                             2,688.1             2,517.0           2,408.8
  Net patient care revenues                                      4,510.5             4,123.0           3,999.3
  Net auxiliary enterprises                                        391.9               372.3             342.1
  Other                                                            464.8               447.6             389.1
     Total operating revenues                                    9,241.7             8,564.2           8,163.3
     Total operating expenses                                  (12,248.2)         (11,775.2)         (11,015.7)
     Operating loss                                             (3,006.5)           (3,211.0)         (2,852.4)

  Nonoperating revenues (expenses):
  State appropriations                                           2,087.5            2,115.0            1,956.7
  Nonexchange Sponsored Programs                                   396.7              189.1                -
  Gift contributions for operations                                299.2              289.6              368.8
  Net investment income (loss) excluding the change in
     fair value of investments                                   1,431.4           (1,304.9)           1,648.3
  Net increase (decrease) in fair value of investments           1,522.1           (1,302.5)          (1,880.6)
  Interest expense on capital asset financings                    (207.5)            (158.9)            (161.7)
  Net other nonoperating revenues (expenses)                        (0.8)              26.9              (28.9)
      Income (loss) before other revenues,
        expenses, gains or losses and transfers                  2,522.1           (3,356.7)            (949.8)

  Capital appropriations – Higher Education Assistance
    Fund (HEAF)                                                     17.5               17.5               17.1
  Capital gifts and grants, additions to permanent
    endowments and extraordinary items                             335.6              165.4              338.7
  Net Transfers to other State entities                           (223.9)            (388.1)            (138.0)
  Change in net assets                                           2,651.3           (3,561.9)            (732.0)

  Net assets, beginning of the year                             24,055.7           27,617.6           28,349.6
  Net assets, end of the year                            $      26,707.0           24,055.7           27,617.6

Operating Revenues (Table 3)
Operating revenues totaled $9.3 billion for the fiscal year ended August 31, 2010, an increase of $677.6 million
over 2009. The System’s primary sources of operating revenues come from net student tuition and fees,
sponsored programs, net patient care revenues, and net auxiliary enterprises.

Net Student Tuition and Fees
Student tuition and fees, a primary source of funding for the System’s academic programs, representing 12.8% of
operating revenues, are reflected net of associated discounts and allowances. Net student tuition and fees
increased $82.1 million, or 7.4%, as a result of a 3.7% enrollment increase at the academic institutions and tuition
and fee increases. Enrollment at the health institutions increased 3.2% in the fall of 2009.
Sponsored Programs
Sponsored program revenues, representing 29.1% of operating revenues, are primarily from governmental and
private sources and are related to research programs that normally provide for the recovery of direct and indirect
costs. Governmental sponsored programs include grants from the federal government such as the National
Institutes of Health (NIH). Other sponsored programs include student financial aid and contracts with affiliated
hospitals for clinical activities. These revenues increased $171.1 million, or 6.7%, in 2010 largely due to an
increase in federal awards and an increase in contracts with nongovernmental entities. The American Recovery
and Reinvestment Act of 2009 (ARRA) provided additional sponsored program revenues for colleges and
universities.

Net Patient Care Revenues
Patient care revenues are principally generated within the System’s hospitals and physicians’ practice plans under
contractual arrangements with governmental payors and private insurers. These revenues are reported net of
unreimbursed charges for financially or medically indigent patients and represent 48.8% of operating revenues.
Net patient care revenues increased $387.6 million, or 9.4%, in 2010, as a result of an increase in patient volumes
and higher rates. This increase was primarily attributable to UT Medical Branch at Galveston (UTMB).
Hurricane Ike caused a significant business disruption in 2009 at UTMB. This resulted in the reduced patient care
revenue as hospital and clinic operations were suspended for a period of time. Restoration of operations began to
be realized mid 2009 and continue today. The System’s health-related institutions provide uncompensated care to
patients who meet certain criteria. Uncompensated care includes the unreimbursed costs for the uninsured and the
underinsured as well as the unreimbursed costs from government-sponsored health programs. To calculate
uncompensated care, charges are converted to costs and providers recognize appropriate patient specific funding
and lump sum funding available to offset costs. Uncompensated care costs amounted to $618.9 million and
$604.8 million for 2010 and 2009, respectively. In prior years, uncompensated care was reported in terms of
charges as “unsponsored charity care.”. In 2009, uncompensated care charges were $1.4 billion.

Net Auxiliary Enterprises
Net auxiliary enterprise revenues, which increased $19.5 million, were earned from a host of activities such as
athletics, housing and food service, bookstores, parking, student health and other activities.

Operating Expenses (Table 4)
Total Operating Expenses totaled $12.2 billion for the fiscal year ended August 31, 2010, an increase of $473.1
million over 2009. The following data summarizes the composition of operating expenses by programmatic
function for the years ended August 31, 2010, 2009 and 2008:

            Table 4

                                                       2010                2009               2008
           Functional classification of
               operating expenses:                                     ($ in millions)
           Instruction                           $    2,755.2             2,598.1            2,430.5
           Research                                   1,858.8             1,780.9            1,714.6
           Public service                               254.7               284.2              257.9
           Hospitals and clinics                      3,148.1             2,963.7            2,866.5
           Academic support                             486.0               456.6              423.8
           Student services                             180.5               180.6              177.6
           Institutional support                      1,237.0             1,173.7            1,103.3
           Operations and maintenance of plant          728.3               861.6              699.2
           Scholarships and fellowships                 371.1               296.5              260.6
           Auxiliary enterprises                        443.1               438.5              401.9
           Depreciation and amortization                785.4               740.8              679.8
               Total operating expenses          $   12,248.2            11,775.2           11,015.7
The operating expenses reflect the System’s commitment to promoting instruction, research, patient care, public
service and student support. Total operating expenses increased $473.1 million, or 4%, in 2010 in response to
growing student enrollment, research, and patient care activities. The System’s full-time equivalent employees
increased 2% from 80,975 in 2009 to 82,711 in 2010. Employee-related costs increased due to salary increases
and higher medical costs. Additionally, there was an increase in the OPEB obligation of $454.7 million in 2010
that is included in the Institutional Support functional classification in the table above.

The following is a graphic illustration of operating expenses by their functional classification for the year ended
August 31, 2010.

                             Functional Classification of Operating Expenses ($12.2 billion)




                             Hospitals and Clinics                         Academic Support
                                    25.7%                                       4.0%
                       Public Service
                           2.1%                                                                   Student Services 1.5%

                                                                                                           Institutional Support
                                                                                                                   10.1%



                  Research
                   15.2%                                                                                     Operations and
                                                                                                           Maintenance of Plant
                                                                                                                  5.9%
                                    Instruction
                                      22.5%                                                               Scholarships and
                                                        Depreciation and                                  Fellowships 3.0%
                                                       Amortization 6.4%       Auxiliary Enterprises
                                                                                       3.6%




In addition to programmatic (functional) classification of operating expenses, the following graph also illustrates
the System’s operating expenses by natural classification for the year ended August 31, 2010.
                             Natural Classification of Operating Expenses ($12.2 billion)


                                                                      Materials and
                                                     OPEB              Supplies
                                                     3.7%                9.8%
                                                                                              Utilities
                                                                                               2.1%
                                                                                                              Professional Fees
                                                                                                                    3.1%

                                                                                                                 Other
                                                                                                                 9.8%




                                                                                                          Depreciation and
                                                                                                           Amortization
                                                                    Repairs and                                6.4%
                             Compensation and                       Maintenance
                                Benefits                               1.8%     Scholarships and
                                 60.1%                                            Fellowships
                                                                                     3.2%
Nonoperating Revenues and Expenses (Table 3)
Certain significant recurring revenues are considered nonoperating, as required by GASB Statement No. 35, Basic
Financial Statements – and Management’s Discussion and Analysis – for Public Colleges and Universities. The
System’s primary sources of nonoperating revenues and expenses come from State appropriations, nonexchange
sponsored programs, gift contributions for operations, net investment income (loss) excluding the change in fair
value of investments, net increase (decrease) in fair value of investments, and interest expense.

State Appropriations
The State appropriation line item decreased $27.5 million, or 1% due to a portion of State appropriations being
funded with ARRA funds in 2010. The portion of State appropriations replaced with ARRA funds were reported
as federal nonexchange pass-through revenues. Total appropriations, including appropriations funded with
ARRA funds of $80.7 million, increased $53.2 million, or 2%. In January 2010, a five percent reduction in State
appropriations was announced by the State’s leadership for the 2010-2011 biennium requiring a reduction of
approximately $175 million for the biennium which will be recognized in 2011.

Nonexchange Sponsored Programs
Federal nonexchange sponsored programs includes $291.9 million of Pell revenues, an increase of 54% as a result
of the passing of the Higher Education Opportunity Act of 2008, and $12.4 million of Build America Bond
subsidy revenues, an increase of 9% as a result of more Build America Bonds being outstanding. State
nonexchange pass-throughs consist of the Texas Research Incentive Program of $10.9 million and enrollment
growth funding of $0.7 million from the Texas Higher Education Coordinating Board.

Gift Contributions for Operations
Gift contributions for operations of $299.2 million increased $9.5 million from 2009 in spite of the current
economic environment.

Net Investment Income (Loss) Excluding the Change in Fair Value of Investments
Net investment income, excluding the change in the fair value of investments, increased $2.7 billion from a
negative $1.3 billion in 2009 to a positive $1.4 billion in 2010. Net investment income includes realized gains of
$797.4 million in 2010 compared to realized losses of $1.9 billion in 2009.

Net Increase (Decrease) in Fair Value of Investments
The change in the fair value of the System’s investments in 2010 was an increase of $1.5 billion as compared to a
decrease of $1.3 billion in 2009 due to more favorable market conditions. Included in the $1.5 billion increase is
a $272.6 million increase in the value of the PUF lands. The fair value of the PUF land’s interest in oil and gas is
based on a third party reserve study of proved reserves. The present value of the royalty cash flows is calculated
by applying a 10 percent discount rate to future expected production volumes of oil and gas based on the price of
oil and gas on August 31, 2010. Probable and possible reserves of oil and gas are not included in the fair value
estimate. The fair value of the PUF lands at August 31, 2010 was $1.5 billion.

Interest Expense
Finally, interest expense on capital asset financings increased by $48.6 million from $158.9 million in 2009 to
$207.5 million in 2010 as a result of new debt issuances. Of the $1.6 billion of bonds issued during 2010, $766.2
million were Build America Bonds. In accordance with the State of Texas reporting requirements, the subsidy
from the federal government of 35% of the interest payments on Build America Bonds is reported as federal
nonexchange sponsored programs and not as a credit to interest expense. During 2010, the System reported $12.4
million of Build America Bond subsidy revenues compared to $1.2 million in 2009.

Income (Loss) Before Other Revenue, Expenses, Gains or Losses and Transfers (Table 3)
Income before other revenue, expenses, gains or losses and transfers, is the sum of the operating loss plus
nonoperating revenues (expenses). It is an indication of recurring revenues and expenses for the System and does
not take into account capital and endowment-related additions and transfers. The income before other revenues,
expenses, gains or losses totaled $2.5 billion in 2010, an increase of $5.9 billion over 2009. This increase was
largely a result of realized gains on investments, an increase in the fair value of investments, partially offset by an
increase in OPEB expense.
The System measures its operating results by considering operating activities, including certain significant
recurring nonoperating revenues and expenses. The following table summarizes the System’s view of its
operating results for 2010, 2009 and 2008:

      Table 5
                                                                                   Restated
                                                                  2010              2009               2008
    Operating results:                                                           ($ in millions)
    Income (loss) before other revenue, expenses,
    gains/(losses) & transfers                               $   2,522.1            (3,356.7)           (949.8)
    Remove nonoperating items:
      Net (increase)/decrease in fair value of investments       (1,522.1)           1,302.5           1,880.6
      Loss on sale of capital assets                                 12.6                6.9              25.3
      Other nonoperating (income)/expense                           (11.8)             (33.8)              3.6
      Realized (gains)/losses on investments                       (797.4)           1,903.3            (695.5)
    Net operating results                                    $      203.4             (177.8)            264.2

Capital Appropriations, Capital Gifts and Grants, Additions to Permanent Endowments and Extraordinary Items
(Table 3)
Capital appropriations, capital gifts and grants, additions to permanent endowments, and extraordinary items
totaled $353.1 million for the year ended August 31, 2010, an increase of $170.1 million over 2009 as a result of
new gifts for capital purposes. The System continues its fundraising efforts to address facilities expansion and
renovation, and the establishment of endowments for instruction, research and patient care activities.

Net Transfers to Other State Entities (Table 3)
Transfers to and from other State agencies includes $172.1 million and $177.0 million for 2010 and 2009,
respectively, for the AUF distribution to the Texas A&M University System (TAMUS) for its annual one-third
participation in distributions from the PUF endowment. In accordance with the provisions set forth in Article 7,
Section 18 of the Texas Constitution, the System transfers one-third of the distributions from the total return of
PUF investments and net income from the surface lands to TAMUS. In addition to the transfer of the current year
earnings, the System recorded a liability of $611.9 million and $577.1 million at August 31, 2010 and 2009,
respectively, for future amounts due to TAMUS from the PUF to cover principal on outstanding PUF bonds and
notes issued by TAMUS. As a result, the change in PUF debt issued by TAMUS is reflected as a transfer to or
from other State agencies. In 2010, there was an increase in TAMUS’s PUF debt of $34.8 million, while in 2009
there was an increase of $142.5 million.

Change in Net Assets (Table 3)
The change in net assets results from all revenues, expenses, gains, losses, gifts and transfers that occurred during
the accounting period. It is an overall indication of the improvement or decline between the prior and current
year’s balance sheet. Net assets increased by $2.7 billion in 2010 as compared to a decrease of $3.6 billion in
2009, primarily due to improved capital market conditions in 2010. Net investment income, excluding the change
in fair value of investments, increased $2.7 billion, from a negative $1.3 billion in 2009 to a positive $1.4 billion
in 2010 (Table 3). The net increase (decrease) in fair value of investments was a positive $1.5 billion in 2010, as
compared to a negative $1.3 billion in 2009 (Table 3), an increase of $2.8 billion. These realized and unrealized
gains were the largest contributor to the total increase in net assets of $2.7 billion during 2010.

2009 Highlights - Statement of Revenues, Expenses and Changes in Net Assets
As a result of poor market conditions in 2009, net investment income, excluding the decrease in fair value of
investments, was a loss of $1.3 billion. The net decrease in fair value of investments was an additional $1.3
billion in 2009. These realized and unrealized losses were the biggest contributor to the total decrease in net
assets of $3.6 billion during 2009. In addition, the System reported an OPEB liability of $841.0 million for 2009,
an increase of $418.3 million from the previous year.
The Statement of Cash Flows
The statement of cash flows provides additional information about the System’s financial results by reporting the
major sources and uses of cash. The statement provides an assessment of the System’s financial flexibility and
liquidity to meet obligations as they come due and the need for external financing. The following table
summarizes cash flows for the years ended August 31, 2010, 2009 and 2008:

  Table 6
                                                                                   Restated
                                                                 2010               2009                 2008
Cash flows:                                                                      ($ in millions)
Cash received from operations                               $     9,398.3             8,816.8             8,237.9
Cash expended for operations                                    (11,089.0)          (10,731.3)           (9,940.5)
 Net cash used in operating activities                           (1,690.7)           (1,914.5)           (1,702.6)
Net cash provided by noncapital financing activities              2,726.9             2,398.8             2,067.3
Net cash used in capital and related financing activities        (1,141.5)             (790.3)             (758.0)
Net cash provided by/(used in) investing activities                 323.2               706.4               456.0
 Net increase/(decrease) in cash and cash equivalents               217.9               400.4                62.7
Cash and cash equivalents, beginning of year                      2,344.7             1,944.3             1,881.6
Cash and cash equivalents, end of year                      $     2,562.6             2,344.7             1,944.3

State appropriations, nonexchange sponsored programs and gift contributions for operations are significant
sources of recurring revenues in support of operating expenses but are required to be classified as noncapital
financing activities. Therefore, when considering cash flows related to operating activities, it is important to
consider these noncapital financing activities which support operating expenses. The System’s cash and cash
equivalents increased $217.9 million during 2010 compared to an increase of $400.4 million in 2009.

Economic Outlook
The mission of the System is to provide high-quality educational opportunities for the enhancement of the human
resources of Texas, the nation, and the world through intellectual and personal growth. The achievement of the
System’s mission is dependent upon the ability to attract and support dedicated students from many cultures;
acquire and retain the highest quality diverse faculty; recruit and appropriately recognize exemplary
administrators and staff members; create and sustain physical environments that enhance and complement
educational goals; and encourage ongoing public and private sector support of higher education. Philanthropic
donations from the private sector provide valuable support for endowed faculty positions, student fellowships and
scholarships, special facilities, enhancement of academic programs, and many other needs. The level of private
support underscores the continued confidence among donors in the quality of the System’s programs and the
importance of its mission. At the same time, public and private support in 2011 will likely continue to reflect the
changes in the economy and financial markets, the effect of which is not determinable at this time.

Major strengths of the System include a diverse source of revenues, including those from the State of Texas,
student tuition and fees, sponsored programs, patient care revenues, self-supporting enterprises and private
support. The diversity of revenues is becoming increasingly important with the continuing economic crisis of the
country. In past years, Student tuition and fee increases have been necessary to address increasing costs
exceeding the growth in State appropriations. The Texas economy continues to fare better than those of many
other states, but Texas is beginning to feel the effects of the worldwide recession. While 2010 was a better year in
the financial markets, a five percent reduction in State appropriations was announced by the State’s leadership for
the 2010-2011 biennium. Currently, the State of Texas is projected to be $11 billion to $25 billion short of
funding the same services in the 2012-2013 biennium as were funded in the 2010-2011 biennium. Higher
education is expected to absorb a portion of the State’s deficit through reduced State appropriations in the 2012-
2013 biennium.
The System continues to recognize a portion of the accrued expenses of its healthcare and dental benefits costs for
its 101,490 employees and retirees over the next 27 years. The unfunded actuarial accrued liability for these costs
was $5.7 billion as of August 31, 2010. Presently, the amount that the System contributes to the plan each year is
equal to the cost of providing the benefits incurred during the year. The System's ability to continue this benefit is
dependent on continuing to receive support from the State at its current level. Long-term policy issues, such as
plan changes, will be considered in the future.

On March 23, 2010, the Patient Protection and Affordable Care Act (PPACA) was signed into law. On
March 30, 2010 the Health Care and Education Reconciliation Act of 2010 was signed, amending the PPACA
(collectively the “Affordable Care Act”). The Affordable Care Act includes expanded health insurance coverage
by providing mandated coverage for health insurance, a substantial expansion of Medicaid eligibility, and
additional coverage for the Children’s Health Insurance Program. The Affordability Act also includes incentives
for research, prevention and wellness, changes designed to curb fraud, waste and abuse, and administrative
simplification such as electronic medical records. Some provisions of the Affordable Care Act are effective
immediately; others will be phased in through 2014. The impact of this legislation will likely affect the System’s
health institutions, the effects of which are not determinable at this time.
                                                                     UNAUDITED

The University of Texas System Consolidated
Exhibit A Balance Sheet
As of August 31, 2010



                                                                                                 Current Year           Prior Year
                                                                                                    Totals                Totals


ASSETS AND DEFERRED OUTFLOWS

Current Assets and Deferred Outflows:
 Cash & Cash Equivalents                                                              $             2,031,156,922.39      2,121,695,417.29
 Restricted Cash & Cash Equivalents                                                                   531,477,594.56        223,029,520.50
 Balance in State Appropriations                                                                      232,207,902.45        239,618,663.47
 Securities Lending Collateral                                                                        468,365,170.60        381,688,392.78
 Accounts Receivable, Net:
    Federal (allow. of $5,274,118.53 in 2010 & $7,740,101.08 in 2009)                                 330,248,827.21        267,031,469.00
    Other Intergov. (allow. of $173,861.66 in 2010 & $0.00 in 2009)                                    33,867,230.14         28,784,118.64
    Student (allow. of $8,679,725.64 in 2010 & $9,133,718.95 in 2009)                                 197,376,727.31        204,747,309.97
    Patient (allow. of $1,250,034,527.84 in 2010 & $1,209,321,720.75 in 2009)                         646,997,420.21        616,752,938.03
    Interest and Dividend Receivables                                                                  57,430,081.89         39,050,689.68
    Contributions (allow. of $6,314,248.28 in 2010 & $4,499,585.27 in 2009)                            96,821,978.22         57,317,497.79
    Investment Trades Receivables                                                                      89,384,866.15         95,927,542.45
    Other (allow. of $10,023,276.35 in 2010 & $8,842,520.54 in 2009)                                  262,462,028.06        225,132,325.73
 Due From Other Funds                                                                                 276,590,688.10        175,705,807.87
 Due From Other Agencies                                                                               22,221,717.44         17,076,416.60
 Inventories                                                                                           69,115,617.72         65,894,678.92
 Loans & Contracts (allow. of $6,907,608.23 in 2010 & $7,153,565.89 in 2009)                           47,896,368.39         47,842,873.67
 Other Current Assets                                                                                 182,987,986.68        197,893,674.38
   Total Current Assets and Deferred Outflows                                                       5,576,609,127.52      5,005,189,336.77


Noncurrent Assets and Deferred Outflows:
 Restricted:
   Cash and Cash Equivalents (Noncurrent Restricted)                                                        17,833.94            13,067.71
   Investments (Restricted)                                                                        19,999,970,968.60    18,123,777,500.72
   Loans & Contracts (allow. of $17,827,884.31 in 2010 & $16,489,732.09 in 2009)                        80,581,150.14        89,223,643.07
 Contributions Rec. (allow. of $8,940,963.81 in 2010 & $10,656,480.58 in 2009)                         153,097,934.90       139,724,593.77
 Unrestricted Investments                                                                            3,356,500,121.79     2,796,826,395.50
 Deferred Outflows-FMV of Derivatives (Noncurrent)                                                     205,166,048.45        93,494,152.83
 Other Noncurrent Assets                                                                                38,794,043.27        37,993,355.88
 Gross Capital/Intangible Assets                                                                   18,096,450,834.49    16,555,269,098.90
   Accumulated Depreciation/Amortization                                                           (7,088,481,724.98)   (6,424,546,934.23)
     Total Noncurrent Assets and Deferred Outflows                                                 34,842,097,210.60    31,411,774,874.15
Total Assets and Deferred Outflows                                                    $            40,418,706,338.12    36,416,964,210.92


LIABILITIES AND DEFERRED INFLOWS
Current Liabilities and Deferred Inflows:
 Accounts Payable and Accrued Liabilities                                                             737,385,615.04        772,912,796.48
 Salaries Payable                                                                                     394,203,710.17        378,333,267.99
 Federal Payables                                                                                      90,742,408.75         33,274,468.35
 Other Intergovernmental Payables                                                                          10,919.10             16,854.05
 Investment Trades Payables                                                                            99,739,901.39        205,800,913.28
 Incurred But Not Reported Self Insurance Claims                                                       90,261,548.41         85,403,589.63
 Securities Lending Obligations                                                                       468,365,170.60        381,688,392.78
 Due To Other Funds                                                                                   276,590,688.10        175,705,807.87
 Due To Other State Agencies                                                                           15,749,328.21         14,041,113.86
 Interfund Payable                                                                                     21,231,597.72         16,167,520.28
 Deferred Revenue                                                                                   1,097,823,518.92      1,030,074,482.88
 Employees' Compensable Leave - Current Portion                                                       283,402,408.81        261,831,782.92
 Notes, Loans, and Leases Payable                                                                     559,522,789.58        952,005,495.84
 Payable From Restricted Assets                                                                       111,877,398.28        117,403,941.20
 Revenue Bonds Payable                                                                              1,581,825,028.08      1,619,983,483.85
 Assets Held for Others                                                                                20,509,345.53         16,773,041.80
 Other Current Liabilities                                                                             54,390,288.58         50,998,998.44
   Total Current Liabilities and Deferred Inflows                                                   5,903,631,665.27      6,112,415,951.50


Noncurrent Liabilities and Deferred Inflows:
 Incurred But Not Reported Self Insurance Claims                                                       27,394,726.59         30,181,103.37
 Employees' Compensable Leave                                                                         157,620,933.50        173,224,314.10
 Assets Held for Others                                                                               648,572,151.33        626,991,747.02
 Liability to Beneficiaries Held by System                                                             11,878,505.23         12,263,173.72
 Net Other Postemployment Benefits Obligation                                                       1,295,763,104.00        841,025,290.00
 Notes, Loans, and Leases Payable                                                                      28,749,778.54         31,760,845.21
 Revenue Bonds Payable                                                                              4,829,918,627.30      3,867,084,956.03
 Interfund Payable                                                                                    594,163,706.12        565,396,012.11
 Hedging Derivative Liability (Noncurrent)                                                            205,166,048.45         93,494,152.83
 Other Noncurrent Liabilities                                                                           8,839,114.73          7,434,881.81
   Total Noncurrent Liabilities and Deferred Inflows                                                7,808,066,695.79      6,248,856,476.20
Total Liabilities and Deferred Inflows                                                             13,711,698,361.06     12,361,272,427.70


 NET ASSETS
 Invested in Capital Assets, Net of Related Debt                                                    4,630,805,088.14      4,475,107,614.90
 Restricted for:
   Nonexpendable
    Permanent University Fund Endowment                                                             7,109,333,589.72      6,492,633,743.16
    Permanent Health, True Endowments, and Annuities                                                3,830,480,669.54      3,731,916,645.89
  Expendable
    Capital Projects                                                                                  111,397,925.90        113,389,303.92
    Debt Service                                                                                        7,538,520.69         10,652,127.76
    Funds Functioning as Endowment (Restricted)                                                       243,435,473.09        206,793,039.82
    Other Expendable                                                                                7,816,823,280.67      6,641,622,790.09
 Unrestricted Net Assets                                                                            2,957,193,429.31      2,383,576,517.68
Total Net Assets                                                                                   26,707,007,977.06     24,055,691,783.22


Total Liabilities, Deferred Inflows and Net Assets                                    $            40,418,706,338.12     36,416,964,210.92



The accompanying Notes to the Consolidated Financial Statements are an integral part of the financial statements.
                                                                UNAUDITED


The University of Texas System Consolidated
Exhibit B Statement of Revenues, Expenses, and Changes in Net Assets
For the Year Ended August 31, 2010



                                                                                        Current Year                Prior Year
                                                                                          Totals                      Totals



Operating Revenues:
Student Tuition and Fees                                                    $                  1,564,426,628.00          1,404,680,263.64
 Discounts and Allowances                                                                      (377,993,767.87)          (300,366,426.84)
Federal Sponsored Programs                                                                     1,455,316,516.19          1,332,686,209.82
Federal Sponsored Programs Pass-Through from State Agencies                                      104,270,983.81            163,470,054.91
State Sponsored Programs                                                                              24,843.75
State Sponsored Programs Pass-Through from State Agencies                                        192,957,787.52            175,100,483.93
Local Sponsored Programs                                                                         536,747,022.83            455,561,895.72
Private Sponsored Programs                                                                       398,799,011.26            390,211,619.29
Sales and Services of Educational Activities                                                     366,804,074.45            373,833,897.67
 Discounts and Allowances Sales and Services of Educational Activities                             (466,459.52)               (520,917.75)
Sales and Services of Hospitals                                                                7,289,132,333.22          6,215,283,347.56
 Discounts and Allowances Sales and Services of Hospitals                                    (3,882,070,198.33)        (3,081,845,532.06)
Professional Fees (Patient Charges)                                                            3,618,448,880.22          3,348,755,837.90
 Discounts and Allowances Professional Fees (Patient Charges)                                (2,514,973,350.50)        (2,359,232,067.38)
Auxiliary Enterprises                                                                            402,023,975.69            381,469,484.24
 Discounts and Allowances Auxiliary Enterprises                                                 (10,148,432.20)             (9,146,021.27)
Other Operating Revenues                                                                          98,421,503.11             74,228,734.32
Total Operating Revenues                                                                       9,241,721,351.63          8,564,170,863.70


Operating Expenses:
Instruction                                                                                    2,755,199,527.12          2,598,087,500.44
Research                                                                                       1,858,819,292.52          1,780,927,330.65
Public Service                                                                                   254,703,054.08            284,209,160.90
Hospitals / Clinics                                                                            3,148,110,319.71          2,963,654,584.49
Academic Support                                                                                 486,020,636.10            456,568,737.87
Student Services                                                                                 180,505,079.92            180,548,583.54
Institutional Support                                                                          1,236,966,717.28          1,173,700,146.11
Operations and Maintenance of Plant                                                              728,275,976.15            861,568,645.25
Scholarships and Fellowships                                                                     371,088,064.15            296,530,330.39
Auxiliary Enterprises                                                                            443,165,609.13            438,536,182.96
Depreciation and Amortization                                                                    785,394,588.26            740,830,606.12
Total Operating Expenses                                                                     12,248,248,864.42         11,775,161,808.72
Operating Income (Loss)                                                                      (3,006,527,512.79)        (3,210,990,945.02)


Nonoperating Revenues (Expenses):
State Appropriations                                                                          2,087,478,451.71           2,114,967,490.17
Federal Nonexchange Sponsored Programs                                                          304,309,174.84             189,075,963.70
Federal Nonexchange Pass-Through                                                                 80,693,072.55
State Nonexchange Pass-Through                                                                   11,659,618.04
Gift Contributions for Operations                                                               299,170,098.79             289,642,192.86
Investment Income                                                                             1,431,411,185.07         (1,304,932,336.47)
Net Increase (Decrease) in Fair Value of Investments                                          1,522,080,692.00         (1,302,493,953.19)
Interest and Other Expenses on Capital Asset Financings                                       (207,452,078.89)           (158,858,505.63)
Gain (Loss) on Sale of Capital Assets                                                          (12,559,195.62)              (6,894,233.64)
Other Nonoperating Revenues                                                                      14,169,315.68              41,405,071.90
Other Nonoperating (Expenses)                                                                    (2,361,565.53)             (7,613,201.80)
Net Nonoperating Revenues (Expenses)                                                          5,528,598,768.64           (145,701,512.10)

Income/(Loss) Before Other Revenue, Expenses, Gains/(Losses), and                             2,522,071,255.85         (3,356,692,457.12)
Transfers

Capital Appropriations (HEAF)                                                                    17,461,477.00              17,461,477.00

Gifts and Sponsored Programs for Capital Acquisitions                                           216,628,695.16              66,263,720.17

Additions to Permanent Endowments / Annuities                                                   118,982,935.67              99,213,733.05
Transfers From Other State Agencies                                                             105,864,387.14             335,207,056.64
Transfers to Other State Agencies                                                             (330,054,276.13)           (722,396,387.52)
Legislative Appropriations Lapsed                                                                      361,719.15                (939,215.45)
Change in Net Assets                                                                          2,651,316,193.84         (3,561,882,073.23)


Beginning Net Assets                                                                         24,025,265,555.60          27,617,579,553.45
Restatements                                                                                     30,426,227.62                     (5,697.00)
Beginning Net Assets (As Restated)                                                           24,055,691,783.22          27,617,573,856.45

Ending Net Assets                                                           $                26,707,007,977.06          24,055,691,783.22



The accompanying Notes to the Consolidated Financial Statements are an integral part of the financial statements.
                                                                          UNAUDITED

The University of Texas System Consolidated
EXHIBIT C - STATEMENT OF CASH FLOWS
For the Year Ended August 31, 2010
                                                                                           Current Year Totals      Prior Year Totals

Cash Flows from Operating Activities:
Proceeds from Tuition and Fees                                                                 1,228,525,974.71        1,153,918,367.16
Proceeds from Patients and Customers                                                           4,505,109,495.44        4,139,191,021.56
Proceeds from Sponsored Programs                                                               2,698,751,656.25        2,566,242,475.66
Proceeds from Auxiliaries                                                                        401,855,234.48          382,828,793.34
Proceeds from Other Revenues                                                                     472,961,263.99          486,830,391.19
Payments to Suppliers                                                                        (3,669,623,572.38)      (3,647,086,252.58)
Payments to Employees                                                                        (7,331,628,104.78)      (6,991,586,255.95)
Payments for Loans Provided                                                                      (87,708,290.35)         (91,826,619.70)
Proceeds from Loan Programs                                                                        91,104,668.48           87,841,777.47
Payments for Other Expenses                                                                                    -            (808,890.99)
   Net Cash Provided (Used) by Operating Activities                                          (1,690,651,674.16)      (1,914,455,192.84)


Cash Flows from Noncapital Financing Activities:
Proceeds from State Appropriations                                                             2,094,751,867.49        1,981,326,944.39
Proceeds from Operating Gifts                                                                    247,841,735.53          288,767,413.52
Proceeds from Private Gifts for Endowment and Annuity Life Purposes                              342,595,298.60          126,853,911.21
Proceeds from Other Nonoperating Revenues                                                          14,340,530.73           25,758,312.08
Payments / Receipts for Transfers to / from System or Other Agencies                           (331,419,591.13)        (160,642,755.43)
Payments for Other Uses                                                                           (1,547,168.55)         (20,901,148.72)
Proceeds from Nonexchange Sponsored Programs                                                     360,290,115.68          157,597,984.29
   Net Cash Provided by Noncapital Financing Activities                                        2,726,852,788.35        2,398,760,661.34


Cash Flows from Capital and Related Financing Activities:
Proceeds from Issuance of Capital Debt                                                         2,134,462,780.26        2,246,422,206.92
Payments of Other Costs on Debt Issuance                                                         (46,219,346.53)          (1,326,027.98)
Proceeds from Capital Appropriations, Grants, and Gifts                                          180,840,828.73            66,813,079.17
Proceeds from Sale of Capital Assets                                                                1,382,247.00            1,549,426.53
Payments for Additions to Capital Assets                                                     (1,655,233,606.46)      (1,630,054,093.36)
Payments of Principal on Capital Related Debt                                                (1,551,210,275.79)      (1,382,511,450.35)
Payments of Interest on Capital Related Debt                                                   (205,523,612.27)        (157,489,198.77)
Proceeds From Insurance Recovery                                                                               -           66,340,503.61
   Net Cash Provided (Used) by Capital and Related Financing Activities                      (1,141,500,985.06)        (790,255,554.23)


Cash Flows from Investing Activities
Proceeds from Sales of Investments                                                            11,283,994,693.83       17,509,321,415.22
Proceeds from Interest and Investment Income                                                     699,568,255.93          506,590,407.33
Payments to Acquire Investments                                                             (11,660,348,733.50)     (17,309,573,603.97)
Net Cash Provided (Used) by Investing Activities                                                 323,214,216.26          706,338,218.58


Net Increase (Decrease) in Cash                                                                  217,914,345.39          400,388,132.85
Cash and Cash Equivalents (Beginning of the Year)                                              2,344,738,005.50        1,944,349,872.65
Cash and Cash Equivalents (End of the Year)                                                  $ 2,562,652,350.89      $ 2,344,738,005.50


Reconciliation of Net Operating Revenues (Expenses) to Net Cash
Provided (Used) by Operating Activities
Operating Income (Loss)                                                                      (3,006,527,512.79)      (3,210,990,945.02)
Adjustments to Reconcile Operating Results to Net Cash:
   Depreciation and Amortization Expense                                                         785,394,588.26         740,830,606.12
   Gross Loss on Impairment of Capital Assets                                                                 -           82,274,664.22
   Bad Debt Expense                                                                              289,177,138.43         195,623,291.88
   Operating Income and Cash Flow Categories Classification Differences                                       -         (66,340,503.61)
Changes in Assets and Liabilities:
   Accounts Receivable                                                                         (329,005,512.15)        (208,910,231.11)
   Inventories                                                                                    (3,220,938.80)            3,922,961.84
   Loans and Contracts                                                                              3,396,378.13          (3,984,842.23)
   Other Current and Noncurrent Assets                                                             19,245,359.42         (49,035,443.15)
   Accounts Payable                                                                                17,945,243.64           67,712,771.14
   Deferred Revenue                                                                                64,738,223.16           86,539,496.85
   Assets Held for Others                                                                           2,838,306.69          (3,028,569.98)
   Employees' Compensable Leave                                                                     5,967,245.29           24,493,802.58
   Other Current and Noncurrent Liabilities                                                         4,661,992.56            8,090,481.63
   Other Postemployment Benefits Obligation                                                      454,737,814.00          418,347,266.00
      Total Adjustments                                                                        1,315,875,838.63        1,296,535,752.18
Net Cash Provided (Used) by Operating Activities                                            $ (1,690,651,674.16)    $ (1,914,455,192.84)


Non Cash Transactions
Net Increase (Decrease) in Fair Value of Investments                                           1,522,080,692.00      (1,332,920,180.81)
Donated Capital Assets                                                                             40,842,915.91          20,651,623.02
Capital Assets Acquired Under Capital Lease Purchases                                               1,046,233.15             474,048.83
Miscellaneous Noncash Transactions                                                               (13,192,277.10)           9,210,706.05


The accompanying Notes to the Consolidated Financial Statements are an integral part of the financial statements.
                    NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               For the Year Ended August 31, 2010
                                          (Unaudited)

1.   The Financial Reporting Entity

     The financial records of The University of Texas System (the System), reported as a business-type activity in the State of
     Texas’ Comprehensive Annual Financial Report, reflect compliance with applicable State statutes and Governmental
     Accounting Standards Board (GASB) pronouncements. The significant accounting policies followed by the System in
     maintaining accounts and in the preparation of the consolidated financial statements are in accordance with the Texas
     Comptroller of Public Accounts’ Annual Financial Reporting Requirements.

     The consolidated financial statements include System Administration and all institutions of the System. Amounts due
     between and among institutions, amounts held for institutions by System Administration and other duplications in
     reporting are eliminated in consolidating the individual financial statements.

     The System is composed of nine academic and six health-related institutions of higher education, as well as the System
     administrative offices. The fifteen institutions are as follows: the University of Texas at Arlington, the University of
     Texas at Austin, the University of Texas at Brownsville, the University of Texas at Dallas, the University of Texas at
     El Paso, the University of Texas – Pan American, the University of Texas of the Permian Basin, the University of Texas
     at San Antonio, the University of Texas at Tyler, the University of Texas Southwestern Medical Center at Dallas, the
     University of Texas Medical Branch at Galveston, the University of Texas Health Science Center at Houston, the
     University of Texas Health Science Center at San Antonio, the University of Texas M. D. Anderson Cancer Center, and
     the University of Texas Health Center at Tyler. The System is governed by a nine-member Board of Regents appointed
     by the Governor.

     Blended Component Units
     The following component units are included in the consolidated financial statements because the System appoints a
     voting majority of the component units’ boards and the System is able to impose its will on the component units. The
     net assets of the blended component units are insignificant to the System. Blended financial information is available
     upon request.

     UT Southwestern Health Systems, 1301 Elmbrook, Dallas, Texas 75390, is governed by a three-member board
     appointed by the University of Texas (UT) Southwestern Medical Center at Dallas. The corporation is blended rather
     than discretely presented because it provides services entirely or almost entirely to UT Southwestern Medical Center at
     Dallas. The corporation’s fiscal year end is August 31.

     The National Pediatric Infectious Diseases Foundation, 4712 Wildwood Drive, Dallas, Texas 75209, is governed by a
     three-member board appointed by UT Southwestern Medical Center at Dallas. The foundation is blended rather than
     discretely presented because it has substantively the same governing board as UT Southwestern Medical Center at
     Dallas. The foundation’s fiscal year end is August 31.

     UT Southwestern Moncrief Cancer Center, 1701 River Run, Suite 500, Fort Worth, Texas 76107, is governed by a
     five-member board appointed by the president of UT Southwestern Medical Center at Dallas. The corporation is blended
     rather than discretely presented because it has substantively the same governing board as UT Southwestern Medical
     Center at Dallas. The corporation’s fiscal year end is August 31.

     UTMB Healthcare Systems, Inc., 301 University Boulevard, Galveston, Texas 77555, is governed by an eight-member
     board appointed by UT Medical Branch at Galveston. The corporation is blended rather than discretely presented
     because it provides services entirely or almost entirely to UT Medical Branch at Galveston. The corporation’s fiscal year
     end is August 31.

     UT Physicians, P. O. Box 20627, Houston, Texas 77225, is governed by a three-member board appointed by
     UT Health Science Center at Houston. The corporation is blended rather than discretely presented because it provides
     services entirely or almost entirely to UT Health Science Center at Houston. The corporation’s fiscal year end is
     August 31.
     UT System Medical Foundation, 6431 Fannin, Suite JJL 310, Houston, Texas 77030, is governed by a three-member
     board appointed by UT Health Science Center at Houston. The foundation is blended rather than discretely presented
     because it provides services entirely or almost entirely to UT Health Science Center at Houston. The foundation’s fiscal
     year end is August 31.

     University Physicians Group, 6126 Wurzbach Road, San Antonio, Texas 78238, is governed by a twenty-four member
     board which includes six members at large appointed by UT Health Science Center at San Antonio. The corporation is
     blended rather than discretely presented because it provides services entirely or almost entirely to
     UT Health Science Center at San Antonio. The corporation’s fiscal year end is August 31.

     M. D. Anderson Physician’s Network, 7505 South Main, Suite 500, Houston, Texas 77030, is governed by a
     four-member board appointed by UT M. D. Anderson Cancer Center. The corporation is blended rather than discretely
     presented because it provides services entirely or almost entirely to UT M. D. Anderson Cancer Center. The
     corporation’s fiscal year end is August 31.

     M. D. Anderson Services Corporation, 7505 South Main, Suite 500, Houston, Texas 77030, is governed by a
     seven-member board appointed by the president of UT M. D. Anderson Cancer Center and the UT System Board of
     Regents. The corporation is blended rather than discretely presented because it provides services entirely or almost
     entirely to UT M. D. Anderson Cancer Center. The corporation’s fiscal year end is August 31.

     East Texas Quality Care Network, Inc., P. O. Box 6053, Tyler, Texas 75711-6053, is governed by a four-member board
     appointed by UT Health Science Center at Tyler. The corporation is blended rather than discretely presented because it
     has substantively the same governing board as UT Health Science Center at Tyler. The corporation’s fiscal year end is
     August 31.

     The University of Texas Investment Management Company (UTIMCO), 401 Congress Avenue, Suite 2800, Austin,
     Texas 78701, is governed by a nine-member board appointed by the UT System Board of Regents. The corporation is
     blended rather than discretely presented because it provides services entirely or almost entirely to UT System. The
     corporation’s fiscal year end is August 31.

     The University of Texas Fine Arts Foundation, UT Austin, Main Building, P. O. Box T, Austin, Texas 78713 is
     governed by a three-member board appointed by UT Austin. The foundation is blended rather than discretely presented
     because it provides services entirely or almost entirely to UT Austin. The foundation’s fiscal year end is December 31.

     University of Texas Communication Foundation, UT Austin, P.O. Box 7322, Austin, Texas 78713 is governed by a
     three-member board appointed by UT Austin. The foundation is blended rather than discretely presented because it
     provides services entirely or almost entirely to UT Austin. The foundation’s fiscal year end is August 31.

2.   Summary of Significant Accounting Policies

     BASIS OF ACCOUNTING
     The financial statements of the System have been prepared using the economic resources measurement focus and the
     accrual basis of accounting. The System reports as a business type activity, as defined by GASB Statement No. 35,
     Basic Financial Statements – and Management’s Discussion and Analysis – for Public Colleges and Universities.
     Business type activities are those that are financed in whole or in part by fees charged to external parties for goods or
     services.

     The financial statements of the System have been prepared in accordance with accounting principles generally accepted
     in the United States of America as prescribed by the GASB. The System applies all GASB pronouncements and
     applicable Financial Accounting Standards Board (FASB) Statements and Interpretations issued on or before
     November 30, 1989, except those that conflict with a GASB pronouncement.
CASH AND CASH EQUIVALENTS
Short-term, highly liquid investments with maturities of three months or less when purchased are generally considered
cash and cash equivalents. It is the System’s policy to exclude items that meet this definition if they are part of an
investment pool, which has an investment horizon of one year or greater. Therefore, highly liquid investments that are
part of the Intermediate Term Fund (ITF) and the Long Term Fund (LTF) are not considered cash and cash equivalents.
Additionally, Funds Functioning as Endowments invested in money market accounts are also excluded from Cash and
Cash Equivalents as it is management’s intent to invest these funds for more than one year. Cash held in the State
treasury for the Permanent University Fund (PUF), the Permanent Health Fund (PHF) and the Available University Fund
(AUF) are considered cash and cash equivalents. Other highly liquid investments of these major funds invested with
custodians are not considered cash and cash equivalents according to the investment policies of the System.

BALANCE IN STATE APPROPRIATIONS
This item represents the balance of General Revenue funds at August 31 as calculated in the Texas State Comptroller’s General
Revenue Reconciliation.

DERIVATIVE FINANCIAL INSTRUMENTS
Derivative instruments are recorded at fair value. The fair value of derivatives is recorded as either an asset or liability
on the balance sheet. The valuation of investment derivatives is discussed in the Investments disclosure below.
Financial institutions have calculated the fair value of the interest rate swaps using quoted market prices or a forecast of
expected discounted future net cash flows.

The System has entered into interest rate swap agreements with various counterparties, all of which a highly rated
financial institutions, to mange various risks associated with the System’s debt programs. Each of the System’s interest
rate swaps is a contractual agreement entered into between the System and a counterparty under which each party agrees
to exchange periodic fixed or variable payments, based upon a stated notional amount, over the stated life of the
agreement. The net differential paid or received is recognized over the life of the agreement as an adjustment to interest
expense.

Interest rate swaps determined to be hedging derivatives are designated as cash flow hedges. Hedging derivative assets
and hedging derivative liabilities are recorded on the System’s balance sheet. Under hedge accounting, for derivatives
that are determined to be effective, changes in the fair value of hedging derivatives are considered to be deferred inflows
(for hedging derivatives with positive fair values) or deferred outflows (for hedging derivatives with negative fair
values).

Changes in the fair value of derivatives that are not effective are recorded as net increase (decrease) in the fair value of
investments in the statement of revenues, expenses and changes in net assets.

INVESTMENTS
Investments of the System, except for PUF lands, are managed by UTIMCO, a private investment corporation that
provides services entirely to the System. All investments are reported as noncurrent as these funds have an investment
horizon extending beyond one year. The System’s investments with readily available fair values are primarily valued on
the basis of market valuations provided by independent pricing services.

Fixed income securities held directly by the System are valued based upon prices supplied by FT Interactive Data and
other major fixed income pricing services, external broker quotes and internal pricing matrices.

Equity security fair values are based on the New York Stock Exchange composite closing prices, if available. If not
available, the fair value is based on the closing price on the primary exchange on which the security is traded (if a
closing price is not available, the average of the last reported bid and ask price is used).

Private investment funds and certain other equity securities are fair valued by management. The fair values of these
investments are estimated by management using the investment’s capital account balance at the closest available
reporting date, as communicated by the investment manager, adjusted for contributions and withdrawals subsequent to
the latest available reporting date as well as consideration of any other information, which has been provided by the
investment manager or other sources. In rare cases the private investments are valued at cost, but only when
management feels this is the best approximation of value. As of August 31, 2010 and 2009, investments in private
investment funds in the amount of $3,755,602,135.00 and $3,432,836,133.00 have been estimated by management.
Securities held by the System in index and exchange traded funds are generally valued as follows:

        Long and short stock positions traded on security exchanges are valued at closing market prices on the valuation
         date.

        Long and short stock positions traded on the over-the-counter (OTC) market are valued at the last reported bid
         price, except for National Market System OTC stocks, which are valued at their closing market prices.

        Fixed income securities are valued based upon bid quotations obtained from major market makers or security
         exchanges.

        Investments in registered U.S. mutual funds are being valued at their respective net asset value per share
         amounts.

Hedge funds, developed country equity, emerging markets equity and fixed income investment funds and certain other
private placements are fair valued by management based on net asset value information provided by the investment
manager, as well as other relevant factors as indicated above. As of August 31, 2010 and 2009, investments in these
funds in the amount of $8,777,863,254.00 and $6,739,183,711.00, respectively, have been estimated by management.

The audited financial statements of the funds managed by UTIMCO may be found on UTIMCO’s website and inquiries
may be directed to UTIMCO via www.utimco.org.

The fair value of the PUF land’s interest in oil and gas is based on a third party reserve study of proved reserves. The
present value of the royalty cash flows is calculated by applying a ten percent discount rate to future expected production
volumes of oil and gas based on the price of oil and gas on August 31, 2010. Probable and possible reserves of oil and
gas are not included in the fair value estimate. The PUF lands’ surface interests are reported at their appraised value as
of January 1, 2010. Other real estate holdings are reported by one of the following methods of valuation: the latest
available appraised amount as determined by an independent State certified or other licensed appraiser, or by any other
generally accepted industry standard, including tax assessments.

The System is authorized to invest funds, as provided in Section 51.0031 of the Texas Education Code and the
Constitution of the State of Texas, under prudent investor investment standards. Such investments include various fixed
income and equity type securities. The investments of the System are governed by various investment policies approved
by the UT System Board of Regents.

CONTRIBUTIONS RECEIVABLE
Current and noncurrent contributions receivable are amounts pledged to the university by donors, net of allowances.

INVENTORIES
Inventories, consisting primarily of supplies and merchandise for resale, are valued at cost, typically based on the
specific identification, weighted average or first-in, first-out methods, which are not in excess of net realizable value.

RESTRICTED ASSETS
Restricted assets include funds restricted by legal or contractual requirements, including those related to sponsored
programs, donors, constitutional restrictions, bond covenants, and loan agreements.

LOANS AND CONTRACTS
Current and noncurrent loans and contracts are receivables, net of allowances, related to student loans.

SECURITIES LENDING COLLATERAL AND OBLIGATIONS
The collateral secured for securities lent are reported as an asset on the balance sheet. The obligations for securities lent
are reported as a liability on the balance sheet that directly offsets the cash collateral received from brokers or dealers in
exchange for securities loaned. The costs of securities lending transactions are reported as expenses in the statement of
revenues, expenses and changes in net assets. See Note 3 for details regarding the securities lending program.
HEDGING DERIVATIVE ASSET
Derivative instruments are recorded at fair value. If the fair value of a hedging derivate is positive, it is reported as a
hedging derivative asset.

DEFERRED OUTFLOWS – FAIR MARKET VALUE OF DERIVATIVES
Under hedge accounting, changes in the fair value of hedging derivatives are considered to be deferred outflows for
hedging derivatives with negative fair values.

CAPITAL ASSETS
Capital assets are recorded at cost at the date of acquisition or fair value at the date of donation in the case of gifts. The
System follows the State’s capitalization policy with a cost equal to or greater than $5,000.00 for equipment items,
$100,000.00 for buildings, building improvements and improvements other than buildings, and $500,000.00 for
infrastructure items, and an estimated useful life of greater than one year. Purchases of library books are capitalized.
Routine repairs and maintenance are charged to operating expense in the year in which the expense is incurred. Outlays
for construction in progress are capitalized as incurred. Interest expense related to construction is capitalized net of
interest income earned on the resources reserved for this purpose (see Note 8).

In February 2010, the State Comptroller’s Office issued GASB 51 guidance for intangible assets, and changed the
thresholds for software which was previously included with equipment to $100,000.00 for purchased software and
$1,000,000.00 for internally developed software including Enterprise Resource Planning replacements. This threshold
change was effective September 1, 2009.

The System capitalizes, but does not depreciate works of art and historical treasures that are held for exhibition,
education, research and public service. These collections are protected and preserved.

Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the assets,
generally two to fifteen years for equipment items, five years for software, six years for Enterprise Resource Planning
replacements, fifteen years for library books, ten to fifty years for buildings and their components and fifteen to forty
years for infrastructure elements.

OTHER ASSETS
Included in other current assets are prepaid expenses and lease receivables due within one year. Included in the other
noncurrent assets are unamortized bond issuance costs and lease receivables that will be realized beyond one year.
Unamortized bond issuance costs are amortized over the life of the related bonds using the straight-line method, which
approximates the effective interest method. The unamortized bond issuance costs as of August 31, 2010 and 2009 were
$19,648,534.66 and $14,872,409.90, respectively.

ASSETS HELD BY AFFILIATED ORGANIZATIONS
GASB Statement number 39 (GASB 39), Determining Whether Certain Organizations are Component Units, provides
criteria for determining whether certain organizations should be reported as component units based on the nature and
significance of their relationship to the primary government, the System. GASB 39 states that a legally separate, tax-
exempt organization should be reported as a component unit of a reporting entity if all of the following criteria are met:
    1.   The economic resources received or held by the separate organization are entirely or almost entirely for the
         direct benefit of the primary government, its component units, or its constituents.
    2.   The primary government is entitled to, or has the ability to otherwise access a majority of the economic
         resources received or held by the separate organization.
    3.   The economic resources received or held by an individual organization that the specific primary government, or
         its component units, is entitled to, or has the ability to otherwise access, are significant to that primary
         government.

The System has defined significance as 5% of net assets. As of August 31, 2010, none of the System’s potential
component units meet the criteria for inclusion in the System’s financial statements. See Note 23, Affiliated
Organizations, for more information.
DEFERRED REVENUE
Deferred revenue represents revenues such as tuition recorded in August for the fall semester and payments received in
advance for sponsored programs.

ASSETS HELD FOR OTHERS – CURRENT AND NONCURRENT
Assets held for others represent funds held by the System as custodial or fiscal agent for students, faculty members,
foundations, and others. Included in assets held for others as of August 31, 2010 and 2009 is $309,949,765.77 and
$300,748,123.68, respectively, for the Physician’s Referral Service Supplemental Retirement Plan/Retirement Benefit Plan
at UT M. D. Anderson Cancer Center. As of August 31, 2010 and 2009, assets held for others also included
$794,786,995.49 and $292,228,738.87, respectively, from foundations that invest their assets with UTIMCO.

LIABILITY TO BENEFICIARIES
The System holds numerous irrevocable charitable remainder trusts and a pooled income fund. Together, these assets
are reflected in the accompanying consolidated financial statements within restricted investments.

The charitable remainder trusts designate the UT System Board of Regents as both trustee and remainder beneficiary.
The System is required to pay to the donors (or other donor-designated income beneficiaries) either a fixed amount or the
lesser of a fixed percentage of the fair value of the trusts’ assets or the trusts’ income during the beneficiaries’ lives.
Trust assets are measured at fair value when received and monthly thereafter. A corresponding liability to beneficiaries
is measured at the present value of expected future cash flows to be paid to the beneficiaries based upon the applicable
federal rate on the gift date. Upon death of the income beneficiaries, substantially all of the principal balance passes to
the System to be used in accordance with the donors’ wishes.

The pooled income fund was formed with contributions from several donors. The contributed assets are invested and
managed by UTIMCO. Donors (or designated beneficiaries) periodically receive, during their lives, a share of the
income earned on the fund proportionate to the value of their contributions to the fund. Upon death of the income
beneficiaries, substantially all of the principal balance passes to the System to be used in accordance with the donors’
wishes. Contribution revenue is measured at the fair value of the assets received, discounted for a term equal to the life
expectancies of the beneficiaries.

REFUNDING AND DEFEASANCE OF DEBT
For debt refundings, the difference between the reacquisition price and the net carrying amount of the old debt is
deferred and reported as a deduction from or an addition to the debt liability. The gain or loss is amortized over the
remaining life of the old debt or the life of the new debt, whichever is shorter, in the statement of revenues, expenses and
changes in net assets as a component of interest expense.

HEDGING DERIVATIVE LIABILITY
Derivative instruments are recorded at fair value. If the fair value of a hedging derivate is negative, it is reported as a
hedging derivative liability.

DEFERRED INFLOWS – FAIR MARKET VALUE OF DERIVATIVES
Under hedge accounting, changes in the fair value of hedging derivatives are considered to be deferred inflows for
hedging derivatives with positive fair values.

NET ASSETS
The System has classified resources into the following three net asset categories:

Invested in Capital Assets, Net of Related Debt
Capital assets, net of accumulated depreciation and outstanding principal balances of debt attributable to the acquisition,
construction or improvement of those assets.

Restricted:
Nonexpendable
Net assets subject to externally imposed stipulations that require the amounts be maintained in perpetuity by the System.
Such assets include the System’s permanent endowment funds.

Expendable
Net assets whose use by the System is subject to externally imposed stipulations that can be fulfilled by actions of the
System pursuant to those stipulations or that expire with the passage of time.
Unrestricted
Net assets that are not subject to externally imposed stipulations. Unrestricted net assets may be designated for special
purposes by action of management or the UT System Board of Regents. Substantially all unrestricted net assets are
designated for academic and research programs and initiatives, and capital programs (see Note 13 for details on
unrestricted net assets).

When an expense is incurred that can be paid using either restricted or unrestricted resources, the System addresses each
situation on a case-by-case basis prior to determining the resources to be used to satisfy the obligation. Generally, the
System’s policy is to first apply the expense towards restricted resources and then towards unrestricted resources.

REVENUES AND EXPENSES
Operating revenues include activities such as student tuition and fees, net of scholarship allowances; sales and services of
auxiliary enterprises; most federal, state and local grants and contracts and federal appropriations; and interest on student
loans. Operating expenses include salaries and wages, payroll related costs, materials and supplies, depreciation,
scholarships and fellowships, and impairment losses and insurance recoveries received in the same year as the associated
loss in accordance with GASB Statement No. 42, Accounting and Financial Reporting for Impairment of Capital Assets
and for Insurance Recoveries. In addition, all changes to incurred but not reported liabilities related to insurance
programs are reflected as operating.

Nonoperating revenues include activities such as gifts and contributions, insurance recoveries received in years
subsequent to the associated loss, State appropriations, investment income and other revenue sources that are defined as
nonoperating revenues by GASB Statement No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust
Funds and Government Entities That Use Proprietary Fund Accounting, GASB Statement No. 34, and GASB Statement
No. 42, Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries.
UT System institutions are the named beneficiaries in certain lawsuits, wills, trust, and insurance policies. UT System
does not recognize these potential refunds, gifts and contributions until realized. Nonoperating expenses include
activities such as interest expense on capital asset financings, and other expenses that are defined as nonoperating
expenses by GASB Statement Nos. 9, 34 and 42.

SCHOLARSHIP ALLOWANCES AND STUDENT AID
Financial aid to students is reported in the financial statements as prescribed by the National Association of College and
University Business Officers (NACUBO). Certain aid (student loans, funds provided to students as awarded by third
parties and Federal Direct Lending) is accounted for as third party payments (credited to the student’s account as if the
student made the payment). All other aid is reflected in the financial statements as operating expense or scholarship
allowances, which reduce revenues. The amount reported as operating expense represents the portion of aid that was
provided to the student in the form of cash. Scholarship allowances represent the portion of aid provided to the student
in the form of reduced tuition. Under the alternative method, these amounts are computed on an entity-wide basis by
allocating cash payments to students, excluding payments for services, on the ratio of total aid to the aid not considered
to be third party aid.

STATEWIDE INTERFUND TRANSFERS AND INTERFUND PAYABLES
In accordance with the provisions set forth in Article 7, Section 18 of the Texas Constitution, the System transfers one-
third of the annual earnings of the PUF investments and lands to the Texas A&M University System (TAMUS). In
addition to the transfer of the current year earnings in 2010 and 2009 of $172,139,802.00 and $176,977,540.00,
respectively, the System recorded a liability of $611,895,000.00 and $577,105,000.00 at August 31, 2010 and 2009,
respectively, for future amounts due to TAMUS from the PUF to cover principal on outstanding PUF bonds and notes
issued by TAMUS. This liability is reported as current and noncurrent interfund payable on the balance sheet.
Additional details related to the operations of the PUF can be found in Note 4. Also included in interfund payables as of
August 31, 2010 and 2009 is $3,500,303.84 and $4,458,532.39, respectively, related to the Loan Star program that is
administered by the Texas Governor’s Office.

In accordance with tuition set-asides required by Section 61.539, Section 61.910, Section 61.9660, Section 61.9731,
Section 56.095 and Section 56.465 of the Texas Education Code, the institutions transferred tuition revenues of
$17,360,823.59 in 2010 and $15,118,985.49 in 2009 to the Texas Higher Education Coordinating Board.
UNCOMPENSATED CARE
The System’s health-related institutions provide uncompensated care to patients who meet certain criteria.
Uncompensated care includes the unreimbursed costs for the uninsured and the underinsured as well as the unreimbursed
costs from government-sponsored health programs. To calculate uncompensated care, charges are converted to costs and
providers recognize appropriate patient specific funding and lump sum funding available to offset costs. Uncompensated
care costs amounted to $618,920,563.97 and $604,811,409.33 for 2010 and 2009, respectively. In prior years,
uncompensated care was reported in terms of charges. In 2009, uncompensated care charges were $1,356,923,554.51.

NET PATIENT SERVICE REVENUE
The System’s health-related institutions have agreements with third-party payors that provide for payments to these
institutions at amounts different from their established rates. A summary of the payment arrangements with major third-
party payors follows:

Medicare
UT Southwestern Medical Center at Dallas’ and UT Medical Branch at Galveston’s inpatient acute care services and
outpatient services rendered to Medicare program beneficiaries are reimbursed under a prospective reimbursement
methodology. Also, additional reimbursement is received for graduate medical education, disproportionate share, bad
debts and other reimbursable costs, as defined, under a variety of payment methodologies.

UT M. D. Anderson Cancer Center’s inpatient acute care services rendered to Medicare program beneficiaries are paid
based on a cost reimbursement methodology that is limited by a facility-specific amount per discharge. The final
reimbursement also includes a calculation of an incentive or relief payment determined through a comparison of the
facilities current year cost to the facility-specific cost per discharge. Certain outpatient services, and defined capital and
medical education costs related to Medicare beneficiaries are paid based on a cost reimbursement methodology.
Effective August 1, 2000, the Medicare program implemented a prospective payment system for outpatient services.
However, as UT M. D. Anderson Cancer Center is designated as a cancer hospital, the Medicare program provides for a
“hold-harmless” payment that is equal to the difference between the prospectively determined amounts and the current
year adjusted cost (i.e., the current year adjusted cost is determined through application of a payment to cost ratio, which
is derived from a previous Medicare cost report, to the current year actual cost). UT M. D. Anderson Cancer Center is
reimbursed for cost reimbursable items at a tentative rate with final settlement determined after submission of annual
cost reports by UT M. D. Anderson Cancer Center and audits thereof by the Medicare fiscal intermediary.

Medicaid
Inpatient services rendered to Medicaid program beneficiaries are reimbursed under a prospective reimbursement
methodology. Certain outpatient services rendered to Medicaid program beneficiaries are reimbursed under a cost
reimbursement cost methodology. The System’s health-related institutions are reimbursed for cost reimbursable items at
a tentative rate with final settlement determined after submission of annual cost reports by the System’s health-related
institutions and audits thereof by the Medicaid fiscal intermediary.

The System’s health-related institutions have also entered into payment agreements with certain commercial insurance
carriers, health maintenance organizations, and preferred provider organizations. The basis for payment to the System’s
health-related institutions under these agreements includes prospectively determined rates per discharge, discounts from
established charges, and prospectively determined daily rates. The System’s health-related institutions recognized bad
debt expense of $283,972,943.78 and $190,670,055.55 in 2010 and 2009, respectively.

USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect
the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates.
3.   Deposits, Investments and Repurchase Agreements

     DEPOSITS OF CASH IN BANK
     As of August 31, 2010 and 2009, the carrying amount of deposits was $50,766,579.88 and $41,726,751.14, respectively,
     as presented below:

                                                                                  2010                       2009
       Cash and cash equivalents per statement of cash flows            $    2,562,652,350.89           2,344,738,005.50

       Less: Cash in State Treasury                                            529,266,586.85             462,018,831.57
             Cash equivalent investments                                     1,974,858,990.55           1,833,704,572.65
             Other                                                               7,760,193.61               7,287,850.14
       Deposits of cash in bank                                         $       50,766,579.88              41,726,751.14

     Deficit demand account balances of $99,483,215.97 were reported as payables at August 31, 2009. Following guidance
     issued by the State Audit Office in 2010, deficit demand accounts for were not reported as a payable. As of
     August 31, 2010 and 2009, the total bank balances were $149,536,282.80 and $46,487,523.77, respectively.

     DEPOSIT RISKS
     Custodial Credit Risk
     Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, the
     System 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 System maintains depository relationships with various banking institutions. The System’s policy
     is that all deposits are governed by a bank depository agreement between the System and the respective banking
     institution. This agreement provides that the System’s deposits, to the extent such deposits exceed the maximum insured
     limit under deposit insurance provided by the Federal Deposit Insurance Corporation, shall at all times be collateralized
     with government securities. As of August 31, 2010 and 2009, the System had no bank balances that were exposed to
     custodial credit risk.
    INVESTMENT DERIVATIVE RISKS
    The investment risk disclosure that follows relates to the System’s investments. Risks associated with the System’s
    investments in hedge funds, private investments, public market funds, and securities lending transactions are discussed in
    separate sections of this note.

    As of August 31, 2010 and 2009, the investments including securities lending collateral were as follows:
                                                                                2010                            2009
Type of Security                                                             Fair Value                      Fair Value
U.S. Government:
   U.S. Treasury Securities                                         $         356,573,121.72                   246,994,680.93
   U.S. Treasury Strips                                                        11,351,847.36                    11,716,403.04
   U.S. Treasury TIPS                                                           1,926,040.08                    14,908,084.29
U.S. Government Agency Obligations                                            338,154,876.91                   561,971,660.77
Corporate Obligations                                                         416,335,372.99                   451,251,536.80
Corporate Asset and Mortgage Backed Securities                                429,014,846.73                   462,494,649.39
Equity                                                                        989,689,656.77                 1,104,507,527.45
International Obligations (Government and Corporate)                        1,234,668,824.75                   739,674,537.04
International Equity                                                        2,032,976,385.49                 1,135,506,211.73
Fixed Income Money Market and Bond Mutual Fund                              2,360,002,784.15                 1,966,573,886.21
Other Commingled Funds                                                         23,454,375.55                     9,231,980.87
International Other Commingled Funds                                            7,389,071.18                   104,218,936.66
Commercial Paper                                                                           -                     5,697,308.99
PUF Lands                                                                   1,522,699,125.00                 1,250,069,294.00
Other Real Estate                                                             325,843,754.88                   358,829,241.05
Derivatives                                                                     3,796,548.56                    30,426,227.62
Investment Funds:
   U.S. Equity                                                               690,667,763.09                    566,157,666.32
   Non-U.S. Developed Equity                                                 641,374,725.72                    666,380,126.91
   Emerging Markets                                                          932,887,115.14                  1,468,324,746.98
   Fixed Income                                                              324,527,145.78                    770,629,125.25
   Real Estate                                                                30,325,473.29                    159,661,146.70
   Natural Resources                                                         235,676,217.45                                 -
Externally Managed Investments:
   Hedge Funds                                                              6,526,421,952.26                 5,238,140,731.21
   Limited Partnerships (Private Investments)                               3,755,602,135.39                 3,432,836,132.55
Miscellaneous (guaranteed investment contract, political
 subdivision, bankers’ acceptance, negotiable CD)                            165,111,930.15                   164,402,053.46
Total Securities                                                          23,356,471,090.39                20,920,603,896.22
Securities Lending Collateral Investment Pool                                468,365,170.60                   381,688,392.78
TOTAL                                                               $     23,824,836,260.99                21,302,292,289.00

    (A) Credit Risk - Article VII, Section 11b of the Texas Constitution authorizes the UT System Board of Regents, subject
    to procedures and restrictions it establishes, to invest System funds in any kind of investment and in amounts it considers
    appropriate, provided that it adheres to the prudent investor standard. This standard provides that the UT System Board
    of Regents, in making investments, may acquire, exchange, sell, supervise, manage or retain, through procedures and
    subject to restrictions it establishes and in amounts it considers appropriate, any kind of investment that prudent
    investors, exercising reasonable care, skill and caution, would acquire or retain in light of the purposes, terms,
    distribution requirements and other circumstances of the fund then prevailing, taking into consideration the investment of
    all of the assets of the fund rather than a single investment.
 Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is
 measured by the assignment of a rating by a nationally recognized statistical rating organization (NRSRO). The
 System’s investment policy does not provide specific requirements and limitations regarding investment ratings. Per
 GASB Statement No. 40 (GASB 40), Deposit and Investment Risk Disclosures, an amendment to GASB Statement No. 3,
 unless there is information to the contrary, obligations of the U.S. government or obligations explicitly guaranteed by the
 U.S. government are not considered to have credit risk and do not require disclosure of credit quality. The following
 tables present each applicable investment type grouped by rating as of August 31, 2010 and 2009:

                                                                         August 31, 2010
                                              MOODY’S                 STANDARD & POOR’S                     FITCH
Investment Type                          Fair Value   Rating           Fair Value      Rating         Fair Value      Rating
U.S. Government Agency
  Obligations                     $     324,875,610.04     Aaa         324,875,610.04     AAA        322,914,049.79    AAA
                                                     -       -                      -       -          1,961,560.25     NR
Corporate Obligations                     8,223,392.16     Aaa           6,901,505.71     AAA          6,085,847.14    AAA
                                         56,381,201.51      Aa          58,557,196.87      AA         51,588,649.38     AA
                                        176,110,218.57      A          185,840,246.27      A         172,368,751.31     A
                                        136,758,793.59     Baa         146,858,954.91     BBB         92,954,716.08    BBB
                                         11,760,282.23      Ba           7,570,995.94      BB          8,058,525.74     BB
                                          6,898,554.69      B            4,957,886.25       B          3,206,567.73      B
                                          1,218,490.00     Caa           5,648,587.04      NR         82,072,315.61     NR
                                         18,984,440.24    Unrated                   -       -                     -      -
Corporate Asset and Mortgage
 Backed Securities                      110,862,260.34     Aaa          98,287,325.21     AAA        154,924,572.86    AAA
                                         40,124,094.45      Aa          14,776,711.82     AA           5,324,681.21     AA
                                         38,542,666.79      A           95,772,543.66      A           2,824,057.46     A
                                         14,081,859.92     Baa          80,688,760.68     BBB          5,262,828.17    BBB
                                          4,341,734.40      Ba          43,804,506.82      BB          2,167,496.17     BB
                                         38,258,878.62      B           22,437,548.06       B          8,489,212.91      B
                                         52,648,258.75     Caa          32,563,066.29     CCC         16,304,181.40    CCC
                                          1,759,740.89      Ca           4,626,617.12      CC         13,057,671.41     CC
                                        128,395,352.57    Unrated          160,057.01      D           1,875,096.42      C
                                                     -       -          35,897,710.06      NR        218,785,048.72     NR
International Obligations
  (Government and Corporate)            641,121,206.45     Aaa         689,879,336.95     AAA        540,111,545.32    AAA
                                        139,844,089.50      Aa         139,120,098.83     AA         182,603,501.06     AA
                                        170,052,306.04      A          191,624,794.26      A         136,144,028.46     A
                                        105,094,833.06     Baa          54,441,239.89     BBB         56,597,255.89    BBB
                                         25,929,028.64      Ba          13,065,820.00      BB         27,357,541.67     BB
                                          1,630,984.49      B            2,958,484.49      B             571,726.80      B
                                        150,907,138.40    Unrated          949,000.00       C            949,000.00     CC
                                                     -       -         142,540,812.16      NR        290,244,987.38     NR
Fixed Income Money Market and
  Bond Mutual Fund                    2,404,965,480.29     Aaa       2,404,716,704.04    AAA          45,941,629.00    AAA
                                         61,699,709.20      Aa          61,699,709.20    AA           51,618,659.00     AA
                                              7,236.00      A           21,965,971.19   Unrated    2,390,822,096.43     NR
                                         21,709,958.94    Unrated                   -      -                      -      -
Miscellaneous                             1,059,475.00     Aaa           3,188,682.03    AAA           3,943,837.40     AA
                                        309,930,789.39      Aa         308,311,527.36    AA           15,424,418.60      A
                                          9,519,222.60      A           15,528,174.60     A            1,691,149.80    BBB
                                          4,774,430.30     Baa           4,600,720.50    BBB         328,147,285.31     NR
                                         23,922,773.82    Unrated       17,577,586.62     NR                      -      -
                                  $   5,242,394,491.88               5,242,394,491.88              5,242,394,491.88
                                                                    August 31, 2009
                                           MOODY’S                STANDARD & POOR’S                    FITCH
Investment Type                       Fair Value   Rating          Fair Value     Rating         Fair Value       Rating
U.S. Government Agency
  Obligations                   $    487,440,508.31     Aaa       487,440,508.31      AAA       485,198,804.81    AAA
                                                  -       -                    -        -         2,241,703.50     NR
Corporate Obligations                  8,437,119.56     Aaa        23,161,672.00      AAA         8,085,591.65    AAA
                                      64,360,215.62      Aa        42,469,848.74       AA        42,332,263.64     AA
                                     215,595,925.29      A        228,643,513.54       A        213,974,240.04     A
                                     133,724,773.51     Baa       147,448,316.14      BBB        98,453,259.61    BBB
                                      17,981,381.07      Ba         3,077,069.40       BB         5,518,020.80     BB
                                         142,662.50      B            914,483.62        B         8,361,279.24      B
                                      11,009,459.25    Unrated      5,536,633.36       NR        74,526,881.82     NR
Corporate Asset and Mortgage
 Backed Securities                   119,236,407.31     Aaa       237,565,530.97      AAA       123,151,626.82    AAA
                                      12,263,149.94      Aa        12,896,428.06      AA         16,386,789.29     AA
                                      19,555,546.78      A         22,629,397.90       A          6,684,957.33     BB
                                      14,779,833.41     Baa         2,281,645.53      BBB         3,335,668.20      B
                                      21,152,099.75      Ba        13,172,310.10       BB         7,501,532.78    CCC
                                      50,383,936.09      B          1,528,097.81        B        27,484,332.30     CC
                                     112,212,235.55     Caa       111,582,830.54      CCC        22,210,105.25      C
                                     112,911,440.56    Unrated      6,069,064.10       CC       255,739,637.42     NR
                                                  -       -         2,523,587.53       D                     -      -
                                                  -       -        52,245,756.85       NR                    -      -
International Obligations
  (Government and Corporate)         439,654,745.84     Aaa       407,319,313.96      AAA       332,348,949.24    AAA
                                      80,804,919.28      Aa        64,101,794.45      AA         71,006,002.75     AA
                                      98,260,388.98      A        123,573,300.63       A        100,570,139.40     A
                                      63,591,461.71     Baa        62,462,144.44      BBB        46,365,983.34    BBB
                                      32,832,321.99      Ba         7,023,007.94       BB        11,821,469.45     BB
                                       2,010,000.00      B          1,896,554.50        B         2,041,258.00      B
                                      22,520,699.24    Unrated      1,470,000.00      CCC       175,520,734.86     NR
                                                  -       -        71,828,421.12       NR                    -      -
Fixed Income Money Market and
  Bond Mutual Fund                  1,812,499,812.16    Aaa      1,812,211,517.47     AAA      1,887,262,724.74    NR
                                       61,298,516.00     Aa         69,569,679.28      Aa                     -     -
                                       13,464,396.58   Unrated        8,367,882.00    CCC                     -     -
                                                   -      -         (2,886,354.01)   Unrated                  -     -
Miscellaneous                           6,397,969.23    Aaa           8,971,299.68    AAA          3,607,010.05   AAA
                                      653,506,535.08     Aa        652,991,864.63     AA           3,054,446.85    AA
                                        1,569,195.60     A              224,040.35     A           1,618,438.60    A
                                        3,780,605.95    Baa           4,482,773.00    BBB          1,710,601.20   BBB
                                       12,850,936.95     Ba         12,850,936.95      BB        773,543,009.90    NR
                                      103,949,340.79     B         103,949,340.79       B                     -     -
                                        1,478,923.00   Unrated           63,251.20     NR                     -     -

                                $   4,811,657,462.88             4,811,657,462.88              4,811,657,462.88
(B) Concentrations of Credit Risk – The System’s investment policy statements contain the limitation that no more than
five percent of the market value of fixed income securities may be invested in corporate or municipal bonds of a single
issuer. As of August 31, 2010 and 2009, the System did not hold any direct investments in any one issuer of corporate or
municipal bonds that were five percent or more of the market value of the System’s fixed income investments.

(C) Custodial Credit Risk – Custodial credit risk for deposits is the risk that, in the event of the failure of a depository
financial institution, the System will not be able to recover its deposits or will not be able to recover collateral securities
that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the
failure of the counterparty to a transaction, the System will not be able to recover the value of its investment or collateral
securities that are in the possession of another party. Texas State Statutes and the System’s investment policy statements
do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or
investments. As of August 31, 2010 and 2009, the System did not have any deposits or investments that are exposed to
custodial credit risk.
(D) Interest Rate Risk – Interest rate risk is the risk that changes in market interest rates will adversely affect the fair
value of an investment. Generally, the longer the maturity of an investment the greater the sensitivity of its fair value to
changes in market interest rates. Interest rate risk inherent in the System’s investments is measured by monitoring the
modified duration of the overall investment portfolio. Modified duration estimates the sensitivity of the System’s
investments to changes in interest rates. The System has no specific policy statement limitations with respect to its
overall modified duration. The following table summarizes the System’s modified duration by investment type as of
August 31, 2010 and 2009:

                                                             August 31, 2010                    August 31, 2009
                                                                           Modified                           Modified
                     Investment Type                   Fair Value          Duration       Fair Value          Duration

Investments in Securities:
U.S. Government Guaranteed:
   U.S. Treasury Bonds and Notes                 $    302,266,841.14           9.95       180,720,952.10          9.25
   U.S. Treasury Strips                                11,351,847.36           1.07        11,716,403.04          2.09
   U.S. Treasury Bills                                 16,696,138.19           0.12        12,965,183.62          0.47
   U.S. Treasury Inflation Protected                     1,926,040.08          22.11       14,908,084.29          3.55
   U.S. Agency Asset Backed                            13,279,266.87           4.84        80,083,035.79          2.22
      Total U.S. Government Guaranteed                345,520,133.64           9.05       300,393,658.84          6.44

U.S. Government Non-Guaranteed:
   U.S. Agency                                           8,961,973.01          4.57        12,971,134.26          2.57
   U.S. Agency Asset Backed                           315,913,637.03           2.41       468,772,065.06          3.49
   U.S. Agency Commercial Paper                                     -            -          5,697,308.99          0.22
      Total U.S. Government Non-Guaranteed            324,875,610.04           2.47       487,440,508.31          3.43

             Total U.S. Government                    670,395,743.68           5.86       787,834,167.15          4.57

Corporate Obligations:
   Domestic                                           845,350,219.72           5.46       913,746,186.19          5.02
   Foreign                                            450,488,536.19           4.75       273,604,679.37          4.57
      Total Corporate Obligations                    1,295,838,755.91          5.22     1,187,350,865.56          4.92

Foreign Government and Provincial Obligations         784,180,288.56           6.15       466,069,857.67          6.33
Other Debt Securities                                  24,679,545.33           11.77       12,904,381.35          9.46

             Total Debt Securities                   2,775,094,333.48          5.69     2,454,159,271.73          5.10

Other Investment Funds - Debt                         324,527,145.78           6.07       770,629,125.25          5.79
Fixed Income Money Market and Mutual Funds           2,383,051,765.23          0.10     1,795,730,009.74          0.10
             Total                               $   5,482,673,244.49          3.29     5,020,518,406.72          3.42
Deposit with Brokers for Derivative Contracts:
U.S. Government Guaranteed:
   U.S. Treasury                                 $     37,610,142.39           1.04        53,453,970.87          0.76
      Total U.S. Government Guaranteed                 37,610,142.39           1.04        53,453,970.87          0.76

Cash                                                  105,473,448.23             -         48,777,275.62           -
Total Deposit with Brokers for Derivative
Contracts                                        $    143,083,590.62           0.27       102,231,246.49          0.40
The System has purchased options on ten year constant maturity swaps, with expiries ranging from five to seven years,
as insurance against possible future increases in inflation. As of August 31, 2010 and 2009, these options had a notional
value of $4,000,000,000 and a fair value of $13,834,020 and $34,046,921, respectively. The risk of loss on these options
is limited to the premiums paid by the System upon the purchase of the options, which totaled $21,406,251 as of August
31, 2010 and 2009. It is estimated that these options would adjust the 2010 duration of total debt securities of 5.69
downward by approximately 0.16, and the total duration of 3.29 downward by approximately 0.16. It is estimated that
these options would adjust the 2009 duration of total debt securities of 5.10 downward by approximately 0.40, and the
total duration of 3.42 downward by approximately 0.28. One of the System’s external managers also uses options and
interest rate and credit default swaps to modify the duration of their portfolio in a cost efficient manner. It is estimated
by management that these positions held by the external manager would not significantly adjust the duration as presented
above.

(E) Investments with Fair Values That Are Highly Sensitive to Interest Rate Changes – The System may invest in various
mortgage backed securities, such as collateralized mortgage backed obligations. The System also may invest in
investments that have floating rates with periodic coupon changes in market rates, zero coupon bonds and stripped
treasury and agency securities created from coupon securities. No percentage of holdings limitations are specified in the
investment policy statements regarding these types of securities. As of August 31, 2010 and 2009, the System’s
investments included the following investments that are highly sensitive to interest rate changes:

   Collateralized mortgage obligations which are subject to early payment in a period of declining interest rates. The
    resultant reduction in expected total cash flows will affect the fair value of these securities. As of August 31, 2010
    and 2009, these securities amounted to $587,381,754 and $607,164,579, respectively.

   Mortgage backed securities which are subject to early payment in a period of declining interest rates. The resultant
    reduction in expected total cash flows will affect the fair value of these securities. As of August 31, 2010 and 2009,
    these securities amounted to $130,131,246 and $330,638,497, respectively.

   Asset backed securities which are backed by home equity loans, auto loans, equipment loans and credit card
    receivables. Prepayments by the obligees of the underlying assets in periods of decreasing interest rates could
    reduce or eliminate the stream of income that would have been received. As of August 31, 2010 and 2009 these
    securities amounted to $63,526,921 and $97,100,875, respectively.

(F) Foreign Currency Risk – Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair
value of the System’s non-U.S. dollar investments. There are no limitations on investments in non-U.S. denominated
bonds or common stocks in relation to the System’s total fixed income and developed country equity exposures in the
System’s investment policy statements.

During the year ended August 31, 2009, one of the System’s external managers employed an investment strategy in
which they hedged their long non-U.S. investment positions back to the U.S. dollar by utilizing currency transactions in
amounts equal to the long investment position. During the year ended August 31, 2010, they changed their strategy to
hedge their investments against the Euro dollar. In the following 2010 table the negative amounts shown for the British
Pound, Canadian Dollar, Czech Koruna, Hong Kong Dollar, Norwegian Kroner and Swiss Franc in the cash and cash
equivalents section reflect this strategy. In the following 2009 table the negative amounts shown for the British Pound,
Danish Krone, Euro, Hong Kong Dollar, and Swiss Franc in the cash and cash equivalents section reflect these strategies.
The negative amounts offset long positions presented in the foreign common stock section.
       Classification between domestic common stock and foreign common stock is based on the country of domicile of the
       issuer, not the currency in which the security is traded. The following tables summarize the System’s exposure to non-
       U.S. dollar investments by asset type as of August 31, 2010 and 2009.
                                                       2010                                                                          2010
                Investment Type                      Fair Value                          Investment Type                           Fair Value
Foreign Common Stock:                                              Foreign Government & Provincial Obligations (cont.):
   Australian Dollar                           $      55,442,512       South Korean Won                                        $    30,222,558
   Brazilian Real                                     85,979,748       Swedish Krona                                                28,273,040
   British Pound                                     170,202,797           Total Foreign Government & Provincial Obligations       771,805,967
   Canadian Dollar                                    63,801,561   Corporate Obligations:
   Chilean Peso                                        5,049,483       Australian Dollar                                            58,921,662
   Czech Koruna                                        4,945,019       British Pound                                                21,984,702
   Danish Krone                                        1,942,788       Canadian Dollar                                               4,260,390
   Egyptian Pound                                      6,196,019       Danish Krone                                                  5,763,835
   Euro                                              213,106,798       Euro                                                          2,104,738
   Hong Kong Dollar                                  283,561,527       Hong Kong Dollar                                            220,755,645
   Hungarian Forint                                    3,915,997       Iceland Krona                                                 1,547,686
   Indian Rupee                                       18,405,904       Japanese Yen                                                  8,348,338
   Indonesian Rupian                                  23,811,607          Total Corporate Obligations                              323,686,996
   Israeli Shekel                                        165,961   Convertible Securities:
   Japanese Yen                                       90,142,925       Swiss Franc                                                      89,238
   Malaysian Ringgit                                  39,550,679    Investment Funds - Emerging Markets:
   Mexican Peso                                       25,854,192       Brazilian Real                                                2,264,401
   Moroccan Dirham                                       840,361   Private Investments:
   Norwegian Kroner                                    4,218,719       Canadian Dollar                                               7,556,618
   Pakistan Rupee                                      2,060,424       Euro                                                        251,430,073
   Peruvian Neuvo Sol                                     37,996          Total Private Investments                                258,986,691
   Philippines Peso                                    3,893,800   Cash and Cash Equivalents:
   Polish Zloty                                       15,151,552       Australian Dollar                                             1,217,770
   Singapore Dollar                                   26,980,574       Brazilian Real                                                1,800,961
   South African Rand                                 58,766,238       British Pound                                                (1,065,270)
   South Korean Won                                  133,316,306       Canadian Dollar                                                (298,760)
   Swedish Krona                                      16,322,456       Chilean Peso                                                      2,946
   Swiss Franc                                        43,657,774       Czech Koruna                                                   (527,114)
   Taiwan Dollar                                      47,004,251       Danish Krone                                                     62,149
   Thai Baht                                          33,505,580       Egyptian Pound                                                   93,732
   Turkish Lira                                       24,494,256       Euro                                                         80,775,673
      Total Foreign Common Stock                   1,502,325,804       Hong Kong Dollar                                            (17,455,902)
Foreign Preferred Stock:                                               Hungarian Forint                                                  2,870
   Brazilian Real                                    60,612,661        Indian Rupee                                                     92,183
   Euro                                               1,607,097        Indonesian Rupian                                                82,162
      Total Private Investments                      62,219,758        Israeli Shekel                                                   39,983
Foreign Government & Provincial Obligations:                           Japanese Yen                                                    647,592
   Australian Dollar                                 53,554,754        Malaysian Ringgit                                                86,299
   Brazilian Real                                    24,197,004        Mexican Peso                                                    346,873
   British Pounds                                   108,122,956        Moroccan Dirham                                                  31,420
   Canadian Dollar                                   76,680,886        New Zealand Dollar                                                1,009
   Euro                                             169,063,438        Norwegian Kroner                                             (1,774,328)
   Hong Kong Dollar                                   1,073,351        Peruvian Nuevo Sol                                                   38
   Hungarian Forint                                  12,327,612        Philippines Peso                                                 37,989
   Indonesian Rupian                                 22,606,245        Polish Zloty                                                    231,338
   Japanese Yen                                      97,800,205        Singapore Dollar                                                    944
   Malaysian Ringgit                                 33,519,492        South African Rand                                              147,041
   Mexican Peso                                      21,125,752        South Korean Won                                                149,651
   New Zealand Dollar                                23,488,825        Swedish Krona                                                   146,320
   Norwegian Kroner                                   6,637,426        Swiss Franc                                                 (27,216,374)
   Polish Zloty                                      40,345,383        Taiwan Dollar                                                 1,299,158
   Singapore Dollar                                   3,784,599        Thailand Baht                                                    72,731
   South African Rand                                18,982,441        Turkish Lira                                                          4
                                                                          Total Cash and Cash Equivalents                           39,031,088
                                             2010                                                       2010
             Investment Type (cont.)       Fair Value                          Investment Type        Fair Value
Written Options:                                             Euro                                $          77,841
  British Pound                        $        (1,196)      Japanese Yen                                  718,497
  Euro                                        (104,316)         Total Swaps                              1,535,274
      Total Written Options                   (105,512)   Futures:
Swaps:                                                       British Pound                                 81,245
  Australian Dollar                            299,197       Canadian Dollar                               81,561
  British Pound                                184,492       Euro                                       3,321,721
  Brazilian Real                                88,005         Total Futures                            3,484,527
  Canadian Dollar                              167,242
                                                                   Total                         $   2,965,324,232
                                         2009                                                                        2009
                Investment Type        Fair Value                         Investment Type                          Fair Value
Domestic Common Stock:                               Foreign Preferred Stock:
   Canadian Dollar                 $      351,079       Brazilian Real                                         $    17,687,599
Foreign Common Stock:                                Foreign Government & Provincial Obligations:
   Australian Dollar                    45,419,591      Australian Dollar                                           54,928,166
   Brazilian Real                        9,372,252      Brazilian Real                                              21,544,852
   British Pound                       108,408,308      British Pounds                                              33,181,009
   Canadian Dollar                      32,697,962      Canadian Dollar                                             31,973,362
   Czech Koruna                          1,079,205      Euro                                                       142,037,242
   Danish Krone                          3,850,041      Indonesian Rupian                                           15,041,360
   Egyptian Pound                        5,865,143      Japanese Yen                                                17,089,267
   Euro                                217,371,065      Malaysian Ringgit                                           27,582,671
   Hong Kong Dollar                    177,861,585      Mexican Peso                                                21,032,717
   Hungarian Forint                      3,421,587      New Zealand Dollar                                          20,714,017
   Indonesian Rupian                     7,710,154      Norwegian Kroner                                            14,744,668
   Israeli Shekel                          747,353      Polish Zloty                                                22,650,656
   Japanese Yen                         99,301,437      South African Rand                                           8,219,018
   Malaysian Ringgit                     9,587,001      Swedish Krona                                               29,664,864
   Mexican Peso                          8,955,567         Total Foreign Government & Provincial Obligations       460,403,869
   Moroccan Dirham                         848,693   Corporate Obligations:
   Norwegian Kroner                      1,194,115      Australian Dollar                                           33,547,977
   Pakistan Rupee                        2,043,367      British Pound                                               10,982,746
   Philippines Peso                      2,715,741      Canadian Dollar                                              7,776,960
   Polish Zloty                          2,981,991      Danish Krone                                                   403,740
   Singapore Dollar                     22,955,791      Euro                                                        91,524,773
   South African Rand                   16,635,975      Hong Kong Dollar                                             1,553,248
   South Korean Won                     36,877,895      Japanese Yen                                                 2,581,997
   Swedish Krona                         2,961,521         Total Corporate Obligations                             148,371,441
   Swiss Franc                          49,997,444   Purchased Options:
   Thai Baht                            14,857,350      Euro                                                         1,102,398
   Turkish Lira                          6,701,937      Indian Rupee                                                 2,508,334
      Total Foreign Common Stock       892,420,071      Swiss Franc                                                  2,547,495
Other Equity Securities:                                   Total Purchased Options                                   6,158,227
   Canadian Dollar                            158
                                             2009                                                         2009
            Investment Type (cont.)        Fair Value                         Investment Type           Fair Value
Private Investments:                                         Polish Zloty                         $          106,100
   British Pound                      $     1,938,235        Singapore Dollar                                    973
   Canadian Dollar                          2,423,852        South African Rand                                7,383
   Euro                                   299,738,176        South Korean Won                                 30,732
      Total Private Investments           304,100,263        Swedish Krona                                    17,031
Cash and Cash Equivalents:                                   Swiss Franc                                (53,474,560)
   Australian Dollar                         1,276,181       Taiwan Dollar                                   995,949
   Brazilian Real                              312,250       Thailand Baht                                     9,736
   British Pound                           (13,237,070)      Turkish Lira                                    164,054
   Canadian Dollar                             659,615          Total Cash and Cash Equivalents       (219,449,868)
   Czech Koruna                                120,409    Swaps:
   Danish Krone                             (3,861,174)      Australian Dollar                            (551,883)
   Euro                                   (146,854,773)      British Pound                                 592,518
   Hong Kong Dollar                         (6,822,470)      Canadian Dollar                                 1,569
   Hungarian Forint                            104,427       Euro                                          824,496
   Indonesian Rupian                            20,476       Japanese Yen                                  379,373
   Indian Rupee                                 17,199       Swedish Krona                                 229,269
   Israeli Shekel                               36,435          Total Swaps                              1,475,342
   Japanese Yen                                718,100    Futures:
   Malaysian Ringgit                            41,813       British Pound                                   11,479
   Mexican Peso                                 14,258       Euro                                            56,452
   Moroccan Dirham                              41,225       Japanese Yen                                (1,140,626)
   New Zealand Dollar                           92,875          Total Futures                            (1,072,695)
   Norwegian Kroner                                386
   Philippines Peso                             12,572             Total                          $   1,610,445,486
  (G) Counterparty (Credit) Risk – The derivative instruments utilized by the System contain varying degrees of off-
  balance sheet risk whereby changes in the fair values of securities underlying the financial instruments may exceed the
  amounts recognized in the consolidated statement of revenues, expenses and changes in net assets.. The System
  manages these risks on an aggregate basis along with the risks associated with its other investments as part of its overall
  risk management process.

  The System had gross counterparty exposure as follows as of August 31, 2010 and 2009 for options, swaps, and foreign
  currency exchange contracts:

Options
                Assets               Liabilities                 Assets                   Liabilities
                                                            Fair Value as of           Fair Value as of         Counterparty
               Notional               Notional              August 31, 2010            August 31, 2010            Rating
        $     4,004,964,642   $        157,414,231    $            18,849,537    $             2,477,400               A
                   212,282              22,450,280                    212,283                    294,523              AA
        $     4,005,176,924   $        179,864,511    $            19,061,820    $             2,771,923

Swaps
                Assets               Liabilities                 Assets                   Liabilities
                                                            Fair Value as of           Fair Value as of         Counterparty
               Notional               Notional              August 31, 2010            August 31, 2010            Rating
        $      102,598,272    $        145,925,222    $              4,030,989   $             3,794,889               A
                96,080,793              76,629,391                   1,307,007                   863,041              AA
        $      198,679,065    $        222,554,613    $              5,337,996   $             4,657,930

FX Forwards
                Assets               Liabilities                 Assets                   Liabilities
                                                            Fair Value as of           Fair Value as of         Counterparty
               Notional               Notional              August 31, 2010            August 31, 2010            Rating
        $      357,284,138    $        249,578,860    $              8,019,409   $             4,649,691               A
               184,090,887             185,978,648                   4,202,193                 4,150,696              AA
        $      541,375,025    $        435,557,508    $            12,221,602    $             8,800,387
Options
                Assets              Liabilities                Assets                  Liabilities
                                                         Fair Value as of           Fair Value as of         Counterparty
               Notional              Notional            August 31, 2009            August 31, 2009            Rating
        $     4,403,149,674    $      81,100,000    $           41,977,712      $             362,615              A
                           -           7,400,000                            -                  38,281             AA
        $     4,403,149,674    $      88,500,000    $           41,977,712      $             400,896

Swaps
                Assets              Liabilities                Assets                  Liabilities
                                                         Fair Value as of           Fair Value as of         Counterparty
               Notional              Notional            August 31, 2009            August 31, 2009            Rating
        $      412,498,425     $     299,256,203    $            7,652,574      $           4,334,610              A
                 1,200,000             5,300,000                     24,951                   394,387             AA
        $      413,698,425     $     304,556,203    $             7,677,525     $           4,728,997



FX Forwards
                Assets              Liabilities                Assets                  Liabilities
                                                         Fair Value as of           Fair Value as of         Counterparty
               Notional              Notional            August 31, 2009            August 31, 2009            Rating
        $      427,170,620     $     304,013,262    $            8,940,511      $           5,596,472              A
                61,841,031            93,718,484                   579,005                  1,936,942             AA
        $      489,011,651     $     397,731,746    $            9,519,516      $           7,533,414


  As of August 31, 2010 and 2009, the System also had investments in futures contracts. Futures contracts expose the
  System to minimal counterparty credit risk since futures are exchange traded and the exchange’s clearinghouse, as
  counterparty to all exchange traded futures, guarantees the futures against default.

  Counterparty risk for swaps, options and foreign currency exchange contracts is mitigated by having master netting
  arrangements between the System and its counterparties, and by the posting of collateral on a daily basis by the
  counterparty to the System to cover the System’s exposure to a counterparty above the limits set in place in each master
  netting agreement. Collateral posted by counterparties for net assets is held by the System in one of its accounts at the
  System’s custodian bank. As of August 31, 2010 and 2009, the System held $23,140,000 and $37,288,140, respectively,
  as collateral related to derivative instruments other than futures, and had on deposit with brokers $68,905,010 and
  $1,883,005, respectively, as collateral related to derivative instruments other than futures.

  SECURITIES LENDING
  In accordance with the prudent investor investment standards, the System participates in a securities lending program.
  The System began the program, under a contract with the System’s lending agent, on September 1, 1995. The lending
  agent is authorized to lend any securities held by the System’s custodian except those securities, which the policy
  guidelines prohibit lending. At August 31, 2010 and 2009, there were a total of $451,075,933 and $369,479,336,
  respectively, of securities out on loan to brokers/dealers. This consisted of $368,544,960 domestic and $86,821,925
  international loans at August 31, 2010 and $287,474,777 domestic and $82,004,559 international loans at
  August 31, 2009. The value of collateral held for these securities consisted of $468,365,171 cash at August 31, 2010 and
  $381,688,393 cash at August 31, 2009. Investments received as collateral for securities lending activities are not
  recorded as assets because the investments remain under the control of the transferor, except in the event of default.

  In security lending transactions, the System transfers its securities to brokers/dealers for collateral, which may be cash,
  securities issued or guaranteed by the United States government or its agencies, and irrevocable bank letters of credit,
  and simultaneously agrees to return the collateral for the same securities in the future.
  Cash received as collateral for securities lending activities is invested and reinvested in a non-commingled pool
  exclusively for the benefit of the System. The pool is managed in accordance with investment guidelines established in
  the securities lending contract between the System and its securities lending agent. Pool investments are valued at cost
  which is indicative of fair value. The maturities of the investments in the pool do not necessarily match the term of the
  loans, rather the pool is managed to maintain a maximum dollar weighted average maturity of 60 days and an overnight
  liquidity of 20 percent. The System was collateralized 104 percent on August 31, 2010 and 103 percent on
  August 31, 2009 for securities on loan collateralized by cash. The System’s collateral pool investments, rating by
  NRSRO and weighted average maturity as of August 31, 2010 and 2009, are shown in the following table:

                                                      August 31, 2010                              August 31, 2009
                                                                        Weighted                                     Weighted
Description                              Fair Value         Rating      Average    Fair Value            Rating      Average
Repurchase Agreements                $   336,644,917       No Rating       1        253,125,381        No Rating        1
Commercial Paper                          77,223,823           P           35        54,095,362            P            31

Corporate Obligations                       5,860,350         AA                     20,501,471           AA
Corporate Obligations                                 -        A                        500,240            A
  Total Corporate Obligations               5,860,350                      56        21,001,711                         11

International Obligations                 11,300,898          AA                      6,992,230           AA
International Obligations                 17,027,440           A                      3,700,444            A
  Total International Obligations         28,328,338                       20        10,692,674                         41


U.S. Treasury Securities                              -        P           -         13,294,976            P            96
Negotiable Certificates of Deposit        23,196,730           P           63        29,988,587            P            68
Other Receivables/Payables                 (2,888,987)     Not Rated       -           (510,298)       Not Rated        -

  Total Collateral Pool Investment   $   468,365,171                       12       381,688,393                         16


  Collateral pool investments are uninsured and are held by the securities lending agent, in its name, on behalf of the
  System, except for the investments in repurchase agreements, which are held in the securities lending agent’s name by a
  third party custodian not affiliated with the System or the borrower of the associated loaned securities. Therefore, the
  collateral pool is not exposed to custodial credit risk, because the pool investments are not held by counterparties to the
  lending transactions or a counterparties’ trust department or agent.

  Lending income is earned if the returns on those investments exceed the “rebate” paid to borrowers of the securities. The
  income is then shared with the lending agent based on a contractually negotiated rate split. If the investment of the cash
  collateral does not provide a return exceeding the rebate or if the investment incurs a loss of principal, part of the
  payment to the borrower would come from the System’s resources and the lending agent based on the rate split.

  Loans that are collateralized with securities generate income when the borrower pays a loan premium or fee for the
  securities loan. This income is split with the same ratio as the earnings for cash collateral. The collateral pledged to the
  System by the borrower is custodied by the lending agent or through a third party arrangement. These securities held as
  collateral are not available to the System for selling or pledging unless the borrower is in default of the loan. On
  August 31, 2010 and 2009, the System was collateralized 104 percent and 103 percent, respectively, for securities on
  loan which were collateralized by securities.

  The collateral received must have a fair value of 102 percent of the loaned securities of United States issuers. If the fair
  value of the collateral held in connection with loans of securities of United States issuers is less than 100 percent at the
  close of trading on any business day, the borrower is required to deliver additional collateral by the close of the next
  business day to equal 102 percent of the fair value.

  For non-U. S. issuers, the collateral should remain at 105 percent of the fair value of the loaned securities at the close of
  any business day. If it falls below 105 percent, the borrower must deliver additional collateral by the close of the
  following business day. The System was collateralized 110 percent for international loans on August 31, 2010 and 106
  percent for international loans on August 31, 2009.
In the event of default, where the borrower is unable to return the securities loaned, the System has authorized the
lending agent to seize the collateral held. The collateral is then used to replace the borrowed securities where possible.
Due to some market conditions, it is possible that the original securities cannot be replaced. If the collateral is
insufficient to replace the securities, the lending agent has indemnified the System from any loss due to borrower default.

At August 31, 2010 and 2009, the System had no credit risk exposure to borrowers because the amounts the System
owed to borrowers exceeded the amounts the borrowers owed the System.

There were no significant violations of legal or contractual provisions, no borrower or lending agent default losses and no
recoveries of prior period losses during the years ended August 31, 2010 and 2009.

DERIVATIVE FINANCIAL INSTRUMENTS
Derivative securities are financial instruments whose value is derived, in whole or in part, from the value of any one or more
underlying securities or assets, or index of securities or assets, such as stocks, bonds, commodities or currencies.
Derivatives cover a broad range of financial instruments, such as forwards, futures, options and swaps.

(A) Futures Contracts – Futures contracts are used to facilitate various trading strategies, primarily as a tool to increase
or decrease market exposure to various asset classes. The net liability is included in payables from restricted assets.
Futures contracts are marked to market daily; that is, they are valued at the close of business each day and a gain or loss
is recorded between the value of the contracts that day and on the previous day. The daily gain or loss difference is
referred to as the daily variation margin, which is settled in cash with the broker each morning for the amount of the
previous day’s mark to market. The amount that is settled in cash with the broker each morning is the carrying and fair
value of the futures contracts.

During the years ended August 31, 2010 and 2009, the asset classes that used futures include domestic and foreign
equities, domestic and foreign debt, and commodities. The change in fair value of open futures contracts for the year
ending August 31, 2010 was an increase in the amount of $20,495,541 which is included in the net increase (decrease) in
fair value of investments on the consolidated statement of revenues, expenses and changes in net assets. The change in
fair value of open futures contracts for the year ending August 31, 2009 was a decrease in the amount of $3,773,013
which is included in the net increase (decrease) in fair value of investments on the consolidated statement of revenues,
expenses and changes in net assets. The System had $97,318,581 and $137,636,381 on deposit with brokers for
collateral as margin for the futures contracts as of August 31, 2010 and 2009, respectively. Short futures may be used by
internal managers and a limited number of external managers of the System to hedge the System’s interest rate or
currency risk associated with security positions. The amount of the net realized gain on the futures contracts was
$146,447,214 for the year ended August 31, 2010. The amount of the net realized loss on the futures contracts was
$259,640,921 for the year ended August 31, 2009. The System executes such contracts either on major exchanges or
with major international financial institutions and minimizes market and credit risk associated with these contracts
through the managers’ various trading and credit monitoring techniques.

During the year ended August 31, 2010, one of the System’s investment managers trading in commodity futures on the
London Metals Exchange (LME) closed out various long contract positions with offsetting short contract positions. For
contracts traded and closed on the LME, cash settlement does not occur until the expiration date of the contract. The
gross notional value of these long and short positions are shown below with the associated pending cash settlement
amounts shown as the carrying and fair value as of August 31, 2010.
The following discloses the notional, carrying and fair values of futures contracts at August 31, 2010:

                                                     Notional Value at                   Carrying and Fair Value at
                                                     August 31, 2010                          August 31, 2010
                                                  Long               Short                Assets         Liabilities
 Domestic Equity Futures                  $       89,367,575                    -          272,800                 -
 Commodity Futures                             1,004,825,117          48,250,541       16,646,764           162,294
 Domestic Fixed Income Futures                    92,711,250                    -          253,744                 -
 International Fixed Income Futures               53,569,544        641,438,625          3,606,457          121,930
 Totals                                   $    1,240,473,486        689,689,166        20,779,765           284,224

The following discloses the notional, carrying and fair values of futures contracts at August 31, 2009.

                                                      Notional Value at                  Carrying and Fair Value at
                                                      August 31, 2009                         August 31, 2009
                                                   Long               Short               Assets         Liabilities
 Domestic Equity Futures                  $      360,463,950                    -                 -       2,721,950
 International Equity Futures                    119,673,158                    -                 -       1,140,626
 Commodity Futures                               428,162,601                    -                 -                -
 Domestic Fixed Income Futures                     7,970,875                    -           21,633                 -
 International Fixed Income Futures              215,320,369                    -           70,077            2,146
 Totals                                   $    1,131,590,953                    -           91,710        3,864,722

(B) Foreign Currency Exchange Contracts – The System enters into forward foreign currency exchange contracts to
hedge against foreign currency exchange rate risks 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 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 System’s net equity
therein, representing unrealized gain or loss on the contracts, as measured by the difference between the forward foreign
exchange rates at the dates of entry into the contracts and the forward rates at the reporting date, is included in other
receivables and payable from restricted assets. These instruments involve market and/or credit risk in excess of the
amount recognized in the consolidated balance sheet. Risks arise from the possible inability of counter-parties to meet
the terms of their contracts and from movement in currency and securities values and interest rates.
 The following tables summarize, by currency, the contractual amounts of the System’s foreign exchange contracts at
 August 31, 2010 and 2009. Foreign currency amounts are translated at exchange rates as of August 31, 2010 and 2009.
 The “Net Buy” amounts represent the U. S. dollar equivalent of net commitments to purchase foreign currencies and the
 “Net Sell” amounts represent the U. S. dollar equivalent of net commitments to sell foreign currencies.

                                                                               Unrealized Gains        Unrealized Losses
                                                                                 on Foreign               on Foreign
                                                                                  Exchange                Exchange
                                  Net Buy                  Net Sell               Contracts                Contracts
         Currency              August 31, 2010          August 31, 2010        August 31, 2010         August 31, 2010
Australian Dollar            $                -             38,606,666                  704,247                  498,528
Brazilian Real                         485,814                         -                  4,303                      968
British Pound                      51,818,807                          -              1,221,371                  695,003
Canadian Dollar                        661,927               6,776,763                  308,745                   77,386
Chilean Peso                            19,756                         -                      -                      528
Chinese Yuan Renminbi              24,656,050                          -                106,115                  963,061
Danish Krone                        2,859,588                          -                 86,000                        -
Egyptian Pound                           9,164                   19,813                   2,832                       94
Euro                                          -             95,982,483                1,171,540                1,812,269
Hong Kong Dollar                       227,527                  119,665                     465                      118
Hungarian Forint                              -                        -                408,943                  199,019
Indian Rupee                           474,844                         -                    301                    2,955
Indonesian Rupian                   2,837,711                          -                340,937                       75
Japanese Yen                       49,043,204                          -              4,683,098                2,473,916
Malaysian Ringgit                   2,948,835                          -                107,066                    4,236
Mexican Peso                           449,145                  393,790                 169,607                  273,593
New Zealand Dollar                  9,824,947                          -                345,771                   24,852
Norwegian Kroner                   32,271,318                          -                392,166                  120,239
Philippines Peso                              -                        -                    116                      142
Polish Zloty                            50,147                  111,749                     650                      164
Singapore Dollar                    1,163,319                          -                 42,350                    6,265
South African Rand                  2,105,086                          -                 99,028                    2,610
South Korean Won                    7,915,537                          -                 35,417                  222,825
Swedish Krona                      11,142,730                          -                198,728                1,279,338
Swiss Franc                        10,934,434                          -                360,000                   81,890
Taiwan Dollar                       3,161,484                          -                      -                   48,892
Thailand Baht                       1,613,013                          -                 64,427                   11,193
Turkish Lira                       24,139,844                          -              1,367,378                      228
        TOTAL                $       240,814,231            142,010,929               12,221,601                8,800,387

 The change in fair value of open foreign currency exchange contracts for the year ending August 31, 2010 was an
 increase in the amount of $3,421,214, which is included in the net increase (decrease) in fair value of investments on the
 consolidated statement of revenues, expenses and changes in net assets.
                                                                               Unrealized Gains        Unrealized Losses
                                                                                 on Foreign               on Foreign
                                                                                  Exchange                Exchange
                                  Net Buy                  Net Sell               Contracts                Contracts
         Currency              August 31, 2009          August 31, 2009        August 31, 2009         August 31, 2009
Australian Dollar            $                -             46,387,085                        -                  547,057
Brazilian Real                      5,471,611                          -                329,073                        -
British Pound                      83,264,885                          -                783,671                1,362,229
Bulgarian Lev                                 -              2,479,866                        -                   57,633
Canadian Dollar                     4,478,369                4,553,974                  156,202                  371,738
Chilean Peso                            18,125                    2,337                   5,065                    4,711
Chinese Yuan Renminbi              11,612,813                          -                 20,794                  421,008
Danish Krone                        2,591,770                          -                 61,841                        -
Estonia Kroon                                 -              3,635,475                        -                   95,481
Euro                               29,931,148                          -              1,107,618                1,469,752
Hong Kong Dollar                              -              1,064,744                        -                       21
Hungarian Forint                           633                         -                     45                        -
Indian Rupee                            17,614                    7,590                      75                      134
Indonesian Rupian                             -                        -                 40,071                        -
Japanese Yen                       71,561,923                          -              3,779,221                2,110,167
Malaysian Ringgit                   1,268,041                          -                 17,102                       72
Mexican Peso                        1,614,414                          -                155,578                        -
New Zealand Dollar                            -              5,646,111                    1,011                  164,353
Norwegian Kroner                    2,558,261                          -                742,295                  466,988
Philippines Peso                         6,003                   17,332                      87                       30
Singapore Dollar                    1,097,748                          -                 12,378                      101
South African Rand                  1,526,112                          -                290,187                        -
South Korean Won                   35,915,498                          -                304,037                   62,179
Swedish Krona                       4,026,543                          -              1,449,985                  393,265
Taiwan Dollar                       2,801,781                          -                  6,189                    6,495
Thailand Baht                       1,262,632                          -                 12,091                        -
Turkish Lira                        5,435,511                          -                244,900                        -
        TOTAL                $       266,461,435              63,794,514               9,519,516                7,533,414

 The change in fair value of open foreign currency exchange contracts for the year ending August 31, 2009 was an
 increase in the amount of $2,138,112, which is included in the net increase (decrease) in fair value of investments on the
 consolidated statement of revenues, expenses and changes in net assets.
(C) Written Options – Written options are used to alter the market (systematic) exposure without trading the underlying
cash market securities, and to hedge and control risks, so that the actual risk/return profile is more closely aligned with
the target risk/return profile. They are included in payables from restricted assets. During the year, the System wrote
call options were written on Treasury Notes, commodity, domestic and international equity indexes, and exchange traded
funds. The following discloses the contracts outstanding, the expiration date and the fair values of the outstanding
written call options contracts as of August 31, 2010:

                                                                                              Fair Value
                                                                                          at August 31, 2010
                                                                   Expiration
  Type                  Underlying                 Contracts         Date              Assets         Liabilities
 Interest Rate Swap
              U.S. 3 month Libor                   33,100,000         10/29/10   $              -       2,186,321

 Credit Default Swap
             British Petroleum                      6,100,000         12/15/10                  -           9,165

 Currency
              U.S. Dollar vs. Euro                     17,000         09/09/10                  -            945
              U.S. Dollar vs. Euro                     49,000         09/22/10                  -         39,680
              U.S. Dollar vs. Mexican Peso             15,000         09/22/10                  -              -
              U.S. Dollar vs. South Korean Won         14,000         09/07/10                  -              -
              U.S. Dollar vs. British Pound            17,000         09/15/10                  -          1,196
                                                                                                -         41,821

 Equity
              MetroPCS Communications                    270          11/20/10                  -         20,250

                                                                                 $              -       2,257,557

The fair value is included on the consolidated balance sheet in payable from restricted assets. The change in fair value of
open call options for the year ending August 31, 2010, was a decrease in the amount of $1,877,961, which is included in
the net increase (decrease) in fair value of investments on the consolidated statement of revenues, expenses and changes
in net assets. The System recognized gains in the amount of $1,957,839 on call options written, which are included in
investment income on the consolidated statement of revenues, expenses and changes in net assets for the year ended
August 31, 2010.
The System also wrote put options on Treasury note and Euro Bund futures, domestic and international equities, interest
rate swaps and various currencies for the year ended August 31, 2010. The following discloses the contracts
outstanding, the expiration date and the fair values of the outstanding written put options contracts as of
August 31, 2010:

                                                                                              Fair Value
                                                                                          at August 31, 2010
                                                                   Expiration
     Type                Underlying               Contracts          Date             Assets           Liabilities
    Interest Rate Swap
                 U.S 3 month Libor                 33,100,000        10/29/10   $              -               354
                 U.S. 3 month Libor                10,900,000        12/01/10                  -               291
                 U.S. 3 month Libor                59,400,000        06/18/12                  -           392,386
                 U.S. 3 month Libor                 8,400,000        07/10/12                  -             1,475
                                                                                               -           394,506

    Credit Default Swap
                British Petroleum                   6,100,000        12/15/10                  -            24,684

    Currency
                 U.S. Dollar vs. Euro                  57,000        09/09/10                  -            63,690

    Equity
                 Devon Energy                              47        10/16/10                  -             7,144
                 Papa John's International                110        10/16/10                  -             4,950
                 Walmart                                   48        09/18/10                  -            19,392
                                                                                               -            31,486

                                                                                $              -   $       514,366

The fair value is included on the consolidated balance sheet in payable from restricted assets. The change in fair value of
open put options for the year ending August 31, 2010, was an increase in the amount of $600,659, which is included in
the net increase (decrease) in fair value of investments on the consolidated statement of revenues, expenses and changes
in net assets. The System recognized gains in the amount of $3,887,596 on put options written which are included in
investment income on the consolidated statement of revenues, expenses and changes in net assets for the year ended
August 31, 2010.

For the year ended August 31, 2009, the System wrote call options on Treasury note futures, commodities, domestic and
international equities, interest rate swaps, equity indexes and exchange traded funds. The System recognized losses of
$15,271,864 on call options written, which are included in investment income on the consolidated statement of revenues,
expenses and changes in net assets for the year ended August 31, 2009. There were no written call options outstanding
as of August 31, 2009.
The System also wrote put options on Treasury note futures, commodities, domestic and international equities, interest
rate swaps, equity indexes and exchange traded funds for the year ended August 31, 2009. The following discloses the
contracts outstanding, the expiration date, and the fair values of the outstanding written put options contracts as of
August 31, 2009:

                                                                                             Fair Value
                                                                                         at August 31, 2009
                                                                  Expiration
     Type              Underlying                Contracts          Date              Assets          Liabilities
     Interest Rate Swap
              U.S. 3 month Libor                 71,800,000          11/23/09   $              -         333,002
              U.S. 3 month Libor                  8,700,000          12/15/09                  -           6,508
              U.S. 3 month Libor                 10,300,000          08/31/10                  -          61,386
                                                                                $              -         400,896

The fair value is included on the consolidated balance sheet in payable from restricted assets. The change in fair value of
open put options for the year ending August 31, 2009, was an increase in the amount of $402,181, which is included in
the net increase (decrease) in fair value of investments on the consolidated statement of revenues, expenses and changes
in net assets. The System recognized gains in the amount of $12,999,082 on put options written which are included in
investment income on the consolidated statement of revenues, expenses and changes in net assets for the year ended
August 31, 2009.
(D) Swaps – Swaps are used to adjust interest rate and yield curve exposures. During the year, the System entered into
interest rate, equity, inflation, credit default, and commodity swap contracts. They are included in other receivables and
payables from restricted assets. The following discloses the notional amount (presented in local currency), the coupon
rate and the fair values of the outstanding swap contracts as of August 31, 2010:

                                                                                         Fair Value at August 31, 2010
                                                                        Maturity
       Currency              Coupon               Notional Value         Date              Assets          Liabilities
  Interest Rate:
    Australian Dollar                 6.000%            5,800,000       12/15/2020   $       299,197                 -

    Brazilian Real                  11.290%             7,500,000       01/02/2012                  -                -
                                    11.330%            32,100,000       01/02/2012                  -                -

    Canadian Dollar                   2.500%           21,500,000       06/18/2013           118,767                 -
                                      5.750%            1,000,000       12/19/2028            48,475                 -

    Japanese Yen                      1.500%         1,550,000,000      12/15/2020           718,497                 -

    U.S. Dollar                       3.250%            2,500,000       09/02/2020           173,150                 -
                                      3.500%           24,600,000       09/02/2020                 -         2,266,117
                                                                                           1,358,086         2,266,117
  Credit Default
    British Pound                     0.530%            1,000,000       09/20/2010                  -            1,554
                                      0.670%              780,000       09/20/2014                  -            8,939

    Euro                              1.400%            2,100,000       06/20/2011                  -            4,540

    U.S. Dollar                       0.165%              300,000      03/202/2011                 -                34
                                      0.210%              200,000       06/20/2011                 -                56
                                      0.210%              600,000       09/20/2011             1,030                 -
                                      0.220%              200,000       09/20/2011               642                 -
                                      0.230%              200,000       03/20/2012               227                 -
                                      0.290%              800,000       03/20/2011                 -             1,048
                                      0.450%            1,000,000       09/20/2014                 -             2,533
                                      0.460%              600,000       09/20/2011             5,574                 -
                                      0.460%              600,000       03/20/2012            15,102                 -
                                      0.460%            1,000,000       12/20/2013                 -             8,715
                                      0.510%              500,000       06/20/2011             1,020                 -
                                      0.510%              800,000       03/20/2018             3,383                 -
                                      0.550%              600,000       09/20/2011             4,896                 -
                                      0.590%            1,000,000       09/20/2014            26,547                 -
                                      0.590%            1,000,000       09/20/2016             9,493                 -
                                      0.700%              800,000       12/20/2018            22,129                 -
                                      0.740%              700,000       03/20/2018               507                 -
                                      0.750%            1,000,000       12/20/2013                 -             7,449
                                      0.750%            1,000,000       09/20/2017             7,887                 -
                                      0.770%              800,000       03/20/2012             1,474                 -
                                      0.820%            1,000,000       03/20/2018               274                 -
                                      0.862%            1,800,000       11/20/2016           312,951                 -
                                      0.900%            1,000,000       06/20/2019            44,546                 -
                                      0.940%              400,000       06/20/2018            26,756                 -
                                      0.990%            1,000,000       09/20/2015            17,951                 -
                                      1.000%           22,300,000       06/20/2015           401,760                 -
                                      1.000%            2,400,000       12/20/2016           274,250                 -
                                      1.000%              200,000       06/20/2019             6,927                 -
                                      1.030%            2,000,000       03/20/2013           128,920                 -
                                      1.060%              900,000       03/20/2018            17,986                 -
                                      1.090%            1,000,000       06/20/2018            56,121                 -
                                      1.100%            1,700,000       09/20/2012                 -             9,555
                                      1.135%              500,000       09/20/2013               318                 -
                                      1.160%            2,000,000       03/20/2013                 -               570
                                      1.170%            1,000,000       06/20/2013                 -             8,260
                                      1.280%            1,000,000       06/20/2013                 -            11,520
    (Continued)                                                                         Fair Value at August 31, 2010
                                                                       Maturity
         Currency              Coupon             Notional Value        Date             Assets          Liabilities
 Credit Default (cont.)
   U.S. Dollar (cont.)                 1.290%             700,000      06/20/2011                -             1,868
                                       1.300%             900,000      06/20/2013                -            10,901
                                       1.320%           1,000,000      03/20/2017           17,736                 -
                                       1.350%             600,000      03/20/2018                -            28,959
                                       1.380%           2,000,000      03/20/2017                -            86,628
                                       1.400%           1,100,000      03/20/2018                -            27,198
                                       1.420%           1,500,000      03/20/2018                -            39,190
                                       1.450%           3,000,000      06/20/2013                -            39,474
                                       1.530%           1,000,000      09/20/2016           17,072                 -
                                       1.540%           1,000,000      12/20/2013          124,713                 -
                                       1.540%             400,000      06/20/2018                -             8,504
                                       1.600%           1,000,000      03/20/2013           49,834                 -
                                       1.620%           1,000,000      06/20/2012           62,988                 -
                                       1.720%             300,000      12/20/2013                -               865
                                       1.743%             900,000      06/20/2013                -            22,705
                                       1.780%             800,000      06/20/2013                -            21,072
                                       1.820%             700,000      06/20/2013                -            19,267
                                       1.920%           1,000,000      03/20/2017           70,223                 -
                                       2.700%           1,000,000      03/20/2019                -            26,406
                                       2.930%             300,000      06/20/2015                -            18,867
                                       3.460%           1,700,000      06/20/2017                -           193,939
                                       4.230%           1,500,000      12/20/2013                -           177,633
                                       5.000%             700,000      09/20/2015           80,992                 -
                                                                                         1,812,229           788,249

 Commodity:
  U.S. Dollar                        Sugar #11          1,880,199      09/14/2010          351,287                     -

 Equity:
   British Pound                Rio Tinto PLC           1,194,171      09/10/2012          194,984                     -

 Brazilian Real                      Eletrobras          680,720       09/10/2012           88,005                     -

   Euro                       Ryanair Holdings          1,683,775      09/10/2012          102,914                 -
                              Ryanair Holdings             49,775      08/04/2020                -             1,138
                                    Telefonica          1,039,938      09/10/2012                -            19,395

 U.S. Dollar               Alerian MLP Basket          64,608,900      11/26/2010                -           698,818
                                Bank of Baroda          1,356,218      09/10/2012          158,494                 -
                                Bank of Baroda          1,449,942      12/11/2019           24,958                 -
                          MSCI Australia Index         74,229,391      05/16/2011                -           799,998
                           MSCI Canada Index           90,880,793      05/16/2011        1,138,648                 -
                            State Bank of India         1,801,274      12/01/2010                -            49,794
                           Union Bank of India            591,778      09/10/2012           24,921                 -
                           Union Bank of India            843,049      11/11/2019                -            34,422
                             United Spirits Ltd         1,140,192      09/10/2012           83,471                 -
                                                                                         1,816,395         1,603,565

 Total                                                                              $    5,337,997         4,657,931


The change in fair value of open swap positions for the year ending August 31, 2010, was an increase in the amount of
$427,192, which is included in the net increase (decrease) in fair value of investments on the consolidated statement of
revenues, expenses and changes in net assets.
The following discloses the notional amount (presented in local currency), the coupon rate, and the fair values of the
outstanding swap contracts as of August 31, 2009:

                                                                                     Fair Value at August 31, 2009
                                                                      Maturity
        Currency            Coupon              Notional Value         Date            Assets           Liabilities
  Interest Rate:
    Australian Dollar                4.500%          31,100,000       12/15/2011               -    $      333,962
                                     5.400%          50,300,000       12/15/2011               -           346,996
                                     6.500%          54,500,000        6/15/2012         129,075                 -

    British Pound                    3.500%           2,900,000        3/17/2015               -             52,609
                                     3.500%           3,900,000        5/17/2015               -             70,750
                                     4.500%          20,300,000        3/17/2020         909,485                  -

    Canadian Dollar                  5.700%            1,000,000      12/19/2028           1,569                  -

    Euro                             3.400%          25,700,000        9/15/2011         227,651                  -

    Japanese Yen                     1.400%          470,000,000      12/16/2010          26,347                  -
                                     1.400%        5,740,000,000      12/16/2014         353,026                  -

    U.S. Dollar                      3.400%            2,900,000      12/16/2011          74,424                  -

    Swedish Krona                    4.500%           19,000,000       3/18/2014         229,269                 -
                                                                                       1,950,846           804,317
  Credit Default
    Euro                             2.020%             400,000        3/20/2014                -            23,980
                                     2.350%             100,000        3/20/2014                -             8,101

    British Pound                    0.530%            1,000,000       9/20/2010                -            2,902
                                     0.670%              780,000       9/20/2014                -           15,093
                                     8.750%              600,000       6/20/2012                -          175,613

    U.S. Dollar                      0.110%              300,000       6/20/2010          10,232                 -
                                     0.110%              298,510       5/25/2046               -           191,014
                                     0.160%              200,000      12/20/2013          19,196                 -
                                     0.165%              300,000       3/20/2011           1,147                 -
                                     0.210%              200,000       6/20/2011             636                 -
                                     0.210%              600,000       9/20/2011             824                 -
                                     0.220%              200,000       9/20/2011           7,870                 -
                                     0.230%              200,000       3/20/2012           1,125                 -
                                     0.240%              200,000       3/20/2011           3,839                 -
                                     0.290%              800,000       3/20/2011               -             1,515
                                     0.310%              300,000      12/20/2011             712                 -
                                     0.390%              500,000       6/20/2010           1,005                 -
                                     0.450%            1,000,000       9/20/2014               -               341
                                     0.450%            1,000,000       6/20/2017           5,754                 -
                                     0.460%              600,000       9/20/2011          23,718                 -
                                     0.460%              600,000       3/20/2012          43,624                 -
                                     0.460%            1,000,000      12/20/2013               -             8,867
                                     0.460%              300,000      12/20/2016          15,981                 -
                                     0.510%              500,000       6/20/2011           2,528                 -
                                     0.510%              800,000       3/20/2018               -             2,970
                                     0.550%              600,000       9/20/2011          22,544                 -
                                     0.590%            1,000,000       9/20/2014               -             8,725
                                     0.590%            1,000,000       9/20/2016               -            15,032
                                     0.630%              700,000       9/20/2011               -             7,060
                                     0.700%              800,000      12/20/2018               -             3,712
                                     0.740%              700,000       3/20/2018               -            20,885
                                     0.750%            1,000,000      12/20/2013              22                 -
                                     0.750%            1,000,000       9/20/2017          16,376                 -
                                     0.770%              800,000       3/20/2012               -             9,664
                                     0.800%              488,000      12/20/2017          20,967                 -
                                     0.820%            2,000,000       3/20/2018          27,464                 -
                                     0.840%            1,756,800      12/20/2017          75,482                 -
                                     0.850%              600,000      12/20/2009               -             1,530
                                     0.860%            1,800,000      11/20/2016         269,719                 -
   (Continued)                                                        Fair Value at August 31, 2009
                                                         Maturity
      Currency           Coupon        Notional Value     Date         Assets          Liabilities
Credit Default (cont.)
  U.S. Dollar (cont.)         0.900%         1,000,000    6/20/2019            -            35,048
                              0.940%           700,000    9/20/2014       28,452                 -
                              0.940%         1,000,000    6/20/2016            -            22,103
                              0.940%           400,000    6/20/2018       43,518                 -
                              0.950%         1,000,000   12/20/2015       60,267                 -
                              0.950%         1,000,000    9/20/2017            -            23,635
                              0.950%           500,000    9/20/2018            -             9,076
                              0.990%         1,000,000    9/20/2015            -            31,922
                              1.000%           700,000    6/20/2014        3,747             2,202
                              1.000%         2,000,000   12/20/2016      179,400                 -
                              1.000%         7,800,000    6/20/2019       61,753                 -
                              1.030%         2,000,000    3/20/2013            -            34,288
                              1.060%         1,000,000    3/20/2018            -            51,255
                              1.090%         1,000,000    6/20/2018       32,655                 -
                              1.135%           500,000    9/20/2013            -             3,667
                              1.140%         1,000,000    9/20/0218       99,795                 -
                              1.160%         2,000,000    3/20/2013       13,920                 -
                              1.170%         1,000,000    6/20/2013        4,183                 -
                              1.280%         1,000,000    6/20/2013           18                 -
                              1.290%           700,000    6/20/2011            -             3,350
                              1.300%           900,000    6/20/2013            -               665
                              1.300%         2,000,000    3/20/2017            -               293
                              1.300%         2,100,000    6/20/2018      129,517                 -
                              1.350%           600,000    3/20/2018            -            31,755
                              1.370%           200,000    6/20/2013            -             2,515
                              1.380%         1,000,000    3/20/2017            -            46,021
                              1.400%           200,000    6/20/2014            -             4,405
                              1.400%         1,100,000    3/20/2018            -            64,115
                              1.420%           400,000   12/20/2016       35,880                 -
                              1.420%         1,500,000    3/20/2018            -            89,705
                              1.430%         2,800,000    6/20/2019       22,168                 -
                              1.450%         3,000,000    6/20/2013            -            21,501
                              1.470%           500,000   12/20/2016       23,221                 -
                              1.500%         2,800,000    6/20/2010            -            21,302
                              1.500%         1,854,400    6/20/2018            -            11,055
                              1.530%         1,000,000    9/20/2016            -            29,312
                              1.540%         1,200,000    6/20/2010            -             9,129
                              1.540%         1,000,000   12/20/2013      275,045                 -
                              1.540%           400,000    6/20/2018            -             2,900
                              1.543%         2,342,400    6/20/2018            -            13,964
                              1.620%         1,000,000    6/20/2012      217,399                 -
                              1.640%         1,000,000    3/20/2013            -            37,836
                              1.720%           300,000   12/20/2013            -             1,389
                              1.743%           900,000    6/20/2013            -            15,744
                              1.780%           800,000    6/20/2013            -            15,131
                              1.820%           700,000    6/20/2013            -            14,301
                              1.880%         1,000,000   12/20/2015            -            12,133
                              1.920%         1,000,000    3/20/2017       37,523                 -
                              2.170%         1,000,000    8/20/2013       53,033                 -
                              2.250%           500,000    3/20/2014            -            25,942
                              2.300%           400,000    3/20/2014            -            21,641
                              2.700%         1,000,000    3/20/2019        1,812                 -
                              2.930%           300,000    6/20/2015            -             8,232
                              2.980%         2,400,000    3/20/2019            -           340,089
                              3.460%         1,700,000    6/20/2017            -           161,769
                              4.230%         1,000,000   12/20/2013            -           125,751
                              4.200%           500,000   12/20/2013            -            62,875
                              5.400%           700,000    6/20/2011       81,696                 -
                                                                       1,975,767         1,905,020
       (Continued)                                                                         Fair Value at August 31, 2009
                                                                          Maturity
            Currency           Coupon               Notional Value         Date             Assets          Liabilities
    Equity
      Euro                                                2,537,190        8/04/2010                 -           28,204

      U.S. Dollar                                       172,393,198       11/05/2009        3,528,068                 -
                                                        167,820,344       11/23/2009                -         1,944,081
                                                                                            3,528,068         1,972,285
    Inflation
      Euro                            1.948%                600,000        3/15/2012           19,383                     -
                                      1.955%                700,000        3/28/2012           20,408                     -
                                      1.960%                600,000        3/30/2012           18,757                     -
                                      2.080%              3,200,000        6/15/2012          116,920                     -
                                                                                              175,468                     -

    Total                                                                              $    7,630,149         4,681,622

The change in fair value of open swap positions for the year ending August 31, 2009, was an increase in the amount of
$2,930,047, which is included in the net increase (decrease) in fair value of investments on the consolidated statement of
revenues, expenses and changes in net assets.

(E) Investment Funds – The System’s investment funds include exchange traded funds, index funds, Securities and
Exchange Commission regulated mutual funds and externally managed funds, limited partnerships and corporate
structures, which are generally unrated and may be unregulated. These investments are recorded on System’s balance
sheet at fair value.

Hedge fund pools are invested in private placements with external investment managers who invest in equity and fixed
income securities of both domestic and international issuers. These investment managers may invest in both long and
short securities and may utilize leverage in their portfolios. The funds invested may be subject to a lock-up restriction of
one or more years before the investment may be withdrawn from the manager without significant penalty. There are
certain risks associated with these private placements, some of which include investment manager risk, market risk and
liquidity risk, as well as the risk of utilizing leverage in the portfolios. The hedge fund pools have committed
$27,579,189 and $98,077,673 of future funding to various hedge fund investments as of August 31, 2010 and 2009,
respectively.

Private investment pools are invested in limited partnerships with external investment managers or general partners who
invest primarily in private equity securities. These investments, 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 of these
investments are held through LLCs, of which UTIMCO is the sole managing member. The System had committed
$2,453,783,015 and $2,536,892,509 of future funding to various private investments as of August 31, 2010 and 2009,
respectively.

Public market funds are invested in exchange traded funds, index funds and private placements with external investment
managers who invest in equity and fixed income securities of both domestic and international issuers. These funds are
characterized as public market funds based on individual risk/return characteristics and their relationship to the overall
asset mix of the funds. Some of these investment managers may invest in both long and short securities and may utilize
modest leverage in their portfolios. There are certain risks associated with these investments, some of which are
investment manager risk, market risk and liquidity risk, as well as the risk of utilizing leverage in the portfolios.

Hedge funds, private investments and public market funds include investments in private placement vehicles that are
subject to risk, which could result in the loss of invested capital. The risks include the following:

      Non-regulation risk – Some of System’s general partners and investment managers are not registered with the
       Securities and Exchange Commission or other domestic or international regulators, and therefore are not subject to
       regulatory controls.
      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.
      Liquidity risk – Many of the System’s investment funds may impose lock-up periods, which would cause the System
       to incur penalties to redeem its units or prevent the System from redeeming its shares until a certain period of time
       has elapsed.
        Limited transparency – As private placement investment vehicles, these funds may not disclose the holdings of their
         portfolios.
        Investment strategy risk – These funds often employ sophisticated investment strategies and may use leverage,
         which could result in the loss of invested capital.

     Investments in hedge funds, private investments and public market funds are also subject to the investment risks
     previously discussed under the heading of Investment Risks, including custodial credit risk and foreign currency risk.
     Fixed income investments held by these funds would also be subject to credit risk and interest rate risk; moreover, they
     may invest in securities whose fair values would be sensitive to changes in interest rates.

     The fair values of these various investment funds as of August 31, 2010 and 2009 were $13,137,482,529 and
     $12,302,129,676, respectively.

     (F) Securities Sold Short – The System may sell securities it does not own in anticipation of a decline in the fair value of
     that security or as a means to adjust the duration of certain fixed income portfolios. When the System sells a security
     short, it must borrow the security sold short and deliver it to the broker-dealer through which it made the short sale and
     provide collateral for its obligation to deliver the security upon conclusion of the sale. The System must pay dividends
     or interest on the securities sold short. Until the System covers its short sales, it is exposed to market risk to the extent
     that subsequent market fluctuations may require purchasing securities sold short at prices, which may be significantly
     higher than the market value reflected in the statements of fiduciary net assets. As of August 31, 2010 and 2009 the
     System had no securities sold short.

4.   Endowments

     Restricted investments include $18,642,882,688.24 and $16,747,064,166.36 of endowment funds, including annuity and
     life income funds, as of August 31, 2010 and 2009, respectively. The net asset classifications on the balance sheet
     related to endowment funds, including annuity and life income funds, as of August 31, 2010 and 2009 are as follows:

           Net Asset Classification of Endowments                            2010                        2009
           Restricted, nonexpendable                              $    10,939,814,259.26           10,181,990,706.05
           Restricted, expendable:
            Net Appreciation on True Endowments                         6,170,677,444.54            5,162,444,352.64
            Funds Functioning as Endowments                               243,435,473.09              206,793,039.82
            Term Endowments                                                28,474,910.03               26,186,264.65
           Unrestricted:
            Funds Functioning as Endowments                               688,145,984.21              256,570,982.88
           Total                                                  $    18,070,548,071.13           15,833,985,346.04

     In the table above, amounts reported as “Net Appreciation” represent net appreciation on investments of donor or
     constitutionally restricted endowments that are available for authorization for expenditure by the UT System Board of
     Regents. For donor restricted endowments, pursuant to the Uniform Prudent Management of Institutional Funds Act, as
     adopted by Texas, the UT System Board of Regents may distribute net appreciation, realized and unrealized, in the fair
     market value of the assets of endowment holdings over the historic dollar value of the gifts, to the extent prudent. The
     System’s policy is to retain all undistributed net realized and unrealized appreciation within the endowment funds. The
     System’s endowment distribution policy is further discussed below.

     ENDOWMENTS AND SIMILAR FUNDS – STATE
     These endowments are comprised of: the PUF and the PHF. The PUF was established for the benefit of the System and
     the Texas A&M University System. A portion of the PHF was established for the benefit of the System’s health-related
     institutions, as well as for the Texas A&M University Health Science Center, the University of North Texas Health
     Science Center at Fort Worth, the Texas Tech University Health Science Center and Baylor College of Medicine.
The PUF was established by the Texas Constitution of 1876 through the appropriation of land grants. Amendments to
the Constitution, approved by voters in 1999, were related to the investment of the PUF and the distributions from the
PUF to the AUF. The Constitution, as amended, is summarized as follows: (i) The UT System Board of Regents is held
to a “prudent investor” rather than a “prudent person” standard; (ii) distributions to the AUF are made from the total
return on all PUF investment assets; (iii) the UT System Board of Regents determines the amount of distributions to the
AUF, which may not exceed an amount equal to 7% of the average net fair value of investment assets, except as
necessary to pay debt service on PUF bonds and notes; (iv) the UT System Board of Regents determines the amount of
distributions to the AUF in a manner intended to provide the AUF with a stable and predictable stream of annual
distributions and to maintain, over time, the purchasing power of PUF investments and annual distributions to the AUF;
and (v) the expenses of managing PUF land and investments are paid by the PUF.

The UT System Board of Regents manages certain permanent funds for health-related institutions of higher education as
more fully described in Chapter 63 of the Texas Education Code. Certain funds created by this statute were transferred
to the UT System Board of Regents on August 30, 1999, to be managed and invested in the same manner as the UT
System Board of Regents manages and invests other endowment funds. The PHF as defined in the statute is classified as
Endowment and Similar Funds – State. These endowments provide support for programs that benefit medical research,
health education or treatment at health-related institutions. The UT System Board of Regents determines the amount of
distributions to support the programs based on the PHF’s investment policy.

The investment policy provides that the annual payout will be adjusted by the average consumer price index of the
previous twelve quarters. However, if this inflationary increase results in a distribution rate below 3.5%, the UTIMCO
Board may recommend an increase in the distribution amount as long as such increase does not result in a distribution
rate of more than 5.5%. If the distribution rate exceeds 5.5%, the board may recommend a reduction in the per unit
distribution amount. Notwithstanding any of the forgoing provisions, the UT System Board of Regents may approve a
per unit distribution amount that, in their judgment, would be more appropriate than the rate calculated by the policy
provisions.

The General Endowment Fund (GEF), created March 1, 2001, is a pooled fund established for the collective investment
of long-term funds under the control and management of the UT System Board of Regents. The GEF is organized as a
pooled investment and has two participants, the PHF and the LTF. The PHF and LTF initially purchased units of the
GEF on March 1, 2001, in exchange for the contribution of their investment assets. The GEF provides for greater
diversification of investments than would be possible if each account were managed separately. As provided in the LTF
investment policy, distributions from the LTF are determined in the same manner as the PHF described above.

ENDOWMENT AND SIMILAR FUNDS - OTHER THAN STATE
Funds subject to restrictions of endowment and trust instruments, requiring that the principal be maintained and that only
the income be utilized. Funds may include Endowments, Term Endowments and Funds Functioning as Endowments.
Funds Functioning as Endowments consist of amounts that have been internally dedicated by the System for long-term
investment purposes. Funds with external donor restrictions are classified as Funds Functioning as Endowments – Restricted.
If no external restriction exists, the funds are classified as Funds Functioning as Endowments – Unrestricted. Endowment and
Term Endowment holdings may be invested in the LTF, or may be separately invested based upon the following three factors:
(i) there are investment restrictions incorporated into the trust or endowment document; (ii) the inability to sell the gifted
investment asset; or (iii) they are holdings being migrated upon liquidation into the LTF. Distributions are based upon the
actual income received from the separately invested holdings.

ANNUITY AND LIFE INCOME FUNDS
The Annuity Funds consist of funds donated to an institution on the condition that the institution pay a stipulated amount
of the funds to the donor or designated individual for a specified time or until the time of death of the annuitant. The
Life Income Funds consist of funds contributed to an institution subject to the requirement that the institution
periodically pay the income earned on the assets, less management expenses, to designated beneficiaries.

AVAILABLE UNIVERSITY FUND
The AUF consists of distributions made to it from the total return on the PUF investment assets and surface income from
PUF lands. All surface income from the PUF lands (i.e., grazing leases and land easements) is deposited to the AUF.
The AUF must be used first to pay debt service on the PUF bonds and notes. After debt service requirements are met,
under present Legislative authority, the AUF may be appropriated for the support and maintenance of UT Austin and
UT System Administration.
5.   Capital Assets
     A summary of changes in the capital assets for the year ended August 31, 2010, is presented below.


                                                                               Balance                             Reclassifications
                                                                               09/01/09         Adjustments        Completed CIP
                      Nondepreciable Assets:
                      Land and Land Improvements                       $      432,652,167.33      (3,189,647.48)         561,820.27
                      Construction in Progress (CIP)                        1,496,127,148.69        (442,515.36)    (868,264,214.44)
                      Nondepreciable Collections                              225,856,547.91         (10,678.26)                  -
                      Land Use Rights Nonamortizable                                       -       3,189,647.50                   -
                        Total Nondepreciable/Nonamortizable
                        Assets                                              2,154,635,863.93        (453,193.60)    (867,702,394.17)
                      Depreciable Assets:
                      Buildings and Building Improvements                   9,999,101,230.03      (2,089,607.92)     752,037,791.11
                      Infrastructure                                          238,172,902.48                  -       16,577,531.19
                      Facilities and Other Improvements                       670,438,513.07       2,089,607.92       44,716,198.46
                      Furniture and Equipment                               2,840,669,315.68    (499,189,011.95)       6,681,969.16
                      Vehicles, Boats and Aircraft                             61,388,125.00                  -                   -
                      Other Capital Assets (including Library Books)          590,863,148.71       1,968,152.92       12,412,868.85
                        Total Depreciable Assets at Historical Cost        14,400,633,234.97    (497,220,859.03)     832,426,358.77
                      Less Accumulated Depreciation for:
                      Buildings and Building Improvements                  (3,777,273,123.09)        462,967.15                   -
                      Infrastructure                                         (112,779,997.60)                 -                   -
                      Facilities and Other Improvements                      (205,370,229.63)       (462,967.15)                  -
                      Furniture and Equipment                              (1,869,384,785.14)    347,640,825.51                   -
                      Vehicles, Boats and Aircraft                            (39,891,485.74)                 -                   -
                      Other Capital Assets (including Library Books)         (419,847,313.03)       (988,080.11)                  -
                      Total Accumulated Depreciation                       (6,424,546,934.23)    346,652,745.40                   -
                        Depreciable Assets, net                             7,976,086,300.74    (150,568,113.63)     832,426,358.77
                      Amortizable Intangible Assets:
                      Computer Software                                                    -    495,557,815.16        35,276,035.40
                        Total Amortizable Intangible Assets                                -    495,557,815.16        35,276,035.40
                      Less Accumulated Amortization for:
                      Computer Software                                                    -    (346,652,745.40)                  -
                      Total Accumulated Amortization                                       -    (346,652,745.40)                  -
                        Intangible Capital Assets, net                                     -     148,905,069.76       35,276,035.40

                      Capital Assets, net                              $   10,130,722,164.67      (2,116,237.47)                   -
Reclassifications       Reclassifications
  Interagency             Interagency                                                  Balance
 Transfers - In         Transfers - Out        Additions          Deletions            08/31/10

                    -             (711.80)      26,090,333.32    (12,196,682.85)      443,917,278.79
                    -                   -    1,270,828,888.47                 -     1,898,249,307.36
                    -                   -       16,344,790.16     (3,420,529.89)      238,770,129.92
                    -                   -           30,692.60                 -         3,220,340.10

                    -             (711.80)   1,313,294,704.55    (15,617,212.74)    2,584,157,056.17

    6,337,806.64           (6,337,806.64)      60,956,111.26     (18,585,978.82)   10,791,419,545.66
               -                       -          157,943.26                  -       254,908,376.93
               -                       -        4,155,089.00                  -       721,399,408.45
    2,769,190.89           (2,205,403.58)     243,532,872.56     (99,201,778.20)    2,493,057,154.56
               -              (73,151.40)       4,845,568.76      (2,445,297.65)       63,715,244.71
    1,954,305.14           (1,954,305.14)      27,333,298.60     (11,824,842.24)      620,752,626.84
   11,061,302.67          (10,570,666.76)     340,980,883.44    (132,057,896.91)   14,945,252,357.15

   (2,281,177.59)           2,281,177.59     (435,795,535.13)     9,715,967.61     (4,202,889,723.46)
               -                       -       (7,833,371.41)                -       (120,613,369.01)
               -                       -      (24,919,418.35)                -       (230,752,615.13)
   (2,134,654.51)           1,870,162.70     (217,715,212.95)    90,428,388.24     (1,649,295,276.15)
               -               70,763.73       (5,585,373.90)     2,298,422.78        (43,107,673.13)
               -                       -      (26,232,694.90)    11,823,293.53       (435,244,794.51)
   (4,415,832.10)           4,222,104.02     (718,081,606.64)   114,266,072.16     (6,681,903,451.39)
    6,645,470.57           (6,348,562.74)    (377,100,723.20)   (17,791,824.75)     8,263,348,905.76

        16,725.00             (10,700.00)      46,875,137.01     (10,673,591.40)     567,041,421.17
        16,725.00             (10,700.00)      46,875,137.01     (10,673,591.40)     567,041,421.17

        (2,309.43)             10,700.00      (67,312,981.62)      7,379,062.86     (406,578,273.59)
        (2,309.43)             10,700.00      (67,312,981.62)      7,379,062.86     (406,578,273.59)
        14,415.57                      -      (20,437,844.61)     (3,294,528.54)     160,463,147.58
    6,659,886.14           (6,349,274.54)     915,756,136.74     (36,703,566.03)   11,007,969,109.51
A summary of changes in the capital assets for the year ended August 31, 2009, is presented below.

                                                                        Balance                             Reclassifications
                                                                        09/01/08         Adjustments        Completed CIP
               Nondepreciable Assets:
               Land and Land Improvements                       $      420,696,765.77                  -        2,347,159.15
               Construction in Progress (CIP)                        1,166,239,323.42    (20,575,584.37)     (985,312,692.33)
               Nondepreciable Collections                              208,269,471.30             (1.00)                   -
                 Total Nondepreciable Assets                         1,795,205,560.49    (20,575,585.37)     (982,965,533.18)
               Depreciable Assets:
               Buildings and Building Improvements                   9,274,149,212.79       3,930,321.24      756,044,936.66
               Infrastructure                                          215,985,309.54                  -       22,550,923.33
               Facilities and Other Improvements                       534,499,514.78    (4,942,957.63)       142,622,455.59
               Furniture and Equipment                               2,656,138,102.85       (102,453.95)       54,633,461.14
               Vehicles, Boats and Aircraft                             59,382,583.55       (131,652.86)                   -
               Other Capital Assets (including Library Books)          568,086,286.56          (1,342.35)       7,113,756.46
                 Total Depreciable Assets at Historical Cost        13,308,241,010.07     (1,248,085.55)      982,965,533.18
               Less Accumulated Depreciation for:
               Buildings and Building Improvements                  (3,386,977,726.82)                -                    -
               Infrastructure                                         (105,686,684.01)                -                    -
               Facilities and Other Improvements                      (183,226,228.74)                -                    -
               Furniture and Equipment                              (1,687,377,239.32)                 -                   -
               Vehicles, Boats and Aircraft                            (38,926,857.52)                 -                   -
               Other Capital Assets (including Library Books)         (401,109,626.86)                -                    -
               Total Accumulated Depreciation                       (5,803,304,363.27)                 -                   -
                 Depreciable Assets, net                             7,504,936,646.80     (1,248,085.55)      982,965,533.18

               Capital Assets, net                              $    9,300,142,207.29    (21,823,670.92)                        -
Reclassifications       Reclassifications
  Interagency             Interagency                                                      Balance
 Transfers - In         Transfers - Out           Additions          Deletions             08/31/09

                    -                       -       9,608,242.96             (0.55)       432,652,167.33
                    -                       -   1,335,776,101.97                   -    1,496,127,148.69
                    -                       -      17,709,729.61       (122,652.00)       225,856,547.91
                    -                       -   1,363,094,074.54       (122,652.55)     2,154,635,863.93

               -                        -         39,967,943.79     (74,991,184.45)     9,999,101,230.03
               -                       -           (318,033.16)         (45,297.23)       238,172,902.48
               -                       -             842,861.48      (2,583,361.15)       670,438,513.07
    1,554,803.32           (2,285,718.76)        256,938,162.74    (126,207,041.66)     2,840,669,315.68
               -             (278,204.32)          7,096,230.48      (4,680,831.85)        61,388,125.00
    2,664,429.40           (2,664,429.40)         19,204,913.17      (3,540,465.13)       590,863,148.71
    4,219,232.72           (5,228,352.48)        323,732,078.50    (212,048,181.47)    14,400,633,234.97

                -                      -        (393,858,457.92)     3,563,061.65      (3,777,273,123.09)
                -                      -          (7,093,313.36)            (0.23)       (112,779,997.60)
                -                      -         (22,143,999.27)            (1.62)       (205,370,229.63)
   (1,004,477.76)           1,406,959.25        (290,984,149.29)   108,574,121.98      (1,869,384,785.14)
                 -            182,357.88          (5,720,448.04)     4,573,461.94         (39,891,485.74)
                -                      -         (21,030,238.24)     2,292,552.07        (419,847,313.03)
    (1,004,477.76)          1,589,317.13        (740,830,606.12)   119,003,195.79      (6,424,546,934.23)
     3,214,754.96          (3,639,035.35)       (417,098,527.62)   (93,044,985.68)      7,976,086,300.74

    3,214,754.96           (3,639,035.35)        945,995,546.92     (93,167,638.23)    10,130,722,164.67
     GASB Statement No. 42, Accounting and Financial Reporting for Impairment of Capital Assets and Insurance
     Recoveries, requires the disclosure of impairment losses and associated insurance recoveries. UT Medical Branch at
     Galveston sustained significant physical damage as a result of Hurricane Ike which resulted in a permanent impairment
     of capital assets for UT Medical Branch at Galveston for 2009. This information is provided in the following table for
     the year ended August 31, 2009. The System did not have any impairment losses to report for the year ended
     August 31, 2010. There were no capital assets that were idle as of August 31, 2010 or 2009.

                                                                                                       2009
               OPERATING IMPAIRMENT LOSSES/RECOVERIES – CAPITAL ASSETS
                 Impairment Losses – Capital Assets                                           $   (82,274,664.22)
                 Insurance Recovery – Current Year                                                  66,340,503.61
                      Net Losses – Capital Assets                                                 (15,934,160.61)


               OTHER NONOPERATING (REVENUE) EXPENSE
                 Insurance Recoveries for Other than Capital Assets – Current Year Losses           39,509,200.00
                      Net Losses – Other than Capital Assets                                        39,509,200.00



6.   Risk Management and Related Insurance

     The System has seven funded self-insurance plans providing coverage in the following areas: employee health and
     dental, unemployment compensation, workers’ compensation, medical professional liability, property protection,
     directors and officers/employment practices liability, and construction contractor insurance.

     EMPLOYEE AND RETIREE INSURANCE BENEFITS
     The UT System Employee Benefits program provides health insurance, dental insurance, vision insurance, life insurance,
     accidental death and dismemberment (AD&D), long-term disability, short-term disability, long-term care and flexible
     spending account coverage to all benefits-eligible employees and retirees of the System and its fifteen institutions. These
     insurance benefits are provided through both self-funded and fully-insured arrangements. A portion of the System’s cost
     of providing group health and basic life insurance coverage is paid by the State as specified in the General
     Appropriations Act. The System’s Office of Employee Benefits (OEB) is responsible for the overall administration of
     the insurance plans. OEB was established by Chapter 1601 of the Texas Insurance Code and complies with State laws
     and statues pertinent to employee benefits for the System.

     Effective January 1, 2006, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 established
     prescription drug coverage for Medicare beneficiaries under Medicare Part D. Medicare Part D provides sponsors of
     postemployment healthcare plans with a subsidy of up to 28 percent of the amount of eligible prescription drug benefit
     costs of retirees who are eligible for, but not enrolled in, Medicare Part D, if the sponsor’s plan provides a prescription
     drug benefit that is actuarially equivalent to the Medicare Part D benefit. The System recognized $7,456,450.26 and
     $5,458,336.95 of Medicare Part D payments from the federal government in 2010 and 2009, respectively. In 2009, The
     Centers for Medicare and Medicaid Services, administrators of Medicare Part D subsidies, elected to strictly enforce plan
     year application deadlines for submission of retired employee lists which were not previously enforced, and as a result,
     the application for the period September 1, 2008 to August 31, 2009 was denied. UT System immediately applied for
     and received approval for a short period application for the period December 29, 2008 to August 31, 2009. The denied
     amount of Medicare Part D federal revenue for 2009 is estimated to be $1,830,000.00. The revenue under the denied
     application was not reported for August 31, 2009. The first appeal was denied and a second appeal has been filed for the
     denied amount. The System is not optimistic that the outcome will be favorable.

     UNEMPLOYMENT COMPENSATION INSURANCE
     The General Appropriations Act requires the System to reimburse the Texas Workforce Commission (TWC) for 50% of
     the unemployment benefits paid to former employees that were paid from general revenue funds. The System
     reimburses the TWC 100% of the unemployment benefits paid to former employees that were paid from local funds.
WORKERS’ COMPENSATION INSURANCE
The University of Texas System Workers’ Compensation Insurance (WCI) program provides coverage to all employees
of the System and its fifteen institutions. Under the oversight of the System’s Office of Risk Management (ORM), the
System self-insures and administers the program. The WCI staff is responsible for administering all aspects of the
system-wide program, which provides income and medical benefits to all employees who have sustained job-related
injuries or occupational diseases. The program’s statutory authority is embodied in Chapter 503 of the Texas Labor
Code.

PROFESSIONAL MEDICAL LIABILITY BENEFIT PLAN
The coverage provided under the Professional Medical Liability Benefit Plan (Plan) is on an occurrence basis; thus, a
participant is covered by the Plan for claims and lawsuits relating to events that occurred while enrolled in the Plan,
including those filed after the participant has left the System’s employment or training. The Plan covers all of the
System staff physicians, dentists, residents, fellows, and medical students who have been enrolled. The limits of liability
of the Plan include an annual policy aggregate of $30 million, an annual aggregate of $1.5 million for each staff
physician ($500,000.00 per claim), an annual aggregate of $300,000.00 for each resident or fellow ($100,000.00 per
claim) and a $75,000.00 annual aggregate for each medical student ($25,000.00 per claim). Other coverage is available
for medical student externships outside of Texas and for approved international activities.

Liability is limited to $2 million per incident, regardless of the number of claimants or physicians involved in an
incident. As of September 1, 2003, the limits of liability are prescribed by law as $100,000.00 per claim per physician.
Also effective September 1, 2003, UT institutions are covered under the Plan for actions that could have been brought
against an individual plan participant. The liability of a UT institution is limited by law to $250,000.00 per claimant and
$500,000.00 per occurrence for bodily injury or death.

COMPREHENSIVE PROPERTY PROTECTION PROGRAM
The Comprehensive Property Protection Plan (CPPP) was renewed in April of 2010 and is a combination of interim
financing and commercial coverage and provides Fire and All Other Perils (Fire and AOP), as well as coverage for
Named Windstorm and Flood (Wind and Flood). All coverage is subject to the terms, exclusions, limits and conditions
of the Insurance Policies. The Fire and AOP program provides a $1 million per occurrence limit for most perils, with
sub-limits that do apply. Deductibles for Fire and AOP are $5 million per occurrence with a $15 million annual
aggregate limit. Coverage for Named Windstorm and resulting perils is included with a $50 million per occurrence
deductible for Galveston and Harris County. Named Windstorm coverage is provided for other locations with a lower
deductible.

In addition, underlying policies are purchased on certain flood and wind exposed properties. These policies provide
relatively low limits (up to$4.4 million per building/contents for wind and $1 million maximum building/contents for
flood) and are purchased through the Texas Windstorm Insurance Association (TWIA) and the National Flood Insurance
Program (NFIP) for facilities in Tier 1 seacoast territories and for properties located in various flood zones. The interim
financing component of the program participates in losses resulting from physical damage that exceeds the coverage
available under these primary policies and the institution’s deductible. The interim financing for the Wind and Flood
program is funded by annual contributions made by each institution in addition to paying insurance premiums.

DIRECTORS AND OFFICERS/EMPLOYMENT PRACTICES LIABILITY SELF-INSURANCE PLAN
The Directors and Officers Liability (D&O) and Employment Practices Liability (EPL) Self-insurance Plan (the “Plan”)
provides coverage for claims arising from actual or alleged wrongful acts performed by the plan beneficiaries. The plan
also provides coverage for EPL claims, such as wrongful termination, failure to promote and wrongful discipline. In
2003, the UT System Board of Regents allocated $3.7 million from the Available University Fund to establish the
D&O/EPL loss reserve fund. Institutions make annual premium contributions to this fund.

Coverage applies to individual board members, employees, faculty, etc., as well as to the System itself. The limit of
liability is a $10 million annual aggregate (Coverages A, B and C combined), except for $5 million annual aggregate
sublimit for Coverage C. Coverage A applies to non-indemnifiable claims made against individuals and it has no
deductible. Coverage B applies to a UT institution that is required to indemnify a covered individual with deductibles of
$100,000 per individual and $300,000 per occurrence. Coverage C applies to a UT institution and related entities with a
$300,000 deductible. An excess coverage commercial insurance policy provides $10 million limit of liability in excess
of a $5 million aggregate retention which is satisfied by payment of losses under the Plan.
     ROLLING OWNER CONTROLLED INSURANCE PROGRAM
     The Rolling Owner Controlled Insurance Program (ROCIP) was established for the centralized purchase of construction
     contractor insurance on various capital projects. This program provides workers’ compensation and general liability
     insurance for all contractors enrolled on projects participating in the program. The insurance carries a $250,000.00 per
     claim and a $375,000.00 per occurrence clash deductible, which is paid through the program’s self-insurance fund.

     INCURRED BUT NOT REPORTED SELF-INSURANCE CLAIMS
     Insurance claims that were Incurred But Not Reported (IBNR) were actuarially determined for the employee’s health and
     dental, workers’ compensation, professional medical liability, directors and officers/employment practices liability, and
     rolling owner controlled self-insurance plans. IBNR figures for the workers’ compensation, professional medical
     liability, directors and officers/employment practices liability, and rolling owner controlled self-insurance plans include
     liabilities for unpaid reported claims and are reported on an undiscounted basis. The IBNR liability for the property
     protection self-insurance plan is not actuarially determined but rather estimated based on unpaid reported claims. Since
     an annual accrual is recorded for the third quarter TWC billing, no IBNR liability is recorded for Unemployment
     Compensation Insurance. In the past three fiscal years only losses from Hurricane Ike in fiscal year 2009 exceeded
     insurance coverage.

     Since the responsibility for processing all claims for employee health and dental benefits has been fully delegated to third
     parties, the IBNR claims liability for those benefits does not include a provision for unallocated loss adjustment expenses
     (ULAE). However, it does include a provision of 5% of the projected incurred but unpaid claims for the administrative
     expenses associated with processing those claims. The IBNR claims liability for the workers’ compensation,
     professional medical liability, directors and officers/employment practices liability, and rolling owner controlled self-
     insurance plans includes a related accrual for allocated loss adjustment expenses (ALAE), which are the administrative
     expenses associated with the ultimate settlement of those claims. They do not include a provision for ULAE.

     Changes in the System’s claims liabilities for the various self-insurance plans during fiscal years 2010 and 2009 were as
     follows:

                                                                   Current Year
                                                                    Claims and
Fiscal Year 2010                           IBNR Liability           Changes in                                    IBNR Liability
Plan                                          09/01/09              Estimates            Claims Payments            08/31/10
Employee Health and Dental             $    71,800,000.00         699,784,135.66         (693,484,135.66)          78,100,000.00
Workers’ Compensation                        8,718,000.00           4,470,991.58            (4,800,991.58)          8,388,000.00
Medical Professional Liability              23,941,448.00          (1,869,244.45)           (2,663,149.55)         19,409,054.00
Property Protection – Fire & AOP                90,531.00              78,641.32               (87,172.32)             82,000.00
Property Protection – Wind & Flood                       -          1,221,123.90            (1,221,123.90)                      -
Directors and Officers/EPL                   3,312,502.00             981,790.00                        -           4,294,292.00
ROCIP I, II, III, IV and V                   7,722,212.00           2,469,096.07            (2,808,379.07)          7,382,929.00
TOTAL                                  $   115,584,693.00         707,136,534.08         (705,064,952.08)         117,656,275.00

                                                                   Current Year
                                                                    Claims and
Fiscal Year 2009                           IBNR Liability           Changes in                                    IBNR Liability
Plan                                          09/01/08              Estimates            Claims Payments            08/31/09
Employee Health and Dental             $    64,900,000.00         659,617,436.67         (652,717,436.67)          71,800,000.00
Workers’ Compensation                       10,208,000.00           3,329,671.41            (4,819,671.41)          8,718,000.00
Medical Professional Liability              29,867,984.00          (3,154,626.29)           (2,771,909.71)         23,941,448.00
Property Protection – Fire & AOP               850,000.00            (122,277.52)             (637,191.48)             90,531.00
Property Protection – Wind & Flood             150,000.00         106,559,641.00         (106,709,641.00)                       -
Directors and Officers/EPL                   3,410,789.00             (98,287.00)                       -           3,312,502.00
ROCIP I, II, III, IV and V                   6,745,724.00           2,458,945.94            (1,482,457.94)          7,722,212.00
TOTAL                                  $   116,132,497.00         768,590,504.21         (769,138,308.21)         115,584,693.00
 7.   Postemployment Health Care and Life Insurance Benefits

      In addition to providing pension benefits, the State provides certain health and life insurance benefits for retired
      employees (OPEB), in accordance with State statutes. Many employees may become eligible for the health and life
      insurance benefits as a retired employee if they meet certain age and service requirements as defined by the State.
      Similar benefits for active employees are provided through the same self-funded plan. For the years ended
      August 31, 2010 and 2009, 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 the State contributions.

                                      Level of Coverage                            2010                2009
                                      Retiree Only                      $         393.08       $      369.12
                                      Retiree/Spouse                              599.14              562.54
                                      Retiree/Children                            524.91              492.87
                                      Retiree/Family                              732.19              687.44

      The number of systemwide retired employees who were eligible for these benefits, as well as the cost of providing the
      benefits for the years ended August 31, 2010 and 2009 are provided in the following table.

                                                                              2010                      2009
                                   Number of Retirees                        18,779                    17,674
                                   Cost to the State                $    52,385,345.75             49,890,043.21
                                   Cost to the System               $    43,503,299.27             36,438,499.69

      PLAN DESCRIPTION AND FUNDING POLICY
      OPEB are provided to the System’s retirees under the UT System Employee Group Insurance Program (EGIP). The
      EGIP is a single-employer defined benefit OPEB plan. The authority under which the obligations of the plan members
      and the System are established and may be amended is Chapter 1601, Texas Insurance Code.

      The System and member contribution rates are determined annually by the System based on the recommendations of the
      OEB staff and consulting actuary. The contribution rates are determined based on the benefit and administrative costs
      expected to be incurred and (i) the funds appropriated and (ii) the funding policy established by the Texas Legislature in
      connection with benefits provided through the EGIP. The System revises benefits when necessary to match expected
      benefit and administrative costs with available revenue. The plan is operated on a pay-as-you-go basis.

      Because the OPEB plan described herein is not administered through a trust as defined under Paragraph No. 4 of GASB
      Statement No. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, GASB Statement
      No. 43 accounting is not required for this plan.

                     2010 ANNUAL OPEB COST, EMPLOYER CONTRIBUTIONS AND NET OPEB OBLIGATION
       (1)                (2)              (3)                (4)                     (5)                   (6)            (7)               (8)
                                                                                                      Increase
                                                                                                    (Decrease) in     Net OPEB          Net OPEB
                     Interest on                         Annual                                      Net OPEB        Obligation at     Obligation at
                     Net OPEB        Adjustment        OPEB Cost                 Employer            Obligation      Beginning of       End of Year
     ARC             Obligation      to the ARC      {(1) + (2) - (3)}         Contributions          {(4) - (5)}        Year            {(6) + (7)}
$553,974,947.00   58,871,770.00      41,085,822.00   571,760,895.00           117,023,081.00       454,737,814.00   841,025,290.00   1,295,763,104.00



      THREE-YEAR HISTORY OF ANNUAL OPEB COST AND NET OPEB OBLIGATION

                   (1)                      (2)                             (3)                    (4)                      (5)
                                                                                             Percentage of              Net OPEB
                 Fiscal                                                                      Annual OPEB                Obligation
                 Year                     Annual                  Employer                  Cost Contributed              at End
                Ending                  OPEB Cost               Contributions                   {(3)/(2)}                of Year
             August 31, 2008          $522,570,019.00            99,891,995.00                    19.1%                422,678,024.00
             August 31, 2009           523,703,457.00           105,356,191.00                    20.1%                841,025,290.00
             August 31, 2010           571,760,895.00           117,023,081.00                    20.5%               1,295,763,104.00

      The OPEB expense (cost) reflected on the Statement of Revenues, Expenses and Changes in Net Assets is net of the
      employer contributions as these costs are reflected as a portion of payroll related costs.
   SCHEDULE OF FUNDING PROGRESS OF THE PLAN AS OF DECEMBER 31, 2009
   The Schedule of Funding Progress presents information as of the current valuation date and the two preceding valuation
   dates.

             (1)               (2)                 (3)                     (4)                  (5)              (6)                  (7)
                                                                                                                                   Ratio of
                                                                    Unfunded Actuarial                                             UAAL to
                            Actuarial                                Accrued Liability       Funded                                Covered
Actuarial Valuation         Value of      Actuarial Accrued               (UAAL)              Ratio       Annual Covered            Payroll
       Date                  Assets            Liability                 {(3) - (2)}         {(2)/(3)}        Payroll              {(4)/(6)}
December 31, 2007              $-          5,014,216,756.00          5,014,216,756.00          0.0%       4,312,903,627.00          116.3%
December 31, 2008               -          5,102,764,529.00          5,102,764,529.00          0.0%       4,820,567,837.00          105.9%
December 31, 2009               -          5,676,867,734.00          5,676,867,734.00          0.0%       5,026,491,379.00          112.9%

   ACTUARIAL METHODS AND ASSUMPTIONS
   Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events far
   into the future. Actuarially determined amounts are subject to continual revision as actual results are compared to past
   expectations and new estimates are made about the future.

   The Schedule of Funding Progress shown above presents multi-year trend information about whether the actuarial value of
   plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits.

   GASB Statement No. 45 calculations are based on the types of benefits provided under the terms of the substantive plan at
   the time of each valuation and on the pattern of sharing of costs between the employer and plan members to that point. In
   addition, the projection of benefits for financial reporting purposes does not explicitly incorporate the potential effects of legal
   or contractual funding limitations on the pattern of cost sharing between the employer and plan members in the future.

   Actuarial calculations reflect a long-term perspective. In addition, consistent with that perspective, actuarial methods and
   assumptions used in developing the figures include techniques that are designed to reduce short-term volatility in actuarial
   accrued liabilities.

   The information presented herein was determined as part of the actuarial valuation using the actuarial methods and
   assumptions summarized below.

                                          Summary of Actuarial Methods and Assumptions
         Actuarial cost method                                                           Entry Age Normal (Level percent of pay)
         Asset valuation method                                                                                          Market
         Actuarial assumptions:
             Annual investment return assumption (discount rate)1                                                         7.00%
             Projected annual salary increases1                                                                  5.25% to 8.50%
                   Weighted-average at valuation date1                                                                    6.98%
             Annual Healthcare Trend Rates1                                                                  9.00% in FYE 2011
                                                                                                Declining to 6.00% in FYE 2016
         Amortization method                                                                                       Level percent
         Amortization period                                                                                 30 year open period

         1
          Includes inflation assumption of 4.00%

   SIGNIFICANT FACTORS AFFECTING THE COMPARABILITY OF AMOUNTS REPORTED
   The following assumptions have been changed since the previous valuation:

              the Assumed Per Capita Health Benefit Costs and Assumed Expenses for retirees and dependents have been updated to
               reflect claims and expense experience in the twelve months following the date as of which the prior valuation’s
               assumptions were determined; and
              the Health Benefit Cost Trend has been updated to reflect changes in short-term expectations of the annual rate of
               increase of the Assumed Per Capita Health Benefit Costs.
         The benefit provisions have been changed since the prior valuation. These changes will become effective September 1, 2010
         and are incorporated into this valuation in accordance with question number 49 of the Guide to Implementation of GASB
         Statements 43 and 45 on Other Postemployment Benefits. Through increases in certain deductibles, copayments and other out-
         of-pocket costs of retirees, these benefit changes will increase retiree cost sharing and correspondingly reduce plan costs. The
         diminished plan cost will reduce the employer’s Annual OPEB Cost and Actuarial Accrued Liability below the levels they
         would have otherwise been in the absence of these changes to the benefit provisions.

  8.     Summary of Long-Term Liabilities

         Long-term liability activity for the year ended August 31, 2010, is summarized as follows:

                                                Balance                                                   Balance           Amounts due
                                                09/01/09            Additions         Reductions          08/31/10         within one year
Bonds Payable:

  Permanent University Fund             $    1,274,235,000.00      250,000,000.00     47,855,000.00    1,476,380,000.00      418,375,000.00
  Revenue Financing System                   4,058,590,000.00    1,233,040,000.00    556,135,000.00    4,735,495,000.00    1,153,715,000.00
Subtotal Bonds Payable – Par                 5,332,825,000.00    1,483,040,000.00    603,990,000.00    6,211,875,000.00    1,572,090,000.00
  Unamortized Net Premiums                    201,109,257.94       100,742,510.55     37,810,008.71      264,041,759.78       20,615,472.59
  Unamortized Net (Losses)                     (46,865,818.06)       9,827,272.36     27,134,558.70      (64,173,104.40)     (10,880,444.51)
Total Bonds Payable                          5,487,068,439.88    1,593,609,782.91    668,934,567.41    6,411,743,655.38    1,581,825,028.08
Notes & Loans Payable:

  Permanent University Fund Notes             250,000,000.00      260,000,000.00     250,000,000.00      260,000,000.00      260,000,000.00
  Revenue Financing System Notes              697,608,000.00      290,639,000.00     693,673,000.00      294,574,000.00      294,574,000.00
  Other Notes and Loans                        32,054,260.32                    -       2,037,479.18      30,016,781.14        3,715,687.57
Subtotal Notes & Loans Payable – Par          979,662,260.32      550,639,000.00     945,710,479.18      584,590,781.14      558,289,687.57
       Unamortized Net Premiums                             -                   -                  -                  -                      -
Total Notes and Loans Payable                 979,662,260.32      550,639,000.00     945,710,479.18      584,590,781.14      558,289,687.57
Leases Payable:

  Lease Obligations                              4,104,080.73        1,087,502.86       1,509,796.61       3,681,786.98        1,233,102.01
Total Notes, Loans and Leases Payable         983,766,341.05      551,726,502.86     947,220,275.79      588,272,568.12      559,522,789.58
Pollution Remediation Obligation                    5,697.00                    -          5,697.00                   -                      -
Net Other Post Employment Benefits
  Obligation                                  841,025,290.00      571,760,895.00     117,023,081.00    1,295,763,104.00                      -
Hedging Derivative Liability                   93,494,152.83      111,671,895.62                   -     205,166,048.45                      -
Employee Compensable Leave                    435,056,097.02      204,940,681.45     198,973,436.16      441,023,342.31      283,402,408.81
Incurred But Not Reported Self-Insurance
  Claims                                      115,584,693.00      707,136,534.08     705,064,952.08      117,656,275.00       90,261,548.41
Total Bonds, Notes, Loans, Leases, and
  Compensable Leave Payable              $   7,956,000,710.78    3,740,846,291.92   2,637,222,009.44   9,059,624,993.26    2,515,011,774.88
       Long-term liability activity for the year ended August 31, 2009, is summarized as follows:

                                                  Balance                                                           Balance           Amounts due
                                                  09/01/08                Additions            Reductions           08/31/09         within one year
Bonds Payable:
  Permanent University Fund             $     918,980,000.00             400,905,000.00         45,650,000.00    1,274,235,000.00     448,760,000.00
  Revenue Financing System                   3,356,520,000.00            847,285,000.00        145,215,000.00    4,058,590,000.00    1,164,650,000.00
Subtotal Bonds Payable – Par                 4,275,500,000.00        1,248,190,000.00          190,865,000.00    5,332,825,000.00    1,613,410,000.00
  Unamortized Net Premiums                    188,113,031.55              27,528,520.45         14,532,294.06     201,109,257.94       15,442,257.52
  Unamortized Net (Losses)                     (55,559,403.50)             9,362,191.70           668,606.26       (46,865,818.06)      (8,868,773.67)
Total Bonds Payable                          4,408,053,628.05        1,285,080,712.15          206,065,900.32    5,487,068,439.88    1,619,983,483.85
Notes & Loans Payable:

  Permanent University Fund Notes             400,000,000.00             250,000,000.00        400,000,000.00     250,000,000.00      250,000,000.00
  Revenue Financing System Notes              764,400,000.00             720,641,000.00        787,433,000.00     697,608,000.00      697,608,000.00
  Other Notes and Loans                           34,824,934.36                                  2,770,674.04      32,054,260.32         3,095,385.41
Subtotal Notes & Loans Payable – Par         1,199,224,934.36            970,641,000.00      1,190,203,674.04     979,662,260.32      950,703,385.41
    Unamortized Net Premiums                        686,641.29                        -           686,641.29                    -                      -
Total Notes and Loans Payable                1,199,911,575.65            970,641,000.00      1,190,890,315.33     979,662,260.32      950,703,385.41
Leases Payable:

  Lease Obligations                                5,072,808.21             474,048.83           1,442,776.31        4,104,080.73        1,302,110.43
Total Notes, Loans and Leases Payable        1,204,984,383.86            971,115,048.83      1,192,333,091.64     983,766,341.05      952,005,495.84
Pollution Remediation Obligation                       5,697.00                       -                     -            5,697.00            5,697.00
Net Other Post Employment Benefits
  Obligation                                  422,678,024.00             523,703,457.00        105,356,191.00     841,025,290.00                       -
Hedging Derivative Liability                                   -          93,494,152.83                     -      93,494,152.83                       -
Employee Compensable Leave                    410,562,294.44             140,247,360.60        115,753,558.02     435,056,097.02      261,831,782.92
Incurred But Not Reported Self-Insurance
  Claims                                      116,132,497.00             768,590,504.21        769,138,308.21     115,584,693.00       85,403,589.63
Total Bonds, Notes, Loans, Leases, and
  Compensable Leave Payable              $   6,562,416,524.35        3,782,231,235.62        2,388,647,049.19    7,956,000,710.78    2,919,230,049.24


       PROJECTED BOND DEBT SERVICE REQUIREMENTS
       The principal and interest expense for the next five years and beyond are projected below for bonds issued and
       outstanding:


                          Fiscal Year                        Principal                      Interest                  Total
                               2011           $        1,572,090,000.00                   220,715,945.72        1,792,805,945.72
                               2012                      184,835,000.00                   210,403,808.43         395,238,808.43
                               2013                      202,340,000.00                   201,455,717.50         403,795,717.50
                               2014                      206,905,000.00                   191,911,792.34         398,816,792.34
                               2015                      216,620,000.00                   182,003,259.61         398,623,259.61
                          2016 – 2020                  1,166,490,000.00                   749,639,487.72        1,916,129,487.72
                          2021 – 2025                    954,035,000.00                   482,321,368.30        1,436,356,368.30
                          2026 – 2030                    558,485,000.00                   305,379,347.05         863,864,347.05
                          2031 – 2035                    622,439,000.00                   182,561,436.39         805,000,436.39
                          2036 – 2040                    473,256,000.00                    59,308,486.78         532,564,486.78
                          2041 – 2045                        54,380,000.00                  2,587,160.68           56,967,160.68
                      Total Requirements      $        6,211,875,000.00               2,788,287,810.52          9,000,162,810.52
The System’s variable rate demand bonds mature at various dates through 2039. GASB Interpretation No. 1, Demand Bonds
Issued by State and Local Governmental Entities, provides guidance on the balance sheet classification of these bonds.
Under GASB Interpretation No. 1, outstanding principal balances on variable rate demand bonds may be classified as non-
current liabilities if the issuer has entered into a “take-out agreement” to convert bonds “put” but not resold into some other
form of long-term obligation. In the absence of such an agreement, the total outstanding principal balances for these bonds
are required to be classified as current liabilities.

Although it is the System’s intent to repay its variable rate demand bonds in accordance with the maturities set forth in the
bond offering circulars, the System does not have “take-out” agreements in place per the GASB Interpretation No. 1
requirements. Accordingly, the System has classified the total outstanding principal balances on its variable rate demand
bonds as current liabilities. The obligations totaled $1,405,700,000.00 and $1,427,735,000.00 at August 31, 2010 and 2009,
respectively.

Total interest expense for the years ended August 31, 2010 and 2009 was $267,322,982.83 and $230,476,832.70,
respectively. Interest expense of $52,757,711.07 and $67,018,394.93 associated with financing projects during the
construction phase was capitalized during the years ended August 31, 2010 and 2009, respectively. Interest expense was also
adjusted $7,113,192.87 and $4,599,932.14 for the amortization of premiums, issuance costs, and deferred losses on
refundings for the years ended August 31, 2010 and 2009, respectively. The remaining amounts of $207,452,078.89 in 2010
and $158,858,505.63 in 2009 were reported as interest expense.

Notes and loans payable obligations are due in annual installments through 2020. General information related to notes and
loans payable at August 31, 2010, which in substance are not bonds, is summarized as follows:

                      Fiscal Year                Principal                Interest                Total
                         2011             $    558,289,687.57           1,917,061.02          560,206,748.59
                         2012                     2,426,016.80          1,313,020.67            3,739,037.47
                         2013                     2,476,062.70          1,180,777.54            3,656,840.24
                         2014                     1,738,393.77          1,050,815.63            2,789,209.40
                         2015                     1,304,627.21          1,001,791.19            2,306,418.40
                      2016 – 2020                18,355,993.09           999,509.02            19,355,502.11
                 Total Requirements       $    584,590,781.14           7,462,975.07          592,053,756.21
POLLUTION REMEDIATION OBLIGATION
GASB Statement No. 49, Accounting for Pollution Remediation Obligations, was adopted by the System during the year
ended August 31, 2009. GASB Statement No. 49 establishes criteria to ascertain whether certain events result in a
requirement to estimate the components of an expected pollution remediation and determine whether those costs should
be accrued as a liability or, if appropriate, capitalized. The costs must be estimated using the expected cash flow
technique, which measures the liability as the sum of probability-weighted amounts in a range of possible estimated
amounts. Previously, pollution remediation costs were accrued only if they were both probable of occurring and could
be reasonably estimated. In accordance with GASB Statement No. 49, the cumulative effect of the accounting change
was recorded as a restatement to net assets as of August 31, 2008 and remained on the System’s financial statements for
the year ended August 31, 2009. There were no estimated recoveries reducing the liability or amounts paid. The System
received the signed acceptance from the United States Environmental Protection Agency (EPA) during the year ended
August 31, 2010 and the pollution remediation obligation was settled for the amount of the liability of $5,697.00.

UT M. D. Anderson Cancer Center purchased contaminated land in June 2007 with plans to provide a ground lease to the
American Cancer Society for a lodging facility for visiting cancer patients with the remaining land to be used for a
warehouse with offices and work areas. The land, known as the Almeda property, was previously used by the seller as a
solvent storage site and contains solvent contamination. The estimated outlays for the pollution remediation are
$271,738.36 using the expected cash flow technique. The potential for a change in the estimate is unlikely but dependent
upon the Texas Commission for Environmental Quality acceptance. These pollution remediation outlays qualify for
capitalization under GASB Statement No. 49 and $62,487.27 and $185,858.96 were capitalized through August 31, 2010
and 2009 respectively. The purchase price of $4,287,882.00 and total expected outlays of $271,738.36 do not exceed the
fair market value of the uncontaminated property of $4,737,882.00, and as such, no pollution remediation liability was
established. There are no estimated recoveries reducing the liability.

EMPLOYEES’ COMPENSABLE LEAVE
Substantially all full-time System employees earn annual leave from eight to twenty-one hours per month depending
upon the respective employee’s years of State employment. State law permits employees to carry accrued leave forward
from one fiscal year to another fiscal year with a maximum number of hours up to 532 for those employees with 35 or
more years of State service. Eligible part-time employees’ annual leave accrual rate and maximum carryover are
proportional to the number of hours appointed to work. Employees with at least six months of continuous State service
who terminate their employment are entitled to payment for all accumulated annual leave. Both an expense and a
liability are recorded as the benefits accrue to employees. Sick leave, the accumulation of which is unlimited, is earned
at the rate of eight hours per month and is paid only when an employee is off due to illness or to the estate of an
employee in the event of his/her death. The maximum sick leave that may be paid to an employee’s estate is one-half of
the employee’s accumulated sick leave or 336 hours, whichever is less. The System’s policy is to recognize the cost of
sick leave when paid, and the liability is not shown in the consolidated financial statements since experience indicates
the expense for sick leave to be minimal. Eligible part-time employees’ sick leave accrual rate is proportional to the
number of hours appointed to work. This obligation is usually paid from the same funding source(s) as the employee’s
salary or wage compensation.
9.   Bonded Indebtedness

     At August 31, 2010 and 2009, the System had outstanding bonds payable of $6,211,875,000.00 and $5,332,825,000.00,
     respectively. Permanent University Fund bonds are secured by and payable from the System’s interest in the Available
     University Fund, which consists of distributions from the investment income of the Permanent University Fund.
     Revenue Financing System debt is secured by and payable from Pledged Revenues as defined in the Master Resolution
     establishing the Revenue Financing System. Pledged Revenues consist of all lawfully available revenues, funds and
     balances, with certain exceptions, pledged to secure revenue-supported indebtedness issued under the Master Resolution.

                                                                          Maturity              Outstanding
            Bonded Indebtedness                  Interest Rates            Dates                 Principal

            Permanent University Fund           0.200%-5.262%             2011-2039      $    1,476,380,000.00
            Revenue Financing System            0.200%-5.375%             2011-2042           4,735,495,000.00
                                                                                         $    6,211,875,000.00


     As of August 31, 2010, the following amounts were authorized, but unissued: Permanent University Fund bonds up to a
     maximum aggregate amount of $500 million and Revenue Financing System bonds up to a maximum aggregate amount
     of $900 million, each authorized to be issued on or before August 31, 2011. All bonds issued by the System are defined
     as revenue bonds. Segment information requirements are not applicable, due to the bond indentures’ lack of specifically
     identifiable activities and external party imposed separate accounting requirements. General information related to
     bonds outstanding as of August 31, 2010, is summarized in the following table.
                                                                                                                   Amount
Bond Series                                               Purpose                                Issue Date         Issued
Permanent University Fund:
   Refunding Bonds Series 2004A   To refund $61,495,000.00 principal amount of Permanent           April 6, 2004    60,665,000
                                  University Fund Bonds, Series 1997, maturing on July 1
                                  in the years 2009 through 2016, both inclusive
   Bonds Series 2004B             To refund $400,000,000.00 principal amount of                    April 6, 2004   396,520,000
                                  Permanent University Fund Flexible Rate Notes, Series A

   Refunding Bonds Series 2005A   To refund $102,670,000.00 principal amount of                    April 5, 2005   100,345,000
                                  Permanent University Fund Bonds, Series 2002B,
                                  maturing on July 1 in the years 2012 through 2019, both
                                  inclusive
   Bonds Series 2005B             To refund $125,000,000.00 principal amount of                     July 7, 2005   124,625,000
                                  Permanent University Fund Flexible Rate Notes, Series A

   Refunding Bonds Series 2006B   To refund $85,545,000.00 principal amount of Permanent        January 24, 2007   284,065,000
                                  University Fund Bonds, Series 2002B, maturing on July 1
                                  in the years 2020 through 2022, both inclusive; to refund
                                  $172,985,000.00 principal amount of Permanent
                                  University Fund Bonds, Series 2004B, maturing on July 1
                                  in the years 2023, 2026 and 2028 through 2030, both
                                  inclusive; to refund $51,905,000.00 principal amount of
                                  Permanent University Fund Bonds, Series 2005B,
                                  maturing on July 1 in the year 2035
   Bonds Series 2006C             To refund $100,000,000.00 principal amount of                 January 24, 2007    97,755,000
                                  Permanent University Fund Flexible Rate Notes, Series A

   Taxable Bonds Series 2009A     To refund $250,000,000.00 principal amount of               September 17, 2009   250,000,000
                                  Permanent University Taxable Commercial Paper Notes,
                                  Series B

Revenue Financing System:
   Bonds Series 2001B             To refund $110,070,000.00 principal of Revenue                 October 2, 2001   179,610,000
                                  Financing System Commercial Paper Notes, Series A,
                                  provide new money of $76,000,000.00 and pay the cost of
                                  issuance
   Bonds Series 2001C             To refund $503,000.00 principal of Revenue Financing           October 2, 2001    84,590,000
                                  System Commercial Paper Notes, Series A, provide new
                                  money of $87,800,000.00 and pay the cost of issuance

   Refunding Bonds Series 2002A   To advance refund $54,575,000.00 principal amount of        September 27, 2002    54,430,000
                                  Revenue Financing System Bonds, Series 1999A
                                  maturing from 2010-2016 and 2020 to achieve debt
                                  service savings and pay the cost of issuance
       (Continued)
                                                                                                                  Amount
Bond Series                                               Purpose                               Issue Date         Issued
Revenue Financing System:
  (continued)
    Refunding Bonds Series 2002B   To advance refund $109,240,000.00 principal amount of     September 27, 2002   108,855,000
                                   Revenue Financing System Bonds, Series 1999B maturing
                                   from 2010-2017 and 2020 to achieve debt service savings
                                   and pay the cost of issuance

   Bonds Series 2003A              To refund $39,050,000.00 principal amount of Revenue        January 23, 2003   112,040,000
                                   Financing System Commercial Paper Notes, Series A,
                                   provide new money of $80,798,250 and pay the cost of
                                   issuance

   Bonds Series 2003B              To refund $201,039,000.00 principal amount of Revenue       January 23, 2003   481,060,000
                                   Financing System Commercial Paper Notes, Series A,
                                   provide new money of $296,078,000 and pay the cost of
                                   issuance

   Refunding Bonds Series 2004A    To refund $143,155,000.00 principal amount of portions        March 9, 2004    137,915,000
                                   of Revenue Financing System Bonds, Series 1995A,
                                   1996A, 1998A, 1998C, 1999A and 2001C, and pay the
                                   cost of issuance

   Refunding Bonds Series 2004B    To refund $310,460,000.00 principal amount of portions        March 9, 2004    300,330,000
                                   of Revenue Financing System Bonds, Series 1996B,
                                   1998B, 1998D, 1999B and 2001B, and pay the cost of
                                   issuance

   Bonds Series 2004C              To refund $147,012,000.00 principal amount of Revenue      November 4, 2004    218,610,000
                                   Financing System Commercial Paper Notes, Series A,
                                   provide new money of $88,800,000.00 and pay the cost of
                                   issuance

   Bonds Series 2004D              To refund $201,512,000.00 principal amount of Revenue      November 4, 2004    352,170,000
                                   Financing System Commercial Paper Notes, Series A,
                                   provide new money of $172,544,000.00 and pay the cost
                                   of issuance

   Bonds Series 2006A              To refund $24,485,000.00 principal amount of Revenue           May 17, 2006     20,315,000
                                   Financing System Bonds, Series 1996A, and pay the cost
                                   of issuance


   Bonds Series 2006B              To refund $413,161,000.00 principal amount of Revenue          May 10, 2006    540,570,000
                                   Financing System Commercial Paper Notes, Series A,
                                   provide new money of $147,764,140.00 and pay the cost
                                   of issuance

   Refunding Bonds Series 2006C    To refund $177,835,000.00 principal amount of portions       January 4, 2007   175,115,000
                                   of Revenue Financing System Bonds, 2001C, 2003A and
                                   2004C and pay the cost of issuance


   Refunding Bonds Series 2006D    To refund $340,735,000.00 principal amount of portions       January 4, 2007   346,840,000
                                   of Revenue Financing System Bonds, 2001B, 2003B and
                                   2004D and pay the cost of issuance


   Bonds Series 2006E              To refund $58,300,000.00 principal amount of Revenue         January 4, 2007    55,985,000
                                   Financing System Commercial Paper Notes, Series A and
                                   pay the cost of issuance
       (Continued)
                                                                                                             Amount
Bond Series                                              Purpose                           Issue Date         Issued
Revenue Financing System:
  (continued)
    Bonds Series 2006F            To refund $330,187,000.00 principal amount of Revenue    January 4, 2007   318,525,000
                                  Financing System Commercial Paper Notes, Series A and
                                  pay the cost of issuance

   Bonds Series 2008A             To refund $265,386,000.00 principal amount of Revenue    January 6, 2009   256,735,000
                                  Financing System Commercial Paper Notes, Series A and
                                  pay the cost of issuance

   Taxable Bonds Series 2009B     To refund $96,639,000.00 principal amount of Revenue       June 17, 2009   330,545,000
                                  Financing System Commercial Paper Notes, Series A,
                                  provide new money of $230,860,000.00 and pay the cost
                                  of issuance
   Bonds Series 2009D             To refund $258,995,000.00 principal amount of Revenue      July 15, 2009   260,005,000
                                  Financing System Commercial Paper Notes, Series A, to
                                  refund $16,115,000 principal amount of Revenue
                                  Financing System Bonds, 1998B and pay the cost of
                                  issuance
   Bonds Series 2010A             To refund $258,392,000.00 principal amount of Revenue    March 25, 2010    331,415,000
                                  Financing System Commercial Paper Notes, Series A,
                                  provide new money of $134,369,000.00 and pay the cost
                                  of issuance

   Refunding Bonds Series 2010B   To refund $393,690,000.00 principal amount of portions    April 14, 2010   385,380,000
                                  of Revenue Financing System Bonds, 2006B, 2006D and
                                  2006F and pay the cost of issuance

   Taxable Bonds Series 2010D     To refund $349,415,000.00 principal amount of Revenue      June 30, 2010   516,245,000
                                  Financing System Commercial Paper Notes, Series A,
                                  provide new money of $163,441,000.00 and pay the cost
                                  of issuance



     DEMAND BONDS
     Revenue Financing System Refunding Bonds, Series 2001A, Revenue Financing System Refunding Bonds, Series
     2007B, Revenue Financing System Bonds, Series 2008B, and Permanent University Fund Bonds, Series 2008A are
     variable rate demand bonds with an option to tender on seven days notice. The System has entered into corresponding
     interest rate swap agreements to convert the System’s interest rate exposure to a fixed rate. The Revenue Financing
     System Refunding Bonds, Series 2001A and the corresponding swap agreement extend to August 15, 2013. The
     Revenue Financing System Refunding Bonds, Series 2007B and the corresponding swap agreements extend to August
     15, 2034. The Revenue Financing System Bonds, Series 2008B and the corresponding swap agreements extend to
     August 15, 2039. The Permanent University Fund Bonds, Series 2008A and the corresponding swap agreements extend
     to July 1, 2038. General information related to these demand bonds is summarized in the following table:
                                                                                                                 Amount
Bond Series                                              Purpose                               Issue Date         Issued
Permanent University Fund:
   Bonds Series 2008A             To refund $400,000,000.00 of Permanent University          October 30, 2008    400,905,000
                                  Fund Flexible Notes, Series A and pay costs of issuance

Revenue Financing System:
   Bonds Series 2001A             To refund $38,500,000.00 of Revenue Financing System          May 17, 2001      81,665,000
                                  Refunding Bonds, Series 1991A and $42,030,000 of
                                  Revenue Financing System Refunding Bonds, Series
                                  1991B, and pay costs of issuance

   Bonds Series 2007B             To refund $169,015,000.00 of Revenue Financing            December 20, 2007    345,460,000
                                  System Bonds, Series 2003B and $149,860,000 of
                                  Revenue Financing System Bonds, Series 2004D, and
                                  pay costs of issuance

   Bonds Series 2008B             To refund $461,922,000.00 of Revenue Financing               March 18, 2008    685,485,000
                                  System Commercial Paper Notes, Series A and
                                  $34,715,000.00 of Revenue Financing System Bonds,
                                  Series 1998B, provide $182,590,000.00 of new money
                                  to finance the costs of campus improvements, and pay
                                  costs of issuance


   BUILD AMERICA BONDS
   The American Recovery and Reinvestment Act of 2009 authorizes the issuance of Build America Bonds (BABs),
   whereby certain issuers are authorized to issue taxable bonds and receive from the federal government a subsidy equal to
   35% of the interest payments on Direct Payment BABs. During 2010 and 2009, the System issued $766,245,000.00 and
   $330,545,000.00 respectively and had $1,096,790,000.00 and $330,545,000.00 outstanding at August 31, 2010 and
   2009, respectively.

   EARLY EXTINGUISHMENTS IN FISCAL YEAR 2010
   Revenue Financing System Bonds, Series 2010A were issued March 25, 2010, to current refund $258,392,000.00
   principal amount of Revenue Financing System Commercial Paper Notes, Series A, to provide $134,369,000.00 of new
   money to finance the costs of campus improvements, and to pay the costs of issuance related thereof.
    Net proceeds from the refunding series (including a premium of $45,527,166.00 and an issuer equity contribution of
       $17,555,821.86) were $393,197,087.88 – after the payment of $1,300,899.98 in underwriting fees. The net proceeds
       were used to pay cost of issuance of $271,390.54, and deposit $258,556,697.34 with the escrow agent. These funds
       were deposited in an irrevocable trust with an escrow agent to provide for all future debt service payments on the
       refunded notes.
    The refunded debt is considered fully defeased and the liability for these obligations has been removed from the
       consolidated balance sheet.
    An accounting loss of $164,697.34 resulted from the transaction as the reacquisition price of $258,556,697.34
       exceeded the net carrying amount of $258,392,000.00 par value.

   Revenue Financing System Refunding Bonds, Series 2010B were issued April 14, 2010, to advance refund
   $192,185,000.00 principal amount of Revenue Financing System Bonds, Series 2006B, maturing on August 15 in the
   years 2017 through 2024, to advance refund $178,375,000.00 principal amount of Revenue Financing System Refunding
   Bonds, Series 2006D, maturing on August 15 in the years 2017 through 2022, to advance refund $23,130,000.00
   principal amount of Revenue Financing System Bonds, Series 2006F, maturing on August 15 in the years 2023 and
   2024, and to pay the costs of issuance related thereof.
    Net proceeds from the refunding series (including a premium of $55,215,344.55) were $439,057,705.10 – after the
       payment of $1,537,639.45 in underwriting fees. The net proceeds were used to pay cost of issuance of $307,893.30,
       purchase $438,749,811.29 of eligible defeasance securities, and deposit $0.51 with the escrow agent. These
       securities were deposited in an irrevocable trust with an escrow agent to provide for all future debt service payments
       on the refunded notes.
    The advance refunding resulted in gross debt service savings through 2024 of $25,766,535.39.
    The refunded debt is considered fully defeased and the liability for these obligations has been removed from the
       consolidated balance sheet.
   An accounting loss of $22,685,598.77 resulted from the transaction as the reacquisition price of $438,749,811.80
    exceeded the net carrying amount of $393,690,000.00 par value, $19,188,266.41 of unamortized premiums,
    $(1,263,013.31) of unamortized bond issuance costs, and $4,448,959.93 of unamortized gain from Revenue
    Financing System Refunding Bonds, Series 2006D.
   An economic gain from the transaction resulted in a net present value savings of $19,878,988.34 between the old
    and new debt service payments.

Revenue Financing System Taxable Bonds, Series 2010D were issued June 30, 2010 to current refund $349,415,000.00
principal amount of Revenue Financing System Commercial Paper Notes, Series A, to provide $163,441,000.00 of new
money to finance the costs of campus improvements, and to pay the costs of issuance related thereof.
 Net proceeds from the refunding series were $513,533,343.98 – after the payment of $2,711,656.02 in underwriting
    fees. The net proceeds were used to pay cost of issuance of $317,507.93, and deposit $349,774,836.05 with the
    escrow agent. These funds were deposited in an irrevocable trust with an escrow agent to provide for all future debt
    service payments on the refunded notes.
 The refunded debt is considered fully defeased and the liability for these obligations has been removed from the
    consolidated balance sheet.
 An accounting loss of $359,836.05 resulted from the transaction as the reacquisition price of $349,774,836.05
    exceeded the net carrying amount of $349,415,000.00 par value.

Permanent University Fund Taxable Bonds, Series 2009A were issued September 17, 2009 to current refund
$250,000,000.00 principal amount of Permanent University Fund Taxable Commercial Paper, Series B and to pay the
costs of issuance related thereof.
 Net proceeds related to the refunding were $248,359,813.70 – after the payment of $1,640,186.30 in underwriting
    fees. The net proceeds along with $1,947,623.62 of other funds were used to pay cost of issuance of $254,813.71
    and deposit $250,052,623.61 with the escrow agent for the refunded commercial paper notes. These funds were
    deposited in an irrevocable trust with an escrow agent to provide for all future debt service payments on the
    refunded notes.
 The refunded debt is considered fully defeased and the liability for these obligations has been removed from the
    consolidated balance sheet.

On August 2, 2010, $4,300,000.00 of outstanding Revenue Financing System Bonds, Series 2001A were optionally
redeemed. The liability for these obligations has been removed from the consolidated balance sheet. No accounting gain
or loss resulted from the transaction.

EARLY EXTINGUISHMENTS IN FISCAL YEAR 2009
Revenue Financing System Bonds, Series 2008A were issued January 6, 2009 to current refund $265,386,000.00
principal amount of Revenue Financing System Commercial Paper Notes, Series A and to pay the costs of issuance
related thereof.
 Net proceeds from the refunding series (including a premium of $10,652,720.10) were $266,168,228.79 – after the
     payment of $1,219,491.31 in underwriting fees. The net proceeds were used to pay cost of issuance of $301,420.76,
     and deposit $265,866,808.03 with the escrow agent. These funds were deposited in an irrevocable trust with an
     escrow agent to provide for all future debt service payments on the refunded notes.
 The refunded debt is considered fully defeased and the liability for these obligations has been removed from the
     consolidated balance sheet.
 An accounting loss of $480,808.03 resulted from the transaction as the reacquisition price of $265,866,808.03
     exceeded the net carrying amount of $265,386,000.00 par value.

Revenue Financing System Taxable Bonds, Series 2009B were issued June 17, 2009 to current refund $96,639,000.00
principal amount of Revenue Financing System Commercial Paper Notes, Series A, to provide $230,860,000.00 of new
money to finance the costs of campus improvements, to fund $104,697.99 of capitalized interest and to pay the costs of
issuance related thereof.
 Net proceeds related to the refunding were $327,651,527.71 – after the payment of $2,893,472.29 in costs of
     issuance, including underwriting fees. The net proceeds were used to fund a construction fund deposit of
     $230,860,000.00, fund capitalized interest fund of $104,697.99 and deposit $96,686,829.72 with the escrow agent
     for the refunded commercial paper notes.
 The refunded debt is considered fully defeased and the liability for these obligations has been removed from the
     consolidated balance sheet.
 An accounting loss of $47,829.72 resulted from the transaction as the reacquisition price of $96,686,829.72
     exceeded the net carrying amount of $96,639,000.00 par value.
Revenue Financing System Bonds, Series 2009D were issued July 15, 2009 to current refund $16,115,000.00 principal
amount of Revenue Financing System Bonds, Series 1998B, maturing on August 15 in the years 2017 and 2018, to
current refund $258,995,000.00 principal amount of Revenue Financing System Commercial Paper Notes, Series A, and
to pay the costs of issuance related thereof.
 Net proceeds related to the refunding were $275,595,965.19 – after the payment of $1,284,835.16 in underwriting
     fees. The net proceeds were used to pay cost of issuance of $129,098.05 and deposit $259,321,651.54 with the
     escrow agent for the refunded commercial paper notes. The remaining $16,145,215.60 of net proceeds along with
     $251,796.90 of other funds were deposited with the escrow agent for the refunded bonds. The funds deposited with
     the refunded bonds escrow agent were used to optionally redeem the refunded bonds on August 3, 2009 and the
     liability for these obligations has been removed from the consolidated balance sheet.
 The current refunding resulted in gross debt service savings through 2016 of $437,672.90.
 An accounting loss of $668,606.26 resulted from the transaction as the reacquisition price of $275,466,867.14
     exceeded the net carrying amount of $274,798,260.88 par value, $(217,209.75) of unamortized discounts, and
     $(94,529.37) of unamortized bond issuance costs.
 An economic gain from the transaction resulted in a net present value savings of $379,638.19 between the old and
     new debt service payments.

Permanent University Fund Bonds, Series 2008A were issued October 30, 2008 to current refund $400,000,000.00
principal amount of Permanent University Fund Flexible Rate Notes, Series A and to pay the costs of issuance related
thereof.
 Net proceeds related to the refunding were $400,324,286.66 – after the payment of $580,713.34 in underwriting
     fees. The net proceeds along with $1,790,674.43 of other funds were used to pay cost of issuance of $400,905.00
     and deposit $401,714,056.09 with the escrow agent for the refunded flexible rate notes. These funds were deposited
     in an irrevocable trust with an escrow agent to provide for all future debt service payments on the refunded notes.
 The refunded debt is considered fully defeased and the liability for these obligations has been removed from the
     consolidated balance sheet.
 An accounting gain of $686,641.29 resulted from the transaction as the net carrying amount of $400,000,000.00 par
     value and $686,641.29 of unamortized premiums exceeded the reacquisition price of $400,000,000.00.

On August 3, 2009, $4,000,000.00 of outstanding Revenue Financing System Bonds, Series 2001A were optionally
redeemed. The liability for these obligations has been removed from the consolidated balance sheet. No accounting gain
or loss resulted from the transaction.
   CASH FLOW HEDGES – INTEREST RATE SWAPS
   The following table outlines the terms of the System’s interest rate swap agreements in effect at August 31, 2010:
 Interest                                                                                                                               Weighted
   Rate                                                                                                   Cash Paid    Counterparty      Average
 Swaps -      Hedgeable                             Effective    Maturity                     Embedded       or        Credit Rating    Maturity
 by type        Item         Current Notional         Date         Date          Terms*        Options?   Received    (Moody's/S&P)    As of 8/31/10
Pay             PUF          $200,452,500.00        11/3/2008    7/1/2038    Pay 3.696%;         No          No           A2/A          21.23 yrs
Fixed;         Bonds                                                         receive
receive        2008A                                                         SIFMA
variable        PUF           200,452,500.00        11/3/2008    7/1/2038    Pay 3.6575%;        No          No         Aaa/AA          21.23 yrs
               Bonds                                                         receive
               2008A                                                         SIFMA
                RFS            11,490,000.00        8/15/2001    8/15/2013   Pay 4.633%;         No          No         Aa1/AA           0.87 yrs
               Bonds                                                         receive 67% of
               2001A                                                         1M LIBOR
                RFS           167,905,000.00       12/20/2007    8/1/2034    Pay 3.805%;         No          No         Aa1/AA          17.61 yrs
               Bonds                                                         receive
               2007B                                                         SIFMA
                RFS           167,905,000.00       12/20/2007    8/1/2034    Pay 3.805%;         No          No          Aa3/A+         17.61 yrs
               Bonds                                                         receive
               2007B                                                         SIFMA
                RFS           149,170,000.00        3/18/2008    8/1/2036    Pay 3.900%;         No          No         Aa1/AA-         15.58 yrs
               Bonds                                                         receive
               2008B                                                         SIFMA
                RFS           149,170,000.00        3/18/2008    8/1/2036    Pay 3.900%;         No          No           A2/A          15.58 yrs
               Bonds                                                         receive
               2008B                                                         SIFMA
                RFS           358,980,000.00        3/18/2008    8/1/2039    Pay 3.614%;         No          No         Aa1/AA-         13.21 yrs
               Bonds                                                         receive
               2008B                                                         SIFMA
Pay             PUF           284,065,000.00        1/1/2009     7/1/2035    Pay SIFMA;          No          No          Aa3/A+         16.72 yrs
variable;      Bonds                                                         receive
receive        2006B                                                         82.04% of 1M
variable                                                                     LIBOR
                 RFS           90,270,000.00        8/1/2009     8/1/2039    Pay SIFMA;          No          No         Aaa/AA-         27.16 yrs
                Bonds                                                        receive
                2008B                                                        102.5% of 3M
                                                                             LIBOR
                 RFS           92,045,000.00        8/1/2009     8/1/2030    Pay SIFMA;          No          No         Aaa/AA-         18.35 yrs
                Bonds                                                        receive 96% of
                2008B                                                        3M LIBOR
                 RFS          117,190,000.00        8/1/2009     8/1/2035    Pay SIFMA;          No          No         Aaa/AA-         23.00 yrs
                Bonds                                                        receive 103%
                2008B                                                        of 3M LIBOR
TOTAL                        $1,989,095,000.00
*London Interbank Offer Rate (LIBOR)
*Securities Industry and Financial Markets Association (SIFMA)
      The following is the fair market value of the swap agreements in effect at August 31, 2010 based on the zero-coupon method
      and the classification of change in fair value from the previous fiscal year:

                                                Accrued                                                                                        Change in
  Interest                                       Interest                          Swap MTM net                             Change in Fair     Fair Value
Rate Swaps    Hedgeable        Current          (through         Swap MTM            of Accrued        Fair Value as of     Value 8/31/09 -    Recorded
  by type       Item           Notional          8/31/10)         (8/31/10)            Interest            8/31/09             8/31/10             as
Hedging
Derivative    PUF Bonds                                                                                                                          Def
Liabilities     2008A      $200,452,500.00     1,188,765.70      (29,737,018.00)     (28,548,252.30)    (11,871,845.46)      (17,865,172.54)    Outflow
              PUF Bonds                                                                                                                          Def
                2008A       200,452,500.00     1,188,765.70      (28,485,992.00)     (27,297,226.30)    (10,876,691.00)      (17,609,301.00)    Outflow
              RFS Bonds                                                                                                                          Def
                2007B       167,905,000.00      476,103.46       (27,158,629.41)     (26,682,525.95)    (12,562,355.39)      (14,596,274.02)    Outflow
              RFS Bonds                                                                                                                          Def
                2007B       167,905,000.00      476,103.46       (26,985,993.53)     (26,509,890.07)    (12,699,569.09)      (14,286,424.44)    Outflow
              RFS Bonds                                                                                                                          Def
                2008B       149,170,000.00      434,395.03       (24,433,429.33)     (23,999,034.30)    (12,935,227.28)      (11,498,202.05)    Outflow
              RFS Bonds                                                                                                                          Def
                2008B       149,170,000.00      434,394.62       (24,336,763.00)     (23,902,368.38)    (12,824,408.51)      (11,512,354.49)    Outflow
              RFS Bonds                                                                                                                          Def
                2008B       358,980,000.00      962,673.61       (44,028,223.18)     (43,065,549.57)    (19,724,056.10)      (24,304,167.08)    Outflow
                          $1,394,035,000.00   $5,161,201.58    ($205,166,048.45)   ($200,004,846.87)   ($93,494,152.83)    ($111,671,895.62)
                                                                                                                                                Incr. in
Investment    RFS Bonds                                                                                                                        Fair Value
Derivatives    2001A         11,490,000.00       22,391.52          (915,707.65)        (893,316.13)      (1,292,533.26)        376,825.61       of Inv
                                                                                                                                                Decr. In
              PUF Bonds                                                                                                                        Fair Value
                2006B       284,065,000.00       11,730.09       (10,988,695.79)     (10,976,965.70)      (2,189,804.12)      (8,798,891.67)     of Inv
                                                                                                                                                Decr. In
              RFS Bonds                                                                                                                        Fair Value
                2008B        90,270,000.00        (7,530.03)       5,727,236.00        5,719,705.97      11,820,637.00        (6,093,401.00)     of Inv
                                                                                                                                                Decr. In
              RFS Bonds                                                                                                                        Fair Value
                2008B        92,045,000.00        (5,806.30)       2,520,338.00        2,514,531.70       7,141,053.00        (4,620,715.00)     of Inv
                                                                                                                                                Decr. In
              RFS Bonds                                                                                                                        Fair Value
                2008B       117,190,000.00        (9,958.92)       7,453,378.00        7,443,419.08      14,946,875.00        (7,493,497.00)     of Inv
                           $595,060,000.00      $10,826.36       $3,796,548.56       $3,807,374.92      $30,426,227.62      ($26,629,679.06)

TOTAL                     $1,989,095,000.00   $5,172,027.94    ($201,369,499.89)   ($196,197,471.95)   ($63,067,925.21)    ($138,301,574.68)
   Derivative Instrument Objectives


   Interest
Rate Swaps    Hedgeable                                                                            Effective at   Evaluation for
  - by type     Item       Current Notional                       Objective                         8/31/10?      Effectiveness
Hedging
Derivative    PUF Bonds                                                                                            Consistent
Liabilities     2008A      $200,452,500.00     Hedge changes in cash flows on Series 2008A bonds       Yes        Critical Terms
              PUF Bonds                                                                                            Consistent
                2008A      200,452,500.00      Hedge changes in cash flows on Series 2008A bonds       Yes        Critical Terms
              RFS Bonds                                                                                            Consistent
                2007B      167,905,000.00      Hedge changes in cash flows on Series 2007B bonds       Yes        Critical Terms
              RFS Bonds                                                                                            Consistent
                2007B      167,905,000.00      Hedge changes in cash flows on Series 2007B bonds       Yes        Critical Terms
              RFS Bonds                                                                                            Consistent
                2008B      149,170,000.00      Hedge changes in cash flows on Series 2008B bonds       Yes        Critical Terms
              RFS Bonds                                                                                            Consistent
                2008B      149,170,000.00      Hedge changes in cash flows on Series 2008B bonds       Yes        Critical Terms
              RFS Bonds                                                                                            Consistent
                2008B      358,980,000.00      Hedge changes in cash flows on Series 2008B bonds       Yes        Critical Terms
Investment    RFS Bonds
Derivatives    2001A        11,490,000.00      Hedge changes in cash flows on Series 2001A bonds       No              N/A
              PUF Bonds
                2006B      284,065,000.00      Hedge changes in cash flows on Series 2006B bonds      N/A              N/A
              RFS Bonds
                2008B       90,270,000.00      Hedge changes in cash flows on Series 2008B bonds       No              N/A
              RFS Bonds
                2008B       92,045,000.00      Hedge changes in cash flows on Series 2008B bonds       No              N/A
              RFS Bonds
                2008B      117,190,000.00      Hedge changes in cash flows on Series 2008B bonds       No              N/A

TOTAL                     $1,989,095,000.00


   No derivative instruments were reclassified from a hedging derivative instrument to an investment derivative instrument
   in 2010. The fair value of interest rate swaps reported as investment derivatives of $3,796,548.56 as of August 31, 2010
   is included on the consolidated balance sheet as noncurrent unrestricted investments and in the summary of investments
   in Note 3. The change in fair value of interest rate swaps reported as investment derivatives for the year ending
   August 31, 2010, was a decrease in the amount of $26,629,679.06, which is included in the net increase (decrease) in fair
   value of investments on the consolidated statement of revenues, expenses and changes in net assets.

   Hedging Derivative Instrument and Investment Derivative Risks
   Credit Risk: The System is exposed to credit risk if the counterparty to an interest rate swap fails to meet the terms and
   obligations of its contracts. Contracts with a positive fair value expose the System to credit risk. The System faces a
   maximum possible loss equivalent to the amount of the swap contract’s fair value, less any collateral held by the System
   provided by the counterparty. Contracts with a negative fair value do not expose the System to credit risk. All of the
   counterparties associated with swap contracts with the System are creditworthy financial institutions. Additionally, each
   of the System’s swap counterparties has agreed to provide collateral to the System to the extent the positive fair value
   exceeds certain threshold amounts. Should a counterparty fail to meet its contractual agreements, or if the System’s
   credit rating falls below investment grade (Baa2 by Moody’s or BBB by S&P), the System could be required to pay or
   receive a substantial termination payment. As of August 31, 2010, the System’s credit ratings were Aaa by Moody’s and
   AAA by S&P. The System does not have to post collateral due to changes in fair value of its swap agreements. As of
   August 31, 2010, the maximum loss due to credit risk is $15,000,000.00.

   Interest Rate Risk: Interest rate risk involves the risk that the value of the System’s interest rate swaps will fluctuate
   because of changes in interest rates. The value of interest rate swap agreements with a longer weighted average maturity
   tend to be more sensitive to changing interest rates, and therefore, more volatile than those with shorter maturities.
Basis Risk: The System is exposed to basis risk when the variable rate received under an interest rate swap does not
match the variable rate paid on hedged bonds. The interest rate on the System’s variable rate bonds is a tax-exempt
interest rate based on the System’s credit ratings. The variable receipt on the System’s interest rate swaps is based on
either a tax-exempt index (SIFMA) or a taxable index (LIBOR). Tax-exempt interest rates can change without a
corresponding change in taxable interest rates due to factors affecting the tax-exempt market that do not have a similar
effect on the taxable market.

Termination Risk: Termination risk is the risk that the swap may be terminated prior to its scheduled maturity date as a
result of certain specified events. None of the System’s interest rate swaps are subject to automatic early termination.
The System is subject to termination risk if the System’s credit rating falls below investment grade (Baa2 by Moody’s or
BBB by S&P), or if the System commits a specified event of default or other specified event of termination. As of
August 31, 2010, the System’s credit ratings were Aaa by Moody’s and AAA by S&P. The System has the right to
optionally terminate any of its swaps at any time.   At termination, if the fair value of the swap is negative, the System
would be liable to pay a termination payment to the appropriate counterparty in the amount of the swap’s fair value. If
the fair value of the swap is positive at termination, the counterparty would owe a termination payment to the System in
the amount of the swap’s fair value.
Rollover Risk: Rollover risk is the risk caused by a mismatch between the amortization of a derivative contract and the
underlying hedged bonds. The System is not exposed to rollover risk by exactly matching the notional amounts and
amortization schedules of its swap contracts with the principal amounts and amortization schedules of the associated
hedged bonds.

Market Access Risk: Each swap associated with underlying variable rate debt that is subject to tender at the option of the
bondholder is subject to market access risk. In the event the System is unable to remarket its variable rate bonds, the
System may choose to refund the variable rate bonds with fixed-rate bonds and optionally terminate the related interest
rate swap agreements. Should an early termination event occur, the System could be required to pay or to receive a
substantial termination payment. As of August 31, 2010, the System had market risk associated with $1,405,700,000.00
aggregate notional amount of interest rate swaps used to hedge variable rate bonds subject to tender. As of
August 31, 2010, the System’s variable rate bonds carried the highest short term ratings from Moody’s and S&P of
VMIG1 and A-1+, respectively.
Swap Scheduled Payments
The following tables reflect the scheduled payments on the swap agreements which differ from the presentation in the
projected bond debt service requirements table for the related demand bonds. The debt service requirements reflect the
entire outstanding balance of the demand bonds in 2011 because the bonds are supported by internal liquidity.

                                                  As of August 31, 2010
                                                                               Pay-Fixed
                                       Associated                           Receive-Variable
                                 Variable Rate Bonds                         Interest Rate
        Fiscal Year          Principal1           Interest2                      Swaps3                    Total
           2011        $    22,990,000.00        3,094,178.75                   48,463,571.51           74,547,750.26
           2012             33,550,000.00        3,045,336.75                   47,626,471.11           84,221,807.86
           2013             34,925,000.00        2,973,138.75                   46,448,539.45           84,346,678.20
           2014             32,425,000.00        2,898,003.75                   45,222,620.60           80,545,624.35
           2015             33,645,000.00        2,827,672.00                   44,117,814.86           80,590,486.86
        2016-2020          142,575,000.00       13,123,062.75                 204,620,541.11           360,318,603.86
        2021-2025          228,520,000.00       11,354,279.75                 176,848,969.84           416,723,249.59
        2026-2030          289,055,000.00        8,470,431.75                 131,676,569.11           429,202,000.86
        2031-2035          271,260,000.00        5,143,395.75                   79,484,683.74          355,888,079.49
        2036-2040          316,755,000.00        1,923,111.00                   29,175,423.86          347,853,534.86
    1
      Reflects scheduled principal and interest payments of Revenue Financing System Refunding Bonds, Series 2001A, Revenue
      Financing System Refunding Bonds, Series 2007B, Revenue Financing System Bonds, Series 2008B, and Permanent University
      Fund Bonds, Series 2008A to be optionally or mandatorily redeemed in the fiscal years reflected.
    2
      As required by GASB Statement No. 38, annual debt service requirements are computed using the System’s interest rates in
      effect on August 31, 2010 on its Series 2008A Bonds, Series 2001A Bonds, Series 2007B Bonds, and Series 2008B Bonds.
    3
      Reflects net payments on pay-fixed, receive-variable interest rate swaps based on static interest rate environment as of
      August 31, 2010 and applied on the respective notional amounts of the swaps through their respective termination dates.




                                                  As of August 31, 2010
                                                                             Pay-Variable
                                       Associated                           Receive-Variable
                                 Variable Rate Bonds                         Interest Rate
        Fiscal Year          Principal1           Interest2                     Swaps3                      Total
           2011        $                -          643,936.50                       6,907.78                650,844.28
           2012                         -          643,936.50                       6,907.78                650,844.28
           2013                         -          643,936.50                       6,907.78                650,844.28
           2014                         -          643,936.50                       6,907.78                650,844.28
           2015                         -          643,936.50                       6,907.78                650,844.28
        2016-2020                       -        3,219,682.50                      34,538.90              3,254,221.40
        2021-2025                       -        3,219,682.50                      34,538.90              3,254,221.40
        2026-2030           92,045,000.00        2,906,352.25                      10,936.83             94,962,289.08
        2031-2035          117,190,000.00        1,742,750.75                     (29,795.55)           118,902,955.20
        2036-2040           90,270,000.00          432,357.25                      (6,074.58)            90,696,282.67
    1
      Principal and interest requirements on a portion of the outstanding Revenue Financing System Bonds, Series 2008B are reflected
      in both tables above as a portion of the Series 2008B bonds have associated pay-fixed, receive-variable and pay-variable,
      receive-variable interest rate swaps that modify the System’s interest rate exposure on the related Series 2008B bonds.
    2
      As required by GASB Statement No. 38, annual debt service requirements are computed using the System’s interest rates in
      effect on August 31, 2010 on its Series 2008B Bonds.
    3
      Reflects net payments on pay-fixed, receive-variable interest rate swaps based on static interest rate environment as of
      August 31, 2010 and applied on the respective notional amounts of the swaps through their respective termination dates.
                                             As of August 31, 2010
                                                                       Pay-Variable
                                   Associated                         Receive-Variable
                               Fixed Rate Bonds                        Interest Rate
    Fiscal Year          Principal1           Interest2                   Swaps3                     Total
       2011       $                 -       14,851,562.50                    251,376.72           15,102,939.22
       2012                         -       14,851,562.50                    251,376.72           15,102,939.22
       2013                         -       14,851,562.50                    251,376.72           15,102,939.22
       2014                         -       14,851,562.50                    251,376.72           15,102,939.22
       2015                         -       14,851,562.50                    251,376.72           15,102,939.22
    2016-2020           24,740,000.00       74,257,812.50                  1,256,883.60          100,254,696.10
    2021-2025           78,975,000.00       55,617,450.00                    937,473.70          135,529,923.70
    2026-2030          133,790,000.00       35,819,175.00                    603,758.97          170,212,933.97
    2031-2035           46,560,000.00       11,031,037.50                    185,936.39           57,776,973.89
1
 Reflects scheduled principal and interest payments of Permanent University Fund Bonds, Series 2006B.
2
 Reflects net payments on pay-variable, receive-variable interest rate swaps based on static interest rate environment as of
 August 31, 2010 and applied on the respective notional amounts of the swaps through its respective termination dates.



                                             As of August 31, 2009
                                                                         Pay-Fixed
                                   Associated                         Receive-Variable
                             Variable Rate Bonds                       Interest Rate
    Fiscal Year          Principal1           Interest2                    Swaps3                   Total
       2010       $     22,035,000.00        2,302,848.75                 47,985,351.32          72,323,200.07
       2011             22,990,000.00        2,267,285.25                 47,202,173.41          72,459,458.66
       2012             33,550,000.00        2,230,197.00                 46,384,294.72          82,164,491.72
       2013             34,925,000.00        2,175,510.75                 45,235,479.76          82,335,990.51
       2014             32,425,000.00        2,118,601.50                 44,039,809.10          78,583,410.60
    2015-2019          149,385,000.00        9,803,292.75               204,246,525.57          363,434,818.32
    2020-2024          198,295,000.00        8,562,634.50               178,881,279.55          385,738,914.05
    2025-2029          286,235,000.00        6,624,069.75               137,881,771.19          430,740,840.94
    2030-2034          295,505,000.00        4,264,655.25                 87,394,624.29         387,164,279.54
    2035-2039          352,390,000.00        2,006,473.50                 40,089,105.92         394,485,579.42
1
  Reflects scheduled principal and interest payments of Revenue Financing System Refunding Bonds, Series 2001A, Revenue
  Financing System Refunding Bonds, Series 2007B, Revenue Financing System Bonds, Series 2008B, and Permanent University
  Fund Bonds, Series 2008A to be optionally or mandatorily redeemed in the fiscal years reflected.
2
  As required by GASB Statement No. 38, annual debt service requirements are computed using the System’s interest rates in
  effect on August 31, 2009 on its Series 2008A Bonds, Series 2001A Bonds, Series 2007B Bonds, and Series 2008B Bonds.
3
  Reflects net payments on pay-fixed, receive-variable interest rate swaps based on static interest rate environment as of
  August 31, 2009 and applied on the respective notional amounts of the swaps through their respective termination dates.
                                                As of August 31, 2009
                                                                           Pay-Variable
                                    Associated                            Receive-Variable
                              Variable Rate Bonds                          Interest Rate
    Fiscal Year           Principal1           Interest2                      Swaps3                       Total
       2010        $                            494,184.00                        46,495.59                540,679.59
       2011                                     494,184.00                        46,495.59                540,679.59
       2012                                     494,184.00                        46,495.59                540,679.59
       2013                                     494,184.00                        46,495.59                540,679.59
       2014                                     494,184.00                        46,495.59                540,679.59
    2015-2019                                 2,470,920.00                       232,477.95              2,703,397.95
    2020-2024                                 2,470,920.00                       232,477.95              2,703,397.95
    2025-2029            70,990,000.00        2,347,590.75                       207,815.69             73,545,406.44
    2030-2034           113,240,000.00        1,524,306.75                        78,204.47            114,842,511.22
    2035-2039           115,275,000.00          522,014.25                        27,448.38            115,824,462.63
1
  Principal and interest requirements on a portion of the outstanding Revenue Financing System Bonds, Series 2008B are reflected
  in both tables above as a portion of the Series 2008B bonds have associated pay-fixed, receive-variable and pay-variable,
  receive-variable interest rate swaps that modify the System’s interest rate exposure on the related Series 2008B bonds.
2
  As required by GASB Statement No. 38, annual debt service requirements are computed using the System’s interest rates in
  effect on August 31, 2009 on its Series 2008B Bonds.
3
  Reflects net payments on pay-fixed, receive-variable interest rate swaps based on static interest rate environment as of
  August 31, 2009 and applied on the respective notional amounts of the swaps through their respective termination dates.


                                                As of August 31, 2009
                                                                           Pay-Variable
                                    Associated                            Receive-Variable
                                Fixed Rate Bonds                           Interest Rate
    Fiscal Year           Principal1           Interest2                      Swaps3                       Total
       2010        $                         14,851,562.50                       500,463.30             15,352,025.80
       2011                                  14,851,562.50                       500,463.30             15,352,025.80
       2012                                  14,851,562.50                       500,463.30             15,352,025.80
       2013                                  14,851,562.50                       500,463.30             15,352,025.80
       2014                                  14,851,562.50                       500,463.30             15,352,025.80
    2015-2019                                74,257,812.50                     2,502,316.50             76,760,129.00
    2020-2024           103,715,000.00       61,000,637.50                     2,049,130.86            166,764,768.36
    2025-2029            97,320,000.00       40,928,475.00                     1,373,475.02            139,621,950.02
    2030-2034            59,155,000.00       14,136,675.00                       474,397.59             73,766,072.59
    2035-2039            23,875,000.00        1,253,437.50                        42,062.77             25,170,500.27
1
 Reflects scheduled principal and interest payments of Permanent University Fund Bonds, Series 2006B.
2
 Reflects net payments on pay-variable, receive-variable interest rate swaps based on static interest rate environment as of
 August 31, 2009 and applied on the respective notional amounts of the swaps through its respective termination dates.
10. Note Indebtedness

   General information related to notes and loans payable at August 31, 2010, which in substance are not bonds, is
   summarized as follows:

      Note or loan payable issue name: Permanent University Fund Commercial Paper Notes, Series A and Taxable
        Commercial Paper Notes, Series B
        Purpose: To provide new money
        Issue Date: September 1, 2009 through August 31, 2010
        Authorized Amount: Aggregate principal amount not to exceed $500 million
        Source of revenue for debt service: Available University Fund

      Note or loan payable issue name: Revenue Financing System (RFS) Commercial Paper Notes, Series A and
        Taxable Commercial Paper Notes, Series B
        Purpose: To provide new money
        Issue Date: September 1, 2009 through August 31, 2010
        Authorized Amount: Aggregate principal amount not to exceed $1.25 billion
        Source of revenue for debt service: All pledged revenues, subject to the provisions of the Prior Encumbered
        Obligations, collectively: (a) the pledged tuition fee; (b) the pledged General Fee; and (c) any or all of the
        revenues, funds, and balances lawfully available to the Board and derived from and attributable to any Member of
        the Revenue Financing System, which are lawfully available to the Board for payments on parity debt.
        Terms: Interest payable in periodic installments not to exceed 270 days at a variable rate

   Other Notes Payable includes:

      Note or loan payable issue name: Charitable Remainder Trust
        Purpose: Fine Arts Foundation (a blended component unit) purchase of the Suida Manning Art Collection
        Component Unit: UT Austin’s Blended Component Unit
        Issue Date: January 4, 1999
        Authorized Amount: $12,000,000.00
        Source of revenue for debt service: Gift
        Terms: January 4, 1999 through April 17, 2016

      Note or loan payable issue name: Charitable Lead Trust
        Purpose: Fine Arts Foundation (a blended component unit) purchase of the Suida Manning Art Collection
        Component Unit: UT Austin’s Blended Component Unit
        Issue Date: January 4, 1999
        Authorized Amount: $10,713,200
        Source of revenue for debt service: Gift
        Terms: January 4, 1999 through April 17, 2016

      Note or loan payable issue name: Memorial Hermann Hospital System
        Purpose: Reimburse Memorial Hermann Hospital System for equipment purchased and operating funds advanced
        in association with the transfer of clinics from Memorial Hermann Hospital System to UT Physicians
        Component Unit: UT Health Science Center at Houston’s Blended Component Unit
        Issue Date: July 10, 2000
        Authorized Amount: $7,000,000
        Source of revenue for debt service: Debt and interest to be forgiven upon attainment of specified performance
        goals.
        Terms: July 2000 through June 2012

      Note or loan payable issue name: Premier Purchasing Partners L.P.
        Purpose: To purchase an ownership stake in this limited partnership
        Institution: UT Southwestern Medical Center at Dallas
        Issue Date: September 1, 2005
        Authorized Amount: $369,190
        Source of revenue for debt service: Rebates earned
        Terms: Payment time as well as payment amount is dependent on calculation of rebates which is based on the
        purchasing volume of the medical center.
       Note or loan payable issue name: City of Shavano Park Health Facilities Development Corporation
         Purpose: Purchase EPIC Patient and Sales Tracking Software Package
         Institution: UT Health Science Center at San Antonio
         Issue Date: December 1, 2006
         Authorized Amount: $9,000,000
         Source of revenue for debt service: Patient service from MSRDP Designated Funds collected by UT Medicine
         San Antonio
         Terms: February 1, 2007 through January 1, 2018. Interest is computed at 4.13% annually.

       Note or loan payable issue name: City of Shavano Park Health Facilities Development Corporation
         Purpose: Purchase EPIC Patient and Sales Tracking Software Package
         Institution: UT Health Science Center at San Antonio
         Issue Date: January 1, 2007
         Authorized Amount: $3,000,000
         Source of revenue for debt service: Patient service from MSRDP Designated Funds collected by UT Medicine
         San Antonio
         Terms: February 1, 2007 through January 1, 2018. Interest is computed at 4.15% annually.

11. Capital Leases

    Certain leases to finance the purchase of property are capitalized at the present value of future minimum lease payments.
    The original capitalized cost of all such property under capital lease as of August 31, 2010 and 2009 is as follows:

                       Assets Under Capital Lease                     2010                 2009
                       Furniture and Equipment               $    3,001,908.15         3,412,828.82
                       Less: Accumulated Depreciation              (740,527.34)         (771,680.78)
                       Museums and Art Collections                5,045,427.25         5,632,687.50
                       Total                                 $    7,306,808.06         8,273,835.54

    Capital lease obligations are due in annual installments through 2018. The following is a schedule of the future
    minimum lease payments for leased property and the present value of the net minimum lease payments at
    August 31, 2010.

              Fiscal Year                         Principal                 Interest                     Total
                 2011                   $          1,233,102.01                  96,985.19                1,330,087.20
                 2012                                632,256.61                  57,237.65                  689,494.26
                 2013                                466,284.72                  40,531.09                  506,815.81
                 2014                                345,312.38                  26,979.18                  372,291.56
                 2015                                274,062.38                  18,229.18                  292,291.56
              2016 – 2020                            730,768.88                  21,875.06                  752,643.94
    Total Minimum Lease Payments
                                                   3,681,786.98                   261,837.35              3,943,624.33
                                                                              Less: Interest               (261,837.35)

                                            Present Value of Net Minimum Lease Payments                   3,681,786.98

12. Short-Term Debt

    The System had RFS Commercial Paper Notes, Series A and PUF Taxable Commercial Paper Notes, Series B,
    outstanding at August 31, 2010 and 2009. The notes are issued to provide interim financing for capital improvements
    and to finance equipment purchases. While the interest is payable on these notes in periodic installments not to exceed
    270 days, they are generally intended to be refinanced with long-term debt. Information pertaining to the balances and
    activity of these notes is reflected in Note 8.
13. Net Assets

    The System’s net assets at August 31, 2010 and 2009 were comprised of the following:
                                                                             2010                          2009
  Invested in capital assets, net of related debt               $         4,630,805,088.14              4,475,107,614.90
  Restricted
    Nonexpendable                                                       10,939,814,259.26              10,224,550,389.05
    Expendable                                                           8,179,195,200.35               6,972,457,261.59
  Total restricted                                                      19,119,009,459.61              17,197,007,650.64
  Unrestricted net assets:
    Unrestricted
      Reserved
        Encumbrances                                                       806,853,357.20                 418,607,610.36
        Accounts receivable (less deferred revenue portion)                799,130,138.44                 793,003,030.61
        Inventories                                                         69,103,111.72                  65,881,772.92
        Self-insurance plans                                               267,438,671.79                 274,899,785.75
        Higher Education Assistance Fund (HEAF)                              8,354,902.84                   7,370,738.13
        Other specific purposes:
           Advanced Research/Advanced Technology
           Programs                                                           9,120,193.95                  7,749,898.69
           Notes Receivable                                                              -                     67,899.52
           Deposits                                                           5,302,890.97                  5,896,826.22
           Prepaid expenses                                                  89,894,470.79                 78,474,937.24
           Deferred charges                                                  11,860,098.24                 11,638,296.23
           Imprest funds                                                      1,187,806.25                  1,117,334.14
           Travel advances                                                      204,036.76                    268,777.58
      Unreserved
        Allocated
           Funds functioning as endowment-unrestricted                     688,145,984.21                 256,570,982.88
           Provision for operating budgets                                  25,569,222.00                  24,098,617.00
           Capital projects                                                341,334,413.83                 223,659,898.96
           Debt service                                                    142,928,986.58                 162,449,655.65
           Start-up/matching                                                36,277,612.47                  25,867,916.52
           Utilities reserve                                                28,621,416.45                  36,395,858.84
           Research enhancement and support                                132,074,715.72                 108,453,977.83
           Market adjustments                                               25,764,014.69                   6,170,142.61
           Student fees                                                     82,402,543.65                  70,555,099.09
           Texas Tomorrow Fund shortfall                                    10,699,617.13                   8,398,826.69
           Instructional program support                                   280,897,497.65                 124,124,442.90
           Dean, chair and faculty recruitment packages                     14,746,682.35                   2,640,997.66
           Self-supporting enterprises                                      70,520,629.66                  62,448,780.59
           Patient care support                                            152,667,325.91                 188,122,401.91
           Practice plan minimum operating reserve of 90
           days                                                            256,510,893.37                 203,282,845.82
           Uncompensated Patient Care                                                   -                   1,038,877.36
        Unallocated                                                     (1,400,417,805.31)               (785,679,712.02)
  Total unrestricted                                                     2,957,193,429.31               2,383,576,517.68
  Total net assets                                             $        26,707,007,977.06              24,055,691,783.22
    As of August 31, 2010 and 2009, restricted nonexpendable net assets include $7,109,333,589.72 and $6,492,633,743.16,
    respectively, of the Permanent University Fund corpus, and $820,000,000.00 for both years of the Permanent Health
    Fund corpus. As of August 31, 2010 and 2009, restricted expendable net assets include $4,568,541,653.59 and
    $3,890,154,223.14, respectively, of the Permanent University Fund appreciation, and $85,441,709.26 and
    $22,276,740.97, respectively, of the Permanent Health Fund appreciation.

    Unrestricted net assets, detailed in the table above, are not subject to externally imposed stipulations. Unrestricted net
    assets may be designated for special purposes by actions of the Texas Legislature, internal management, and the
    UT System Board of Regents, or may otherwise be limited by contractual agreements with outside parties. Substantially
    all unrestricted net assets are designated for academic programs, patient care, research programs and initiatives, and
    capital programs.
    14. Matrix of Operating Expenses Reported by Function

            For the year ended August 31, 2010, the following table represents operating expenses for both natural and functional
            classifications for the System:




                                                                                                     Hospitals and         Academic
       Operating Expenses               Instruction          Research          Public Service          Clinics              Support

Cost of Goods Sold                $     18,544,582.85             2,221.36       1,222,466.99         66,207,590.04         162,262.39

Salaries and Wages                    1,959,466,622.68    1,031,054,449.02    116,307,671.97        1,484,850,672.12     267,361,488.76

Payroll Related Costs                  437,098,216.05      242,280,802.71      25,934,409.23         397,699,530.66       64,061,568.58

Professional Fees and Services          30,761,711.20       87,592,062.82      23,481,992.23         124,538,487.26       18,028,574.75

Scholarships and Fellowships            10,331,376.72       31,018,775.46        3,547,610.51             42,911.12        3,461,790.80

Travel                                  30,060,381.87       40,253,971.27        5,344,467.96         10,963,677.38        8,412,563.51

Materials and Supplies                  86,066,605.82      192,185,101.26      23,833,870.03         698,006,001.14       35,541,369.15

Utilities                                2,500,845.29        1,370,910.76         806,969.84           8,405,800.43           55,983.51

Communications                          26,497,409.68        7,782,934.76        1,952,189.37         14,959,501.32       27,494,094.48

Repairs and Maintenance                  8,005,385.64       14,832,287.41        1,125,920.60         58,249,568.31        6,981,273.23

Rentals and Leases                      16,060,279.93        8,971,316.03        3,747,525.71         44,084,156.41        5,973,875.42

Printing and Reproduction                7,393,233.23        6,945,043.30        3,047,437.87          2,290,178.22        3,311,330.85

Depreciation and Amortization                         -                  -                      -                    -                -

Bad Debt Expense                                      -                  -                      -                    -                -

Claims and Losses                                     -                  -                      -                    -                -
Increase in Net OPEB
  Obligation                                          -                  -                      -                    -                -

Other Operating Expenses               110,038,942.55      189,282,371.56      42,073,672.64         237,812,245.30       45,174,460.67
Federal Sponsored Pass-through
  to State Agencies                     12,373,933.61        5,048,065.45        2,276,849.13                        -                -
State Sponsored Pass-through to
  State Agencies                                      -        198,979.35                       -                    -                -

Total Operating Expenses          $   2,755,199,527.12    1,858,819,292.52    254,703,054.08        3,148,110,319.71     486,020,636.10
                                        Operations and
   Student          Institutional       Maintenance of   Scholarships and      Auxiliary        Depreciation and
   Services           Support               Plant          Fellowships        Enterprises        Amortization       Total Expenses

     50,314.28         520,973.62          330,849.19                  -      4,403,041.83                    -       91,444,302.55

101,600,701.18     561,143,950.05       215,992,683.84    35,882,292.40     159,628,305.07                    -     5,933,288,837.09

 24,003,294.45     132,890,903.39        54,835,018.28      5,284,880.75     35,913,615.32                    -     1,420,002,239.42

  2,532,617.33      54,368,448.90        32,197,982.57       805,125.13       8,944,462.93                    -      383,251,465.12

  6,572,195.24       1,692,003.91                    -   326,453,612.36       9,362,842.48                    -      392,483,118.60

  3,144,728.36       8,808,513.43         1,297,817.79       714,880.93      18,385,629.55                    -      127,386,632.05

 10,676,548.72      41,762,256.07        60,323,560.45       (596,395.91)    53,727,808.85                    -     1,201,526,725.58

     89,186.46      (17,217,471.99)     231,908,216.20          1,130.69     28,563,048.58                    -      256,484,619.77

  1,969,378.13      (17,672,602.22)       3,297,644.83        27,559.02       4,482,587.37                    -       70,790,696.74

  2,630,172.29      26,390,724.55        81,191,243.73       352,801.57      17,152,536.83                    -      216,911,914.16

  3,276,793.30      12,291,248.22        29,054,590.17       147,243.09       9,827,530.33                    -      133,434,558.61

  2,617,480.30       (3,400,974.64)        404,625.09         79,563.83       5,237,693.44                    -       27,925,611.49

              -                     -                -                 -                    -   785,394,588.26       785,394,588.26

  5,193,914.73          10,254.63                    -                 -             25.29                    -         5,204,194.65

              -     29,823,040.50                    -                 -                    -                 -       29,823,040.50

              -    454,737,814.00                    -                 -                    -                 -      454,737,814.00

 16,147,755.15      (49,872,829.30)      17,441,744.01    12,808,284.30      87,536,481.26                    -      708,443,128.14

              -                     -                -    (11,083,342.49)                   -                 -         8,615,505.70

              -        690,464.16                    -       210,428.48                     -                 -         1,099,871.99

180,505,079.92    1,236,966,717.28      728,275,976.15   371,088,064.15     443,165,609.13      785,394,588.26     12,248,248,864.42
            For the year ended August 31, 2009, the following table represents operating expenses for both natural and functional
            classifications for the System:




                                                                                                     Hospitals and         Academic
       Operating Expenses               Instruction          Research          Public Service          Clinics              Support

Cost of Goods Sold                $     19,388,048.00              715.63           85,625.56         54,336,265.61             384.39

Salaries and Wages                    1,800,232,078.12     986,108,458.28     150,082,930.39        1,406,838,221.38     251,756,332.06

Payroll Related Costs                  431,389,025.31      226,834,721.09      34,211,567.92         374,314,854.86       59,029,237.02

Professional Fees and Services          41,578,559.87       83,424,869.26      17,304,881.21         135,607,653.79       15,345,828.92

Scholarships and Fellowships             9,595,811.70       25,111,439.50        2,431,770.48             78,004.01        2,551,881.90

Travel                                  29,824,540.42       35,681,628.66        5,291,286.07          9,945,581.85        8,095,979.90

Materials and Supplies                  90,917,970.21      186,259,959.01      22,666,155.08         608,823,950.98       38,394,090.30

Utilities                                2,817,839.95        1,174,509.33         933,934.02           7,526,615.74         248,556.50

Communications                          25,308,100.30        7,699,499.26        1,917,779.68         13,002,804.97       23,182,850.69

Repairs and Maintenance                  6,846,021.26       14,764,476.41        1,279,519.25         45,783,099.44        5,538,129.19

Rentals and Leases                      15,754,199.39        9,294,666.80        4,137,843.84         35,219,124.47        5,618,483.53

Printing and Reproduction                6,894,933.29        4,539,554.34        2,837,542.43          1,864,264.42        3,514,773.85

Impairment of Capital Assets                          -                  -                      -                    -                -

Depreciation and Amortization                         -                  -                      -                    -                -

Bad Debt Expense                             (3,481.78)           2,506.06         (4,122.08)              5,007.57           13,493.88

Claims and Losses                                     -                  -                      -                    -                -
Increase in Net OPEB
  Obligation                                          -                  -                      -                    -                -

Other Operating Expenses               116,441,726.92      195,006,534.02      39,830,488.81         270,309,135.40       43,278,715.74
Federal Sponsored Pass-through
  to State Agencies                      1,102,127.48        4,816,609.00        1,201,958.24                        -                -
State Sponsored Pass-through to
  State Agencies                                      -        207,184.00                       -                    -                -

Total Operating Expenses          $   2,598,087,500.44    1,780,927,330.65    284,209,160.90        2,963,654,584.49     456,568,737.87
                                         Operations and                                           Depreciation
                     Institutional       Maintenance of   Scholarships and      Auxiliary             and
Student Services       Support               Plant          Fellowships        Enterprises        Amortization        Total Expenses

    114,463.84        3,305,578.24            25,559.50                 -      4,047,453.48                      -      81,304,094.25

100,288,841.25      558,432,899.11       218,519,821.77    32,311,450.59     153,512,063.04                      -    5,658,083,095.99

 23,328,863.53      106,867,290.19        54,968,514.20     5,279,682.48      34,800,769.27                      -    1,351,024,525.87

  3,266,980.22       55,754,431.06       121,001,559.72       811,330.45      13,635,903.83                      -     487,731,998.33

  5,453,364.16        2,327,454.02                    -   252,790,968.54       8,824,246.26                      -     309,164,940.57

  3,191,023.62        9,729,156.93         1,360,731.55       899,807.12      17,778,879.84                      -     121,798,615.96

 12,247,337.43       47,027,923.74        51,734,598.94     1,267,636.04      57,036,679.05                      -    1,116,376,300.78

    132,287.59       (22,527,021.97)     245,808,106.00         2,408.90      31,580,280.39                      -     267,697,516.45

  2,186,693.90       (12,301,940.00)       3,351,658.77        25,402.68       4,992,237.94                      -      69,365,088.19

  3,510,153.83       19,060,556.66        93,773,340.86       140,013.66      14,398,107.28                      -     205,093,417.84

  3,430,034.61       10,863,819.91        26,462,052.27        99,381.10      11,356,293.54                      -     122,235,899.46

  2,652,240.59        (4,852,467.67)        299,229.09         74,397.03       4,858,132.09                      -      22,682,599.46

              -                      -    15,934,160.61                 -                    -                   -      15,934,160.61

              -                      -                -                 -                    -   740,830,606.12        740,830,606.12

  4,303,071.05          262,824.23                    -        11,234.46        362,702.91                       -        4,953,236.30

              -      43,175,079.25                    -                 -                    -                   -      43,175,079.25

              -     418,347,266.00                    -                 -                    -                   -     418,347,266.00

 16,443,227.92       (61,772,703.59)      28,329,311.97     2,816,617.34      81,352,434.04                      -     732,035,488.57

              -                      -                -                 -                    -                   -        7,120,694.72

              -                      -                -                 -                    -                   -         207,184.00

180,548,583.54     1,173,700,146.11      861,568,645.25   296,530,330.39     438,536,182.96      740,830,606.12      11,775,161,808.72
15. Commitments and Contingent Liabilities

   On August 31, 2010, various lawsuits and claims involving the System were pending. After conferring with legal
   counsel concerning pending litigation and claims, the System’s management believes that the outcome of pending
   litigation should not have a material adverse effect on the financial statements of the System.

   The System continues to implement its $7.9 billion capital improvement program, planned for fiscal years 2011 through
   2016, to upgrade facilities. Contracts have been entered into for the construction and renovation of various facilities.
   These projects are in various stages of completion.

   The System receives grants and other forms of reimbursement from various federal and state agencies. These activities
   are subject to audit by agents of the funding authority, the purpose of which is to ensure compliance with conditions
   precedent to providing such funds. The System believes that the liability, if any, for reimbursement which may arise as
   the result of audits, would not be material.

   The System has invested in certain hedge funds. These agreements commit the System to future funding amounting to
   $27,579,189.00 as of August 31, 2010 and $98,077,673.00 as of August 31, 2009.

   The System has invested in certain private investment funds. These agreements commit the System to future capital
   contributions amounting to $2,453,783,015.00 as of August 31, 2010 and $2,536,892,509.00 as of August 31, 2009.

   Based on the credit support annex agreements with all counterparties, the System does not have to post any collateral for
   any hedging derivative instruments.

16. Operating Lease Obligations

   The System has entered into various operating leases for buildings, equipment and land. Rental expenses for operating
   leases were $80,870,192.29 in 2010 and $81,653,987.94 in 2009. Future minimum lease rental payments under
   noncancelable operating leases having an initial term in excess of one year as of August 31, 2010, were as follows:


                                        Fiscal Year                           Lease Payments
                                           2011                    $           58,847,226.42
                                           2012                                44,230,711.01
                                           2013                                33,305,733.83
                                           2014                                24,769,251.08
                                           2015                                15,713,649.68
                                        2016 – 2020                            35,799,702.11
                                        2021 – 2025                             4,074,584.60
                                        2026 – 2030                             4,052,215.60
                                        2031 – 2035                             3,056,212.06
                                        2036 – 2040                             2,952,771.00
                              Total Minimum Future Payments        $          226,802,057.39

   The System has also leased buildings, equipment and land to outside parties under various operating leases. The cost,
   carrying value and accumulated depreciation of these leased assets as of August 31, 2010 and 2009 were as follows:

                 Assets Leased                                         2010                    2009
                 Buildings:
                  Cost                                      $     94,721,121.84           98,310,506.86
                  Less: Accumulated Depreciation                 (26,580,401.25)         (26,975,329.50)
                  Carrying Value of Buildings                     68,140,720.59           71,335,177.36
                 Land                                              3,308,174.08            3,307,895.00
                 Total Carrying Value                       $     71,448,894.67           74,643,072.36
   There were no contingent rentals for the period ending August 31, 2010. Minimum future lease rental income under
   noncancelable operating leases as of August 31, 2010, was as follows:


                                      Fiscal Year                      Lease Income
                                             2011          $           17,322,856.99
                                             2012                      15,609,460.59
                                             2013                      14,363,058.57
                                             2014                       8,683,706.18
                                             2015                       2,966,988.10
                                      2016 and beyond                  12,439,664.95
                                            Total          $           71,385,735.38

17. Employees’ Retirement Plans

   TEACHER RETIREMENT SYSTEM (TRS)
   The State of Texas has joint contributory retirement plans for substantially all its employees. One of the primary plans in
   which the System participates is a cost-sharing multi-employer defined benefit pension plan administered by the Teacher
   Retirement System of Texas. TRS is primarily funded through State and employee contributions. Depending upon the
   source of funding for a participant’s salary, the System may be required to make contributions in lieu of the State.

   All System personnel employed in a position on a half time or greater basis for at least 4½ months or more are eligible
   for membership in the TRS retirement plan. However, students employed in positions that require student status as a
   condition of employment do not participate. Members with at least five years of service have a vested right to unreduced
   retirement benefits at age 65 or provided they have a combination of age plus years of service totaling 80 or more
   (members who began TRS participation on or after September 1, 2007 must be age 60 to retire under the second option).
   Members are fully vested after five years of service and are entitled to any reduced benefits for which the eligibility
   requirements have been met prior to meeting the eligibility requirements for unreduced benefits.

   TRS contribution rates for both employers and employees are not actuarially determined but are legally established by
   the State Legislature. Contributions by employees are 6.4 percent of gross earnings. Depending upon the source of
   funding for the employee’s compensation, the State or the System contributes a percentage of participant salaries totaling
   6.644 percent of annual compensation. The System’s contributions to TRS for the years ended August 31, 2010, 2009
   and 2008, were $161,321,575.75, $158,498,895.20 and $149,218,315.67, respectively, which equaled the amounts of the
   required contributions for those years.

   TRS does not separately account for each of its component government agencies since the Retirement System itself bears
   sole responsibility for retirement commitments beyond contributions fixed by the State Legislature. Further information
   regarding actuarial assumptions and conclusions, together with audited financial statements are included in the
   Retirement System’s annual financial report, which may be found on the TRS website at www.trs.state.tx.us.

   OPTIONAL RETIREMENT PROGRAM (ORP)
   The State has also established an optional retirement program for institutions of higher education. Participation in the
   ORP is in lieu of participation in the TRS and is available to certain eligible employees. The ORP provides for the
   purchase of annuity contracts and mutual funds. Participants are vested in the employer contributions after one year and
   one day of service. Depending upon the source of funding for the employee’s compensation, the System may be
   required to make the employer contributions in lieu of the State. Since these are individual annuity contracts, the State
   and the System have no additional or unfunded liability for this program. The contributions made by participants (6.65
   percent of annual compensation) and the System (6.40 percent state base rate plus any local supplement for a maximum
   8.50 percent of annual compensation) for the fiscal years ended August 31, 2010, 2009 and 2008, respectively, are
   provided in the following table.

                                                        2010                      2009                      2008
     Participant Contributions               $      122,419,133.00           119,352,442.00            112,917,966.00
     System Contributions                           155,766,626.00           147,000,144.00            135,439,626.00
      Total                                  $      278,185,759.00           266,352,586.00            248,357,592.00
   EMPLOYEES RETIREMENT SYSTEM (ERS)
   Certain employees at UT Medical Branch at Galveston participate in the Employees Retirement System of Texas. The
   Board of Trustees of the Employees Retirement System of Texas is the administrator of the ERS, which is considered to
   be a single employer defined benefit pension plan. ERS covers the eligible System employees who are not covered by
   the TRS or the ORP. Benefits vest after five years of credited service. Employees may retire at age 60 with five years of
   service or any combination of age plus years of service that equals 80.

   The ERS plan provides a standard monthly benefit in a life annuity at retirement as well as death and disability benefits
   for members. Additional payment options are available. The benefit and contribution provisions are authorized by State
   law and may be amended by the Texas Legislature. Contribution requirements are not actuarially determined. The ERS
   contribution requirement, calculated using entry age normal actuarial cost method, is established through State statute.

   The funding policy requires monthly contributions by both the State and employees. For the biennium beginning
   September 1, 2009, the required contribution for both the State and employees has been changed from 6 percent of pay to
   6.45 percent.

   Additional information can be obtained from the separately issued ERS Comprehensive Annual Financial Report.

   THE UNIVERSITY OF TEXAS SYSTEM GOVERNMENTAL RETIREMENT ARRANGEMENT (UTGRA)
   The University of Texas System Governmental Retirement Arrangement (UTGRA) is a defined contribution pension
   plan established by the System to provide certain participants in the ORP that portion of their benefits that would
   otherwise be payable under the ORP except for the $49,000.00 limit on contributions imposed by Section 415 of the
   Internal Revenue Code (IRC). At August 31, 2010 and 2009, there were 654 and 728 plan members, respectively.
   Persons employed by the System prior to September 1, 1996, whose compensation exceeds the limit set by IRC Section
   401(a)(17) and whose ORP contribution is limited by the $49,000.00 cap under IRC Section 415(c), defer 6.65 percent
   of their excess compensation while the System contributes between 6.58 percent and 8.5 percent depending upon the
   institution and the date of employment. The System contributed $4,063,965.87 for the year ended August 31, 2010 and
   $4,651,690.11 for the year ended August 31, 2009. Plan provisions are established and may be amended at any time by
   the UT System Board of Regents.

   Plan assets are valued at fair value and are invested in contracts and accounts in a similar manner to the ORP.
   Participants are immediately vested in the plan, both for the employee deferrals and the employer contributions.
   However, deferrals, contributions, purchased investments and earnings attributable to the plan are the property of the
   System and subject only to the claims of the System’s general creditors. Participant’s rights under the plan are equal to
   those of the general creditors of the System in an amount equal to the fair value of the participant’s account balance. The
   System has no liability under the UTGRA that would exceed the aggregate value of the investments, and it is unlikely
   that any of UTGRA’s assets will be used to satisfy the claims of general creditors in the future.

   PHYSICIANS REFERRAL SERVICE SUPPLEMENTAL RETIREMENT PLAN (SRP)/RETIREMENT BENEFIT
   PLAN (RBP)
   UT M. D. Anderson Cancer Center (the Cancer Center) has established, primarily for the physicians of its Physicians
   Referral Service, the Physicians Referral Service Supplemental Retirement Plan (SRP)/Retirement Benefit Plan (RBP) of
   the Anderson Hospital (collectively “the SRP/RBP”). The SRP/RBP is a non-qualified plan described by Section 457(f)
   of the Internal Revenue Code of 1986, as amended. The SRP/RBP is reported on the accrual basis of accounting. Assets
   of the SRP/RBP remain subject to the claims of the general creditors of the Cancer Center.

   In general, only physicians hired before July 1, 1986, participate in the SRP. The remainder of eligible employees
   participates in the RBP. Retirement benefits are available to persons who have reached the normal retirement age (55 for
   the RBP, 65 for the SRP) with five years of service. Early retirement benefits are available under the SRP. Additional
   information can be obtained from the separately issued financial statements of the SRP/RBP.

18. Voluntary Retirement Plans

   DEFERRED COMPENSATION-457(b)
   The System employees may elect to defer a portion of their earnings for income tax and investment purposes pursuant to
   authority granted in the TEX. GOV'T. CODE ANN., Sec. 609.001. The System offers its own deferred compensation
   plan, created in accordance with Internal Revenue Code Section 457(b). All System employees are eligible to participate
   in the System's plan, and do not participate in the plan offered by the state of Texas. All investments, amounts, property,
   and rights held under the Deferred Compensation Trust Fund are held for the exclusive benefit of participants and
   beneficiaries at the fair market value of the plan account for each participant. The System has no liability under the plan.
    TAX-SHELTERED ANNUITY-403(b)
    The System also administers the UTSaver Tax-Sheltered Annuity Program (TSA), created in accordance with IRC
    Section 403(b). All employees are eligible to participate. The UTSaver TSA is a private plan, and the deductions,
    purchased investments and earnings attributed to each employee’s 403(b) plan are held by vendors chosen by the
    employee. The vendors may be insurance companies, banks or approved non-bank trustees such as mutual fund
    companies. The assets of this plan do not belong to the System or the State. Therefore, neither the System nor the State
    has a liability related to this plan.

19. Subsequent Events

    On September 23, 2010, the System issued $604,310,000.00 of Revenue Financing System Taxable Bonds, Series 2010C
    and $39,785,000.00 of Revenue Financing System Bonds, Series 2010E to current refund $21,328,000.00 principal
    amount of Revenue Financing System Commercial Paper Notes, Series A, to provide $623,822,000.00 of new money to
    finance the costs of campus improvements, and to pay the costs of issuance related thereof.

20. Related Parties

    Through the normal course of operations, the System both receives funds from and provides funds to other State
    agencies in support of sponsored research programs. Funds received and provided during the year ended August 31,
    2010, related to pass-through grants were $389,581,461.92 and $9,715,377.69 respectively. Funds received and
    provided during the year ended August 31, 2009, related to pass-through grants were $338,570,538.84 and
    $7,327,878.72, respectively.

    Other related-party transactions identified in the financial statements include Due From/To Other State Agencies, State
    Appropriations, Capital Appropriations and Transfers From/To Other State Agencies.

21. Stewardship, Compliance and Accountability

    The System had no significant violations of bond or note covenants. Per State law, the System cannot spend amounts in
    excess of appropriations granted by the Texas Legislature. There are no deficits reported in net assets.

22. Disaggregation of Other Receivable Balances

    Net other receivables at August 31, 2010 and 2009 are detailed by type as follows:

Net Other Receivables                                                           2010                         2009
Receivables related to investments                                 $            75,842,600.73                56,970,825.82
Receivables related to healthcare                                               44,415,673.48                56,931,659.17
Receivables related to gifts, grants and sponsored programs                     64,839,917.57                44,801,849.33
Receivables related to external parties/other companies                         28,048,085.97                17,778,657.05
Receivables related to auxiliary enterprises                                     6,376,093.81                 8,496,994.20
Receivables related to facilities/construction projects                            854,255.08                   291,902.07
Receivables related to payroll                                                   4,391,533.35                 5,480,059.83
Receivables related to patents                                                   1,733,625.07                 1,509,012.74
Receivables related to travel                                                    1,138,964.50                 1,168,053.29
Receivables related to loan funds and financial aid                              3,633,675.12                 1,737,654.10
Receivables related to agency funds                                              3,054,200.33                 1,396,979.44
Receivables related to other various activities                                 28,133,403.05                28,568,678.69
Total                                                               $          262,462,028.06               225,132,325.73

23. Affiliated Organizations

    The balances, or transactions, of funds held by others on behalf of the System are not reflected in the financial
    statements. Based upon the most recent available information, the net assets of these funds are reported by the
    organizations at values totaling $1,558,539,874.00 at August 31, 2010 and $2,008,342,476.00 at August 31, 2009. See
    Note 2, Summary of Significant Accounting Policies, Assets Held by Affiliated Organizations for more information.
24. Joint Ventures

   UT Southwestern Health Systems (UTSHS), a blended component unit of UT Southwestern Medical Center at Dallas
   (UTSWMC), is a participating member of UT Southwestern DVA Healthcare, LLP (DVA). DVA is a joint venture
   between UTSHS and Davita Inc. to provide care for dialysis patients in the Dallas-Fort Worth area. UTSHS's equity
   interest in DVA at August 31, 2010 and 2009 was $4,360,057.10 and $3,661,240.16, respectively, or 49%. Separate
   financial statements for DaVita may be obtained at DaVita Inc., 601 Hawaii Street, El Segundo, California 90245 or
   www.davita.com.

   UT Southwestern Medical Center entered into a limited partnership agreement on June 30, 2006, with Premier
   Purchasing Partners, L.P. (Premier). The principal business of Premier is to operate and manage healthcare-related
   programs and investments for the benefit of its partners including UT Southwestern Medical Center and to otherwise
   assist the partners in providing superior healthcare services in their communities. Premier negotiates and executes
   reduced cost purchase contracts between its partners and vendors of healthcare products and services by leveraging the
   aggregated demand of its partners and to operate group purchasing and other programs to increase both individual
   participant and aggregate purchasing volumes. As of August 31, 2010 and 2009, UT Southwestern Medical Center’s
   investment in Premier was $391,484.00 and $413,813.00, respectively, or .26% and .30%, respectively. Separate
   financial statements for Premier may be obtained at Premier, Inc., 12225 El Camino Real, San Diego, California 92130
   or www.premierinc.com.

   UT Health Science Center at Houston’s blended component unit, UT Physicians, is a participating member of
   Physician’s Dialysis of Houston. Physician’s Dialysis of Houston is a joint venture entered into by UT Physicians and
   DaVita, Inc. UT Physician’s equity interest in Physician’s Dialysis of Houston at August 31, 2010 and 2009 was
   $621,335.97 and $771,010.99, respectively, or 35.62%. Separate financial statements for Physician’s Dialysis of
   Houston may be obtained at Physician’s Dialysis of Houston, Attention: Marie Sinfield, 1423 Pacific Avenue, Tacoma,
   Washington 98402.

   UT Health Science Center at Houston’s blended component unit, UT Physicians, is a participating member of
   UT Imaging. UT Imaging is a Limited Liability Partnership entered into by UT Physicians, Outpatient Imaging
   Affiliates, LLC, and Memorial Hermann Hospital System. UT Physician’s equity interest in UT Imaging at
   August 31, 2010 and 2009 was $(35,393.17) and $(23,889.16), respectively, or 61.15% and 60.73%, respectively.
   Separate financial statements for UT Imaging may be obtained at Outpatient Imaging Affiliates, LLC, Attention: Laura
   Cottingham, 840 Crescent Center Drive, Suite 200, Franklin, Tennessee 37067.

   UT Health Science Center at Houston’s blended component unit, UT Physicians, is a participating member of TMC
   Holding Company, L.L.C. (TMC Holding). TMC Holding is a Limited Liability Corporation entered into by UT
   Physicians, Baylor College of Medicine and Memorial Hermann/USP Surgery Centers III, L.L.P. UT Physicians’ equity
   interest in TMC Holding at August 31, 2010 and 2009 was $298,387.92 and $228,580.74 respectively, or 18.1% and
   14.5% respectively. Separate financial statements for TMC Holding may be obtained by contacting Vanessa Smith,
   3050 Post Oak Blvd, Suite 620, Houston, TX 77056.

   UTMDA is a participating member of the Texas Medical Center Hospital Laundry Cooperative Association (the
   Association). The Association was established on April 30, 1971, for the purpose of acquiring, owning, and operating a
   laundry system on a cooperative basis solely for the benefit of members of the Association. Net earnings of the
   Association may be refunded to the members on a patronage basis or retained by the Association as equity allocated to
   the members. UTMDA’s equity interest in the Association at August 31, 2010 and 2009 was $1,536,038.00 and
   $1,212,460.00, respectively, or 40% and 43% respectively. Separate financial statements for the Association may be
   obtained at 1601 Braeswood Boulevard, Houston, Texas 77030.

   UTMDA is a participating member of the Texas Medical Center Central Heating and Cooling Services Cooperative
   Association (TECO). TECO was incorporated on October 2, 1975, for the purpose of operating a central heating and
   cooling services facility on a cooperative basis solely for the benefit of eligible institutions. On June 1, 2003, TECO
   transferred substantially all of its assets and operations to TECO Corporation, and TECO Corporation assumed the
   liabilities and obligations of TECO. TECO still renders services to member and non-member patrons at cost. Savings or
   margins are refunded to the member and non-member patrons on a patronage basis in the form of cash or equity by
   TECO. UTMDA’s equity interest in TECO at August 31, 2010 and 2009 was $25,705,046.00 and $23,032,586.00,
   respectively, or 40.1% and 40.4%, respectively. Separate financial statements for TECO may be obtained at Thermal
   Energy Corporation, 1615 Braeswood Boulevard, Houston, Texas 77030.
UTMDA is a participating member of P.E.T. Net Houston, LLC (PETNet). PETNet is a joint venture entered into by
UTMDA and P.E.T. Pharmaceuticals, Inc. to lease and operate a facility located on UTMDA’s campus to produce
positron radiopharmaceuticals and isotopes. Construction of the facility commenced in 2003. UTMDA’s equity interest
in PETNet at August 31, 2010 and 2009 was $3,325,620.14 and $3,974,207.80, respectively, or 49%. Separate financial
statements for PETNet may be obtained at Siemens Medical Solutions USA, Inc., 51 Valley Stream Parkway, Malvern,
Pennsylvania 19355.

UTMDA entered into a limited partnership agreement on December 19, 2002 with PTC-Houston Management, L.P. and
PTC-Houston Investors, LLC to create The Proton Therapy Center-Houston LTD., L.L.P. (PTC Partnership). PTC
Partnership was established to develop and operate a proton therapy facility, which will provide cancer treatment to
patients utilizing proton therapy technology. Under the Staffing and Operations Agreement between UTMDA and PTC
Partnership, UTMDA shall be the exclusive supplier of all technical and operational services to support PTC Partnership
operations, and for which, UTMDA will be reimbursed on a monthly basis. Under a separate agreement, the
Professional Services Agreement, UTMDA shall provide services of physicians, medical physicists and medical
dosimetrists to PTC Partnership, for which, UTMDA shall bill patients and retain all professional fees associated with
such services.

UTMDA entered into a limited liability company agreement on December 19, 2002 to form PTC-Houston Investors,
L.L.C (Investors). Investors was established to invest in and be a limited partner in the PTC Partnership. Investors
entered into a ground lease with UTMDA on December 19, 2002 to lease approximately four acres on UTMDA’s
property for an initial term of sixty years. UTMDA’s initial capital contribution of $2,500,000.00 to Investors was
provided through the ground lease. UTMDA’s equity interest in Investors at August 31, 2009 was $2,500,000.00, or
approximately 8.2%.

On May 30, 2010, UTMDA entered into an Agreement and Stipulation among Purchasers of LLC Membership Interests
of PTC-Houston Investors, L.L.C. in which PTC Partnership assigned the right to purchase additional shares of Investors
to its partners. As part of this agreement, UTMDA purchased 13.12195 units of interest in Investors for $5,725,941.82
giving UTMDA a total ownership interest of approximately 51.22%. In addition, all members of Investors further
consented to the redemption of UTMDA’s total interest in Investors in exchange for the conveyance by Investors to
UTMDA of 51.22% of Investors’ right, title and interest under PTC Partnership agreement including without limitation,
51.22% of Investors’ Capital Contributions and Investors’ right to receive distributions and 51.22% of the percentage
interests in PTC Partnership owned by Investors, which approximated $15,621,950.00 as March 30, 2010.

Following the execution of the foregoing, UTMDA entered into an Amended and Restated Limited Partnership
Agreement (Agreement) dated March 30, 2010 between PTC Partnership, Investors, PTC-Houston Management, L.P.,
and UTMDA. The purposes of PTC Partnership are to assume the lease formerly held by Investors with UTMDA to
lease approximately four acres on the UTMDA’s property for an initial term of 60 years, develop and/or acquire other
proton therapy related business opportunities in the area and engage in any other activities that are reasonably incidental
to the foregoing or that are contemplated by the agreement or the related agreements. As part of the agreement, each
partner has made or is deemed to have made the Initial Contribution which equaled $15,621,950.00 for UTMDA or
15.22%. However, UTMDA’s only capital contribution to PTC Partnership has been through the ground lease which
equals $2,500,000.00. UTMDA has recorded cash distributions and has adjusted its carrying value based on the
operating results of PTC Partnership as required by the Agreement, which does not equal the Initial Contribution. Until
the carrying value of the investment equals or exceeds the Initial Contribution value, UTMDA has elected to record the
carrying value on the balance sheet. Accordingly, UTMDA’s equity interest in PTC Partnership as of August 31, 2010
was $5,998,136.00.

The Center is a participating member in the National Center for Therapeutics Manufacturing (the “NCTM”). The Center
entered into a Collaboration, Investment and Facility Use Agreement as of May 19, 2010 with Texas A&M University
System to collaborate on the design of the NCTM and on grants and proposals relating to cancer therapeutics that could
be developed at the NCTM. The Center’s cost-based interest in NCTM at August 31, 2010 was $2,490,000.00 or
approximately 5%.
   UTMDA entered into a limited partnership agreement on January 10, 1990, with Premier Purchasing Partners, L.P.
   (Premier). The principal business of Premier is to operate and manage healthcare-related programs and investments for
   the benefit of its partners including UTMDA and to otherwise assist the partners in providing superior healthcare
   services in their communities. Premier negotiates and executes reduced cost purchase contracts between its partners and
   vendors of healthcare products and services by leveraging the aggregated demand of its partners and to operate group
   purchasing and other programs to increase both individual participant and aggregate purchasing volumes. As of August
   31, 2010 and 2009, UTMDA’s investment in Premier was $4,240,793.00 and $3,942,549.00, respectively, or 1.41%.
   Separate financial statements for Premier may be obtained at Premier, Inc., 12225 El Camino Real, San Diego,
   California 92130 or www.premierinc.com.

25. Termination Benefits

   In 2010, UT System Administration implemented a reduction in force effective August 31, 2010. There were no special
   benefits or severance packages offered. UT System Administration incurred expenses of $8,025.00 for services to assist
   the 45 terminated employees in obtaining subsequent employment.

   In 2010, the University of Texas at Arlington implemented a reduction in force effective August 31, 2010. The benefits
   package provided to the 59 terminated employees consisted of payment of one-half of a year’s salary or a minimum of
   $20,000.00 for voluntarily separating. UT Arlington incurred expenses of $1,615,636.50 in early exit incentives.

   In 2010, the University of Texas at Austin offered early retirement incentives at several points throughout the year. The
   benefits package provided to the 88 terminated employees consisted of a one-time $16,000.00 early exit incentive per
   employee. UT Austin incurred expenses of $1,558,528.88 in early exit incentives.

   In 2010, the University of Texas Medical Branch at Galveston implemented a reduction in force effective July 21, 2010.
   The benefits package provided to the 192 terminated employees consisted of normal benefits and salaries with no special
   benefits or severance packages offered. In 2009, as a result of the financial losses incurred by UT Medical Branch at
   Galveston stemming from Hurricane Ike, on November 12, 2008, the UT System Board of Regents found that a financial
   exigency existed at UT Medical Branch at Galveston. The UT System Board of Regents instructed the System to work
   with UT Medical Branch at Galveston to implement a reduction in force of 3,746 employees. Most affected employees
   were carried on the payroll until mid-January 2009, while others were carried for longer periods ranging to the end of the
   fiscal year. The benefits package provided to the terminated employees consisted of normal benefits and salaries with no
   special benefits or severance packages offered. There were expenditures of $136,933.09 paid for job fair services to
   assist terminated employees in obtaining subsequent employment. In 2009, UT M. D. Anderson Cancer Center
   implemented a reduction in force effective April 20, 2009. The benefits package provided to the 557 terminated
   employees consisted of normal benefits and salaries with no special benefits or severance packages offered.
   Healthcare continuation under the Consolidated Omnibus Budget Reconciliation Act (COBRA) is provided for both
   voluntary and involuntary terminations. COBRA participants are eligible to continue group benefits for 18 to 36 months,
   depending upon the circumstances leading to loss of coverage. In addition, as part of the American Recovery and
   Reinvestment Act (ARRA), employees who were involuntarily terminated between September 1, 2008 and
   May 31, 2010 and their covered dependents may be eligible for reduced COBRA premiums of 35% for up to fifteen
   months. The final subsidized period, during which federal funds pay the remaining 65% of COBRA premiums for
   eligible individuals, will end on August 31, 2011. The 65% subsidy will be paid to the former employer by the federal
   government in the form of a reduction in a payroll tax deposit or a credit on the IRS Form 941. Federal funding received
   in 2010 totaled $1,596,715.49 for all insured plans. COBRA benefits for the self-insured plans offered by System for the
   years ended August 31, 2010 and 2009 are provided below:

                                                                  2010                         2009
              Total Number of Participants1                              4,263                        2,501
              Premium Revenue2                       $            4,598,854.23                 4,855,775.15
              2% Administrative Fee Revenue3                        (90,613.43)                  (95,317.69)
              Net Revenue for COBRA Premium                       4,508,240.80                 4,760,457.46
              Federal COBRA Subsidy4                              1,596,715.49                   292,507.80
              Net COBRA Premium & Subsidy                         6,104,956.29                 5,052,965.26
              Less Claims Paid                                  (12,409,482.19)               (8,679,297.05)
              Cost to State                          $           (6,304,525.90)               (3,626,331.79)
       1
         The participants above are for the self-insured program, which includes 816 and 226 COBRA subsidy participants
         in 2010 and 2009, respectively.
       2
         Premium revenue includes premiums received from COBRA participants not eligible for the Federal subsidy as
         well as the 35% of premiums paid by the participants that are eligible for the 65% subsidy.
       3
         The 2 percent administrative fee is retained by the vendor administering the COBRA benefit and is paid by the
         participant. Approximately $2,111.00 and $8,985.00 of the administrative fee in 2010 and 2009, respectively, is
         related to the Delta Dental COBRA subsidy. NOTE: BCBSTX waives administrative fees on the 65% employer’s
         portion of the COBRA premium.
       4
         The Federal COBRA subsidy is funding that the System will receive from the federal government under ARRA for
         the self-insured plans offered. This subsidy does not include that which System will receive for the fully-insured
         dental and vision plans.

26. Restatements

   GASB Statement No. 53, Accounting and Financial Reporting for Derivative Instruments, effective in 2010, requires
   derivative instruments to be reported at fair value. Changes in fair value for effective hedges that are achieved with
   derivative instruments are to be reported as deferred inflows and deferred outflows in the statement of net assets.
   Derivative instruments that either do not meet the criteria for an effective hedge or are associated with investments that
   are already reported at fair value are to be classified as investment derivative instruments. Changes in fair value of
   investment derivative instruments are reported as increase or decrease in fair value of investments, a component of
   investment revenue. The System booked a restatement to hedging derivative liabilities and deferred outflows, with no
   net asset impact of $93,494,152.83 as of August 31, 2009. The System also booked a restatement to investment
   derivative instruments of $30,426,227.62 with a corresponding increase in fair value of investments as of
   August 31, 2009.
                                                                      UNAUDITED

The University of Texas System Administration
Exhibit A Balance Sheet
As of August 31, 2010



                                                                                      Current Year           Prior Year
                                                                                         Totals                Totals


ASSETS AND DEFERRED OUTFLOWS

Current Assets and Deferred Outflows:
 Cash & Cash Equivalents                                                          $      1,174,190,680.84      1,299,884,401.87
 Restricted Cash & Cash Equivalents                                                        311,859,804.83         68,726,701.93
 Balance in State Appropriations                                                                     5.59
 Securities Lending Collateral                                                             468,365,170.60        381,688,392.78
 Accounts Receivable, Net:
    Federal (allow. of $0.00 in 2010 & $0.00 in 2009)                                        3,565,528.58          6,350,194.27
    Other Intergov. (allow. of $0.00 in 2010 & $0.00 in 2009)                                1,740,706.15          1,037,320.17
    Interest and Dividend Receivables                                                       44,419,876.96         27,361,825.39
    Contributions (allow. of $7,325.35 in 2010 & $4,672.90 in 2009)                             47,614.74             48,994.59
    Investment Trades Receivables                                                           89,384,866.15         95,927,542.45
    Other (allow. of $0.00 in 2010 & $0.00 in 2009)                                         84,264,503.59         67,908,188.54
 Due From Other Funds                                                                       77,877,834.91         40,452,122.57
 Due From Other Institutions                                                                64,753,303.84         59,720,618.46
 Due From Other Agencies                                                                     3,088,342.44          3,368,644.74
 Other Current Assets                                                                       12,797,340.92          4,551,594.89
   Total Current Assets and Deferred Outflows                                            2,336,355,580.14      2,057,026,542.65


Noncurrent Assets and Deferred Outflows:
 Restricted:
   Cash and Cash Equivalents (Noncurrent Restricted)                                             17,833.94             13,067.71
   Investments (Restricted)                                                             18,668,777,423.01     16,814,877,053.33
 Contributions Rec. (allow. of $9,972.32 in 2010 & $10,561.82 in 2009)                           64,820.11            110,739.12
 Unrestricted Investments                                                                4,224,559,758.62      3,652,079,968.49
 Deferred Outflows-FMV of Derivatives (Noncurrent)                                         205,166,048.45          93,494,152.83
 Other Noncurrent Assets                                                                     20,576,793.43         16,236,132.44
 Gross Capital/Intangible Assets                                                         7,094,349,538.57      6,568,292,302.90
   Accumulated Depreciation/Amortization                                                   (59,504,016.48)       (48,298,684.77)
     Total Noncurrent Assets and Deferred Outflows                                      30,154,008,199.65     27,096,804,732.05
Total Assets and Deferred Outflows                                                $     32,490,363,779.79     29,153,831,274.70


LIABILITIES AND DEFERRED INFLOWS
Current Liabilities and Deferred Inflows:
 Accounts Payable and Accrued Liabilities                                                   60,258,286.80         60,421,862.35
 Salaries Payable                                                                            4,064,478.06          3,679,663.78
 Investment Trades Payables                                                                 99,739,901.39        205,800,913.28
 Incurred But Not Reported Self Insurance Claims                                            90,261,548.41         85,403,589.63
 Securities Lending Obligations                                                            468,365,170.60        381,688,392.78
 Due To Other Funds                                                                         77,877,834.91         40,452,122.57
 Due To Other Institutions                                                                 943,894,114.34      1,052,178,442.60
 Due To Other State Agencies                                                                13,977,718.14         13,655,445.22
 Interfund Payable                                                                          20,245,000.00         15,210,000.00
 Deferred Revenue                                                                            9,222,666.61          9,419,855.48
 Employees' Compensable Leave - Current Portion                                              3,064,630.92          2,775,785.35
 Notes, Loans, and Leases Payable                                                          554,574,000.00        947,608,000.00
 Payable From Restricted Assets                                                             59,667,363.76         46,181,967.95
 Revenue Bonds Payable                                                                   1,581,825,028.08      1,619,983,483.85
 Other Current Liabilities                                                                       8,000.00              8,000.00
   Total Current Liabilities and Deferred Inflows                                        3,987,045,742.02      4,484,467,524.84


Noncurrent Liabilities and Deferred Inflows:
 Incurred But Not Reported Self Insurance Claims                                            27,394,726.59         30,181,103.37
 Employees' Compensable Leave                                                                2,039,329.61          2,651,721.46
 Assets Held for Others                                                                  4,655,166,802.32      3,577,005,061.48
 Liability to Beneficiaries Held by System                                                  11,878,505.23         12,263,173.72
 Net Other Postemployment Benefits Obligation                                            1,295,763,104.00        841,025,290.00
 Revenue Bonds Payable                                                                   4,829,918,627.30      3,867,084,956.03
 Interfund Payable                                                                         591,650,000.00        561,895,000.00
 Hedging Derivative Liability (Noncurrent)                                                 205,166,048.45         93,494,152.83
 Other Noncurrent Liabilities                                                                  482,765.00            349,234.50
   Total Noncurrent Liabilities and Deferred Inflows                                    11,619,459,908.50      8,985,949,693.39
Total Liabilities and Deferred Inflows                                                  15,606,505,650.52     13,470,417,218.23


 NET ASSETS
 Invested in Capital Assets, Net of Related Debt                                          121,564,681.90         110,817,852.01
 Restricted for:
   Nonexpendable
     Permanent University Fund Endowment                                                 7,109,333,589.72      6,492,633,743.16
     Permanent Health, True Endowments, and Annuities Held for Institutions              3,445,419,591.47      3,304,937,145.14
    Permanent Health, True Endowments, and Annuities                                      384,432,759.31         383,790,267.99
  Expendable
    Capital Projects                                                                        11,459,309.10          11,095,866.69
    Debt Service                                                                             7,538,520.69          10,652,127.76
    Funds Functioning as Endowment (Restricted)                                              5,797,698.33           5,416,958.23
    Funds Functioning as Endowments (Restricted Held for Institutions)                     237,637,774.76        201,376,081.59
    Other Expendable                                                                     6,213,075,384.65      5,206,865,509.33
 Unrestricted Net Assets                                                                 (652,401,180.66)        (44,171,495.43)
Total Net Assets                                                                        16,883,858,129.27     15,683,414,056.47


Total Liabilities, Deferred Inflows and Net Assets                                $     32,490,363,779.79     29,153,831,274.70
                                                               UNAUDITED


The University of Texas System Administration
Exhibit B Statement of Revenues, Expenses, and Changes in Net Assets
For the Year Ended August 31, 2010



                                                                           Current Year              Prior Year
                                                                              Totals                   Totals



Operating Revenues:
Federal Sponsored Programs                                                          16,554,716.68            11,021,983.64
Federal Sponsored Programs Pass-Through from State Agencies                           7,882,754.04           10,438,894.86
State Sponsored Programs Pass-Through from State Agencies                           11,726,736.93               288,636.27
Local Sponsored Programs                                                                 39,640.40               88,937.01
Private Sponsored Programs                                                              673,253.25            1,628,813.99
Sales and Services of Educational Activities                                        18,216,009.41            29,492,654.15
Other Operating Revenues                                                            (4,979,973.97)            9,103,632.82
Total Operating Revenues                                                            50,113,136.74            62,063,552.74


Operating Expenses:
Instruction                                                                         21,359,981.73            16,486,634.95
Institutional Support                                                              550,399,892.49           529,713,382.57
Scholarships and Fellowships                                                         1,374,900.00
Depreciation and Amortization                                                       11,780,644.22            10,946,743.81
Total Operating Expenses                                                           584,915,418.44           557,146,761.33
Operating Income (Loss)                                                          (534,802,281.70)         (495,083,208.59)


Nonoperating Revenues (Expenses):
State Appropriations                                                                (9,413,085.41)            7,458,495.51
Federal Nonexchange Sponsored Programs                                              12,394,883.91
Gift Contributions for Operations                                                       714,253.62            1,049,313.54
Investment Income                                                                  990,591,104.53       (1,515,041,866.23)
Net Increase (Decrease) in Fair Value of Investments                             1,245,300,994.20         (959,362,891.75)
Interest and Other Expenses on Capital Asset Financings                          (207,322,468.20)         (156,047,211.33)
Gain (Loss) on Sale of Capital Assets                                                       499.82              783,350.53
Other Nonoperating Revenues                                                             837,748.59              282,439.79
Other Nonoperating (Expenses)                                                         (436,228.70)              (40,053.10)
Net Nonoperating Revenues (Expenses)                                             2,032,667,702.36       (2,620,918,423.04)

Income/(Loss) Before Other Revenue, Expenses, Gains/(Losses), and                1,497,865,420.66       (3,116,001,631.63)
Transfers

Gifts and Sponsored Programs for Capital Acquisitions                               (3,000,000.00)           (4,425,000.00)

Additions to Permanent Endowments / Annuities                                      118,100,151.75           104,324,590.20
Reclass from/(to) Other Institutions                                             (256,305,538.26)         (387,115,403.54)
Change in Proceeds of Bonds Payable                                                518,938,682.08           879,567,962.59
Transfers Between Institutions & System, Debt Service - Mandatory                  464,401,612.12           444,665,833.96
Transfers Between Institutions & System Admin. - Non mandatory                   (931,917,460.31)       (1,193,594,653.25)
Transfers From Other State Agencies                                                  1,245,311.90                 33,072.17
Transfers to Other State Agencies                                                (208,884,107.14)         (374,116,969.40)
Change in Net Assets                                                             1,200,444,072.80       (3,646,662,198.90)


Beginning Net Assets                                                            15,652,987,828.85        19,330,081,952.37
Restatements                                                                        30,426,227.62                 (5,697.00)
Beginning Net Assets (As Restated)                                              15,683,414,056.47        19,330,076,255.37
                                                                                16,883,858,129.27        15,683,414,056.47
Ending Net Assets                                                    $
                                                                          UNAUDITED

The University of Texas System Administration
EXHIBIT C - STATEMENT OF CASH FLOWS
For the Year Ended August 31, 2010
                                                                                      Current Year Totals     Prior Year Totals

Cash Flows from Operating Activities:
Proceeds from Sponsored Programs                                                             40,740,574.07          15,540,172.71
Proceeds from Other Revenues                                                                 18,061,352.20          44,073,639.60
Payments to Suppliers                                                                      (97,659,996.60)        (81,240,899.02)
Payments to Employees                                                                      (36,620,626.70)        (41,362,999.42)
   Net Cash Provided (Used) by Operating Activities                                        (75,478,697.03)        (62,990,086.13)


Cash Flows from Noncapital Financing Activities:
Proceeds from State Appropriations                                                          (9,413,091.00)          7,458,495.51
Proceeds from Operating Gifts                                                                   761,552.48          1,078,461.39
Proceeds from Private Gifts for Endowment and Annuity Life Purposes                        341,712,514.68         136,299,768.36
Proceeds from Other Nonoperating Revenues                                                       837,748.59            282,439.79
Payments / Receipts for Transfers to / from System or Other Agencies                       (26,178,763.44)      (576,420,269.63)
Proceeds from Nonexchange Sponsored Programs                                                 10,892,993.15                     -
   Net Cash Provided by Noncapital Financing Activities                                    318,612,954.46       (431,301,104.58)


Cash Flows from Capital and Related Financing Activities:
Proceeds from Issuance of Capital Debt                                                    2,134,421,510.55       2,246,359,520.45
Proceeds from Capital Debt Transferred from System (Nonmandatory)                       (1,061,626,371.72)     (1,081,083,364.55)
Payments of Other Costs on Debt Issuance                                                    (46,219,346.53)         (1,326,027.98)
Proceeds from Capital Appropriations, Grants, and Gifts                                      (3,000,000.00)         (4,425,000.00)
Proceeds from Sale of Capital Assets                                                              13,228.00             830,809.93
Payments for Additions to Capital Assets                                                    (10,067,902.55)        (15,748,194.90)
Payments of Principal on Capital Related Debt                                           (1,547,663,000.00)     (1,378,298,000.00)
Mandatory Transfers to System for Capital Related Debt                                      464,401,612.12         444,665,833.96
Payments of Interest on Capital Related Debt                                              (204,130,988.27)       (154,583,375.10)
   Net Cash Provided (Used) by Capital and Related Financing Activities                   (273,871,258.40)           56,392,201.81


Cash Flows from Investing Activities
Proceeds from Sales of Investments                                                       11,269,443,440.50      17,449,791,915.08
Proceeds from Interest and Investment Income                                                501,488,440.11         447,027,507.01
Payments to Acquire Investments                                                        (11,622,750,731.54)    (17,232,477,780.76)
Net Cash Provided (Used) by Investing Activities                                            148,181,149.07         664,341,641.33


Net Increase (Decrease) in Cash                                                            117,444,148.10         226,442,652.43
Cash and Cash Equivalents (Beginning of the Year)                                        1,368,624,171.51       1,142,181,519.08
Cash and Cash Equivalents (End of the Year)                                            $ 1,486,068,319.61     $ 1,368,624,171.51


Reconciliation of Net Operating Revenues (Expenses) to Net Cash
Provided (Used) by Operating Activities
Operating Income (Loss)                                                                   (534,802,281.70)      (495,083,208.59)
Adjustments to Reconcile Operating Results to Net Cash:
   Depreciation and Amortization Expense                                                    11,780,644.22          10,946,743.81
Changes in Assets and Liabilities:
   Accounts Receivable                                                                        6,098,630.33        (10,739,606.72)
   Other Current and Noncurrent Assets                                                      (7,480,977.91)           4,516,156.23
   Accounts Payable                                                                           (153,422.80)             611,984.44
   Due to System                                                                            (5,032,685.38)         (1,666,690.18)
   Deferred Revenue                                                                           (197,188.87)           9,419,855.48
   Assets Held for Others                                                                     (105,682.64)             105,716.25
   Employees' Compensable Leave                                                               (323,546.28)             550,432.15
   Other Current and Noncurrent Liabilities                                                              -               1,265.00
   Other Postemployment Benefits Obligation                                                454,737,814.00         418,347,266.00
      Total Adjustments                                                                    459,323,584.67         432,093,122.46
Net Cash Provided (Used) by Operating Activities                                         $ (75,478,697.03)      $ (62,990,086.13)


Non Cash Transactions
Net Increase (Decrease) in Fair Value of Investments                                     1,245,300,994.20       (989,789,119.37)
Miscellaneous Noncash Transactions                                                          (1,276,241.31)          (925,339.30)
                                                                    UNAUDITED

The University of Texas at Arlington
Exhibit A Balance Sheet
As of August 31, 2010



                                                                                    Current Year          Prior Year
                                                                                       Totals              Totals


ASSETS AND DEFERRED OUTFLOWS

Current Assets and Deferred Outflows:
 Cash & Cash Equivalents                                                        $         31,889,485.86        25,187,878.07
 Restricted Cash & Cash Equivalents                                                     (17,673,842.36)         1,985,486.10
 Balance in State Appropriations                                                           2,831,388.64         3,313,857.19
 Accounts Receivable, Net:
    Federal (allow. of $0.00 in 2010 & $0.00 in 2009)                                     26,954,152.71         6,654,186.42
    Other Intergov. (allow. of $0.00 in 2010 & $0.00 in 2009)                              2,641,146.47         3,166,551.20
    Student (allow. of $1,001,614.86 in 2010 & $970,548.49 in 2009)                       20,047,150.41        23,846,008.11
    Interest and Dividend Receivables                                                        308,900.95           269,865.65
    Contributions (allow. of $4,449.00 in 2010 & $2,172.72 in 2009)                          143,850.77            63,474.87
    Other (allow. of $8,712.10 in 2010 & $19,039.33 in 2009)                               1,351,440.20           944,068.93
 Due From System Administration                                                           37,815,501.61        75,332,091.29
 Due From Other Agencies                                                                     309,232.92             4,152.25
 Inventories                                                                                 312,551.12           454,762.99
 Loans & Contracts (allow. of $134,006.07 in 2010 & $180,848.55 in 2009)                   6,030,893.26         2,968,041.92
 Other Current Assets                                                                        408,587.16           494,374.37
   Total Current Assets and Deferred Outflows                                            113,370,439.72       144,684,799.36


Noncurrent Assets and Deferred Outflows:
 Restricted:
   Investments (Restricted)                                                                9,374,869.55        13,419,775.77
   Loans & Contracts (allow. of $79,689.67 in 2010 & $49,853.42 in 2009)                   3,586,404.15         3,545,392.97
   Funds Held by System Administration                                                    68,311,733.91        53,566,529.78
 Contributions Rec. (allow. of $8,217.64 in 2010 & $1,522.99 in 2009)                        265,703.82            99,092.24
 Unrestricted Investments                                                                194,793,424.49       186,290,946.91
 Gross Capital/Intangible Assets                                                         808,616,710.29       716,820,440.29
   Accumulated Depreciation/Amortization                                               (271,422,439.07)     (247,647,899.12)
     Total Noncurrent Assets and Deferred Outflows                                       813,526,407.14       726,094,278.84
Total Assets and Deferred Outflows                                              $        926,896,846.86       870,779,078.20


LIABILITIES AND DEFERRED INFLOWS
Current Liabilities and Deferred Inflows:
 Accounts Payable and Accrued Liabilities                                                 19,841,369.90        18,366,417.06
 Salaries Payable                                                                         18,758,748.57        17,000,584.45
 Due To System Administration                                                              2,464,173.07         2,246,661.08
 Due To Other State Agencies                                                                  11,970.67
 Deferred Revenue                                                                         73,196,038.76        69,804,882.10
 Employees' Compensable Leave - Current Portion                                            4,980,348.10         4,476,904.17
 Payable From Restricted Assets                                                            1,500,360.05           752,565.61
 Other Current Liabilities                                                                   357,053.39           224,992.03
   Total Current Liabilities and Deferred Inflows                                        121,110,062.51       112,873,006.50


Noncurrent Liabilities and Deferred Inflows:
 Employees' Compensable Leave                                                              2,458,465.97         2,979,091.11
 Assets Held for Others                                                                    1,538,191.58         2,259,945.51
 Liability to Beneficiaries Held by System                                                    40,183.05            40,355.17
 Other Noncurrent Liabilities                                                                482,830.49           469,594.12
   Total Noncurrent Liabilities and Deferred Inflows                                       4,519,671.09         5,748,985.91
Total Liabilities and Deferred Inflows                                                   125,629,733.60       118,621,992.41


 NET ASSETS
 Invested in Capital Assets, Net of Related Debt                                         537,194,271.22       469,172,541.17
 Restricted for:
   Nonexpendable
    Permanent Health, True Endowments, and Annuities                                      40,524,689.86        34,243,595.76
  Expendable
    Capital Projects                                                                      14,802,389.72        61,313,751.74
    Funds Functioning as Endowment (Restricted)                                            2,126,496.82         1,922,903.84
    Other Expendable                                                                      41,337,309.17        36,899,746.06
 Unrestricted Net Assets                                                                 165,281,956.47       148,604,547.22
Total Net Assets                                                                         801,267,113.26       752,157,085.79


Total Liabilities, Deferred Inflows and Net Assets                              $        926,896,846.86       870,779,078.20
                                                               UNAUDITED


The University of Texas at Arlington
Exhibit B Statement of Revenues, Expenses, and Changes in Net Assets
For the Year Ended August 31, 2010



                                                                           Current Year               Prior Year
                                                                              Totals                    Totals



Operating Revenues:
Student Tuition and Fees                                             $            221,027,967.36            189,162,252.45
 Discounts and Allowances                                                         (63,553,532.90)           (46,405,450.44)
Federal Sponsored Programs                                                          40,911,762.06             32,599,706.05
Federal Sponsored Programs Pass-Through from State Agencies                          2,572,840.67              2,549,390.95
State Sponsored Programs Pass-Through from State Agencies                           16,920,075.71              9,932,592.02
Local Sponsored Programs                                                               420,970.25              1,053,230.16
Private Sponsored Programs                                                           6,991,460.14              7,952,633.16
Sales and Services of Educational Activities                                        17,752,036.30             16,759,826.32
Auxiliary Enterprises                                                               25,724,980.06             25,516,129.54
Other Operating Revenues                                                             8,725,844.82              9,806,846.34
Total Operating Revenues                                                          277,494,404.47            248,927,156.55


Operating Expenses:
Instruction                                                                        136,859,127.10            128,080,313.00
Research                                                                            48,048,840.63             43,360,030.24
Public Service                                                                      10,418,144.14             10,243,213.13
Academic Support                                                                    32,560,796.53             30,755,402.15
Student Services                                                                    26,387,842.26             25,164,415.48
Institutional Support                                                               35,146,061.24             30,057,182.04
Operations and Maintenance of Plant                                                 33,476,957.78             29,953,227.51
Scholarships and Fellowships                                                        21,056,165.13             13,175,894.12
Auxiliary Enterprises                                                               38,749,608.66             36,834,601.94
Depreciation and Amortization                                                       27,624,366.30             20,091,861.93
Total Operating Expenses                                                           410,327,909.77            367,716,141.54
Operating Income (Loss)                                                          (132,833,505.30)          (118,788,984.99)


Nonoperating Revenues (Expenses):
State Appropriations                                                               112,133,724.18            113,733,734.77
Federal Nonexchange Sponsored Programs                                              34,202,990.88             21,863,610.84
Federal Nonexchange Pass-Through                                                     5,883,503.00
State Nonexchange Pass-Through                                                         463,158.95
Gift Contributions for Operations                                                    3,174,372.74              1,979,742.10
Investment Income                                                                   11,188,577.03              8,401,501.84
Net Increase (Decrease) in Fair Value of Investments                                 3,869,772.12           (27,725,016.36)
Gain (Loss) on Sale of Capital Assets                                                  202,798.06                  1,127.30
Other Nonoperating Revenues                                                                                        8,558.00
Other Nonoperating (Expenses)                                                        (280,081.88)              (387,160.91)
Net Nonoperating Revenues (Expenses)                                               170,838,815.08           117,876,097.58

Income/(Loss) Before Other Revenue, Expenses, Gains/(Losses), and                   38,005,309.78                  (912,887.41)
Transfers

Gifts and Sponsored Programs for Capital Acquisitions                                3,428,499.17              2,388,735.32

Additions to Permanent Endowments / Annuities                                        2,619,037.69              2,223,432.22
Reclass from/(to) Other Institutions                                             (109,656,436.13)             71,751,628.95
Transfers Between Institutions & System, Debt Service - Mandatory                 (27,489,764.09)           (27,614,194.62)
Transfers Between Institutions & System Admin. - Non mandatory                     147,119,941.99             35,661,727.44
Transfers From Other State Agencies                                                       10,152.02                  35,476.45
Transfers to Other State Agencies                                                   (4,926,712.96)            (2,670,837.30)
Legislative Appropriations Lapsed                                                                                    (2,624.92)
Change in Net Assets                                                                49,110,027.47             80,860,456.13


Beginning Net Assets                                                               752,157,085.79            671,296,629.66
                                                                                   801,267,113.26            752,157,085.79
Ending Net Assets                                                    $
                                                                          UNAUDITED

The University of Texas at Arlington
EXHIBIT C - STATEMENT OF CASH FLOWS
For the Year Ended August 31, 2010
                                                                                      Current Year Totals     Prior Year Totals

Cash Flows from Operating Activities:
Proceeds from Tuition and Fees                                                              166,478,122.06        138,201,913.62
Proceeds from Sponsored Programs                                                             45,760,062.79          52,988,769.24
Proceeds from Auxiliaries                                                                    25,735,080.94          25,561,970.20
Proceeds from Other Revenues                                                                 26,082,776.24          25,759,133.43
Payments to Suppliers                                                                     (124,785,515.71)      (102,989,469.18)
Payments to Employees                                                                     (257,479,658.46)      (239,296,919.46)
Payments for Loans Provided                                                                (10,368,784.54)         (4,852,208.08)
Proceeds from Loan Programs                                                                   7,170,045.21           3,341,461.99
   Net Cash Provided (Used) by Operating Activities                                       (121,407,871.47)      (101,285,348.24)


Cash Flows from Noncapital Financing Activities:
Proceeds from State Appropriations                                                         112,616,192.73         114,369,568.14
Proceeds from Operating Gifts                                                                 3,119,030.01          1,877,242.45
Proceeds from Private Gifts for Endowment and Annuity Life Purposes                           2,619,037.69          2,223,432.22
Proceeds from Other Nonoperating Revenues                                                       280,081.88            315,331.92
Payments / Receipts for Transfers to / from System or Other Agencies                        (2,676,847.06)          (135,422.08)
Payments for Other Uses                                                                       (280,081.88)          (387,160.91)
Proceeds from Nonexchange Sponsored Programs                                                 41,127,850.07         21,660,213.22
   Net Cash Provided by Noncapital Financing Activities                                    156,805,263.44         139,923,204.96


Cash Flows from Capital and Related Financing Activities:
Proceeds from Capital Debt Transferred from System (Nonmandatory)                            74,163,185.95          65,540,438.11
Proceeds from Capital Appropriations, Grants, and Gifts                                       1,216,356.04           1,855,270.00
Payments for Additions to Capital Assets                                                   (92,309,453.88)        (76,027,274.80)
Mandatory Transfers to System for Capital Related Debt                                     (27,489,764.09)        (27,614,194.62)
   Net Cash Provided (Used) by Capital and Related Financing Activities                    (44,419,675.98)        (36,245,761.31)


Cash Flows from Investing Activities
Proceeds from Sales of Investments Invested by System                                                    -                      -
Proceeds from Interest and Investment Income                                                  2,918,719.72           3,557,332.45
Proceeds from Interest and Investment Income Invested by System                               8,478,846.99           4,701,952.44
Payments to Acquire Investments                                                                          -           (600,000.00)
Payments to Acquire Investments Invested by System                                         (15,333,003.37)        (27,768,854.22)
Net Cash Provided (Used) by Investing Activities                                            (3,935,436.66)        (20,109,569.33)


Net Increase (Decrease) in Cash                                                            (12,957,720.67)       (17,717,473.92)
Cash and Cash Equivalents (Beginning of the Year)                                            27,173,364.17         44,890,838.09
Cash and Cash Equivalents (End of the Year)                                                $ 14,215,643.50       $ 27,173,364.17


Reconciliation of Net Operating Revenues (Expenses) to Net Cash
Provided (Used) by Operating Activities
Operating Income (Loss)                                                                   (132,833,505.30)      (118,788,984.99)
Adjustments to Reconcile Operating Results to Net Cash:
   Depreciation and Amortization Expense                                                    27,624,366.30          20,091,861.93
   Bad Debt Expense                                                                             94,876.81             366,895.43
Changes in Assets and Liabilities:
   Accounts Receivable                                                                     (17,266,353.04)         (6,192,474.00)
   Inventories                                                                                  142,211.87             (59,974.57)
   Loans and Contracts                                                                      (3,198,739.33)         (1,510,746.09)
   Other Current and Noncurrent Assets                                                            85,787.21              92,383.29
   Accounts Payable                                                                           1,160,396.22           3,162,995.89
   Due to System                                                                                217,511.99             141,036.93
   Deferred Revenue                                                                           3,391,156.66             784,407.30
   Assets Held for Others                                                                     (953,697.38)             (59,266.17)
   Employees' Compensable Leave                                                                 (17,181.21)            662,966.22
   Other Current and Noncurrent Liabilities                                                     145,297.73               23,550.59
      Total Adjustments                                                                      11,425,633.83          17,503,636.75
Net Cash Provided (Used) by Operating Activities                                        $ (121,407,871.47)     $ (101,285,348.24)


Non Cash Transactions
Net Increase (Decrease) in Fair Value of Investments                                          3,869,772.12        (27,725,016.36)
Donated Capital Assets                                                                        2,020,498.38             484,222.06
Miscellaneous Noncash Transactions                                                          (1,516,341.76)           (343,126.46)
                                                                     UNAUDITED

The University of Texas at Austin
Exhibit A Balance Sheet
As of August 31, 2010



                                                                                       Current Year          Prior Year
                                                                                          Totals              Totals


ASSETS AND DEFERRED OUTFLOWS

Current Assets and Deferred Outflows:
 Cash & Cash Equivalents                                                           $        153,211,412.19        77,987,168.17
 Restricted Cash & Cash Equivalents                                                          65,824,734.45        26,869,849.06
 Balance in State Appropriations                                                             14,771,676.39        12,732,921.64
 Funds Held by System Administration (Current)                                                    7,898.74            13,067.71
 Accounts Receivable, Net:
    Federal (allow. of $0.00 in 2010 & $0.00 in 2009)                                        52,874,738.32        62,960,749.98
    Other Intergov. (allow. of $0.00 in 2010 & $0.00 in 2009)                                 5,483,924.36         5,853,266.06
    Student (allow. of $902,320.95 in 2010 & $1,566,314.47 in 2009)                          79,282,248.32        80,514,468.76
    Interest and Dividend Receivables                                                         5,289,472.43         5,408,227.94
    Contributions (allow. of $778,763.26 in 2010 & $605,310.95 in 2009)                      43,044,565.72        21,683,069.51
    Other (allow. of $163,835.82 in 2010 & $7,595.23 in 2009)                                14,364,936.98        13,942,009.27
 Due From Other Funds                                                                        11,123,125.98        25,007,012.34
 Due From System Administration                                                             367,362,068.15       364,994,619.41
 Due From Other Agencies                                                                      7,338,045.97         5,067,552.54
 Inventories                                                                                  7,408,836.16         7,839,575.26
 Loans & Contracts (allow. of $0.00 in 2010 & $0.00 in 2009)                                 10,877,654.66        12,563,982.30
 Other Current Assets                                                                        58,114,753.16        62,847,036.88
   Total Current Assets and Deferred Outflows                                               896,380,091.98       786,284,576.83


Noncurrent Assets and Deferred Outflows:
 Restricted:
   Investments (Restricted)                                                                 260,625,443.53       261,649,366.84
   Loans & Contracts (allow. of $13,860,009.68 in 2010 & $11,692,039.31 in 2009)             45,369,817.09        53,058,374.69
   Funds Held by System Administration                                                    2,596,220,336.64     2,390,797,855.19
 Contributions Rec. (allow. of $72,958.19 in 2010 & $64,806.54 in 2009)                      55,113,069.65        26,008,005.18
 Unrestricted Investments                                                                   545,647,870.96       462,337,062.86
 Other Noncurrent Assets                                                                      1,386,397.96         1,351,467.96
 Gross Capital/Intangible Assets                                                          4,456,019,721.98     4,119,623,798.95
   Accumulated Depreciation/Amortization                                                (1,908,505,924.09)   (1,775,638,151.39)
     Total Noncurrent Assets and Deferred Outflows                                        6,051,876,733.72     5,539,187,780.28
Total Assets and Deferred Outflows                                                 $      6,948,256,825.70     6,325,472,357.11


LIABILITIES AND DEFERRED INFLOWS
Current Liabilities and Deferred Inflows:
 Accounts Payable and Accrued Liabilities                                                    59,621,256.49        71,434,887.75
 Salaries Payable                                                                            67,092,889.24        58,950,664.76
 Due To Other Funds                                                                          11,123,125.98        25,007,012.34
 Due To System Administration                                                                13,656,337.75        12,821,824.32
 Due To Other State Agencies                                                                    322,763.06             8,567.87
 Deferred Revenue                                                                           446,469,205.69       428,507,157.15
 Employees' Compensable Leave - Current Portion                                              28,860,322.86        27,368,823.52
 Notes, Loans, and Leases Payable                                                             2,151,834.96         2,127,972.22
 Payable From Restricted Assets                                                               3,886,684.22         6,343,032.27
 Other Current Liabilities                                                                    2,078,260.49         2,072,534.06
   Total Current Liabilities and Deferred Inflows                                           635,262,680.74       634,642,476.26


Noncurrent Liabilities and Deferred Inflows:
 Employees' Compensable Leave                                                                19,293,064.44        24,052,209.62
 Assets Held for Others                                                                       8,117,020.26        15,472,235.99
 Liability to Beneficiaries Held by System                                                    6,806,833.34         6,937,185.23
 Notes, Loans, and Leases Payable                                                            19,587,056.90        20,420,925.64
 Other Noncurrent Liabilities                                                                   518,350.36
   Total Noncurrent Liabilities and Deferred Inflows                                         54,322,325.30        66,882,556.48
Total Liabilities and Deferred Inflows                                                      689,585,006.04       701,525,032.74


 NET ASSETS
 Invested in Capital Assets, Net of Related Debt                                          2,525,774,906.03     2,321,436,749.70
 Restricted for:
   Nonexpendable
    Permanent Health, True Endowments, and Annuities                                      1,498,539,634.68     1,453,033,771.28
  Expendable
    Capital Projects                                                                        122,128,154.90       190,838,262.85
    Funds Functioning as Endowment (Restricted)                                             126,869,350.20       111,274,932.51
    Other Expendable                                                                      1,361,088,752.92     1,147,088,047.94
 Unrestricted Net Assets                                                                    624,271,020.93       400,275,560.09
Total Net Assets                                                                          6,258,671,819.66     5,623,947,324.37


Total Liabilities, Deferred Inflows and Net Assets                                 $      6,948,256,825.70     6,325,472,357.11
                                                               UNAUDITED


The University of Texas at Austin
Exhibit B Statement of Revenues, Expenses, and Changes in Net Assets
For the Year Ended August 31, 2010



                                                                             Current Year               Prior Year
                                                                                Totals                    Totals



Operating Revenues:
Student Tuition and Fees                                                 $           553,528,798.20            508,288,031.44
 Discounts and Allowances                                                          (120,369,489.40)          (105,128,049.94)
Federal Sponsored Programs                                                           362,472,770.54            333,046,032.36
Federal Sponsored Programs Pass-Through from State Agencies                           32,175,970.37             27,463,866.49
State Sponsored Programs Pass-Through from State Agencies                             64,261,822.76             52,157,854.82
Local Sponsored Programs                                                                5,873,564.66              5,776,659.13
Private Sponsored Programs                                                            87,622,183.58             85,573,548.89
Sales and Services of Educational Activities                                         177,002,573.03            180,571,524.83
 Discounts and Allowances Sales and Services of Educational Activities                    (67,520.06)             (111,078.07)
Auxiliary Enterprises                                                                225,094,877.72            212,020,114.92
 Discounts and Allowances Auxiliary Enterprises                                       (9,893,036.72)            (8,993,890.94)
Other Operating Revenues                                                                6,050,431.70              6,438,060.25
Total Operating Revenues                                                           1,383,752,946.38          1,297,102,674.18


Operating Expenses:
Instruction                                                                          592,383,878.67            572,672,680.90
Research                                                                             419,228,376.82            420,550,223.38
Public Service                                                                        75,358,242.87             74,451,922.53
Academic Support                                                                     150,337,308.38            146,504,161.96
Student Services                                                                      51,940,468.94             54,400,515.21
Institutional Support                                                                111,585,747.83             97,474,073.33
Operations and Maintenance of Plant                                                  147,118,388.23            157,283,009.03
Scholarships and Fellowships                                                         120,535,020.76            105,065,653.79
Auxiliary Enterprises                                                                225,232,564.90            228,595,659.10
Depreciation and Amortization                                                        168,123,989.50            158,442,694.79
Total Operating Expenses                                                           2,061,843,986.90          2,015,440,594.02
Operating Income (Loss)                                                            (678,091,040.52)          (718,337,919.84)


Nonoperating Revenues (Expenses):
State Appropriations                                                                329,682,364.51             333,089,118.52
Federal Nonexchange Sponsored Programs                                               51,553,143.87              31,216,682.30
Federal Nonexchange Pass-Through                                                     11,137,421.69
State Nonexchange Pass-Through                                                           165,212.31
Gift Contributions for Operations                                                    68,890,405.95             101,434,124.96
Investment Income                                                                   168,731,357.19              65,965,363.69
Net Increase (Decrease) in Fair Value of Investments                                212,197,428.72           (552,304,370.32)
Interest and Other Expenses on Capital Asset Financings                              (1,392,624.00)             (2,905,823.67)
Gain (Loss) on Sale of Capital Assets                                                (7,139,983.57)             (1,757,840.21)
Other Nonoperating Revenues                                                          10,402,490.20              13,965,612.81
Other Nonoperating (Expenses)                                                          (515,966.97)           (19,769,288.60)
Net Nonoperating Revenues (Expenses)                                                843,711,249.90            (31,066,420.52)

Income/(Loss) Before Other Revenue, Expenses, Gains/(Losses), and                   165,620,209.38           (749,404,340.36)
Transfers

Gifts and Sponsored Programs for Capital Acquisitions                               150,763,755.21              38,640,585.52

Additions to Permanent Endowments / Annuities                                         42,102,075.05             58,677,280.92
Reclass from/(to) Other Institutions                                                (74,373,215.58)           193,382,098.75
Transfers Between Institutions & System, Debt Service - Mandatory                   (87,916,779.37)           (80,775,426.66)
Transfers Between Institutions & System Admin. - Non mandatory                      442,863,833.31             354,349,285.08
Transfers From Other State Agencies                                                    1,964,264.93              2,767,932.84
Transfers to Other State Agencies                                                    (6,299,647.64)             (5,420,450.22)
Change in Net Assets                                                                634,724,495.29           (187,783,034.13)


Beginning Net Assets                                                               5,623,947,324.37          5,811,730,358.50
                                                                                   6,258,671,819.66          5,623,947,324.37
Ending Net Assets                                                        $
                                                                          UNAUDITED

The University of Texas at Austin
EXHIBIT C - STATEMENT OF CASH FLOWS
For the Year Ended August 31, 2010
                                                                                      Current Year Totals     Prior Year Totals

Cash Flows from Operating Activities:
Proceeds from Tuition and Fees                                                              443,389,822.17        418,473,550.18
Proceeds from Sponsored Programs                                                            582,295,673.46        510,376,355.56
Proceeds from Auxiliaries                                                                   221,283,112.77        210,646,429.74
Proceeds from Other Revenues                                                                184,470,555.40        184,441,319.48
Payments to Suppliers                                                                     (603,917,687.82)      (617,162,449.74)
Payments to Employees                                                                   (1,284,133,390.57)    (1,239,364,797.40)
Payments for Loans Provided                                                                 (29,110,574.88)       (35,574,822.18)
Proceeds from Loan Programs                                                                   35,595,921.00         36,206,658.23
   Net Cash Provided (Used) by Operating Activities                                       (450,126,568.47)      (531,957,756.13)


Cash Flows from Noncapital Financing Activities:
Proceeds from State Appropriations                                                         327,643,609.76         326,065,171.83
Proceeds from Operating Gifts                                                               18,423,845.27           99,971,802.22
Proceeds from Private Gifts for Endowment and Annuity Life Purposes                         42,102,075.05           58,677,280.92
Proceeds from Other Nonoperating Revenues                                                   10,402,490.20           13,965,612.81
Payments / Receipts for Transfers to / from System or Other Agencies                       148,390,490.17         254,548,439.12
Payments for Other Uses                                                                      (515,966.97)         (19,769,288.60)
Proceeds from Nonexchange Sponsored Programs                                                42,519,316.30           26,497,995.87
   Net Cash Provided by Noncapital Financing Activities                                    588,965,859.78         759,957,014.17


Cash Flows from Capital and Related Financing Activities:
Proceeds from Capital Debt Transferred from System (Nonmandatory)                           213,145,435.48        179,733,052.86
Proceeds from Capital Appropriations, Grants, and Gifts                                     113,147,565.85         26,225,488.02
Proceeds from Sale of Capital Assets                                                             153,287.63            129,858.04
Payments for Additions to Capital Assets                                                  (344,492,051.75)      (342,704,136.43)
Payments of Principal on Capital Related Debt                                                (1,428,223.55)        (1,602,009.88)
Mandatory Transfers to System for Capital Related Debt                                     (87,916,779.37)       (80,775,426.66)
Payments of Interest on Capital Related Debt                                                 (1,392,624.00)        (2,905,823.67)
   Net Cash Provided (Used) by Capital and Related Financing Activities                   (108,783,389.71)      (221,898,997.72)


Cash Flows from Investing Activities
Proceeds from Sales of Investments Invested by System                                                    -                      -
Proceeds from Interest and Investment Income                                               138,460,359.16           41,093,855.90
Proceeds from Interest and Investment Income Invested by System                              21,169,637.20          15,819,628.99
Payments to Acquire Investments Invested by System                                         (75,511,937.52)        (85,497,464.35)
Net Cash Provided (Used) by Investing Activities                                             84,118,058.84        (28,583,979.46)


Net Increase (Decrease) in Cash                                                            114,173,960.44         (22,483,719.14)
Cash and Cash Equivalents (Beginning of the Year)                                          104,870,084.94         127,353,804.08
Cash and Cash Equivalents (End of the Year)                                              $ 219,044,045.38       $ 104,870,084.94


Reconciliation of Net Operating Revenues (Expenses) to Net Cash
Provided (Used) by Operating Activities
Operating Income (Loss)                                                                   (678,091,040.52)      (718,337,919.84)
Adjustments to Reconcile Operating Results to Net Cash:
   Depreciation and Amortization Expense                                                   168,123,989.50         158,442,694.79
   Bad Debt Expense                                                                          2,889,539.12           3,449,034.78
Changes in Assets and Liabilities:
   Accounts Receivable                                                                      29,330,614.23          (1,435,471.36)
   Inventories                                                                                   430,739.10          (583,988.07)
   Loans and Contracts                                                                        6,485,346.12             631,836.05
   Other Current and Noncurrent Assets                                                        4,732,283.72        (15,742,057.56)
   Accounts Payable                                                                             (81,032.66)          8,955,583.81
   Due to System                                                                                 834,513.43            376,265.12
   Deferred Revenue                                                                         17,962,048.54           28,537,177.33
   Employees' Compensable Leave                                                             (3,267,645.84)           3,688,742.83
   Other Current and Noncurrent Liabilities                                                      524,076.79             60,345.99
      Total Adjustments                                                                    227,964,472.05         186,380,163.71
Net Cash Provided (Used) by Operating Activities                                        $ (450,126,568.47)     $ (531,957,756.13)


Non Cash Transactions
Net Increase (Decrease) in Fair Value of Investments                                       212,197,428.72       (552,304,370.32)
Donated Capital Assets                                                                      37,616,189.36          12,415,097.50
Capital Assets Acquired Under Capital Lease Purchases                                           618,217.55            319,062.50
Miscellaneous Noncash Transactions                                                          (5,188,504.22)            970,550.27
                                                                    UNAUDITED

The University of Texas at Brownsville
Exhibit A Balance Sheet
As of August 31, 2010



                                                                                    Current Year          Prior Year
                                                                                       Totals               Totals


ASSETS AND DEFERRED OUTFLOWS

Current Assets and Deferred Outflows:
 Cash & Cash Equivalents                                                        $         24,160,854.66        20,112,011.73
 Restricted Cash & Cash Equivalents                                                        1,196,061.65         1,258,734.67
 Balance in State Appropriations                                                           8,461,635.72         6,657,138.12
 Accounts Receivable, Net:
    Federal (allow. of $0.00 in 2010 & $0.00 in 2009)                                      6,452,416.78         4,745,939.35
    Other Intergov. (allow. of $0.00 in 2010 & $0.00 in 2009)                                895,339.53           834,082.69
    Student (allow. of $425,669.15 in 2010 & $357,667.24 in 2009)                          3,824,970.14         4,485,727.84
    Interest and Dividend Receivables                                                         60,850.16            54,053.42
    Other (allow. of $43,588.78 in 2010 & $38,055.24 in 2009)                              5,550,276.85         3,973,759.73
 Due From Other Funds                                                                     11,063,713.12        13,072,421.56
 Due From System Administration                                                           18,238,869.33        10,921,375.02
 Due From Other Agencies                                                                         262.16               218.16
 Loans & Contracts (allow. of $516,529.41 in 2010 & $1,008,203.94 in 2009)                 1,047,830.69         1,404,003.15
 Other Current Assets                                                                     16,657,745.02        13,898,721.96
   Total Current Assets and Deferred Outflows                                             97,610,825.81        81,418,187.40


Noncurrent Assets and Deferred Outflows:
 Restricted:
   Investments (Restricted)                                                                1,974,412.05         1,974,412.05
   Funds Held by System Administration                                                     7,333,822.72         6,305,802.55
 Unrestricted Investments                                                                 20,846,894.12        18,580,958.02
 Gross Capital/Intangible Assets                                                        127,816,010.19       113,076,927.51
   Accumulated Depreciation/Amortization                                                (44,619,298.38)      (39,002,656.95)
     Total Noncurrent Assets and Deferred Outflows                                      113,351,840.70       100,935,443.18
Total Assets and Deferred Outflows                                              $       210,962,666.51       182,353,630.58


LIABILITIES AND DEFERRED INFLOWS
Current Liabilities and Deferred Inflows:
 Accounts Payable and Accrued Liabilities                                                 23,161,365.63        20,164,200.02
 Salaries Payable                                                                          5,113,375.00         4,617,895.10
 Federal Payables                                                                             29,607.22            15,435.14
 Due To Other Funds                                                                       11,063,713.12        13,072,421.56
 Due To System Administration                                                                882,050.57           762,125.80
 Deferred Revenue                                                                          9,513,557.02         9,069,228.57
 Employees' Compensable Leave - Current Portion                                            1,421,810.93         1,257,961.02
 Payable From Restricted Assets                                                              820,670.73           475,721.25
 Assets Held for Others                                                                   13,933,114.23        11,076,226.71
 Other Current Liabilities                                                                                         93,778.60
   Total Current Liabilities and Deferred Inflows                                         65,939,264.45        60,604,993.77


Noncurrent Liabilities and Deferred Inflows:
 Employees' Compensable Leave                                                              1,435,336.29         1,294,028.79
   Total Noncurrent Liabilities and Deferred Inflows                                       1,435,336.29         1,294,028.79
Total Liabilities and Deferred Inflows                                                    67,374,600.74        61,899,022.56


 NET ASSETS
 Invested in Capital Assets, Net of Related Debt                                          83,196,711.81        74,074,270.56
 Restricted for:
   Nonexpendable
    Permanent Health, True Endowments, and Annuities                                       6,497,452.17         5,941,532.02
   Expendable
    Capital Projects                                                                     18,166,285.28         10,327,649.69
    Funds Functioning as Endowment (Restricted)                                              27,000.00
    Other Expendable                                                                      5,531,134.64          4,406,667.56
 Unrestricted Net Assets                                                                 30,169,481.87         25,704,488.19
Total Net Assets                                                                        143,588,065.77        120,454,608.02


Total Liabilities, Deferred Inflows and Net Assets                              $       210,962,666.51        182,353,630.58
                                                               UNAUDITED


The University of Texas at Brownsville
Exhibit B Statement of Revenues, Expenses, and Changes in Net Assets
For the Year Ended August 31, 2010



                                                                           Current Year                Prior Year
                                                                              Totals                     Totals



Operating Revenues:
Student Tuition and Fees                                             $              23,912,016.82              21,643,894.84
 Discounts and Allowances                                                           (6,211,326.76)             (4,420,071.38)
Federal Sponsored Programs                                                          13,834,969.72              12,899,462.81
Federal Sponsored Programs Pass-Through from State Agencies                             883,380.51               1,212,720.58
State Sponsored Programs Pass-Through from State Agencies                             5,071,114.97               5,205,753.71
Local Sponsored Programs                                                            59,595,087.89              54,110,413.86
Private Sponsored Programs                                                              465,207.51                 150,051.30
Sales and Services of Educational Activities                                          1,997,650.74               2,109,807.00
Auxiliary Enterprises                                                                 1,373,967.13               1,182,529.76
 Discounts and Allowances Auxiliary Enterprises                                       (255,395.48)               (152,130.33)
Other Operating Revenues                                                                373,575.85                 248,484.73
Total Operating Revenues                                                           101,040,248.90              94,190,916.88


Operating Expenses:
Instruction                                                                         45,383,256.26              42,523,737.86
Research                                                                             5,136,682.46               4,726,293.21
Public Service                                                                       5,357,299.07               6,112,833.17
Academic Support                                                                    15,369,716.67              14,631,687.24
Student Services                                                                    10,279,590.95              10,366,314.34
Institutional Support                                                               13,117,835.47              11,453,147.57
Operations and Maintenance of Plant                                                 12,814,766.91              13,480,290.44
Scholarships and Fellowships                                                        49,197,570.14              36,846,518.53
Auxiliary Enterprises                                                                8,959,004.65               8,123,688.47
Depreciation and Amortization                                                        5,717,838.24               5,764,194.76
Total Operating Expenses                                                          171,333,560.82             154,028,705.59
Operating Income (Loss)                                                           (70,293,311.92)            (59,837,788.71)


Nonoperating Revenues (Expenses):
State Appropriations                                                                37,090,029.47              36,366,733.70
Federal Nonexchange Sponsored Programs                                              34,895,438.92              22,961,102.99
Federal Nonexchange Pass-Through                                                     1,399,479.00
State Nonexchange Pass-Through                                                           23,020.93
Gift Contributions for Operations                                                      367,040.31                  136,304.73
Investment Income                                                                    1,111,958.38                  942,097.31
Net Increase (Decrease) in Fair Value of Investments                                 2,058,120.77              (4,070,784.56)
Gain (Loss) on Sale of Capital Assets                                                  (92,482.19)                   1,968.93
Other Nonoperating Revenues                                                                                         93,000.00
Net Nonoperating Revenues (Expenses)                                                76,852,605.59              56,430,423.10

Income/(Loss) Before Other Revenue, Expenses, Gains/(Losses), and                    6,559,293.67              (3,407,365.61)
Transfers

Capital Appropriations (HEAF)                                                        4,284,677.00               4,284,677.00

Gifts and Sponsored Programs for Capital Acquisitions                                      63,488.12                 672,227.58

Additions to Permanent Endowments / Annuities                                             356,021.12                 536,107.08
Reclass from/(to) Other Institutions                                                18,248,000.00                1,752,000.00
Transfers Between Institutions & System, Debt Service - Mandatory                   (7,477,021.17)             (7,491,907.96)
Transfers Between Institutions & System Admin. - Non mandatory                            853,769.44            2,264,533.83
Transfers to Other State Agencies                                                    (139,592.43)                    (22,595.91)
Legislative Appropriations Lapsed                                                         384,822.00                (943,838.00)
Change in Net Assets                                                                23,133,457.75              (2,356,161.99)


Beginning Net Assets                                                               120,454,608.02             122,810,770.01
                                                                                   143,588,065.77             120,454,608.02
Ending Net Assets                                                    $
                                                                          UNAUDITED

The University of Texas at Brownsville
EXHIBIT C - STATEMENT OF CASH FLOWS
For the Year Ended August 31, 2010
                                                                                      Current Year Totals     Prior Year Totals

Cash Flows from Operating Activities:
Proceeds from Tuition and Fees                                                               19,413,522.38          17,196,152.13
Proceeds from Sponsored Programs                                                             75,206,606.63          74,674,583.11
Proceeds from Auxiliaries                                                                       (12,788.45)          1,292,225.17
Proceeds from Other Revenues                                                                  4,546,602.78           3,657,183.63
Payments to Suppliers                                                                      (77,462,055.29)        (67,803,397.16)
Payments to Employees                                                                      (86,812,780.37)        (80,822,725.53)
Payments for Loans Provided                                                                 (2,994,709.01)         (3,303,073.74)
Proceeds from Loan Programs                                                                   3,319,083.17           2,892,112.01
   Net Cash Provided (Used) by Operating Activities                                        (64,796,518.16)        (52,216,940.38)


Cash Flows from Noncapital Financing Activities:
Proceeds from State Appropriations                                                          35,171,289.48          37,464,457.65
Proceeds from Operating Gifts                                                                  367,040.31             136,304.73
Proceeds from Private Gifts for Endowment and Annuity Life Purposes                            356,021.12             536,107.08
Proceeds from Other Nonoperating Revenues                                                               -              93,000.00
Payments / Receipts for Transfers to / from System or Other Agencies                           (48,649.65)            756,177.62
Proceeds from Nonexchange Sponsored Programs                                                38,738,324.16          22,961,102.99
   Net Cash Provided by Noncapital Financing Activities                                     74,584,025.42          61,947,150.07


Cash Flows from Capital and Related Financing Activities:
Proceeds from Capital Debt Transferred from System (Nonmandatory)                            11,693,272.93           6,029,281.65
Proceeds from Capital Appropriations, Grants, and Gifts                                       4,826,929.51           3,877,579.85
Proceeds from Sale of Capital Assets                                                                     -              11,200.00
Payments for Additions to Capital Assets                                                   (14,713,904.18)         (8,058,373.73)
Mandatory Transfers to System for Capital Related Debt                                      (7,477,021.17)         (7,491,907.96)
   Net Cash Provided (Used) by Capital and Related Financing Activities                     (5,670,722.91)         (5,632,220.19)


Cash Flows from Investing Activities
Proceeds from Sales of Investments Invested by System                                                    -                      -
Proceeds from Interest and Investment Income                                                     81,112.68             315,207.22
Proceeds from Interest and Investment Income Invested by System                               1,024,108.38             679,191.84
Payments to Acquire Investments Invested by System                                          (1,235,835.50)        (17,052,426.45)
Net Cash Provided (Used) by Investing Activities                                              (130,614.44)        (16,058,027.39)


Net Increase (Decrease) in Cash                                                              3,986,169.91        (11,960,037.89)
Cash and Cash Equivalents (Beginning of the Year)                                           21,370,746.40          33,330,784.29
Cash and Cash Equivalents (End of the Year)                                               $ 25,356,916.31        $ 21,370,746.40


Reconciliation of Net Operating Revenues (Expenses) to Net Cash
Provided (Used) by Operating Activities
Operating Income (Loss)                                                                    (70,293,311.92)        (59,837,788.71)
Adjustments to Reconcile Operating Results to Net Cash:
   Depreciation and Amortization Expense                                                     5,717,838.24            5,764,194.76
   Bad Debt Expense                                                                             31,798.30              180,791.72
Changes in Assets and Liabilities:
   Accounts Receivable                                                                      (5,065,647.25)             (67,878.31)
   Loans and Contracts                                                                          324,374.16           (410,961.73)
   Other Current and Noncurrent Assets                                                      (2,759,023.06)         (1,838,106.23)
   Accounts Payable                                                                           3,614,933.82           1,254,285.81
   Due to System                                                                                119,924.77               35,646.16
   Deferred Revenue                                                                             444,328.45           1,364,790.24
   Assets Held for Others                                                                     2,856,887.52           1,310,909.77
   Employees' Compensable Leave                                                                 305,157.41                5,770.68
   Other Current and Noncurrent Liabilities                                                     (93,778.60)              21,405.46
      Total Adjustments                                                                       5,496,793.76           7,620,848.33
Net Cash Provided (Used) by Operating Activities                                         $ (64,796,518.16)      $ (52,216,940.38)


Non Cash Transactions
Net Increase (Decrease) in Fair Value of Investments                                         2,058,120.77          (4,070,784.56)
Donated Capital Assets                                                                           20,300.00                     -
Miscellaneous Noncash Transactions                                                             (92,482.19)              1,968.93
                                                                    UNAUDITED

The University of Texas at Dallas
Exhibit A Balance Sheet
As of August 31, 2010



                                                                                    Current Year          Prior Year
                                                                                       Totals              Totals


ASSETS AND DEFERRED OUTFLOWS

Current Assets and Deferred Outflows:
 Cash & Cash Equivalents                                                        $        40,912,080.66         31,372,961.22
 Restricted Cash & Cash Equivalents                                                      (2,583,179.24)         5,631,476.48
 Balance in State Appropriations                                                           1,736,066.45         2,756,381.48
 Accounts Receivable, Net:
    Federal (allow. of $0.00 in 2010 & $0.00 in 2009)                                      6,951,451.79        7,181,528.29
    Other Intergov. (allow. of $0.00 in 2010 & $0.00 in 2009)                              1,071,162.64          550,614.56
    Student (allow. of $2,189,953.25 in 2010 & $1,986,241.55 in 2009)                     17,459,519.67       23,513,207.20
    Interest and Dividend Receivables                                                        357,339.94          293,667.95
    Contributions (allow. of $74,737.91 in 2010 & $25,366.25 in 2009)                      1,420,020.21          481,958.78
    Other (allow. of $1,228,865.94 in 2010 & $611,577.61 in 2009)                          5,905,551.73        4,667,398.68
 Due From Other Funds                                                                                         10,648,815.82
 Due From System Administration                                                          60,593,074.64        66,945,565.32
 Due From Other Agencies                                                                    594,369.69         1,002,532.61
 Inventories                                                                                304,885.97           414,043.09
 Loans & Contracts (allow. of $927,790.46 in 2010 & $951,236.47 in 2009)                  5,548,215.37         5,074,000.77
 Other Current Assets                                                                     4,295,150.49        10,060,767.79
   Total Current Assets and Deferred Outflows                                           144,565,710.01       170,594,920.04


Noncurrent Assets and Deferred Outflows:
 Restricted:
   Investments (Restricted)                                                               31,368,006.22        32,425,217.49
   Loans & Contracts (allow. of $331,211.27 in 2010 & $322,300.31 in 2009)                    24,200.40           125,275.15
   Funds Held by System Administration                                                   229,252,938.80       195,118,299.18
 Contributions Rec. (allow. of $65,813.68 in 2010 & $143,258.98 in 2009)                   1,250,460.10         2,721,920.63
 Unrestricted Investments                                                                103,585,450.07        76,082,816.02
 Gross Capital/Intangible Assets                                                         736,576,393.05       634,598,993.62
   Accumulated Depreciation/Amortization                                               (237,075,058.84)     (210,016,235.35)
     Total Noncurrent Assets and Deferred Outflows                                       864,982,389.80       731,056,286.74
Total Assets and Deferred Outflows                                              $      1,009,548,099.81       901,651,206.78


LIABILITIES AND DEFERRED INFLOWS
Current Liabilities and Deferred Inflows:
 Accounts Payable and Accrued Liabilities                                                 13,015,889.87       18,896,415.30
 Salaries Payable                                                                         15,028,070.54       12,337,461.67
 Due To Other Funds                                                                                           10,648,815.82
 Due To System Administration                                                             1,571,352.47         1,340,984.36
 Deferred Revenue                                                                        68,120,970.33        68,653,682.29
 Employees' Compensable Leave - Current Portion                                           2,792,405.40         2,695,201.39
 Notes, Loans, and Leases Payable                                                           111,663.95           193,721.02
 Payable From Restricted Assets                                                             233,637.87           104,636.62
 Assets Held for Others                                                                     397,073.73           887,134.96
 Other Current Liabilities                                                                  451,190.95           467,999.09
   Total Current Liabilities and Deferred Inflows                                       101,722,255.11       116,226,052.52


Noncurrent Liabilities and Deferred Inflows:
 Employees' Compensable Leave                                                              3,543,559.49         3,004,389.88
 Liability to Beneficiaries Held by System                                                    22,735.99            21,395.10
 Notes, Loans, and Leases Payable                                                            112,043.60           106,346.66
   Total Noncurrent Liabilities and Deferred Inflows                                       3,678,339.08         3,132,131.64
Total Liabilities and Deferred Inflows                                                  105,400,594.19       119,358,184.16


 NET ASSETS
 Invested in Capital Assets, Net of Related Debt                                        499,277,626.66       424,282,690.59
 Restricted for:
   Nonexpendable
    Permanent Health, True Endowments, and Annuities                                    145,481,816.52       123,477,013.09
  Expendable
    Capital Projects                                                                     30,669,507.05        43,675,749.56
    Funds Functioning as Endowment (Restricted)                                           5,338,618.61         3,959,649.49
    Other Expendable                                                                    126,933,751.90       115,854,353.31
 Unrestricted Net Assets                                                                 96,446,184.88        71,043,566.58
Total Net Assets                                                                        904,147,505.62       782,293,022.62


Total Liabilities, Deferred Inflows and Net Assets                              $      1,009,548,099.81      901,651,206.78
                                                               UNAUDITED


The University of Texas at Dallas
Exhibit B Statement of Revenues, Expenses, and Changes in Net Assets
For the Year Ended August 31, 2010



                                                                             Current Year                 Prior Year
                                                                                Totals                      Totals



Operating Revenues:
Student Tuition and Fees                                                 $          175,038,630.60              154,784,039.01
 Discounts and Allowances                                                           (38,190,274.28)             (34,719,509.56)
Federal Sponsored Programs                                                            31,106,598.34               25,811,503.52
Federal Sponsored Programs Pass-Through from State Agencies                            3,145,410.34                3,284,366.51
State Sponsored Programs Pass-Through from State Agencies                              5,818,704.96                7,909,078.98
Local Sponsored Programs                                                                  53,206.89                  280,610.74
Private Sponsored Programs                                                             7,943,402.16                5,693,620.95
Sales and Services of Educational Activities                                          11,417,604.28                9,429,131.62
 Discounts and Allowances Sales and Services of Educational Activities                 (327,828.41)                (409,839.68)
Auxiliary Enterprises                                                                  8,556,777.78                6,296,855.25
Other Operating Revenues                                                               2,699,383.53                3,114,917.35
Total Operating Revenues                                                            207,261,616.19              181,474,774.69


Operating Expenses:
Instruction                                                                          107,522,490.48               95,303,774.84
Research                                                                              65,837,772.18               52,755,533.83
Public Service                                                                         8,139,497.29                7,953,089.79
Academic Support                                                                      36,183,405.04               28,426,861.82
Student Services                                                                      10,142,463.05               10,284,869.20
Institutional Support                                                                 28,606,260.00               25,251,656.20
Operations and Maintenance of Plant                                                   21,268,381.12               22,137,601.56
Scholarships and Fellowships                                                          16,446,155.74                9,416,958.23
Auxiliary Enterprises                                                                 17,642,267.02               15,991,151.51
Depreciation and Amortization                                                         28,620,310.09               23,692,777.73
Total Operating Expenses                                                             340,409,002.01              291,214,274.71
Operating Income (Loss)                                                            (133,147,385.82)            (109,739,500.02)


Nonoperating Revenues (Expenses):
State Appropriations                                                                  90,360,564.83               82,163,809.12
Federal Nonexchange Sponsored Programs                                                20,682,295.31                7,293,205.09
State Nonexchange Pass-Through                                                         7,850,187.82
Gift Contributions for Operations                                                     11,929,629.36               10,943,677.72
Investment Income                                                                     15,801,274.57                3,877,668.85
Net Increase (Decrease) in Fair Value of Investments                                  20,641,404.27             (71,145,986.68)
Gain (Loss) on Sale of Capital Assets                                                  (685,280.20)                (801,543.89)
Other Nonoperating Revenues                                                              108,866.83
Net Nonoperating Revenues (Expenses)                                                 166,688,942.79               32,330,830.21

Income/(Loss) Before Other Revenue, Expenses, Gains/(Losses), and                     33,541,556.97             (77,408,669.81)
Transfers

Gifts and Sponsored Programs for Capital Acquisitions                                       501,186.24             1,048,009.30

Additions to Permanent Endowments / Annuities                                         17,370,879.72                1,287,244.77
Reclass from/(to) Other Institutions                                                 (2,965,113.39)                8,991,134.86
Transfers Between Institutions & System, Debt Service - Mandatory                   (19,593,609.05)             (16,675,607.07)
Transfers Between Institutions & System Admin. - Non mandatory                        94,015,515.36               60,896,644.20
Transfers From Other State Agencies                                                         533,681.33                 72,404.21
Transfers to Other State Agencies                                                     (1,526,511.33)              (1,163,443.93)
Legislative Appropriations Lapsed                                                           (23,102.85)
Change in Net Assets                                                                 121,854,483.00             (22,952,283.47)


Beginning Net Assets                                                                 782,293,022.62              805,245,306.09
                                                                                     904,147,505.62              782,293,022.62
Ending Net Assets                                                        $
                                                                          UNAUDITED

The University of Texas at Dallas
EXHIBIT C - STATEMENT OF CASH FLOWS
For the Year Ended August 31, 2010
                                                                                      Current Year Totals     Prior Year Totals

Cash Flows from Operating Activities:
Proceeds from Tuition and Fees                                                              143,673,169.16        117,850,292.53
Proceeds from Sponsored Programs                                                              45,284,369.46         50,325,135.70
Proceeds from Auxiliaries                                                                      9,936,039.16          7,898,016.01
Proceeds from Other Revenues                                                                  12,579,701.43         11,765,537.11
Payments to Suppliers                                                                     (100,798,076.01)       (85,163,090.11)
Payments to Employees                                                                     (203,049,800.12)      (186,553,370.32)
Payments for Loans Provided                                                                  (8,087,882.01)        (7,748,719.68)
Proceeds from Loan Programs                                                                    7,519,106.94          5,340,060.64
Payments for Other Expenses                                                                               -          (751,393.88)
   Net Cash Provided (Used) by Operating Activities                                        (92,943,371.99)       (87,037,532.00)


Cash Flows from Noncapital Financing Activities:
Proceeds from State Appropriations                                                          91,357,777.01          80,927,850.58
Proceeds from Operating Gifts                                                               12,454,214.70           9,309,307.47
Proceeds from Private Gifts for Endowment and Annuity Life Purposes                         17,370,879.72           1,287,244.77
Payments / Receipts for Transfers to / from System or Other Agencies                         5,177,292.77          13,501,685.93
Proceeds from Nonexchange Sponsored Programs                                                28,214,464.60           7,146,901.38
   Net Cash Provided by Noncapital Financing Activities                                    154,574,628.80         112,172,990.13


Cash Flows from Capital and Related Financing Activities:
Proceeds from Issuance of Capital Debt                                                                   -              62,686.47
Proceeds from Capital Debt Transferred from System (Nonmandatory)                            83,357,458.29          79,113,981.72
Proceeds from Capital Appropriations, Grants, and Gifts                                         510,000.00           1,145,900.00
Payments for Additions to Capital Assets                                                  (107,310,065.70)        (93,058,517.26)
Payments of Principal on Capital Related Debt                                                 (412,492.23)           (168,460.05)
Mandatory Transfers to System for Capital Related Debt                                     (19,593,609.05)        (16,675,607.07)
   Net Cash Provided (Used) by Capital and Related Financing Activities                    (43,448,708.69)        (29,580,016.19)


Cash Flows from Investing Activities
Proceeds from Sales of Investments Invested by System                                                    -                      -
Proceeds from Interest and Investment Income                                                    220,821.66             959,499.26
Proceeds from Interest and Investment Income Invested by System                              22,859,752.07           (668,088.11)
Payments to Acquire Investments Invested by System                                         (39,938,658.13)         (4,100,925.63)
Net Cash Provided (Used) by Investing Activities                                           (16,858,084.40)         (3,809,514.48)


Net Increase (Decrease) in Cash                                                               1,324,463.72        (8,254,072.54)
Cash and Cash Equivalents (Beginning of the Year)                                            37,004,437.70         45,258,510.24
Cash and Cash Equivalents (End of the Year)                                                $ 38,328,901.42       $ 37,004,437.70


Reconciliation of Net Operating Revenues (Expenses) to Net Cash
Provided (Used) by Operating Activities
Operating Income (Loss)                                                                   (133,147,385.82)      (109,739,500.02)
Adjustments to Reconcile Operating Results to Net Cash:
   Depreciation and Amortization Expense                                                    28,620,310.09          23,692,777.73
   Bad Debt Expense                                                                            195,635.22             165,904.78
Changes in Assets and Liabilities:
   Accounts Receivable                                                                       5,251,244.35         (12,196,527.17)
   Inventories                                                                                 109,157.12                40,908.25
   Loans and Contracts                                                                       (568,775.07)          (2,408,659.04)
   Other Current and Noncurrent Assets                                                       5,765,617.30          (8,598,841.09)
   Accounts Payable                                                                          1,003,664.42            3,453,192.85
   Due to System                                                                               230,368.11                69,111.58
   Deferred Revenue                                                                          (532,711.96)           18,178,012.13
   Assets Held for Others                                                                    (490,061.23)            (286,193.57)
   Employees' Compensable Leave                                                                636,373.62              674,760.18
   Other Current and Noncurrent Liabilities                                                    (16,808.14)             (82,478.61)
      Total Adjustments                                                                     40,204,013.83           22,701,968.02
Net Cash Provided (Used) by Operating Activities                                         $ (92,943,371.99)      $ (87,037,532.00)


Non Cash Transactions
Net Increase (Decrease) in Fair Value of Investments                                        20,641,404.27         (71,145,986.68)
Capital Assets Acquired Under Capital Lease Purchases                                          336,132.10               62,686.47
Miscellaneous Noncash Transactions                                                             (42,732.04)           (729,139.68)
                                                                     UNAUDITED

The University of Texas at El Paso
Exhibit A Balance Sheet
As of August 31, 2010



                                                                                     Current Year          Prior Year
                                                                                        Totals              Totals


ASSETS AND DEFERRED OUTFLOWS

Current Assets and Deferred Outflows:
 Cash & Cash Equivalents                                                         $         29,496,935.06        24,224,801.18
 Restricted Cash & Cash Equivalents                                                         6,216,946.13         5,707,258.55
 Balance in State Appropriations                                                            2,262,552.01         2,509,916.56
 Accounts Receivable, Net:
    Federal (allow. of $0.00 in 2010 & $0.00 in 2009)                                       9,657,862.82         8,223,380.71
    Student (allow. of $610,048.00 in 2010 & $1,355,163.29 in 2009)                        14,800,692.10        16,598,882.15
    Interest and Dividend Receivables                                                         380,041.53           288,344.65
    Contributions (allow. of $664,889.02 in 2010 & $270,368.50 in 2009)                     3,817,704.42         1,632,087.15
    Other (allow. of $279,688.08 in 2010 & $582,427.34 in 2009)                            10,294,202.54         8,999,125.65
 Due From System Administration                                                            95,929,693.88        44,807,807.18
 Due From Other Agencies                                                                      286,628.58           303,466.06
 Inventories                                                                                  419,143.46           453,655.12
 Loans & Contracts (allow. of $0.00 in 2010 & $0.00 in 2009)                                3,084,432.52         4,411,598.91
 Other Current Assets                                                                      14,892,426.19        15,904,752.37
   Total Current Assets and Deferred Outflows                                             191,539,261.24       134,065,076.24


Noncurrent Assets and Deferred Outflows:
 Restricted:
   Investments (Restricted)                                                                13,424,975.42        11,451,399.12
   Loans & Contracts (allow. of $1,062,460.73 in 2010 & $2,052,312.37 in 2009)              1,891,533.05           832,584.52
   Funds Held by System Administration                                                    154,471,265.28       136,062,389.54
 Contributions Rec. (allow. of $708,446.63 in 2010 & $414,560.91 in 2009)                   4,014,530.97         2,349,179.45
 Unrestricted Investments                                                                  69,693,407.03        56,462,838.31
 Other Noncurrent Assets                                                                       28,783.01
 Gross Capital/Intangible Assets                                                          599,516,844.03       514,307,189.26
   Accumulated Depreciation/Amortization                                                (201,530,169.02)     (185,157,846.81)
     Total Noncurrent Assets and Deferred Outflows                                        641,511,169.77       536,307,733.39
Total Assets and Deferred Outflows                                               $        833,050,431.01       670,372,809.63


LIABILITIES AND DEFERRED INFLOWS
Current Liabilities and Deferred Inflows:
 Accounts Payable and Accrued Liabilities                                                  15,065,593.62         6,421,738.05
 Salaries Payable                                                                          12,475,354.16        11,336,114.77
 Due To System Administration                                                               1,878,427.70         1,717,160.25
 Due To Other State Agencies                                                                   44,542.69            72,009.34
 Deferred Revenue                                                                          58,619,068.60        54,401,836.57
 Employees' Compensable Leave - Current Portion                                             3,348,375.31         3,195,985.99
 Payable From Restricted Assets                                                               900,943.95         1,023,796.91
 Assets Held for Others                                                                     2,176,188.29         1,919,037.10
 Other Current Liabilities                                                                  1,368,813.64         1,381,583.46
   Total Current Liabilities and Deferred Inflows                                          95,877,307.96        81,469,262.44


Noncurrent Liabilities and Deferred Inflows:
 Employees' Compensable Leave                                                               2,618,348.75         2,365,430.78
 Liability to Beneficiaries Held by System                                                    364,362.63           371,032.40
 Other Noncurrent Liabilities                                                                 389,674.97           376,600.59
   Total Noncurrent Liabilities and Deferred Inflows                                        3,372,386.35         3,113,063.77
Total Liabilities and Deferred Inflows                                                     99,249,694.31        84,582,326.21


 NET ASSETS
 Invested in Capital Assets, Net of Related Debt                                          397,986,675.01       329,149,342.45
 Restricted for:
   Nonexpendable
    Permanent Health, True Endowments, and Annuities                                       93,650,751.34        89,084,763.84
  Expendable
    Capital Projects                                                                       79,938,741.01        40,232,967.52
    Funds Functioning as Endowment (Restricted)                                            14,553,368.74         4,783,143.56
    Other Expendable                                                                       87,618,425.05        74,577,623.16
 Unrestricted Net Assets                                                                   60,052,775.55        47,962,642.89
Total Net Assets                                                                          733,800,736.70       585,790,483.42


Total Liabilities, Deferred Inflows and Net Assets                               $        833,050,431.01       670,372,809.63
                                                               UNAUDITED


The University of Texas at El Paso
Exhibit B Statement of Revenues, Expenses, and Changes in Net Assets
For the Year Ended August 31, 2010



                                                                           Current Year               Prior Year
                                                                              Totals                    Totals



Operating Revenues:
Student Tuition and Fees                                             $            113,612,682.97            103,738,559.14
 Discounts and Allowances                                                         (24,799,454.00)           (18,496,703.00)
Federal Sponsored Programs                                                          52,486,710.55             35,447,624.81
Federal Sponsored Programs Pass-Through from State Agencies                          3,184,049.70              2,560,994.89
State Sponsored Programs Pass-Through from State Agencies                           16,958,586.41             17,240,654.23
Local Sponsored Programs                                                               560,213.56                396,470.87
Private Sponsored Programs                                                           5,686,594.61              5,354,027.95
Sales and Services of Educational Activities                                         4,656,252.38              8,446,631.21
Auxiliary Enterprises                                                               22,807,644.45             22,671,021.76
Other Operating Revenues                                                               312,459.92                123,781.20
Total Operating Revenues                                                          195,465,740.55            177,483,063.06


Operating Expenses:
Instruction                                                                         90,094,053.33             87,143,512.78
Research                                                                            53,873,684.23             42,769,110.62
Public Service                                                                       8,130,807.26              7,294,120.25
Academic Support                                                                    20,762,540.12             20,554,083.32
Student Services                                                                    16,427,053.07             16,043,670.55
Institutional Support                                                               22,756,878.81             19,953,955.92
Operations and Maintenance of Plant                                                 23,630,080.48             23,516,717.56
Scholarships and Fellowships                                                        47,197,274.28             36,621,937.79
Auxiliary Enterprises                                                               34,345,592.76             34,076,947.33
Depreciation and Amortization                                                       18,337,030.87             17,000,623.95
Total Operating Expenses                                                           335,554,995.21            304,974,680.07
Operating Income (Loss)                                                          (140,089,254.66)          (127,491,617.01)


Nonoperating Revenues (Expenses):
State Appropriations                                                                97,325,374.18             94,337,027.61
Federal Nonexchange Sponsored Programs                                              37,820,228.00             33,068,500.33
Federal Nonexchange Pass-Through                                                     5,307,756.00
State Nonexchange Pass-Through                                                       1,568,473.76
Gift Contributions for Operations                                                   13,846,184.30              7,894,767.65
Investment Income                                                                   10,312,106.94              4,449,068.63
Net Increase (Decrease) in Fair Value of Investments                                14,751,820.82           (27,889,720.82)
Gain (Loss) on Sale of Capital Assets                                                  136,759.85                (32,624.45)
Net Nonoperating Revenues (Expenses)                                               181,068,703.85           111,827,018.95

Income/(Loss) Before Other Revenue, Expenses, Gains/(Losses), and                   40,979,449.19           (15,664,598.06)
Transfers

Gifts and Sponsored Programs for Capital Acquisitions                                1,364,199.93             (3,000,389.84)

Additions to Permanent Endowments / Annuities                                        4,844,306.72              6,275,455.38
Reclass from/(to) Other Institutions                                                77,572,712.20           (91,224,759.39)
Transfers Between Institutions & System, Debt Service - Mandatory                 (17,320,043.78)           (18,223,329.60)
Transfers Between Institutions & System Admin. - Non mandatory                      41,979,539.20            179,504,620.42
Transfers From Other State Agencies                                                       49,958.17
Transfers to Other State Agencies                                                   (1,459,868.35)            (1,236,016.05)
Legislative Appropriations Lapsed                                                                                  (72,714.56)
Change in Net Assets                                                               148,010,253.28             56,358,268.30


Beginning Net Assets                                                               585,790,483.42            529,432,215.12
                                                                                   733,800,736.70            585,790,483.42
Ending Net Assets                                                    $
                                                                          UNAUDITED

The University of Texas at El Paso
EXHIBIT C - STATEMENT OF CASH FLOWS
For the Year Ended August 31, 2010
                                                                                      Current Year Totals    Prior Year Totals

Cash Flows from Operating Activities:
Proceeds from Tuition and Fees                                                               95,060,446.84         87,465,289.66
Proceeds from Sponsored Programs                                                             78,515,251.16         59,185,297.62
Proceeds from Auxiliaries                                                                    22,602,665.78         23,252,713.77
Proceeds from Other Revenues                                                                  3,693,041.42          9,496,089.37
Payments to Suppliers                                                                     (125,103,781.78)      (113,938,756.31)
Payments to Employees                                                                     (188,649,789.32)      (176,455,355.24)
Payments for Loans Provided                                                                 (7,158,560.01)        (7,351,917.00)
Proceeds from Loan Programs                                                                   7,304,656.27          7,467,784.49
   Net Cash Provided (Used) by Operating Activities                                       (113,736,069.64)      (110,878,853.64)


Cash Flows from Noncapital Financing Activities:
Proceeds from State Appropriations                                                          97,572,738.73         95,252,749.92
Proceeds from Operating Gifts                                                                 9,995,215.51         9,592,506.84
Proceeds from Private Gifts for Endowment and Annuity Life Purposes                           4,844,306.72         1,940,455.38
Payments / Receipts for Transfers to / from System or Other Agencies                        (1,531,756.45)         3,524,606.09
Proceeds from Nonexchange Sponsored Programs                                                44,696,457.76         33,068,500.33
   Net Cash Provided by Noncapital Financing Activities                                    155,576,962.27        143,378,818.56


Cash Flows from Capital and Related Financing Activities:
Proceeds from Capital Debt Transferred from System (Nonmandatory)                            68,465,697.80         57,236,270.88
Proceeds from Capital Appropriations, Grants, and Gifts                                         345,652.93          1,066,153.84
Proceeds from Sale of Capital Assets                                                            230,096.48                     -
Payments for Additions to Capital Assets                                                   (79,169,569.95)       (58,118,497.56)
Payments of Principal on Capital Related Debt                                                            -            (24,201.65)
Mandatory Transfers to System for Capital Related Debt                                     (17,320,043.78)       (18,223,329.60)
   Net Cash Provided (Used) by Capital and Related Financing Activities                    (27,448,166.52)       (18,063,604.09)


Cash Flows from Investing Activities
Proceeds from Sales of Investments Invested by System                                                    -                     -
Proceeds from Interest and Investment Income                                                     89,624.91            459,306.18
Proceeds from Interest and Investment Income Invested by System                              10,160,670.38          3,512,682.11
Payments to Acquire Investments Invested by System                                         (18,861,199.94)        (7,506,383.09)
Net Cash Provided (Used) by Investing Activities                                            (8,610,904.65)        (3,534,394.80)


Net Increase (Decrease) in Cash                                                               5,781,821.46        10,901,966.03
Cash and Cash Equivalents (Beginning of the Year)                                            29,932,059.73        19,030,093.70
Cash and Cash Equivalents (End of the Year)                                                $ 35,713,881.19      $ 29,932,059.73


Reconciliation of Net Operating Revenues (Expenses) to Net Cash
Provided (Used) by Operating Activities
Operating Income (Loss)                                                                   (140,089,254.66)      (127,491,617.01)
Adjustments to Reconcile Operating Results to Net Cash:
   Depreciation and Amortization Expense                                                    18,337,030.87         17,000,623.95
   Bad Debt Expense                                                                            122,121.60                     -
Changes in Assets and Liabilities:
   Accounts Receivable                                                                         (12,773.47)        (2,062,028.28)
   Inventories                                                                                   34,511.66            (29,345.82)
   Loans and Contracts                                                                         146,096.26             115,867.49
   Other Current and Noncurrent Assets                                                         983,543.17         (2,839,459.13)
   Accounts Payable                                                                          1,701,392.41              (2,500.28)
   Due to System                                                                               161,267.45               37,201.69
   Deferred Revenue                                                                          4,217,232.03           2,977,250.63
   Assets Held for Others                                                                      257,151.19             331,267.39
   Employees' Compensable Leave                                                                405,307.29             548,933.77
   Other Current and Noncurrent Liabilities                                                         304.56            534,951.96
      Total Adjustments                                                                     26,353,185.02         16,612,763.37
Net Cash Provided (Used) by Operating Activities                                        $ (113,736,069.64)    $ (110,878,853.64)


Non Cash Transactions
Net Increase (Decrease) in Fair Value of Investments                                        14,751,820.82        (27,889,720.82)
Donated Capital Assets                                                                         116,789.00            664,533.34
Miscellaneous Noncash Transactions                                                             186,718.02            (32,624.45)
                                                                    UNAUDITED

The University of Texas - Pan American
Exhibit A Balance Sheet
As of August 31, 2010



                                                                                    Current Year          Prior Year
                                                                                       Totals               Totals


ASSETS AND DEFERRED OUTFLOWS

Current Assets and Deferred Outflows:
 Cash & Cash Equivalents                                                        $         41,302,561.48         5,034,824.70
 Restricted Cash & Cash Equivalents                                                     (20,229,825.43)         5,526,667.63
 Balance in State Appropriations                                                          12,008,189.62        11,648,796.73
 Accounts Receivable, Net:
    Federal (allow. of $0.00 in 2010 & $0.00 in 2009)                                     31,809,975.74        30,664,443.13
    Other Intergov. (allow. of $0.00 in 2010 & $0.00 in 2009)                              1,178,582.16         1,063,595.71
    Student (allow. of $1,327,022.48 in 2010 & $987,372.21 in 2009)                        4,378,275.92         4,802,387.39
    Interest and Dividend Receivables                                                        152,238.03           117,487.51
    Contributions (allow. of $568.82 in 2010 & $350.36 in 2009)                               56,313.14            34,684.99
    Other (allow. of $500.00 in 2010 & $76,777.09 in 2009)                                15,078,981.94        12,637,947.03
 Due From Other Funds                                                                                          26,269,556.98
 Due From System Administration                                                              925,690.33         5,525,092.37
 Due From Other Agencies                                                                      81,403.66           117,244.30
 Inventories                                                                                 175,947.50           195,038.66
 Loans & Contracts (allow. of $3,430,121.96 in 2010 & $3,183,574.44 in 2009)               4,686,911.46         5,045,164.34
 Other Current Assets                                                                         15,173.46            72,586.00
   Total Current Assets and Deferred Outflows                                             91,620,419.01       108,755,517.47


Noncurrent Assets and Deferred Outflows:
 Restricted:
   Investments (Restricted)                                                                1,598,646.44         1,453,124.27
   Loans & Contracts (allow. of $705,922.18 in 2010 & $564,816.71 in 2009)                 1,031,369.78         1,090,237.79
   Funds Held by System Administration                                                    28,696,314.32        26,551,754.70
 Contributions Rec. (allow. of $199.55 in 2010 & $215.29 in 2009)                             19,763.13            21,313.37
 Unrestricted Investments                                                                 57,990,292.30        45,490,433.92
 Gross Capital/Intangible Assets                                                         366,763,861.58       351,628,606.58
   Accumulated Depreciation/Amortization                                               (183,828,772.99)     (171,467,489.17)
     Total Noncurrent Assets and Deferred Outflows                                       272,271,474.56       254,767,981.46
Total Assets and Deferred Outflows                                              $        363,891,893.57       363,523,498.93


LIABILITIES AND DEFERRED INFLOWS
Current Liabilities and Deferred Inflows:
 Accounts Payable and Accrued Liabilities                                                  7,663,984.71         4,014,124.95
 Salaries Payable                                                                         10,525,137.66         9,921,435.75
 Federal Payables                                                                          4,176,829.02         1,752,500.76
 Due To Other Funds                                                                                            26,269,556.98
 Due To System Administration                                                              1,229,172.56         1,142,326.79
 Due To Other State Agencies                                                                 451,893.81           305,091.43
 Deferred Revenue                                                                         40,629,990.77        36,965,561.90
 Employees' Compensable Leave - Current Portion                                              991,044.95           656,405.11
 Payable From Restricted Assets                                                            1,250,728.63         1,243,584.56
 Other Current Liabilities                                                                   768,449.97           810,004.54
   Total Current Liabilities and Deferred Inflows                                         67,687,232.08        83,080,592.77


Noncurrent Liabilities and Deferred Inflows:
 Employees' Compensable Leave                                                              3,377,804.36         3,419,477.07
 Assets Held for Others                                                                      852,771.19         1,023,734.63
   Total Noncurrent Liabilities and Deferred Inflows                                       4,230,575.55         4,443,211.70
Total Liabilities and Deferred Inflows                                                    71,917,807.63        87,523,804.47


 NET ASSETS
 Invested in Capital Assets, Net of Related Debt                                        182,935,088.59        180,161,117.41
 Restricted for:
   Nonexpendable
    Permanent Health, True Endowments, and Annuities                                      10,114,706.01         9,929,256.64
  Expendable
    Capital Projects                                                                          85,171.49         4,769,593.40
    Funds Functioning as Endowment (Restricted)                                            1,193,865.67         1,012,233.96
    Other Expendable                                                                      19,745,435.78        19,489,113.19
 Unrestricted Net Assets                                                                  77,899,818.40        60,638,379.86
Total Net Assets                                                                        291,974,085.94        275,999,694.46


Total Liabilities, Deferred Inflows and Net Assets                              $       363,891,893.57        363,523,498.93
                                                               UNAUDITED


The University of Texas - Pan American
Exhibit B Statement of Revenues, Expenses, and Changes in Net Assets
For the Year Ended August 31, 2010



                                                                           Current Year                Prior Year
                                                                              Totals                     Totals



Operating Revenues:
Student Tuition and Fees                                             $              98,677,761.73              84,102,675.43
 Discounts and Allowances                                                         (48,073,994.27)            (34,061,635.43)
Federal Sponsored Programs                                                          24,343,198.21              20,848,565.48
Federal Sponsored Programs Pass-Through from State Agencies                          1,265,307.61               1,370,660.90
State Sponsored Programs Pass-Through from State Agencies                           27,114,402.57              28,398,340.76
Local Sponsored Programs                                                                31,433.75                   5,268.24
Private Sponsored Programs                                                           2,164,917.23               2,462,025.07
Sales and Services of Educational Activities                                         5,426,573.22               5,763,837.69
Auxiliary Enterprises                                                                6,263,451.02               5,998,766.71
Other Operating Revenues                                                             2,261,736.76               3,324,494.45
Total Operating Revenues                                                          119,474,787.83             118,212,999.30


Operating Expenses:
Instruction                                                                         86,007,184.29              79,053,016.39
Research                                                                             7,359,916.01               6,962,606.96
Public Service                                                                       7,583,132.36               6,857,426.26
Academic Support                                                                    15,985,468.76              12,936,409.40
Student Services                                                                    15,666,113.75              14,292,620.29
Institutional Support                                                               22,427,784.51              23,464,680.02
Operations and Maintenance of Plant                                                 17,867,551.88              18,418,416.58
Scholarships and Fellowships                                                        46,943,318.27              37,650,346.29
Auxiliary Enterprises                                                               14,938,036.89              14,416,377.48
Depreciation and Amortization                                                       13,530,547.32              12,847,539.61
Total Operating Expenses                                                           248,309,054.04             226,899,439.28
Operating Income (Loss)                                                          (128,834,266.21)           (108,686,439.98)


Nonoperating Revenues (Expenses):
State Appropriations                                                                76,259,562.31              74,197,590.24
Federal Nonexchange Sponsored Programs                                              52,511,588.52              33,950,975.54
Federal Nonexchange Pass-Through                                                     4,015,570.00
State Nonexchange Pass-Through                                                           91,891.02
Gift Contributions for Operations                                                    2,856,445.27                1,905,889.44
Investment Income                                                                    3,255,467.52                  892,307.01
Net Increase (Decrease) in Fair Value of Investments                                 5,449,122.43              (8,505,134.42)
Gain (Loss) on Sale of Capital Assets                                                  (84,978.18)                  (7,725.03)
Other Nonoperating Revenues                                                            106,000.00                     4,456.00
Other Nonoperating (Expenses)                                                        (218,531.00)
Net Nonoperating Revenues (Expenses)                                               144,242,137.89             102,438,358.78

Income/(Loss) Before Other Revenue, Expenses, Gains/(Losses), and                   15,407,871.68              (6,248,081.20)
Transfers

Capital Appropriations (HEAF)                                                       13,176,800.00              13,176,800.00

Gifts and Sponsored Programs for Capital Acquisitions                                      78,646.66                400,343.51

Additions to Permanent Endowments / Annuities                                             245,244.34                185,969.54
Reclass from/(to) Other Institutions                                                                              550,000.00
Transfers Between Institutions & System, Debt Service - Mandatory                 (12,353,154.16)            (12,428,219.86)
Transfers Between Institutions & System Admin. - Non mandatory                            574,039.10            7,538,102.63
Transfers to Other State Agencies                                                   (1,155,056.14)             (1,631,872.42)
Legislative Appropriations Lapsed                                                                                   (41,576.00)
Change in Net Assets                                                                15,974,391.48               1,501,466.20


Beginning Net Assets                                                               275,999,694.46             274,498,228.26
                                                                                   291,974,085.94             275,999,694.46
Ending Net Assets                                                    $
                                                                          UNAUDITED

The University of Texas - Pan American
EXHIBIT C - STATEMENT OF CASH FLOWS
For the Year Ended August 31, 2010
                                                                                      Current Year Totals     Prior Year Totals

Cash Flows from Operating Activities:
Proceeds from Tuition and Fees                                                               56,672,067.62         80,299,074.10
Proceeds from Sponsored Programs                                                             48,902,677.67         50,623,451.21
Proceeds from Auxiliaries                                                                     7,171,539.90          5,717,695.77
Proceeds from Other Revenues                                                                  5,317,335.67          3,976,261.69
Payments to Suppliers                                                                      (91,654,027.71)       (80,576,941.26)
Payments to Employees                                                                     (140,299,121.94)      (129,926,202.56)
Payments for Loans Provided                                                                 (9,717,007.47)        (9,637,375.41)
Proceeds from Loan Programs                                                                   9,746,475.37          9,862,044.85
   Net Cash Provided (Used) by Operating Activities                                       (113,860,060.89)       (69,661,991.61)


Cash Flows from Noncapital Financing Activities:
Proceeds from State Appropriations                                                          75,900,169.42          73,273,716.44
Proceeds from Operating Gifts                                                                2,836,367.36           1,955,059.18
Proceeds from Private Gifts for Endowment and Annuity Life Purposes                            245,244.34             185,969.54
Proceeds from Other Nonoperating Revenues                                                      106,000.00               4,456.00
Payments / Receipts for Transfers to / from System or Other Agencies                         (638,430.14)             649,331.25
Payments for Other Uses                                                                      (218,531.00)                      -
Proceeds from Nonexchange Sponsored Programs                                                61,195,223.10           7,496,738.09
   Net Cash Provided by Noncapital Financing Activities                                    139,426,043.08          83,565,270.50


Cash Flows from Capital and Related Financing Activities:
Proceeds from Capital Debt Transferred from System (Nonmandatory)                             4,656,804.63             784,311.07
Proceeds from Capital Appropriations, Grants, and Gifts                                      13,176,800.00          13,333,929.15
Proceeds from Sale of Capital Assets                                                                     -               7,466.47
Payments for Additions to Capital Assets                                                   (14,415,098.71)        (10,304,778.68)
Mandatory Transfers to System for Capital Related Debt                                     (12,353,154.16)        (12,428,219.86)
   Net Cash Provided (Used) by Capital and Related Financing Activities                     (8,934,648.24)         (8,607,291.85)


Cash Flows from Investing Activities
Proceeds from Sales of Investments Invested by System                                                    -                      -
Proceeds from Interest and Investment Income                                                    125,233.26             505,315.82
Proceeds from Interest and Investment Income Invested by System                               3,095,494.25             403,819.97
Payments to Acquire Investments Invested by System                                          (9,340,817.74)         (4,894,167.37)
Net Cash Provided (Used) by Investing Activities                                            (6,120,090.23)         (3,985,031.58)


Net Increase (Decrease) in Cash                                                              10,511,243.72          1,310,955.46
Cash and Cash Equivalents (Beginning of the Year)                                            10,561,492.33          9,250,536.87
Cash and Cash Equivalents (End of the Year)                                                $ 21,072,736.05       $ 10,561,492.33


Reconciliation of Net Operating Revenues (Expenses) to Net Cash
Provided (Used) by Operating Activities
Operating Income (Loss)                                                                   (128,834,266.21)      (108,686,439.98)
Adjustments to Reconcile Operating Results to Net Cash:
   Depreciation and Amortization Expense                                                    13,530,547.32          12,847,539.61
   Bad Debt Expense                                                                            387,652.99           (345,833.78)
Changes in Assets and Liabilities:
   Accounts Receivable                                                                      (7,717,775.42)          13,332,940.85
   Inventories                                                                                    19,091.16            (13,268.15)
   Loans and Contracts                                                                            29,467.90            224,669.44
   Other Current and Noncurrent Assets                                                            57,412.54            (28,895.53)
   Accounts Payable                                                                           4,836,085.07           4,067,867.03
   Due to System                                                                                  86,845.77            (44,981.91)
   Deferred Revenue                                                                           3,664,428.87          12,412,632.95
   Assets Held for Others                                                                     (170,963.44)         (3,803,982.36)
   Employees' Compensable Leave                                                                 292,967.13             204,132.27
   Other Current and Noncurrent Liabilities                                                     (41,554.57)            171,627.95
      Total Adjustments                                                                      14,974,205.32          39,024,448.37
Net Cash Provided (Used) by Operating Activities                                        $ (113,860,060.89)      $ (69,661,991.61)


Non Cash Transactions
Net Increase (Decrease) in Fair Value of Investments                                          5,449,122.43         (8,505,134.42)
Donated Capital Assets                                                                            78,646.66            243,214.36
Miscellaneous Noncash Transactions                                                              (84,978.18)             (7,725.03)
                                                                        UNAUDITED

The University of Texas of the Permian Basin
Exhibit A Balance Sheet
As of August 31, 2010



                                                                                        Current Year          Prior Year
                                                                                           Totals              Totals


ASSETS AND DEFERRED OUTFLOWS

Current Assets and Deferred Outflows:
 Cash & Cash Equivalents                                                            $         12,159,020.07         8,541,928.60
 Restricted Cash & Cash Equivalents                                                            1,152,244.11         3,495,098.90
 Balance in State Appropriations                                                                  18,000.00            73,853.25
 Accounts Receivable, Net:
    Federal (allow. of $0.00 in 2010 & $0.00 in 2009)                                          3,153,363.05           674,931.56
    Student (allow. of $0.00 in 2010 & $0.00 in 2009)                                            578,652.45           563,839.49
    Contributions (allow. of $3,272.35 in 2010 & $5,405.69 in 2009)                               29,451.11            38,816.09
    Other (allow. of $113,319.14 in 2010 & $115,467.26 in 2009)                                1,295,615.79         1,623,698.06
 Due From System Administration                                                               57,355,502.51        52,175,873.82
 Inventories                                                                                     100,664.11            99,318.92
 Loans & Contracts (allow. of $71,311.03 in 2010 & $109,334.02 in 2009)                           89,504.15           144,007.42
 Other Current Assets                                                                            882,191.97        21,120,514.00
   Total Current Assets and Deferred Outflows                                                 76,814,209.32        88,551,880.11


Noncurrent Assets and Deferred Outflows:
 Restricted:
   Investments (Restricted)                                                                   13,080,045.44           629,442.76
   Funds Held by System Administration                                                        16,839,930.86        15,254,934.05
 Contributions Rec. (allow. of $4,715.06 in 2010 & $9,835.10 in 2009)                             42,435.57            98,351.04
 Unrestricted Investments                                                                      6,568,252.32        24,704,123.78
 Gross Capital/Intangible Assets                                                            197,937,420.63       141,299,386.68
   Accumulated Depreciation/Amortization                                                    (53,233,251.24)      (50,063,642.01)
     Total Noncurrent Assets and Deferred Outflows                                          181,234,833.58       131,922,596.30
Total Assets and Deferred Outflows                                                  $       258,049,042.90       220,474,476.41


LIABILITIES AND DEFERRED INFLOWS
Current Liabilities and Deferred Inflows:
 Accounts Payable and Accrued Liabilities                                                      9,048,323.50        25,427,298.04
 Salaries Payable                                                                              2,436,220.57         2,378,117.97
 Due To System Administration                                                                    296,562.80           246,933.75
 Deferred Revenue                                                                             17,566,744.96        15,137,109.16
 Employees' Compensable Leave - Current Portion                                                  466,465.71           383,718.81
 Payable From Restricted Assets                                                                  131,936.12           146,157.86
 Assets Held for Others                                                                          219,010.38           269,146.06
 Other Current Liabilities                                                                       221,906.77           197,662.01
   Total Current Liabilities and Deferred Inflows                                             30,387,170.81        44,186,143.66


Noncurrent Liabilities and Deferred Inflows:
 Employees' Compensable Leave                                                                    215,324.20           205,227.54
 Other Noncurrent Liabilities                                                                     15,379.62            38,356.04
   Total Noncurrent Liabilities and Deferred Inflows                                             230,703.82           243,583.58
Total Liabilities and Deferred Inflows                                                        30,617,874.63        44,429,727.24


 NET ASSETS
 Invested in Capital Assets, Net of Related Debt                                            144,704,169.39         91,235,744.67
 Restricted for:
   Nonexpendable
    Permanent Health, True Endowments, and Annuities                                          12,035,753.12        11,574,122.49
   Expendable
    Capital Projects                                                                         46,418,351.75         51,824,433.34
    Funds Functioning as Endowment (Restricted)                                                  50,000.00
    Other Expendable                                                                         12,495,906.33        10,423,711.80
 Unrestricted Net Assets                                                                     11,726,987.68        10,986,736.87
Total Net Assets                                                                            227,431,168.27       176,044,749.17


Total Liabilities, Deferred Inflows and Net Assets                                  $       258,049,042.90       220,474,476.41
                                                               UNAUDITED


The University of Texas of the Permian Basin
Exhibit B Statement of Revenues, Expenses, and Changes in Net Assets
For the Year Ended August 31, 2010



                                                                           Current Year                Prior Year
                                                                              Totals                     Totals



Operating Revenues:
Student Tuition and Fees                                             $              19,169,207.46              14,277,082.61
 Discounts and Allowances                                                           (5,332,960.06)             (4,577,079.96)
Federal Sponsored Programs                                                            4,873,657.50               2,800,122.72
Federal Sponsored Programs Pass-Through from State Agencies                             590,708.68                 344,048.79
State Sponsored Programs Pass-Through from State Agencies                               391,992.45               1,159,607.31
Local Sponsored Programs                                                                 37,604.06                  35,867.52
Private Sponsored Programs                                                              361,990.10                  52,581.13
Sales and Services of Educational Activities                                            715,461.87                 617,743.18
Auxiliary Enterprises                                                                 2,866,926.30               3,134,252.24
Other Operating Revenues                                                              3,177,655.37                 368,255.95
Total Operating Revenues                                                            26,852,243.73              18,212,481.49


Operating Expenses:
Instruction                                                                         14,364,604.25              13,473,824.17
Research                                                                             2,133,849.57               1,297,853.25
Public Service                                                                       2,027,615.29               1,826,606.61
Academic Support                                                                     7,248,713.78               5,929,247.16
Student Services                                                                     3,431,458.87               2,404,091.34
Institutional Support                                                                4,246,985.85               4,179,745.21
Operations and Maintenance of Plant                                                  5,850,799.29               5,972,630.90
Scholarships and Fellowships                                                         7,821,072.19               4,046,314.58
Auxiliary Enterprises                                                                3,272,933.96               3,227,071.16
Depreciation and Amortization                                                        3,796,747.47               3,769,989.41
Total Operating Expenses                                                            54,194,780.52              46,127,373.79
Operating Income (Loss)                                                           (27,342,536.79)            (27,914,892.30)


Nonoperating Revenues (Expenses):
State Appropriations                                                                31,004,507.54              32,412,547.62
Federal Nonexchange Sponsored Programs                                               5,890,053.25               2,954,436.24
Federal Nonexchange Pass-Through                                                       245,555.29
Gift Contributions for Operations                                                    1,166,535.16                1,111,550.32
Investment Income                                                                    1,295,991.14                  917,688.30
Net Increase (Decrease) in Fair Value of Investments                                 2,633,694.35              (2,296,523.58)
Gain (Loss) on Sale of Capital Assets                                                  (40,294.26)                  (4,394.02)
Net Nonoperating Revenues (Expenses)                                                42,196,042.47              35,095,304.88

Income/(Loss) Before Other Revenue, Expenses, Gains/(Losses), and                   14,853,505.68               7,180,412.58
Transfers

Gifts and Sponsored Programs for Capital Acquisitions                                     374,945.73            7,500,000.00

Additions to Permanent Endowments / Annuities                                             436,684.60                 399,251.85
Reclass from/(to) Other Institutions                                                43,658,946.56             (9,723,539.72)
Transfers Between Institutions & System, Debt Service - Mandatory                 (11,364,018.70)            (11,716,839.91)
Transfers Between Institutions & System Admin. - Non mandatory                       3,594,612.73              73,277,687.16
Transfers to Other State Agencies                                                    (168,257.50)                   (124,980.00)
Legislative Appropriations Lapsed                                                                                    121,538.03
Change in Net Assets                                                                51,386,419.10              66,913,529.99


Beginning Net Assets                                                               176,044,749.17             109,131,219.18
                                                                                   227,431,168.27             176,044,749.17
Ending Net Assets                                                    $
                                                                          UNAUDITED

The University of Texas of the Permian Basin
EXHIBIT C - STATEMENT OF CASH FLOWS
For the Year Ended August 31, 2010
                                                                                      Current Year Totals     Prior Year Totals

Cash Flows from Operating Activities:
Proceeds from Tuition and Fees                                                               13,355,260.24          10,679,599.90
Proceeds from Sponsored Programs                                                             16,816,381.92           8,431,314.41
Proceeds from Auxiliaries                                                                     3,665,718.01           3,226,592.86
Proceeds from Other Revenues                                                                (6,766,727.81)           1,039,399.91
Payments to Suppliers                                                                      (21,937,531.02)        (18,281,459.83)
Payments to Employees                                                                      (27,280,390.89)        (24,876,610.09)
Payments for Loans Provided                                                                   (223,698.81)           (345,473.52)
Proceeds from Loan Programs                                                                   (276,525.71)             543,842.86
   Net Cash Provided (Used) by Operating Activities                                        (22,647,514.07)        (19,582,793.50)


Cash Flows from Noncapital Financing Activities:
Proceeds from State Appropriations                                                          31,060,360.79          33,644,973.61
Proceeds from Operating Gifts                                                                1,231,815.61           1,108,666.62
Proceeds from Private Gifts for Endowment and Annuity Life Purposes                            436,684.60             399,251.85
Payments / Receipts for Transfers to / from System or Other Agencies                         (110,865.08)             513,254.66
Proceeds from Nonexchange Sponsored Programs                                                 6,135,608.54           2,954,436.24
   Net Cash Provided by Noncapital Financing Activities                                     38,753,604.46          38,620,582.98


Cash Flows from Capital and Related Financing Activities:
Proceeds from Capital Debt Transferred from System (Nonmandatory)                            41,988,175.44          23,718,292.46
Proceeds from Capital Appropriations, Grants, and Gifts                                                  -           7,500,000.00
Payments for Additions to Capital Assets                                                   (53,511,868.65)        (22,448,391.83)
Mandatory Transfers to System for Capital Related Debt                                     (11,364,018.70)        (11,716,839.91)
   Net Cash Provided (Used) by Capital and Related Financing Activities                    (22,887,711.91)         (2,946,939.28)


Cash Flows from Investing Activities
Proceeds from Sales of Investments Invested by System                                         6,731,504.32                      -
Proceeds from Interest and Investment Income                                                    558,704.75             816,569.34
Proceeds from Interest and Investment Income Invested by System                                 765,649.13              88,429.30
Payments to Acquire Investments Invested by System                                                       -        (13,610,854.69)
Net Cash Provided (Used) by Investing Activities                                              8,055,858.20        (12,705,856.05)


Net Increase (Decrease) in Cash                                                              1,274,236.68           3,384,994.15
Cash and Cash Equivalents (Beginning of the Year)                                           12,037,027.50           8,652,033.35
Cash and Cash Equivalents (End of the Year)                                               $ 13,311,264.18        $ 12,037,027.50


Reconciliation of Net Operating Revenues (Expenses) to Net Cash
Provided (Used) by Operating Activities
Operating Income (Loss)                                                                    (27,342,536.79)        (27,914,892.30)
Adjustments to Reconcile Operating Results to Net Cash:
   Depreciation and Amortization Expense                                                      3,796,747.47           3,769,989.41
   Bad Debt Expense                                                                             554,407.44             120,282.26
Changes in Assets and Liabilities:
   Accounts Receivable                                                                      (2,165,162.18)           (339,056.35)
   Inventories                                                                                   (1,345.19)             (3,935.50)
   Loans and Contracts                                                                        (500,224.52)             198,369.34
   Other Current and Noncurrent Assets                                                       20,238,322.03        (13,819,988.73)
   Accounts Payable                                                                        (19,753,745.75)          12,855,220.30
   Due to System                                                                                  49,629.05             11,061.07
   Deferred Revenue                                                                           2,429,635.80           5,301,472.65
   Assets Held for Others                                                                       (47,353.33)            356,841.69
   Employees' Compensable Leave                                                                   92,843.56             36,675.06
   Other Current and Noncurrent Liabilities                                                        1,268.34          (154,832.40)
      Total Adjustments                                                                       4,695,022.72           8,332,098.80
Net Cash Provided (Used) by Operating Activities                                         $ (22,647,514.07)      $ (19,582,793.50)


Non Cash Transactions
Net Increase (Decrease) in Fair Value of Investments                                          2,633,694.35         (2,296,523.58)
Donated Capital Assets                                                                          374,945.73                      -
Miscellaneous Noncash Transactions                                                              (40,294.26)            (4,394.02)
                                                                    UNAUDITED

The University of Texas at San Antonio
Exhibit A Balance Sheet
As of August 31, 2010



                                                                                    Current Year           Prior Year
                                                                                       Totals               Totals


ASSETS AND DEFERRED OUTFLOWS

Current Assets and Deferred Outflows:
 Cash & Cash Equivalents                                                        $         58,922,146.88         69,977,019.47
 Restricted Cash & Cash Equivalents                                                       (8,125,835.61)         5,787,308.86
 Balance in State Appropriations                                                            4,113,254.30         8,406,661.13
 Accounts Receivable, Net:
    Federal (allow. of $0.00 in 2010 & $0.00 in 2009)                                     29,974,118.67          6,213,025.86
    Student (allow. of $686,500.00 in 2010 & $516,000.00 in 2009)                         23,695,053.75         21,563,033.58
    Interest and Dividend Receivables                                                        647,303.38            539,010.44
    Contributions (allow. of $5,229.46 in 2010 & $8,134.56 in 2009)                        1,040,663.66          1,153,945.66
    Other (allow. of $34,757.03 in 2010 & $14,581.63 in 2009)                              3,237,426.99          3,893,122.85
 Due From Other Funds                                                                     12,111,381.67            500,000.00
 Due From System Administration                                                           14,683,739.79         30,658,474.90
 Due From Other Agencies                                                                         242.00                132.00
 Inventories                                                                                 649,627.16            810,329.67
 Loans & Contracts (allow. of $629,363.49 in 2010 & $697,567.06 in 2009)                   6,016,222.31          6,267,122.63
 Other Current Assets                                                                      1,237,977.86          1,416,837.53
   Total Current Assets and Deferred Outflows                                            148,203,322.81        157,186,024.58


Noncurrent Assets and Deferred Outflows:
 Restricted:
   Investments (Restricted)                                                                2,000,000.00          8,000,000.00
   Loans & Contracts (allow. of $226,740.98 in 2010 & $212,398.85 in 2009)                 3,843,751.24          3,604,491.14
   Funds Held by System Administration                                                    60,305,084.07         46,665,104.33
 Contributions Rec. (allow. of $10,157.65 in 2010 & $15,915.35 in 2009)                    2,021,371.46          2,257,706.41
 Unrestricted Investments                                                                209,314,352.96        163,854,770.48
 Gross Capital/Intangible Assets                                                         943,784,243.03        902,666,154.23
   Accumulated Depreciation/Amortization                                               (282,904,962.23)      (248,502,207.53)
     Total Noncurrent Assets and Deferred Outflows                                       938,363,840.53        878,546,019.06
Total Assets and Deferred Outflows                                              $      1,086,567,163.34      1,035,732,043.64


LIABILITIES AND DEFERRED INFLOWS
Current Liabilities and Deferred Inflows:
 Accounts Payable and Accrued Liabilities                                                 12,277,082.46         22,788,541.73
 Salaries Payable                                                                         17,537,425.60         15,950,907.99
 Due To Other Funds                                                                       12,111,381.67            500,000.00
 Due To System Administration                                                              2,524,321.94          2,240,648.09
 Due To Other State Agencies                                                                  29,604.18
 Deferred Revenue                                                                        105,177,567.88         98,719,016.59
 Employees' Compensable Leave - Current Portion                                            5,584,546.97          5,016,977.84
 Payable From Restricted Assets                                                            1,973,731.23          1,650,622.35
 Assets Held for Others                                                                    1,418,161.45          1,419,664.15
 Other Current Liabilities                                                                 1,110,086.06          1,201,660.28
   Total Current Liabilities and Deferred Inflows                                        159,743,909.44        149,488,039.02


Noncurrent Liabilities and Deferred Inflows:
 Employees' Compensable Leave                                                              2,481,456.98          2,575,902.74
 Liability to Beneficiaries Held by System                                                                              24.10
   Total Noncurrent Liabilities and Deferred Inflows                                       2,481,456.98          2,575,926.84
Total Liabilities and Deferred Inflows                                                   162,225,366.42        152,063,965.86


 NET ASSETS
 Invested in Capital Assets, Net of Related Debt                                         660,879,280.80        654,163,946.70
 Restricted for:
   Nonexpendable
    Permanent Health, True Endowments, and Annuities                                      42,376,649.85         32,051,315.57
  Expendable
    Capital Projects                                                                      25,158,653.04         20,578,291.39
    Funds Functioning as Endowment (Restricted)                                              665,011.48            606,374.32
    Other Expendable                                                                      38,535,775.52         35,726,080.31
 Unrestricted Net Assets                                                                 156,726,426.23        140,542,069.49
Total Net Assets                                                                         924,341,796.92        883,668,077.78


Total Liabilities, Deferred Inflows and Net Assets                              $      1,086,567,163.34      1,035,732,043.64
                                                               UNAUDITED


The University of Texas at San Antonio
Exhibit B Statement of Revenues, Expenses, and Changes in Net Assets
For the Year Ended August 31, 2010



                                                                             Current Year                Prior Year
                                                                                Totals                     Totals



Operating Revenues:
Student Tuition and Fees                                                 $          219,173,915.36             200,035,616.59
 Discounts and Allowances                                                           (48,683,210.41)            (38,534,724.51)
Federal Sponsored Programs                                                            45,451,475.52              44,017,033.52
Federal Sponsored Programs Pass-Through from State Agencies                            1,492,516.30               1,324,078.58
State Sponsored Programs Pass-Through from State Agencies                             14,239,759.06              15,587,366.39
Local Sponsored Programs                                                                 631,436.85                 621,966.35
Private Sponsored Programs                                                             2,904,217.82               3,344,664.45
Sales and Services of Educational Activities                                           8,900,313.27               9,620,836.40
 Discounts and Allowances Sales and Services of Educational Activities                   (71,111.05)
Auxiliary Enterprises                                                                 24,011,026.91              21,648,499.51
Other Operating Revenues                                                               2,641,504.88               2,021,455.21
Total Operating Revenues                                                            270,691,844.51              259,686,792.49


Operating Expenses:
Instruction                                                                          115,680,731.51             107,937,692.25
Research                                                                              38,492,052.70              35,929,725.01
Public Service                                                                        17,386,255.29              19,192,331.55
Academic Support                                                                      41,356,106.09              35,186,212.30
Student Services                                                                      22,952,416.97              24,544,225.29
Institutional Support                                                                 42,816,433.79              40,437,656.64
Operations and Maintenance of Plant                                                   42,199,908.29              36,819,494.26
Scholarships and Fellowships                                                          38,761,964.63              30,110,538.24
Auxiliary Enterprises                                                                 30,791,063.25              26,083,228.88
Depreciation and Amortization                                                         37,552,487.63              32,551,415.13
Total Operating Expenses                                                             427,989,420.15             388,792,519.55
Operating Income (Loss)                                                            (157,297,575.64)           (129,105,727.06)


Nonoperating Revenues (Expenses):
State Appropriations                                                                 121,371,754.88             115,473,222.78
Federal Nonexchange Sponsored Programs                                                43,958,976.10              28,714,333.77
Federal Nonexchange Pass-Through                                                       5,022,175.99
State Nonexchange Pass-Through                                                         1,497,673.25
Gift Contributions for Operations                                                      8,759,234.16               6,473,510.61
Investment Income                                                                      9,032,120.19               4,727,833.51
Net Increase (Decrease) in Fair Value of Investments                                  17,740,268.47            (28,166,464.42)
Gain (Loss) on Sale of Capital Assets                                                  (244,700.28)               (238,526.86)
Other Nonoperating (Expenses)                                                            (96,849.03)                (66,346.26)
Net Nonoperating Revenues (Expenses)                                                 207,040,653.73            126,917,563.13

Income/(Loss) Before Other Revenue, Expenses, Gains/(Losses), and                     49,743,078.09              (2,188,163.93)
Transfers

Gifts and Sponsored Programs for Capital Acquisitions                                       284,590.37                331,231.85

Additions to Permanent Endowments / Annuities                                         10,249,882.19               1,508,144.09
Reclass from/(to) Other Institutions                                                  13,046,177.35              38,865,033.53
Transfers Between Institutions & System, Debt Service - Mandatory                   (31,520,585.17)            (31,797,061.14)
Transfers Between Institutions & System Admin. - Non mandatory                         1,220,260.88               8,457,347.21
Transfers to Other State Agencies                                                     (2,349,684.57)             (2,221,057.13)
Change in Net Assets                                                                  40,673,719.14              12,955,474.48


Beginning Net Assets                                                                 883,668,077.78             870,712,603.30
                                                                                     924,341,796.92             883,668,077.78
Ending Net Assets                                                        $
                                                                          UNAUDITED

The University of Texas at San Antonio
EXHIBIT C - STATEMENT OF CASH FLOWS
For the Year Ended August 31, 2010
                                                                                      Current Year Totals     Prior Year Totals

Cash Flows from Operating Activities:
Proceeds from Tuition and Fees                                                              174,233,904.10        166,647,717.64
Proceeds from Sponsored Programs                                                             61,733,818.90         64,589,488.14
Proceeds from Auxiliaries                                                                    25,392,617.89         22,806,286.46
Proceeds from Other Revenues                                                                 12,349,085.30         10,552,505.69
Payments to Suppliers                                                                     (139,528,484.04)      (118,214,691.21)
Payments to Employees                                                                     (254,311,340.97)      (233,274,182.22)
Payments for Loans Provided                                                                (15,612,102.33)       (15,182,842.85)
Proceeds from Loan Programs                                                                  15,129,686.27         16,529,951.42
   Net Cash Provided (Used) by Operating Activities                                       (120,612,814.88)       (85,545,766.93)


Cash Flows from Noncapital Financing Activities:
Proceeds from State Appropriations                                                         125,665,161.71         120,704,772.65
Proceeds from Operating Gifts                                                                 9,108,851.11          4,734,277.92
Proceeds from Private Gifts for Endowment and Annuity Life Purposes                         10,249,882.19           1,508,144.09
Payments / Receipts for Transfers to / from System or Other Agencies                        (1,941,555.32)          1,083,601.69
Proceeds from Nonexchange Sponsored Programs                                                28,728,538.34          28,757,710.07
   Net Cash Provided by Noncapital Financing Activities                                    171,810,878.03         156,788,506.42


Cash Flows from Capital and Related Financing Activities:
Proceeds from Capital Debt Transferred from System (Nonmandatory)                            29,867,650.96          48,845,306.69
Proceeds from Sale of Capital Assets                                                             33,702.91              40,521.63
Payments for Additions to Capital Assets                                                   (48,043,236.41)        (66,433,104.08)
Mandatory Transfers to System for Capital Related Debt                                     (31,520,585.17)        (31,797,061.14)
   Net Cash Provided (Used) by Capital and Related Financing Activities                    (49,662,467.71)        (49,344,336.90)


Cash Flows from Investing Activities
Proceeds from Sales of Investments Invested by System                                                    -                      -
Proceeds from Interest and Investment Income                                                    192,701.48             688,525.83
Proceeds from Interest and Investment Income Invested by System                               8,662,979.77           4,064,447.69
Payments to Acquire Investments Invested by System                                         (35,359,293.75)        (15,506,497.44)
Net Cash Provided (Used) by Investing Activities                                           (26,503,612.50)        (10,753,523.92)


Net Increase (Decrease) in Cash                                                           (24,968,017.06)          11,144,878.67
Cash and Cash Equivalents (Beginning of the Year)                                           75,764,328.33          64,619,449.66
Cash and Cash Equivalents (End of the Year)                                               $ 50,796,311.27        $ 75,764,328.33


Reconciliation of Net Operating Revenues (Expenses) to Net Cash
Provided (Used) by Operating Activities
Operating Income (Loss)                                                                   (157,297,575.64)      (129,105,727.06)
Adjustments to Reconcile Operating Results to Net Cash:
   Depreciation and Amortization Expense                                                    37,552,487.63          32,551,415.13
   Bad Debt Expense                                                                            504,336.20             737,406.84
Changes in Assets and Liabilities:
   Accounts Receivable                                                                      (3,497,495.04)          1,648,527.03
   Inventories                                                                                  160,702.51            (41,476.80)
   Loans and Contracts                                                                        (482,416.06)          1,347,108.57
   Other Current and Noncurrent Assets                                                          178,859.67          (268,368.71)
   Accounts Payable                                                                         (4,891,216.34)          2,167,484.07
   Due to System                                                                                283,673.85            105,631.98
   Deferred Revenue                                                                           6,458,551.29          4,400,434.19
   Assets Held for Others                                                                         35,727.90           109,107.72
   Employees' Compensable Leave                                                                 473,123.37            811,083.23
   Other Current and Noncurrent Liabilities                                                     (91,574.22)            (8,393.12)
      Total Adjustments                                                                     36,684,760.76          43,559,960.13
Net Cash Provided (Used) by Operating Activities                                        $ (120,612,814.88)      $ (85,545,766.93)


Non Cash Transactions
Net Increase (Decrease) in Fair Value of Investments                                        17,740,268.47         (28,166,464.42)
Donated Capital Assets                                                                         284,590.37              331,231.85
Miscellaneous Noncash Transactions                                                           (345,264.88)            (452,476.43)
                                                                     UNAUDITED

The University of Texas at Tyler
Exhibit A Balance Sheet
As of August 31, 2010



                                                                                     Current Year          Prior Year
                                                                                        Totals              Totals


ASSETS AND DEFERRED OUTFLOWS

Current Assets and Deferred Outflows:
 Cash & Cash Equivalents                                                         $         13,007,642.80        10,099,418.49
 Restricted Cash & Cash Equivalents                                                         4,820,529.59         5,008,035.60
 Balance in State Appropriations                                                            1,225,942.15         1,338,123.97
 Accounts Receivable, Net:
    Federal (allow. of $0.00 in 2010 & $0.00 in 2009)                                         864,529.91         1,404,812.66
    Student (allow. of $928,919.53 in 2010 & $831,719.39 in 2009)                           1,818,778.90         1,444,648.73
    Interest and Dividend Receivables                                                          98,260.76            75,621.77
    Contributions (allow. of $7,900.00 in 2010 & $274.83 in 2009)                             149,279.15             5,221.72
    Other (allow. of $0.00 in 2010 & $0.00 in 2009)                                         2,368,953.45           555,550.98
 Due From System Administration                                                             9,659,806.10        10,245,383.49
 Due From Other Agencies                                                                      417,959.26           280,577.27
 Loans & Contracts (allow. of $788,826.03 in 2010 & $742,906.13 in 2009)                    1,581,516.89         1,518,923.05
 Other Current Assets                                                                         387,780.56           382,318.17
   Total Current Assets and Deferred Outflows                                              36,400,979.52        32,358,635.90


Noncurrent Assets and Deferred Outflows:
 Restricted:
   Funds Held by System Administration                                                     60,259,650.69        55,460,252.79
 Contributions Rec. (allow. of $34,500.00 in 2010 & $18,125.17 in 2009)                       657,545.36           345,850.98
 Unrestricted Investments                                                                  36,702,490.00        27,686,200.27
 Gross Capital/Intangible Assets                                                         237,265,599.36       226,714,763.38
   Accumulated Depreciation/Amortization                                                 (79,462,152.46)      (69,680,377.92)
    Total Noncurrent Assets and Deferred Outflows                                        255,423,132.95       240,526,689.50
Total Assets and Deferred Outflows                                               $       291,824,112.47       272,885,325.40


LIABILITIES AND DEFERRED INFLOWS
Current Liabilities and Deferred Inflows:
 Accounts Payable and Accrued Liabilities                                                   3,388,103.07         6,647,826.10
 Salaries Payable                                                                           3,476,468.72         3,346,766.54
 Due To System Administration                                                                 536,790.02           486,198.71
 Deferred Revenue                                                                          14,537,073.00        14,289,924.96
 Employees' Compensable Leave - Current Portion                                               774,016.94           705,537.20
 Payable From Restricted Assets                                                                89,964.52           140,109.02
 Assets Held for Others                                                                       813,909.38            11,274.33
 Other Current Liabilities                                                                     71,955.29            39,609.60
   Total Current Liabilities and Deferred Inflows                                          23,688,280.94        25,667,246.46


Noncurrent Liabilities and Deferred Inflows:
 Employees' Compensable Leave                                                                 418,863.24           407,383.89
 Other Noncurrent Liabilities                                                                 371,739.47           366,939.47
   Total Noncurrent Liabilities and Deferred Inflows                                          790,602.71           774,323.36
Total Liabilities and Deferred Inflows                                                     24,478,883.65        26,441,569.82


 NET ASSETS
 Invested in Capital Assets, Net of Related Debt                                         157,803,446.90       157,034,385.46
 Restricted for:
   Nonexpendable
    Permanent Health, True Endowments, and Annuities                                       33,106,689.89        32,030,621.70
   Expendable
    Capital Projects                                                                      10,460,440.99         5,206,105.72
    Funds Functioning as Endowment (Restricted)                                              305,244.59           541,796.13
    Other Expendable                                                                      31,690,230.34        27,096,139.49
 Unrestricted Net Assets                                                                  33,979,176.11        24,534,707.08
Total Net Assets                                                                         267,345,228.82       246,443,755.58


Total Liabilities, Deferred Inflows and Net Assets                               $       291,824,112.47       272,885,325.40
                                                               UNAUDITED


The University of Texas at Tyler
Exhibit B Statement of Revenues, Expenses, and Changes in Net Assets
For the Year Ended August 31, 2010



                                                                           Current Year                Prior Year
                                                                              Totals                     Totals



Operating Revenues:
Student Tuition and Fees                                             $              35,920,303.62              33,677,485.60
 Discounts and Allowances                                                         (13,037,327.46)              (6,723,339.93)
Federal Sponsored Programs                                                           3,098,273.03                3,241,081.54
Federal Sponsored Programs Pass-Through from State Agencies                          1,714,885.28                1,603,200.67
State Sponsored Programs Pass-Through from State Agencies                            3,452,951.38                2,999,226.97
Local Sponsored Programs                                                                 8,379.69
Private Sponsored Programs                                                           1,051,906.71                 796,498.34
Sales and Services of Educational Activities                                         2,597,397.27               2,725,085.63
Auxiliary Enterprises                                                                3,689,584.70               3,222,409.33
Other Operating Revenues                                                               330,101.42                 257,252.83
Total Operating Revenues                                                            38,826,455.64              41,798,900.98


Operating Expenses:
Instruction                                                                         29,845,280.74              27,709,821.13
Research                                                                             2,582,271.15               3,048,362.19
Public Service                                                                       2,411,967.41               1,768,997.13
Academic Support                                                                     7,111,846.54               6,778,598.09
Student Services                                                                     6,746,549.76               6,187,387.39
Institutional Support                                                                9,041,648.20               8,802,750.18
Operations and Maintenance of Plant                                                  6,161,224.92               6,547,386.46
Scholarships and Fellowships                                                         4,065,456.59               7,143,759.12
Auxiliary Enterprises                                                                5,192,982.65               5,478,570.78
Depreciation and Amortization                                                       10,433,470.99               9,016,524.58
Total Operating Expenses                                                            83,592,698.95              82,482,157.05
Operating Income (Loss)                                                           (44,766,243.31)            (40,683,256.07)


Nonoperating Revenues (Expenses):
State Appropriations                                                                36,145,315.19              36,371,005.53
Federal Nonexchange Sponsored Programs                                               7,042,332.00               5,136,617.79
Federal Nonexchange Pass-Through                                                     1,604,033.00
Gift Contributions for Operations                                                    1,424,170.55               1,239,822.21
Investment Income                                                                    4,362,978.47               1,663,587.32
Net Increase (Decrease) in Fair Value of Investments                                 6,458,701.40            (15,023,591.17)
Gain (Loss) on Sale of Capital Assets                                                  (25,002.74)                 (6,553.90)
Other Nonoperating (Expenses)                                                        (112,344.48)               (112,367.43)
Net Nonoperating Revenues (Expenses)                                                56,900,183.39              29,268,520.35

Income/(Loss) Before Other Revenue, Expenses, Gains/(Losses), and                   12,133,940.08            (11,414,735.72)
Transfers

Gifts and Sponsored Programs for Capital Acquisitions                                1,370,279.33                     49,291.66

Additions to Permanent Endowments / Annuities                                             814,219.13            1,845,490.00
Reclass from/(to) Other Institutions                                                14,408,778.33              14,837,573.59
Transfers Between Institutions & System, Debt Service - Mandatory                   (8,504,372.56)             (8,816,701.21)
Transfers Between Institutions & System Admin. - Non mandatory                       1,024,671.09               5,214,234.65
Transfers to Other State Agencies                                                    (346,042.16)                   (302,674.16)
Change in Net Assets                                                                20,901,473.24               1,412,478.81


Beginning Net Assets                                                               246,443,755.58             245,031,276.77
                                                                                   267,345,228.82             246,443,755.58
Ending Net Assets                                                    $
                                                                          UNAUDITED

The University of Texas at Tyler
EXHIBIT C - STATEMENT OF CASH FLOWS
For the Year Ended August 31, 2010
                                                                                      Current Year Totals     Prior Year Totals

Cash Flows from Operating Activities:
Proceeds from Tuition and Fees                                                               23,085,305.77          25,984,076.93
Proceeds from Sponsored Programs                                                              9,007,837.79           7,424,358.09
Proceeds from Auxiliaries                                                                     3,768,264.08           3,157,444.37
Proceeds from Other Revenues                                                                  2,264,978.90           1,837,232.76
Payments to Suppliers                                                                      (24,306,264.95)        (26,057,137.90)
Payments to Employees                                                                      (48,385,606.62)        (46,338,720.73)
Payments for Loans Provided                                                                   (352,812.05)         (1,730,721.35)
Proceeds from Loan Programs                                                                     244,298.31             202,048.46
Payments for Other Expenses                                                                              -             (57,497.11)
   Net Cash Provided (Used) by Operating Activities                                        (34,673,998.77)        (35,578,916.48)


Cash Flows from Noncapital Financing Activities:
Proceeds from State Appropriations                                                          36,257,497.01          35,864,752.22
Proceeds from Operating Gifts                                                                1,407,164.34           1,286,644.55
Proceeds from Private Gifts for Endowment and Annuity Life Purposes                            814,219.13           1,845,490.00
Proceeds from Other Nonoperating Revenues                                                               -              13,263.00
Payments / Receipts for Transfers to / from System or Other Agencies                         (272,311.16)           2,362,403.49
Payments for Other Uses                                                                         (4,463.37)          (112,367.43)
Proceeds from Nonexchange Sponsored Programs                                                 8,648,731.00           5,140,400.29
   Net Cash Provided by Noncapital Financing Activities                                     46,850,836.95          46,400,586.12


Cash Flows from Capital and Related Financing Activities:
Proceeds from Capital Debt Transferred from System (Nonmandatory)                            15,980,502.41          21,153,032.78
Proceeds from Capital Appropriations, Grants, and Gifts                                         931,533.73             305,000.00
Proceeds from Sale of Capital Assets                                                                     -               5,966.25
Payments for Additions to Capital Assets                                                   (14,811,930.11)        (22,675,021.74)
Mandatory Transfers to System for Capital Related Debt                                      (8,504,372.56)         (8,816,701.21)
   Net Cash Provided (Used) by Capital and Related Financing Activities                     (6,404,266.53)        (10,027,723.92)


Cash Flows from Investing Activities
Proceeds from Sales of Investments Invested by System                                                    -                      -
Proceeds from Interest and Investment Income                                                  1,127,171.71           1,007,184.08
Proceeds from Interest and Investment Income Invested by System                               3,177,961.17             662,275.90
Payments to Acquire Investments Invested by System                                          (7,356,986.23)         (2,526,337.34)
Net Cash Provided (Used) by Investing Activities                                            (3,051,853.35)           (856,877.36)


Net Increase (Decrease) in Cash                                                               2,720,718.30            (62,931.64)
Cash and Cash Equivalents (Beginning of the Year)                                            15,107,454.09         15,170,385.73
Cash and Cash Equivalents (End of the Year)                                                $ 17,828,172.39       $ 15,107,454.09


Reconciliation of Net Operating Revenues (Expenses) to Net Cash
Provided (Used) by Operating Activities
Operating Income (Loss)                                                                    (44,766,243.31)        (40,683,256.07)
Adjustments to Reconcile Operating Results to Net Cash:
   Depreciation and Amortization Expense                                                    10,433,470.99            9,016,524.58
   Bad Debt Expense                                                                             45,919.90              397,038.17
Changes in Assets and Liabilities:
   Accounts Receivable                                                                      (1,786,997.88)         (2,202,146.29)
   Loans and Contracts                                                                        (108,513.74)         (1,528,672.89)
   Other Current and Noncurrent Assets                                                           (5,462.39)            (44,503.66)
   Accounts Payable                                                                             296,348.48             570,538.15
   Due to System                                                                                 50,591.31               24,557.11
   Deferred Revenue                                                                             247,148.04           (278,741.98)
   Assets Held for Others                                                                       802,635.05           (938,869.55)
   Employees' Compensable Leave                                                                  79,959.09               63,350.96
   Other Current and Noncurrent Liabilities                                                      37,145.69               25,264.99
      Total Adjustments                                                                     10,092,244.54            5,104,339.59
Net Cash Provided (Used) by Operating Activities                                         $ (34,673,998.77)      $ (35,578,916.48)


Non Cash Transactions
Net Increase (Decrease) in Fair Value of Investments                                          6,458,701.40        (15,023,591.17)
Miscellaneous Noncash Transactions                                                            (132,883.85)            (19,816.90)
                                                                     UNAUDITED

The University of Texas Southwestern Medical Center at Dallas
Exhibit A Balance Sheet
As of August 31, 2010



                                                                                     Current Year          Prior Year
                                                                                        Totals              Totals


ASSETS AND DEFERRED OUTFLOWS

Current Assets and Deferred Outflows:
 Cash & Cash Equivalents                                                         $       117,543,694.27         50,548,819.87
 Restricted Cash & Cash Equivalents                                                       20,557,363.78         10,600,508.13
 Balance in State Appropriations                                                           8,665,748.37         14,161,155.21
 Accounts Receivable, Net:
    Federal (allow. of $0.00 in 2010 & $0.00 in 2009)                                     47,677,871.41        40,628,927.56
    Other Intergov. (allow. of $0.00 in 2010 & $0.00 in 2009)                              2,620,079.68         2,457,865.09
    Patient (allow. of $421,511,879.34 in 2010 & $419,574,732.47 in 2009)                146,032,897.47       128,127,989.22
    Interest and Dividend Receivables                                                      1,851,524.16         1,588,540.23
    Contributions (allow. of $220,525.13 in 2010 & $161,880.54 in 2009)                    4,859,853.27         3,528,377.61
    Other (allow. of $98,885.54 in 2010 & $140,514.58 in 2009)                            21,735,534.04        34,253,663.44
 Due From System Administration                                                           89,658,415.59        37,879,400.00
 Inventories                                                                              13,653,119.91        12,379,008.53
 Loans & Contracts (allow. of $38,841.77 in 2010 & $30,867.58 in 2009)                     1,502,284.06         1,365,007.40
 Other Current Assets                                                                      4,280,007.33         6,560,105.65
   Total Current Assets and Deferred Outflows                                            480,638,393.34       344,079,367.94


Noncurrent Assets and Deferred Outflows:
 Restricted:
   Investments (Restricted)                                                               336,985,874.08       310,217,569.06
   Loans & Contracts (allow. of $169,240.78 in 2010 & $174,582.96 in 2009)                  6,545,122.27         7,720,300.53
   Funds Held by System Administration                                                    760,724,679.92       684,690,830.89
 Contributions Rec. (allow. of $195,287.30 in 2010 & $253,931.89 in 2009)                   4,041,858.49         4,780,892.76
 Unrestricted Investments                                                                 474,777,167.42       409,638,024.47
 Gross Capital/Intangible Assets                                                        1,923,235,358.42     1,784,533,147.70
   Accumulated Depreciation/Amortization                                                (642,394,933.11)     (570,143,956.80)
     Total Noncurrent Assets and Deferred Outflows                                      2,863,915,127.49     2,631,436,808.61
Total Assets and Deferred Outflows                                               $      3,344,553,520.83     2,975,516,176.55


LIABILITIES AND DEFERRED INFLOWS
Current Liabilities and Deferred Inflows:
 Accounts Payable and Accrued Liabilities                                                127,447,512.78       104,552,445.91
 Salaries Payable                                                                         42,713,174.23        40,949,664.90
 Due To System Administration                                                              8,059,721.41         7,270,255.19
 Deferred Revenue                                                                         10,964,616.61        13,104,713.51
 Employees' Compensable Leave - Current Portion                                           38,980,090.13        34,655,546.69
 Notes, Loans, and Leases Payable                                                             16,988.00           116,907.21
 Payable From Restricted Assets                                                           15,650,774.82        27,954,479.36
 Assets Held for Others                                                                      382,271.93           453,600.73
 Other Current Liabilities                                                                   112,506.39           117,214.39
   Total Current Liabilities and Deferred Inflows                                        244,327,656.30       229,174,827.89


Noncurrent Liabilities and Deferred Inflows:
 Employees' Compensable Leave                                                              29,274,400.50        28,990,675.20
 Other Noncurrent Liabilities                                                               1,870,263.65         3,049,197.42
   Total Noncurrent Liabilities and Deferred Inflows                                       31,144,664.15        32,039,872.62
Total Liabilities and Deferred Inflows                                                   275,472,320.45       261,214,700.51


 NET ASSETS
 Invested in Capital Assets, Net of Related Debt                                        1,280,840,425.31     1,214,352,377.69
 Restricted for:
   Nonexpendable
    Permanent Health, True Endowments, and Annuities                                     500,020,172.95       473,919,531.62
   Expendable
    Capital Projects                                                                       79,804,861.03        16,528,895.31
    Funds Functioning as Endowment (Restricted)                                            23,135,279.85        21,448,748.37
    Other Expendable                                                                      616,627,603.16       530,482,885.25
 Unrestricted Net Assets                                                                  568,652,858.08       457,569,037.80
Total Net Assets                                                                        3,069,081,200.38     2,714,301,476.04


Total Liabilities, Deferred Inflows and Net Assets                               $      3,344,553,520.83     2,975,516,176.55
                                                                UNAUDITED


The University of Texas Southwestern Medical Center at Dallas
Exhibit B Statement of Revenues, Expenses, and Changes in Net Assets
For the Year Ended August 31, 2010



                                                                            Current Year               Prior Year
                                                                              Totals                     Totals



Operating Revenues:
Student Tuition and Fees                                              $              19,465,476.30             18,053,269.70
 Discounts and Allowances                                                            (4,813,084.00)            (3,880,224.00)
Federal Sponsored Programs                                                          231,188,640.92            209,675,371.25
Federal Sponsored Programs Pass-Through from State Agencies                            4,072,968.83              3,346,535.88
State Sponsored Programs Pass-Through from State Agencies                              1,371,729.96                515,855.78
Local Sponsored Programs                                                            156,144,755.64            157,639,497.96
Private Sponsored Programs                                                           77,225,604.00             57,481,785.23
Sales and Services of Educational Activities                                         17,608,212.87             13,642,767.62
Sales and Services of Hospitals                                                   1,409,781,927.78          1,144,951,484.47
 Discounts and Allowances Sales and Services of Hospitals                         (932,822,547.85)          (740,711,623.78)
Professional Fees (Patient Charges)                                               1,211,810,339.12          1,213,283,726.40
 Discounts and Allowances Professional Fees (Patient Charges)                     (829,389,252.40)          (853,947,513.05)
Auxiliary Enterprises                                                                17,986,421.50             17,130,105.91
Other Operating Revenues                                                             13,606,268.47             12,610,461.32
Total Operating Revenues                                                          1,393,237,461.14          1,249,791,500.69


Operating Expenses:
Instruction                                                                         527,896,974.55            470,316,614.32
Research                                                                            308,606,969.95            305,359,670.12
Public Service                                                                       24,234,252.80             78,592,085.89
Hospitals / Clinics                                                                 423,837,795.32            377,937,996.05
Academic Support                                                                     21,367,497.55             26,205,243.83
Student Services                                                                      3,229,919.27              4,194,844.20
Institutional Support                                                                48,514,398.07             50,475,338.60
Operations and Maintenance of Plant                                                  76,759,705.99             73,291,608.82
Scholarships and Fellowships                                                            764,473.63                656,530.33
Auxiliary Enterprises                                                                16,762,992.35             16,019,565.47
Depreciation and Amortization                                                        80,507,746.17             75,827,825.46
Total Operating Expenses                                                          1,532,482,725.65          1,478,877,323.09
Operating Income (Loss)                                                           (139,245,264.51)          (229,085,822.40)


Nonoperating Revenues (Expenses):
State Appropriations                                                                174,040,333.33            166,282,296.47
Federal Nonexchange Sponsored Programs                                                    74,359.00                84,943.00
Federal Nonexchange Pass-Through                                                     10,216,070.57
Gift Contributions for Operations                                                    38,990,899.85             37,821,001.24
Investment Income                                                                    69,674,641.84             37,508,758.24
Net Increase (Decrease) in Fair Value of Investments                                101,281,681.41          (220,516,825.69)
Gain (Loss) on Sale of Capital Assets                                                (2,697,398.88)           (2,550,568.86)
Other Nonoperating Revenues                                                              572,029.73               122,892.42
Other Nonoperating (Expenses)                                                          (682,020.85)             (529,456.25)
Net Nonoperating Revenues (Expenses)                                                391,470,596.00             18,223,040.57

Income/(Loss) Before Other Revenue, Expenses, Gains/(Losses), and
                                                                                    252,225,331.49          (210,862,781.83)
Transfers

Gifts and Sponsored Programs for Capital Acquisitions                                      19,359.44                 639,509.48

Additions to Permanent Endowments / Annuities                                        22,121,706.21              5,597,822.09
Reclass from/(to) Other Institutions                                                 78,938,888.24              18,488,063.76
Transfers Between Institutions & System, Debt Service - Mandatory                  (70,878,666.78)            (66,288,814.02)
Transfers Between Institutions & System Admin. - Non mandatory                       72,500,352.38            106,062,530.27
Transfers From Other State Agencies                                                                                   72,447.00
Transfers to Other State Agencies                                                     (147,246.64)                  (260,771.51)
Change in Net Assets                                                                354,779,724.34          (146,551,994.76)


Beginning Net Assets                                                              2,714,301,476.04          2,860,853,470.80

Ending Net Assets                                                     $           3,069,081,200.38          2,714,301,476.04
                                                                          UNAUDITED

The University of Texas Southwestern Medical Center at Dallas
EXHIBIT C - STATEMENT OF CASH FLOWS
For the Year Ended August 31, 2010
                                                                                      Current Year Totals     Prior Year Totals

Cash Flows from Operating Activities:
Proceeds from Tuition and Fees                                                                13,827,464.78        15,588,884.65
Proceeds from Patients and Customers                                                        842,206,547.57        733,569,921.46
Proceeds from Sponsored Programs                                                            472,137,024.30        407,816,920.86
Proceeds from Auxiliaries                                                                     17,978,951.79        17,113,528.54
Proceeds from Other Revenues                                                                  29,632,178.16        26,364,432.43
Payments to Suppliers                                                                     (426,901,740.37)      (419,152,073.08)
Payments to Employees                                                                   (1,011,872,186.80)      (959,721,227.10)
Payments for Loans Provided                                                                    (607,341.56)        (1,656,771.64)
Proceeds from Loan Programs                                                                    1,346,428.39          1,161,047.43
   Net Cash Provided (Used) by Operating Activities                                         (62,252,673.74)     (178,915,336.45)


Cash Flows from Noncapital Financing Activities:
Proceeds from State Appropriations                                                         179,535,740.17         176,217,141.83
Proceeds from Operating Gifts                                                               38,398,458.46          38,771,972.30
Proceeds from Private Gifts for Endowment and Annuity Life Purposes                         22,121,706.21           5,597,822.09
Proceeds from Other Nonoperating Revenues                                                      572,029.73                      -
Payments / Receipts for Transfers to / from System or Other Agencies                         3,357,403.45          30,106,010.25
Payments for Other Uses                                                                      (682,020.85)           (529,456.25)
Proceeds from Nonexchange Sponsored Programs                                                10,290,429.57              84,943.00
   Net Cash Provided by Noncapital Financing Activities                                    253,593,746.74         250,248,433.22


Cash Flows from Capital and Related Financing Activities:
Proceeds from Capital Debt Transferred from System (Nonmandatory)                            95,872,615.96        114,748,695.66
Proceeds from Capital Appropriations, Grants, and Gifts                                       1,711,585.59            125,760.32
Proceeds from Sale of Capital Assets                                                             548,478.22           348,772.96
Payments for Additions to Capital Assets                                                  (147,054,090.13)      (151,724,514.85)
Payments of Principal on Capital Related Debt                                                   (99,919.21)         (158,610.19)
Mandatory Transfers to System for Capital Related Debt                                     (70,878,666.78)       (66,288,814.02)
   Net Cash Provided (Used) by Capital and Related Financing Activities                   (119,899,996.35)      (102,948,710.12)


Cash Flows from Investing Activities
Proceeds from Sales of Investments Invested by System                                                    -                      -
Proceeds from Interest and Investment Income                                                 29,864,782.82             202,567.46
Proceeds from Interest and Investment Income Invested by System                              38,940,709.81          36,087,831.54
Payments to Acquire Investments                                                             (2,665,959.42)                      -
Payments to Acquire Investments Invested by System                                         (60,628,879.81)        (55,582,270.39)
Net Cash Provided (Used) by Investing Activities                                              5,510,653.40        (19,291,871.39)


Net Increase (Decrease) in Cash                                                             76,951,730.05        (50,907,484.74)
Cash and Cash Equivalents (Beginning of the Year)                                           61,149,328.00        112,056,812.74
Cash and Cash Equivalents (End of the Year)                                              $ 138,101,058.05        $ 61,149,328.00


Reconciliation of Net Operating Revenues (Expenses) to Net Cash
Provided (Used) by Operating Activities
Operating Income (Loss)                                                                   (139,245,264.51)      (229,085,822.40)
Adjustments to Reconcile Operating Results to Net Cash:
   Depreciation and Amortization Expense                                                    80,507,746.17          75,827,825.46
   Bad Debt Expense                                                                            298,814.77             287,276.32
Changes in Assets and Liabilities:
   Accounts Receivable                                                                     (14,069,626.11)        (43,583,720.08)
   Inventories                                                                              (1,274,111.38)           (129,767.98)
   Loans and Contracts                                                                           739,086.83          (495,724.21)
   Other Current and Noncurrent Assets                                                        2,280,098.32           2,687,140.33
   Accounts Payable                                                                           6,507,914.68          16,513,463.01
   Due to System                                                                                 789,466.22             408,768.50
   Deferred Revenue                                                                         (2,140,096.90)         (5,433,093.38)
   Assets Held for Others                                                                       (71,328.80)          (334,499.81)
   Employees' Compensable Leave                                                               4,608,268.74           4,436,302.20
   Other Current and Noncurrent Liabilities                                                 (1,183,641.77)             (13,484.41)
      Total Adjustments                                                                      76,992,590.77          50,170,485.95
Net Cash Provided (Used) by Operating Activities                                         $ (62,252,673.74)     $ (178,915,336.45)


Non Cash Transactions
Net Increase (Decrease) in Fair Value of Investments                                       101,281,681.41       (220,516,825.69)
Donated Capital Assets                                                                            6,000.00             34,900.00
Miscellaneous Noncash Transactions                                                          (2,700,611.01)        (2,457,737.38)
                                                                     UNAUDITED

The University of Texas Medical Branch at Galveston
Exhibit A Balance Sheet
As of August 31, 2010



                                                                                     Current Year          Prior Year
                                                                                        Totals               Totals


ASSETS AND DEFERRED OUTFLOWS

Current Assets and Deferred Outflows:
 Cash & Cash Equivalents                                                         $       177,972,815.53         92,753,331.28
 Restricted Cash & Cash Equivalents                                                       30,255,235.34          (532,729.67)
 Balance in State Appropriations                                                         149,404,996.37        158,163,237.62
 Accounts Receivable, Net:
    Federal (allow. of $5,274,118.53 in 2010 & $7,740,101.08 in 2009)                     28,997,517.81         16,043,131.06
    Other Intergov. (allow. of $10,215.16 in 2010 & $0.00 in 2009)                         2,687,569.59          3,129,479.10
    Student (allow. of $226,217.50 in 2010 & $137,120.27 in 2009)                          7,871,628.05          6,937,706.91
    Patient (allow. of $110,718,753.57 in 2010 & $81,011,430.72 in 2009)                  51,451,537.33         47,118,807.54
    Interest and Dividend Receivables                                                        393,454.53            320,978.34
    Contributions (allow. of $114,850.87 in 2010 & $1,161,084.51 in 2009)                    210,664.22            236,777.27
    Other (allow. of $1,068,942.50 in 2010 & $0.00 in 2009)                               37,958,372.26         16,959,896.83
 Due From System Administration                                                           17,490,860.08         38,185,579.91
 Due From Other Agencies                                                                   2,233,755.30
 Inventories                                                                              10,781,985.13         10,382,170.79
 Loans & Contracts (allow. of $0.00 in 2010 & $0.00 in 2009)                               1,104,289.42            720,941.12
 Other Current Assets                                                                     11,391,935.15         10,404,145.34
   Total Current Assets and Deferred Outflows                                            530,206,616.11        400,823,453.44


Noncurrent Assets and Deferred Outflows:
 Restricted:
   Investments (Restricted)                                                                23,737,527.47        34,857,381.56
   Loans & Contracts (allow. of $661,791.91 in 2010 & $650,142.25 in 2009)                  6,672,376.49         6,555,263.81
   Funds Held by System Administration                                                    432,150,109.81       399,080,854.84
 Contributions Rec. (allow. of $20,808.77 in 2010 & $939.04 in 2009)                           83,776.91           233,820.06
 Unrestricted Investments                                                                 105,981,695.53        85,516,362.22
 Other Noncurrent Assets                                                                      427,000.00           193,667.00
 Gross Capital/Intangible Assets                                                        1,493,148,868.97     1,370,469,949.66
   Accumulated Depreciation/Amortization                                                (833,019,813.32)     (778,216,586.81)
     Total Noncurrent Assets and Deferred Outflows                                      1,229,181,541.86     1,118,690,712.34
Total Assets and Deferred Outflows                                               $      1,759,388,157.97     1,519,514,165.78


LIABILITIES AND DEFERRED INFLOWS
Current Liabilities and Deferred Inflows:
 Accounts Payable and Accrued Liabilities                                                155,324,204.14       102,196,335.92
 Salaries Payable                                                                         30,163,908.05        28,825,732.08
 Due To System Administration                                                              9,122,868.27         8,750,346.37
 Due To Other State Agencies                                                                 705,108.79
 Deferred Revenue                                                                         45,636,152.00         46,054,748.27
 Employees' Compensable Leave - Current Portion                                           34,765,867.39         35,027,968.77
 Payable From Restricted Assets                                                            9,485,019.73          8,218,654.82
 Assets Held for Others                                                                      995,878.30            600,564.54
   Total Current Liabilities and Deferred Inflows                                        286,199,006.67        229,674,350.77


Noncurrent Liabilities and Deferred Inflows:
 Employees' Compensable Leave                                                              25,240,765.42        26,939,008.76
 Liability to Beneficiaries Held by System                                                  1,582,692.01         1,791,415.26
 Other Noncurrent Liabilities                                                                 415,121.25           396,233.22
   Total Noncurrent Liabilities and Deferred Inflows                                       27,238,578.68        29,126,657.24
Total Liabilities and Deferred Inflows                                                   313,437,585.35        258,801,008.01


 NET ASSETS
 Invested in Capital Assets, Net of Related Debt                                         660,129,055.65        592,253,362.85
 Restricted for:
   Nonexpendable
    Permanent Health, True Endowments, and Annuities                                     293,496,695.54        287,892,208.67
  Expendable
    Capital Projects                                                                     164,775,151.85        201,361,951.82
    Funds Functioning as Endowment (Restricted)                                           20,509,299.94         18,622,661.79
    Other Expendable                                                                     160,541,442.25        132,531,115.64
 Unrestricted Net Assets                                                                 146,498,927.39         28,051,857.00
Total Net Assets                                                                        1,445,950,572.62     1,260,713,157.77


Total Liabilities, Deferred Inflows and Net Assets                               $      1,759,388,157.97     1,519,514,165.78
                                                                UNAUDITED


The University of Texas Medical Branch at Galveston
Exhibit B Statement of Revenues, Expenses, and Changes in Net Assets
For the Year Ended August 31, 2010



                                                                            Current Year              Prior Year
                                                                              Totals                    Totals



Operating Revenues:
Student Tuition and Fees                                              $              23,725,139.37            20,697,452.47
 Discounts and Allowances                                                            (1,547,001.62)            (775,965.47)
Federal Sponsored Programs                                                          131,924,277.79           126,142,938.29
Federal Sponsored Programs Pass-Through from State Agencies                          37,872,167.66           102,394,302.80
State Sponsored Programs Pass-Through from State Agencies                            10,655,558.13             3,528,983.38
Local Sponsored Programs                                                               5,380,068.02            5,358,958.52
Private Sponsored Programs                                                           72,099,844.44            74,449,258.29
Sales and Services of Educational Activities                                         16,182,345.56            24,588,322.44
Sales and Services of Hospitals                                                   1,497,861,812.74         1,058,143,457.28
 Discounts and Allowances Sales and Services of Hospitals                         (801,559,289.21)         (461,076,340.20)
Professional Fees (Patient Charges)                                                 345,881,948.83           277,197,675.58
 Discounts and Allowances Professional Fees (Patient Charges)                     (217,784,016.14)         (187,581,286.44)
Auxiliary Enterprises                                                                  5,833,273.51            4,502,585.78
Other Operating Revenues                                                             24,542,835.54             9,763,023.80
Total Operating Revenues                                                          1,151,068,964.62         1,057,333,366.52


Operating Expenses:
Instruction                                                                         243,027,572.78           258,055,257.27
Research                                                                            116,760,151.39           114,203,057.31
Public Service                                                                       21,244,206.32             4,400,872.44
Hospitals / Clinics                                                                 891,040,302.21           862,372,929.38
Academic Support                                                                     22,776,495.85            20,880,212.97
Student Services                                                                      5,558,097.96             5,062,764.82
Institutional Support                                                                57,352,649.18            54,470,685.31
Operations and Maintenance of Plant                                                  87,968,204.31           195,323,513.70
Scholarships and Fellowships                                                          5,958,898.70             6,270,491.93
Auxiliary Enterprises                                                                 6,143,838.95             8,035,373.05
Depreciation and Amortization                                                        67,441,749.58            64,863,909.93
Total Operating Expenses                                                          1,525,272,167.23         1,593,939,068.11
Operating Income (Loss)                                                           (374,203,202.61)         (536,605,701.59)


Nonoperating Revenues (Expenses):
State Appropriations                                                                416,589,538.89           467,346,710.92
Federal Nonexchange Sponsored Programs                                                  784,517.00               488,240.00
Federal Nonexchange Pass-Through                                                      6,745,161.00
Gift Contributions for Operations                                                    11,615,798.23             13,212,984.69
Investment Income                                                                    30,382,835.29              3,646,708.62
Net Increase (Decrease) in Fair Value of Investments                                 36,313,852.30           (98,716,159.29)
Gain (Loss) on Sale of Capital Assets                                                 (986,362.51)              (490,292.24)
Other Nonoperating Revenues                                                           2,537,962.42             39,531,341.02
Other Nonoperating (Expenses)                                                          (18,501.50)               (31,245.52)
Net Nonoperating Revenues (Expenses)                                                503,964,801.12           424,988,288.20

Income/(Loss) Before Other Revenue, Expenses, Gains/(Losses), and
                                                                                    129,761,598.51         (111,617,413.39)
Transfers

Gifts and Sponsored Programs for Capital Acquisitions                                51,082,178.90            14,023,641.35

Additions to Permanent Endowments / Annuities                                         3,639,872.21             3,390,929.10
Reclass from/(to) Other Institutions                                                  3,976,378.04              4,237,043.98
Transfers Between Institutions & System, Debt Service - Mandatory                  (24,687,083.84)           (23,047,512.04)
Transfers Between Institutions & System Admin. - Non mandatory                       21,632,636.76            73,292,543.73
Transfers From Other State Agencies                                                  47,653,400.75           226,790,956.79
Transfers to Other State Agencies                                                  (47,821,566.48)         (227,065,201.71)
Change in Net Assets                                                                185,237,414.85           (39,995,012.19)


Beginning Net Assets                                                              1,260,713,157.77         1,300,708,169.96

Ending Net Assets                                                     $           1,445,950,572.62         1,260,713,157.77
                                                                          UNAUDITED

The University of Texas Medical Branch at Galveston
EXHIBIT C - STATEMENT OF CASH FLOWS
For the Year Ended August 31, 2010
                                                                                      Current Year Totals     Prior Year Totals

Cash Flows from Operating Activities:
Proceeds from Tuition and Fees                                                                22,538,940.68         22,851,583.21
Proceeds from Patients and Customers                                                        842,509,474.88        747,707,487.33
Proceeds from Sponsored Programs                                                            254,420,387.89        309,875,593.20
Proceeds from Auxiliaries                                                                      5,882,102.24          4,479,024.79
Proceeds from Other Revenues                                                                  39,975,143.02         28,980,420.16
Payments to Suppliers                                                                     (472,078,638.49)      (559,131,203.58)
Payments to Employees                                                                     (965,443,734.63)      (959,318,656.19)
Payments for Loans Provided                                                                  (1,179,336.57)        (1,242,654.68)
Proceeds from Loan Programs                                                                      678,875.59            981,212.03
   Net Cash Provided (Used) by Operating Activities                                       (272,696,785.39)      (404,817,193.73)


Cash Flows from Noncapital Financing Activities:
Proceeds from State Appropriations                                                         425,347,780.14         310,357,360.45
Proceeds from Operating Gifts                                                               11,791,954.43          13,252,282.40
Proceeds from Private Gifts for Endowment and Annuity Life Purposes                          3,639,872.21           3,390,929.10
Proceeds from Other Nonoperating Revenues                                                    2,537,962.42          39,531,341.02
Payments / Receipts for Transfers to / from System or Other Agencies                         1,184,608.96          17,650,404.97
Payments for Other Uses                                                                         21,327.43             (31,245.52)
Proceeds from Nonexchange Sponsored Programs                                                 7,529,678.00             488,240.00
   Net Cash Provided by Noncapital Financing Activities                                    452,053,183.59         384,639,312.42


Cash Flows from Capital and Related Financing Activities:
Proceeds from Capital Debt Transferred from System (Nonmandatory)                            44,688,727.60          57,551,415.45
Proceeds from Capital Appropriations, Grants, and Gifts                                      37,225,425.76          10,348,905.61
Proceeds from Sale of Capital Assets                                                             76,764.42              18,810.00
Payments for Additions to Capital Assets                                                  (144,946,186.40)        (83,231,729.24)
Mandatory Transfers to System for Capital Related Debt                                     (24,687,083.84)        (23,047,512.04)
Proceeds From Insurance Recovery                                                                         -          66,340,503.61
   Net Cash Provided (Used) by Capital and Related Financing Activities                    (87,642,352.46)          27,980,393.39


Cash Flows from Investing Activities
Proceeds from Sales of Investments Invested by System                                                    -         86,603,659.93
Proceeds from Interest and Investment Income                                                  1,165,171.04          1,449,301.17
Proceeds from Interest and Investment Income Invested by System                              29,229,114.37          1,357,344.90
Payments to Acquire Investments                                                                          -            (89,000.00)
Payments to Acquire Investments Invested by System                                          (6,100,881.89)                     -
Net Cash Provided (Used) by Investing Activities                                             24,293,403.52         89,321,306.00


Net Increase (Decrease) in Cash                                                            116,007,449.26          97,123,818.08
Cash and Cash Equivalents (Beginning of the Year)                                           92,220,601.61         (4,903,216.47)
Cash and Cash Equivalents (End of the Year)                                              $ 208,228,050.87        $ 92,220,601.61


Reconciliation of Net Operating Revenues (Expenses) to Net Cash
Provided (Used) by Operating Activities
Operating Income (Loss)                                                                   (374,203,202.61)      (536,605,701.59)
Adjustments to Reconcile Operating Results to Net Cash:
   Depreciation and Amortization Expense                                                    67,441,749.58           64,863,909.93
   Gross Loss on Impairment of Capital Assets                                                           -           82,274,664.22
   Bad Debt Expense                                                                                      -              21,181.12
   Operating Income and Cash Flow Categories Classification Differences                                 -         (66,340,503.61)
Changes in Assets and Liabilities:
   Accounts Receivable                                                                      (7,502,488.53)          44,651,307.40
   Inventories                                                                                (399,814.34)           (742,183.71)
   Loans and Contracts                                                                        (500,460.98)           (261,442.65)
   Other Current and Noncurrent Assets                                                      (1,221,122.81)         (2,640,463.31)
   Accounts Payable                                                                          46,430,328.74             407,042.09
   Due to System                                                                                372,521.90           (550,873.28)
   Deferred Revenue                                                                         (1,568,153.41)           4,821,387.77
   Assets Held for Others                                                                       395,313.76             369,771.47
   Employees' Compensable Leave                                                             (1,960,344.72)         (1,936,898.10)
   Other Current and Noncurrent Liabilities                                                      18,888.03           6,851,608.52
      Total Adjustments                                                                    101,506,417.22         131,788,507.86
Net Cash Provided (Used) by Operating Activities                                        $ (272,696,785.39)     $ (404,817,193.73)


Non Cash Transactions
Net Increase (Decrease) in Fair Value of Investments                                         36,313,852.30        (98,716,159.29)
Donated Capital Assets                                                                                   -           2,600,000.00
Miscellaneous Noncash Transactions                                                          (1,016,779.73)          15,363,186.10
                                                                    UNAUDITED

The University of Texas Health Science Center at Houston
Exhibit A Balance Sheet
As of August 31, 2010



                                                                                    Current Year          Prior Year
                                                                                       Totals              Totals


ASSETS AND DEFERRED OUTFLOWS

Current Assets and Deferred Outflows:
 Cash & Cash Equivalents                                                        $         65,350,722.10        48,461,819.61
 Restricted Cash & Cash Equivalents                                                        8,592,393.70         8,795,121.57
 Balance in State Appropriations                                                           5,396,186.53         3,264,924.92
 Accounts Receivable, Net:
    Federal (allow. of $0.00 in 2010 & $0.00 in 2009)                                     22,161,214.80         9,676,361.25
    Other Intergov. (allow. of $163,646.50 in 2010 & $0.00 in 2009)                       12,138,314.63         6,942,538.22
    Student (allow. of $381,459.92 in 2010 & $425,572.04 in 2009)                         12,607,962.15         9,818,931.03
    Patient (allow. of $120,527,139.18 in 2010 & $114,926,165.61 in 2009)                 37,608,410.00        34,083,233.22
    Interest and Dividend Receivables                                                        770,928.52           651,095.93
    Contributions (allow. of $316,599.81 in 2010 & $313,929.10 in 2009)                   10,405,980.73        12,805,714.40
    Other (allow. of $5,109,057.35 in 2010 & $5,437,903.91 in 2009)                       13,045,227.83        13,769,728.58
 Due From System Administration                                                           89,196,369.18        30,096,485.18
 Due From Other Agencies                                                                   4,945,938.96         6,928,098.52
 Inventories                                                                               1,136,074.74           487,098.04
 Loans & Contracts (allow. of $291,919.15 in 2010 & $175,286.74 in 2009)                   5,224,391.89         5,160,229.77
 Other Current Assets                                                                      1,162,205.38           322,276.15
   Total Current Assets and Deferred Outflows                                            289,742,321.14       191,263,656.39


Noncurrent Assets and Deferred Outflows:
 Restricted:
   Investments (Restricted)                                                               67,488,430.05        72,881,803.59
   Loans & Contracts (allow. of $356,313.54 in 2010 & $429,946.99 in 2009)                 6,384,738.28         7,137,743.95
   Funds Held by System Administration                                                   171,266,597.06       154,758,036.94
 Contributions Rec. (allow. of $386,372.39 in 2010 & $506,446.16 in 2009)                 15,760,817.90        20,658,853.32
 Unrestricted Investments                                                                247,353,817.24       198,701,400.49
 Other Noncurrent Assets                                                                                          725,131.37
 Gross Capital/Intangible Assets                                                         930,457,498.11       856,489,506.45
   Accumulated Depreciation/Amortization                                               (342,838,281.40)     (306,058,619.98)
     Total Noncurrent Assets and Deferred Outflows                                     1,095,873,617.24     1,005,293,856.13
Total Assets and Deferred Outflows                                              $      1,385,615,938.38     1,196,557,512.52


LIABILITIES AND DEFERRED INFLOWS
Current Liabilities and Deferred Inflows:
 Accounts Payable and Accrued Liabilities                                                 42,932,492.12        41,369,942.96
 Salaries Payable                                                                         15,717,136.66        11,568,415.72
 Due To System Administration                                                              4,132,025.99         3,714,317.99
 Due To Other State Agencies                                                                 205,726.87
 Interfund Payable                                                                           986,597.72           957,520.28
 Deferred Revenue                                                                         54,569,550.50        37,825,718.93
 Employees' Compensable Leave - Current Portion                                           20,139,559.87        18,330,908.22
 Notes, Loans, and Leases Payable                                                          1,538,150.24           875,000.00
 Payable From Restricted Assets                                                            1,578,832.13         1,573,837.53
 Other Current Liabilities                                                                10,984,085.50        11,872,509.42
   Total Current Liabilities and Deferred Inflows                                        152,784,157.60       128,088,171.05


Noncurrent Liabilities and Deferred Inflows:
 Employees' Compensable Leave                                                             15,466,082.09        15,483,391.29
 Assets Held for Others                                                                    2,254,441.43         2,005,305.57
 Liability to Beneficiaries Held by System                                                   148,861.04           146,371.83
 Notes, Loans, and Leases Payable                                                            875,441.64         1,934,822.17
 Interfund Payable                                                                         2,513,706.12         3,501,012.11
 Other Noncurrent Liabilities                                                                180,600.00           238,782.13
   Total Noncurrent Liabilities and Deferred Inflows                                      21,439,132.32        23,309,685.10
Total Liabilities and Deferred Inflows                                                   174,223,289.92       151,397,856.15


 NET ASSETS
 Invested in Capital Assets, Net of Related Debt                                         584,118,912.87       545,972,354.08
 Restricted for:
   Nonexpendable
    Permanent Health, True Endowments, and Annuities                                     123,134,288.39       119,191,227.21
  Expendable
    Capital Projects                                                                      79,107,727.61        24,120,262.24
    Funds Functioning as Endowment (Restricted)                                           10,443,814.40         8,192,407.98
    Other Expendable                                                                     136,289,065.02       130,888,474.57
 Unrestricted Net Assets                                                                 278,298,840.17       216,794,930.29
Total Net Assets                                                                       1,211,392,648.46     1,045,159,656.37


Total Liabilities, Deferred Inflows and Net Assets                              $      1,385,615,938.38     1,196,557,512.52
                                                                UNAUDITED


The University of Texas Health Science Center at Houston
Exhibit B Statement of Revenues, Expenses, and Changes in Net Assets
For the Year Ended August 31, 2010



                                                                            Current Year               Prior Year
                                                                               Totals                    Totals



Operating Revenues:
Student Tuition and Fees                                              $              28,492,109.29             26,121,178.17
 Discounts and Allowances                                                             (966,410.36)              (911,584.60)
Federal Sponsored Programs                                                          153,078,803.72            132,877,778.62
Federal Sponsored Programs Pass-Through from State Agencies                          19,649,882.15             15,649,209.16
State Sponsored Programs Pass-Through from State Agencies                            11,495,292.05             25,659,575.22
Local Sponsored Programs                                                            195,869,837.16            129,062,092.46
Private Sponsored Programs                                                           21,847,024.62             27,205,996.06
Sales and Services of Educational Activities                                         60,904,012.14             43,679,731.65
Sales and Services of Hospitals                                                     109,943,018.65             94,874,728.12
 Discounts and Allowances Sales and Services of Hospitals                          (70,744,192.52)           (59,055,277.09)
Professional Fees (Patient Charges)                                                 608,408,976.17            538,271,217.39
 Discounts and Allowances Professional Fees (Patient Charges)                     (464,931,629.63)          (410,347,290.66)
Auxiliary Enterprises                                                                22,585,925.90             22,955,544.59
Other Operating Revenues                                                              9,171,552.06             10,306,225.05
Total Operating Revenues                                                            704,804,201.40            596,349,124.14


Operating Expenses:
Instruction                                                                         355,550,066.66            323,957,830.74
Research                                                                            194,367,927.58            174,860,738.53
Public Service                                                                       26,309,180.82             20,704,996.45
Hospitals / Clinics                                                                 142,921,318.92             83,928,475.26
Academic Support                                                                     28,753,893.59             27,101,104.63
Student Services                                                                      4,708,743.16              4,890,205.62
Institutional Support                                                                62,213,251.95             59,607,293.54
Operations and Maintenance of Plant                                                  39,623,258.14             37,205,825.82
Scholarships and Fellowships                                                          6,793,312.22              5,674,667.97
Auxiliary Enterprises                                                                15,526,086.10             15,160,170.03
Depreciation and Amortization                                                        44,230,692.74             40,000,361.40
Total Operating Expenses                                                            920,997,731.88            793,091,669.99
Operating Income (Loss)                                                           (216,193,530.48)          (196,742,545.85)


Nonoperating Revenues (Expenses):
State Appropriations                                                               173,695,684.41             170,350,777.02
Federal Nonexchange Sponsored Programs                                                 990,597.27                 306,864.00
Federal Nonexchange Pass-Through                                                    15,026,974.10
Gift Contributions for Operations                                                   14,805,393.23              15,080,458.46
Investment Income                                                                   24,988,444.89              13,911,370.17
Net Increase (Decrease) in Fair Value of Investments                                31,584,552.56            (57,938,244.82)
Gain (Loss) on Sale of Capital Assets                                                (254,716.78)               (247,184.05)
Other Nonoperating Revenues                                                          (532,763.24)                 635,417.00
Net Nonoperating Revenues (Expenses)                                               260,304,166.44            142,099,457.78

Income/(Loss) Before Other Revenue, Expenses, Gains/(Losses), and                    44,110,635.96           (54,643,088.07)
Transfers

Gifts and Sponsored Programs for Capital Acquisitions                                 2,735,232.01              2,478,505.38

Additions to Permanent Endowments / Annuities                                         3,822,021.54              3,603,233.33
Reclass from/(to) Other Institutions                                                 63,754,995.72             24,407,462.33
Transfers Between Institutions & System, Debt Service - Mandatory                  (24,362,025.79)           (22,624,041.10)
Transfers Between Institutions & System Admin. - Non mandatory                       79,176,078.06             47,295,360.56
Transfers From Other State Agencies                                                        14,646.26                  57,593.97
Transfers to Other State Agencies                                                   (3,018,591.67)                  (601,475.23)
Change in Net Assets                                                               166,232,992.09                    (26,448.83)


Beginning Net Assets                                                              1,045,159,656.37          1,045,186,105.20
                                                                                  1,211,392,648.46          1,045,159,656.37
Ending Net Assets                                                     $
                                                                          UNAUDITED

The University of Texas Health Science Center at Houston
EXHIBIT C - STATEMENT OF CASH FLOWS
For the Year Ended August 31, 2010
                                                                                      Current Year Totals     Prior Year Totals
Cash Flows from Operating Activities:
Proceeds from Tuition and Fees                                                                24,777,148.52         23,975,201.17
Proceeds from Patients and Customers                                                        180,974,611.16        153,555,909.45
Proceeds from Sponsored Programs                                                            392,583,393.25        326,402,383.78
Proceeds from Auxiliaries                                                                     22,685,168.76         22,912,434.93
Proceeds from Other Revenues                                                                  78,206,051.37         57,599,269.54
Payments to Suppliers                                                                     (269,603,309.04)      (241,453,412.82)
Payments to Employees                                                                     (600,918,140.53)      (496,917,938.82)
Payments for Loans Provided                                                                  (1,637,984.92)        (1,735,978.00)
Proceeds from Loan Programs                                                                    2,326,828.47          1,879,809.55
   Net Cash Provided (Used) by Operating Activities                                       (170,606,232.96)      (153,782,321.22)


Cash Flows from Noncapital Financing Activities:
Proceeds from State Appropriations                                                         171,564,422.80         175,018,257.02
Proceeds from Operating Gifts                                                               21,017,051.07          19,630,372.84
Proceeds from Private Gifts for Endowment and Annuity Life Purposes                          3,822,021.54           3,603,233.33
Proceeds from Other Nonoperating Revenues                                                    (532,763.24)             635,417.00
Payments / Receipts for Transfers to / from System or Other Agencies                         3,148,567.54           9,509,699.49
Payments for Other Uses                                                                        133,609.21              15,124.69
Proceeds from Nonexchange Sponsored Programs                                                15,975,357.37             304,351.00
   Net Cash Provided by Noncapital Financing Activities                                    215,128,266.29         208,716,455.37


Cash Flows from Capital and Related Financing Activities:
Proceeds from Issuance of Capital Debt                                                           41,269.71                      -
Proceeds from Capital Debt Transferred from System (Nonmandatory)                            79,425,724.56          57,018,218.75
Proceeds from Capital Appropriations, Grants, and Gifts                                       3,821,343.26           3,550,339.40
Proceeds from Sale of Capital Assets                                                             54,820.88              71,397.13
Payments for Additions to Capital Assets                                                   (83,158,936.68)        (88,776,813.66)
Payments of Principal on Capital Related Debt                                                 (437,500.00)           (635,417.00)
Mandatory Transfers to System for Capital Related Debt                                     (24,362,025.79)        (22,624,041.10)
   Net Cash Provided (Used) by Capital and Related Financing Activities                    (24,615,304.06)        (51,396,316.48)


Cash Flows from Investing Activities
Proceeds from Sales of Investments                                                              225,728.79              32,739.98
Proceeds from Sales of Investments Invested by System                                                    -                      -
Proceeds from Interest and Investment Income                                                  1,355,179.58             864,836.73
Proceeds from Interest and Investment Income Invested by System                              23,607,316.54          13,296,906.12
Payments to Acquire Investments                                                               (932,014.44)         (1,033,053.77)
Payments to Acquire Investments Invested by System                                         (27,476,765.12)        (23,469,824.92)
Net Cash Provided (Used) by Investing Activities                                            (3,220,554.65)        (10,308,395.86)


Net Increase (Decrease) in Cash                                                              16,686,174.62        (6,770,578.19)
Cash and Cash Equivalents (Beginning of the Year)                                            57,256,941.18         64,027,519.37
Cash and Cash Equivalents (End of the Year)                                                $ 73,943,115.80       $ 57,256,941.18


Reconciliation of Net Operating Revenues (Expenses) to Net Cash
Provided (Used) by Operating Activities
Operating Income (Loss)                                                                   (216,193,530.48)      (196,742,545.85)
Adjustments to Reconcile Operating Results to Net Cash:
   Depreciation and Amortization Expense                                                    44,230,692.74          40,000,361.40
   Bad Debt Expense                                                                              1,615.00               2,472.64
Changes in Assets and Liabilities:
   Accounts Receivable                                                                     (20,685,225.56)        (17,458,116.05)
   Inventories                                                                                (648,976.70)             192,796.00
   Loans and Contracts                                                                          688,843.55             143,831.55
   Other Current and Noncurrent Assets                                                        (114,797.86)           (118,500.31)
   Accounts Payable                                                                           3,990,855.58          12,426,874.84
   Due to System                                                                                417,708.00             285,149.78
   Deferred Revenue                                                                          16,612,710.51           1,005,674.90
   Assets Held for Others                                                                       249,135.86             (36,877.77)
   Employees' Compensable Leave                                                               1,791,342.45           3,811,768.65
   Other Current and Noncurrent Liabilities                                                   (946,606.05)           2,704,789.00
      Total Adjustments                                                                      45,587,297.52          42,960,224.63
Net Cash Provided (Used) by Operating Activities                                        $ (170,606,232.96)     $ (153,782,321.22)


Non Cash Transactions
Net Increase (Decrease) in Fair Value of Investments                                         31,584,552.56        (57,938,244.82)
Miscellaneous Noncash Transactions                                                          (3,051,387.67)           (603,918.91)
                                                                     UNAUDITED

The University of Texas Health Science Center at San Antonio
Exhibit A Balance Sheet
As of August 31, 2010



                                                                                     Current Year          Prior Year
                                                                                        Totals              Totals


ASSETS AND DEFERRED OUTFLOWS

Current Assets and Deferred Outflows:
 Cash & Cash Equivalents                                                         $         57,698,982.25        34,846,540.69
 Restricted Cash & Cash Equivalents                                                        23,184,477.92        21,536,675.94
 Balance in State Appropriations                                                           20,034,335.87        13,901,309.22
 Accounts Receivable, Net:
    Federal (allow. of $0.00 in 2010 & $0.00 in 2009)                                      12,052,136.84        16,279,803.84
    Other Intergov. (allow. of $0.00 in 2010 & $0.00 in 2009)                               3,410,404.93         3,748,805.84
    Student (allow. of $0.00 in 2010 & $0.00 in 2009)                                      11,011,795.45        10,658,468.78
    Patient (allow. of $69,475,810.53 in 2010 & $81,747,932.31 in 2009)                    17,152,158.11        16,141,431.24
    Interest and Dividend Receivables                                                         515,976.98           466,517.10
    Contributions (allow. of $39,097.26 in 2010 & $0.00 in 2009)                            4,507,296.20         4,255,469.76
    Other (allow. of $0.00 in 2010 & $0.00 in 2009)                                        14,172,039.23        18,315,395.80
 Due From Other Funds                                                                                           16,437,585.28
 Due From System Administration                                                            38,300,095.39        59,713,324.59
 Due From Other Agencies                                                                    2,729,238.30
 Inventories                                                                                1,782,594.04         1,464,350.91
 Loans & Contracts (allow. of $78,898.86 in 2010 & $73,740.96 in 2009)                      1,102,221.71         1,199,850.89
 Other Current Assets                                                                         160,997.71           529,561.94
   Total Current Assets and Deferred Outflows                                             207,814,750.93       219,495,091.82


Noncurrent Assets and Deferred Outflows:
 Restricted:
   Investments (Restricted)                                                                78,841,924.93        73,713,951.20
   Loans & Contracts (allow. of $374,503.57 in 2010 & $341,338.92 in 2009)                  5,231,837.39         5,553,978.52
   Funds Held by System Administration                                                    374,173,743.53       345,651,559.84
 Contributions Rec. (allow. of $53,668.99 in 2010 & $0.00 in 2009)                          5,313,229.78         8,249,527.31
 Unrestricted Investments                                                                 123,546,894.84       114,083,976.47
 Other Noncurrent Assets                                                                   13,708,666.55        16,811,947.97
 Gross Capital/Intangible Assets                                                          922,878,632.80       844,948,886.08
   Accumulated Depreciation/Amortization                                                (368,123,645.58)     (339,230,248.61)
     Total Noncurrent Assets and Deferred Outflows                                      1,155,571,284.24     1,069,783,578.78
Total Assets and Deferred Outflows                                               $      1,363,386,035.17     1,289,278,670.60


LIABILITIES AND DEFERRED INFLOWS
Current Liabilities and Deferred Inflows:
 Accounts Payable and Accrued Liabilities                                                  17,294,222.40        21,401,190.52
 Salaries Payable                                                                          21,518,930.53        20,865,022.87
 Due To Other Funds                                                                                             16,437,585.28
 Due To System Administration                                                               3,991,542.34         3,665,762.95
 Deferred Revenue                                                                          38,427,947.17        32,977,292.03
 Employees' Compensable Leave - Current Portion                                            20,430,803.57        19,303,966.16
 Notes, Loans, and Leases Payable                                                           1,130,152.43         1,083,895.39
 Payable From Restricted Assets                                                            11,456,021.23        17,802,977.66
 Assets Held for Others                                                                       173,737.84           136,393.22
 Other Current Liabilities                                                                  4,568,207.05           940,801.32
   Total Current Liabilities and Deferred Inflows                                         118,991,564.56       134,614,887.40


Noncurrent Liabilities and Deferred Inflows:
 Employees' Compensable Leave                                                              22,508,249.61        19,851,291.80
 Assets Held for Others                                                                       302,805.10           259,607.49
 Liability to Beneficiaries Held by System                                                    767,235.87           699,823.71
 Notes, Loans, and Leases Payable                                                           8,175,236.40         9,298,750.74
 Other Noncurrent Liabilities                                                               2,226,549.63           763,370.00
   Total Noncurrent Liabilities and Deferred Inflows                                       33,980,076.61        30,872,843.74
Total Liabilities and Deferred Inflows                                                    152,971,641.17       165,487,731.14


 NET ASSETS
 Invested in Capital Assets, Net of Related Debt                                          554,741,204.69       505,669,352.82
 Restricted for:
   Nonexpendable
    Permanent Health, True Endowments, and Annuities                                      319,231,724.18       316,196,442.41
  Expendable
    Capital Projects                                                                       18,146,735.50        33,776,639.64
    Funds Functioning as Endowment (Restricted)                                             7,328,504.73         6,297,756.31
    Other Expendable                                                                      158,819,520.68       139,720,065.67
 Unrestricted Net Assets                                                                  152,146,704.22       122,130,682.61
Total Net Assets                                                                        1,210,414,394.00     1,123,790,939.46


Total Liabilities, Deferred Inflows and Net Assets                               $      1,363,386,035.17     1,289,278,670.60
                                                                UNAUDITED


The University of Texas Health Science Center at San Antonio
Exhibit B Statement of Revenues, Expenses, and Changes in Net Assets
For the Year Ended August 31, 2010



                                                                            Current Year                Prior Year
                                                                               Totals                     Totals



Operating Revenues:
Student Tuition and Fees                                              $              31,747,782.38              29,211,795.54
 Discounts and Allowances                                                            (2,413,319.93)             (1,732,088.62)
Federal Sponsored Programs                                                          133,703,136.61             139,116,804.65
Federal Sponsored Programs Pass-Through from State Agencies                            1,975,981.18               2,300,709.73
State Sponsored Programs                                                                  24,843.75
State Sponsored Programs Pass-Through from State Agencies                              3,023,825.35              2,712,509.68
Local Sponsored Programs                                                            112,100,824.01              99,309,351.94
Private Sponsored Programs                                                           48,514,463.64              51,557,853.21
Sales and Services of Educational Activities                                         20,543,782.13              23,396,773.20
Professional Fees (Patient Charges)                                                 388,370,837.23             362,149,012.57
 Discounts and Allowances Professional Fees (Patient Charges)                     (266,984,774.93)           (251,329,414.54)
Auxiliary Enterprises                                                                  4,304,715.84              5,159,338.46
Other Operating Revenues                                                               9,547,505.28              9,387,645.38
Total Operating Revenues                                                            484,459,602.54             471,240,291.20


Operating Expenses:
Instruction                                                                         300,517,330.19             279,676,202.80
Research                                                                            145,165,309.78             152,651,861.98
Public Service                                                                       37,295,289.68              35,326,274.99
Hospitals / Clinics                                                                  74,792,260.70              75,587,614.07
Academic Support                                                                     29,157,758.52              27,082,887.53
Student Services                                                                      3,034,361.91               2,711,726.51
Institutional Support                                                                39,112,583.57              43,163,963.00
Operations and Maintenance of Plant                                                  30,409,541.34              32,418,159.91
Scholarships and Fellowships                                                          3,164,468.62               3,081,344.09
Auxiliary Enterprises                                                                 5,654,659.03               6,712,440.35
Depreciation and Amortization                                                        33,092,740.34              31,311,424.48
Total Operating Expenses                                                            701,396,303.68             689,723,899.71
Operating Income (Loss)                                                           (216,936,701.14)           (218,483,608.51)


Nonoperating Revenues (Expenses):
State Appropriations                                                                178,603,325.63             171,941,973.79
Federal Nonexchange Sponsored Programs                                                1,060,249.81                 812,048.00
Federal Nonexchange Pass-Through                                                     13,374,956.91
Gift Contributions for Operations                                                    12,544,808.08              24,520,898.35
Investment Income                                                                    29,283,647.26              23,441,226.75
Net Increase (Decrease) in Fair Value of Investments                                 39,481,254.93            (93,885,930.91)
Gain (Loss) on Sale of Capital Assets                                                 (531,874.46)               (503,692.50)
Other Nonoperating Revenues                                                                                        101,052.50
Net Nonoperating Revenues (Expenses)                                                273,816,368.16            126,427,575.98

Income/(Loss) Before Other Revenue, Expenses, Gains/(Losses), and                    56,879,667.02            (92,056,032.53)
Transfers

Gifts and Sponsored Programs for Capital Acquisitions                                      350,832.71            3,878,418.91

Additions to Permanent Endowments / Annuities                                         1,993,869.69               5,731,571.11
Reclass from/(to) Other Institutions                                                 42,378,803.70              43,187,687.80
Transfers Between Institutions & System, Debt Service - Mandatory                  (22,260,552.06)            (22,112,522.42)
Transfers Between Institutions & System Admin. - Non mandatory                        7,475,738.94              33,586,809.44
Transfers From Other State Agencies                                                          6,771.63                 133,208.63
Transfers to Other State Agencies                                                     (201,677.09)                   (326,589.33)
Change in Net Assets                                                                 86,623,454.54            (27,977,448.39)


Beginning Net Assets                                                              1,123,790,939.46           1,151,768,387.85
                                                                                  1,210,414,394.00           1,123,790,939.46
Ending Net Assets                                                     $
                                                                          UNAUDITED

The University of Texas Health Science Center at San Antonio
EXHIBIT C - STATEMENT OF CASH FLOWS
For the Year Ended August 31, 2010
                                                                                      Current Year Totals    Prior Year Totals

Cash Flows from Operating Activities:
Proceeds from Tuition and Fees                                                               31,088,346.27         27,818,100.79
Proceeds from Patients and Customers                                                        120,375,335.43       109,960,047.19
Proceeds from Sponsored Programs                                                            308,833,521.87       291,144,677.35
Proceeds from Auxiliaries                                                                     4,332,761.15          5,159,338.46
Proceeds from Other Revenues                                                                 38,196,717.91         34,728,230.21
Payments to Suppliers                                                                     (171,697,691.47)     (186,123,301.56)
Payments to Employees                                                                     (496,199,792.22)     (468,221,907.59)
Payments for Loans Provided                                                                   (657,496.19)        (1,464,061.57)
Proceeds from Loan Programs                                                                     999,789.20          1,433,743.51
   Net Cash Provided (Used) by Operating Activities                                       (164,728,508.05)     (185,565,133.21)


Cash Flows from Noncapital Financing Activities:
Proceeds from State Appropriations                                                         172,470,298.98        178,493,026.62
Proceeds from Operating Gifts                                                               15,229,279.17         17,392,336.35
Proceeds from Private Gifts for Endowment and Annuity Life Purposes                          1,993,869.69          5,731,571.11
Proceeds from Other Nonoperating Revenues                                                               -            101,052.50
Payments / Receipts for Transfers to / from System or Other Agencies                         1,498,623.63         13,097,953.30
Proceeds from Nonexchange Sponsored Programs                                                14,435,206.72            812,048.00
   Net Cash Provided by Noncapital Financing Activities                                    205,627,278.19        215,627,987.88


Cash Flows from Capital and Related Financing Activities:
Proceeds from Capital Debt Transferred from System (Nonmandatory)                            70,318,512.46        83,405,902.42
Proceeds from Sale of Capital Assets                                                                     -            10,272.28
Payments for Additions to Capital Assets                                                   (88,231,781.55)     (103,973,625.14)
Payments of Principal on Capital Related Debt                                               (1,169,140.80)       (1,624,751.58)
Mandatory Transfers to System for Capital Related Debt                                     (22,260,552.06)      (22,112,522.42)
   Net Cash Provided (Used) by Capital and Related Financing Activities                    (41,342,961.95)      (44,294,724.44)


Cash Flows from Investing Activities
Proceeds from Sales of Investments Invested by System                                                    -                     -
Proceeds from Interest and Investment Income                                                    321,617.18          3,244,772.59
Proceeds from Interest and Investment Income Invested by System                              28,254,639.03         20,062,960.32
Payments to Acquire Investments Invested by System                                          (3,631,820.86)        (7,903,513.68)
Net Cash Provided (Used) by Investing Activities                                             24,944,435.35         15,404,219.23


Net Increase (Decrease) in Cash                                                              24,500,243.54         1,172,349.46
Cash and Cash Equivalents (Beginning of the Year)                                            56,383,216.63        55,210,867.17
Cash and Cash Equivalents (End of the Year)                                                $ 80,883,460.17      $ 56,383,216.63


Reconciliation of Net Operating Revenues (Expenses) to Net Cash
Provided (Used) by Operating Activities
Operating Income (Loss)                                                                   (216,936,701.14)     (218,483,608.51)
Adjustments to Reconcile Operating Results to Net Cash:
   Depreciation and Amortization Expense                                                    33,092,740.34         31,311,424.48
   Bad Debt Expense                                                                             77,477.30          (429,213.98)
Changes in Assets and Liabilities:
   Accounts Receivable                                                                        4,642,015.94        (6,786,893.34)
   Inventories                                                                                (318,243.13)          (109,426.70)
   Loans and Contracts                                                                          342,293.01            (30,318.06)
   Other Current and Noncurrent Assets                                                        3,471,845.65            539,296.32
   Accounts Payable                                                                         (3,831,293.36)            779,650.09
   Due to System                                                                                325,779.39            254,854.42
   Deferred Revenue                                                                           5,450,655.14          2,885,401.34
   Assets Held for Others                                                                        80,542.23          (152,495.04)
   Employees' Compensable Leave                                                               3,783,795.22          3,672,391.59
   Other Current and Noncurrent Liabilities                                                   5,090,585.36            983,804.18
      Total Adjustments                                                                      52,208,193.09         32,918,475.30
Net Cash Provided (Used) by Operating Activities                                        $ (164,728,508.05)    $ (185,565,133.21)


Non Cash Transactions
Net Increase (Decrease) in Fair Value of Investments                                        39,481,254.93        (93,885,930.91)
Donated Capital Assets                                                                         324,949.41           3,878,418.91
Capital Assets Acquired Under Capital Lease Purchases                                           91,883.50              92,299.86
Miscellaneous Noncash Transactions                                                           (550,800.84)           (521,477.66)
                                                                     UNAUDITED

The University of Texas M. D. Anderson Cancer Center
Exhibit A Balance Sheet
As of August 31, 2010



                                                                                     Current Year           Prior Year
                                                                                        Totals               Totals


ASSETS AND DEFERRED OUTFLOWS

Current Assets and Deferred Outflows:
 Cash & Cash Equivalents                                                         $         30,715,962.54        212,436,606.57
 Restricted Cash & Cash Equivalents                                                        96,959,972.32         49,066,047.71
 Balance in State Appropriations                                                              206,112.30            137,682.15
 Accounts Receivable, Net:
    Federal (allow. of $0.00 in 2010 & $0.00 in 2009)                                      44,739,720.76         47,127,566.33
    Patient (allow. of $500,465,415.22 in 2010 & $490,655,105.64 in 2009)                 386,625,965.60        383,754,578.48
    Interest and Dividend Receivables                                                       2,183,913.56          1,615,453.36
    Contributions (allow. of $4,076,040.04 in 2010 & $1,940,634.36 in 2009)                26,878,909.91         11,300,657.92
    Other (allow. of $1,873,124.07 in 2010 & $1,798,581.32 in 2009)                        31,008,820.45         27,538,376.88
 Due From System Administration                                                            26,991,581.92        215,537,414.39
 Due From Other Agencies                                                                        4,131.93              3,798.15
 Inventories                                                                               30,564,828.12         28,514,075.34
 Other Current Assets                                                                      56,184,041.76         49,293,589.73
   Total Current Assets and Deferred Outflows                                             733,063,961.17      1,026,325,847.01


Noncurrent Assets and Deferred Outflows:
 Restricted:
   Investments (Restricted)                                                               490,400,518.17        523,017,789.02
   Funds Held by System Administration                                                    452,824,072.88        507,595,240.99
 Contributions Rec. (allow. of $7,369,845.64 in 2010 & $9,216,361.34 in 2009)              64,100,068.87         71,789,341.90
 Unrestricted Investments                                                               1,243,754,088.05        490,555,846.41
 Other Noncurrent Assets                                                                    2,620,744.57          2,675,009.14
 Gross Capital/Intangible Assets                                                        4,047,339,847.20      3,692,768,668.05
   Accumulated Depreciation/Amortization                                              (1,480,934,811.17)    (1,292,580,529.45)
     Total Noncurrent Assets and Deferred Outflows                                      4,820,104,528.57      3,995,821,366.06
Total Assets and Deferred Outflows                                               $      5,553,168,489.74      5,022,147,213.07


LIABILITIES AND DEFERRED INFLOWS
Current Liabilities and Deferred Inflows:
 Accounts Payable and Accrued Liabilities                                                 164,636,634.58       142,545,776.70
 Salaries Payable                                                                         125,708,737.15       134,404,503.67
 Federal Payables                                                                          86,535,972.51        31,506,532.45
 Other Intergovernmental Payables                                                              10,919.10            16,854.05
 Due To System Administration                                                              13,501,745.92        12,478,224.04
 Deferred Revenue                                                                         103,047,341.75        92,539,564.75
 Employees' Compensable Leave - Current Portion                                           114,129,214.14       103,454,369.20
 Payable From Restricted Assets                                                             2,856,083.20         3,285,794.12
 Other Current Liabilities                                                                 32,297,773.08        31,578,649.64
   Total Current Liabilities and Deferred Inflows                                         642,724,421.43       551,810,268.62


Noncurrent Liabilities and Deferred Inflows:
 Employees' Compensable Leave                                                              26,783,983.39         37,763,513.48
 Assets Held for Others                                                                   309,949,765.77        300,748,123.68
 Liability to Beneficiaries Held by System                                                  1,361,877.74          1,359,780.36
 Other Noncurrent Liabilities                                                               1,840,182.54          1,386,574.32
   Total Noncurrent Liabilities and Deferred Inflows                                      339,935,809.44        341,257,991.84
Total Liabilities and Deferred Inflows                                                    982,660,230.87        893,068,260.46


 NET ASSETS
 Invested in Capital Assets, Net of Related Debt                                        2,566,405,036.03      2,400,188,138.60
 Restricted for:
   Nonexpendable
    Permanent Health, True Endowments, and Annuities                                      295,428,278.67        327,272,005.63
  Expendable
    Capital Projects                                                                      (43,733,340.69)       177,495,765.97
    Funds Functioning as Endowment (Restricted)                                             24,410,535.36        22,057,017.85
    Other Expendable                                                                       380,088,848.22       303,754,665.44
 Unrestricted Net Assets                                                                1,347,908,901.28        898,311,359.12
Total Net Assets                                                                        4,570,508,258.87      4,129,078,952.61


Total Liabilities, Deferred Inflows and Net Assets                               $      5,553,168,489.74      5,022,147,213.07
                                                                UNAUDITED


The University of Texas M. D. Anderson Cancer Center
Exhibit B Statement of Revenues, Expenses, and Changes in Net Assets
For the Year Ended August 31, 2010



                                                                            Current Year              Prior Year
                                                                               Totals                   Totals



Operating Revenues:
Student Tuition and Fees                                              $                 934,836.54                 886,930.65
 Discounts and Allowances                                                                (2,382.42)
Federal Sponsored Programs                                                          202,437,328.68           195,694,306.21
Federal Sponsored Programs Pass-Through from State Agencies                           7,212,064.39             6,346,443.58
State Sponsored Programs Pass-Through from State Agencies                               291,700.00             1,142,300.30
Private Sponsored Programs                                                           95,679,128.13            90,569,610.63
Sales and Services of Educational Activities                                          1,497,855.20             1,569,448.37
Sales and Services of Hospitals                                                   4,135,486,291.13         3,770,913,989.15
 Discounts and Allowances Sales and Services of Hospitals                       (1,986,230,027.51)       (1,725,927,824.78)
Professional Fees (Patient Charges)                                               1,032,132,258.95           921,596,660.66
 Discounts and Allowances Professional Fees (Patient Charges)                     (714,690,951.28)         (632,362,781.47)
Auxiliary Enterprises                                                                30,700,522.20            29,797,216.35
Other Operating Revenues                                                             44,061,475.11            41,275,007.35
Total Operating Revenues                                                          2,849,510,099.12         2,701,501,307.00


Operating Expenses:
Instruction                                                                          80,859,939.27            88,431,600.57
Research                                                                            463,104,670.85           431,058,983.05
Public Service                                                                        8,806,188.88            10,076,635.32
Hospitals / Clinics                                                               1,579,735,295.38         1,512,759,959.01
Academic Support                                                                     56,339,255.58            52,896,782.82
Student Services                                                                                                     933.30
Institutional Support                                                               206,847,597.41           210,903,776.71
Operations and Maintenance of Plant                                                 173,107,665.69           199,973,610.41
Scholarships and Fellowships                                                          1,153,167.48               769,375.38
Auxiliary Enterprises                                                                19,753,798.70            19,567,605.68
Depreciation and Amortization                                                       226,960,748.66           224,844,269.56
Total Operating Expenses                                                          2,816,668,327.90         2,751,283,531.81
Operating Income (Loss)                                                              32,841,771.22          (49,782,224.81)


Nonoperating Revenues (Expenses):
State Appropriations                                                               179,818,472.66            171,265,816.87
Federal Nonexchange Sponsored Programs                                                 447,521.00                224,403.81
Federal Nonexchange Pass-Through                                                       634,206.00
Gift Contributions for Operations                                                  107,364,150.22             64,633,326.18
Investment Income                                                                   59,165,668.06             34,420,665.25
Net Increase (Decrease) in Fair Value of Investments                               107,831,605.56          (160,215,939.46)
Gain (Loss) on Sale of Capital Assets                                                  (69,539.81)             (985,475.54)
Other Nonoperating Revenues                                                            136,080.77                  68,602.29
Other Nonoperating (Expenses)                                                           (1,041.14)               (86,754.70)
Net Nonoperating Revenues (Expenses)                                               455,327,123.32            109,324,644.70

Income/(Loss) Before Other Revenue, Expenses, Gains/(Losses), and                  488,168,894.54             59,542,419.89
Transfers

Gifts and Sponsored Programs for Capital Acquisitions                                 6,651,905.30             1,448,364.03

Additions to Permanent Endowments / Annuities                                         7,689,321.79             7,291,094.37
Reclass from/(to) Other Institutions                                                 14,626,204.79          136,324,968.38
Transfers Between Institutions & System, Debt Service - Mandatory                  (94,222,581.73)          (90,664,760.52)
Transfers Between Institutions & System Admin. - Non mandatory                       15,738,363.65           164,844,813.80
Transfers From Other State Agencies                                                  50,211,450.15            89,252,665.54
Transfers to Other State Agencies                                                  (47,434,252.23)          (89,240,154.18)
Change in Net Assets                                                               441,429,306.26            278,799,411.31


Beginning Net Assets                                                              4,129,078,952.61         3,850,279,541.30
                                                                                  4,570,508,258.87         4,129,078,952.61
Ending Net Assets                                                     $
                                                                          UNAUDITED

The University of Texas M. D. Anderson Cancer Center
EXHIBIT C - STATEMENT OF CASH FLOWS
For the Year Ended August 31, 2010
                                                                                      Current Year Totals    Prior Year Totals

Cash Flows from Operating Activities:
Proceeds from Tuition and Fees                                                                  932,454.12            886,930.65
Proceeds from Patients and Customers                                                      2,463,703,861.08      2,332,506,268.33
Proceeds from Sponsored Programs                                                            312,640,997.96        319,537,800.63
Proceeds from Auxiliaries                                                                    31,209,839.79         29,370,618.14
Proceeds from Other Revenues                                                                 47,067,330.87         40,630,647.64
Payments to Suppliers                                                                     (849,761,638.64)      (880,540,938.64)
Payments to Employees                                                                   (1,676,888,793.47)    (1,641,446,505.46)
   Net Cash Provided (Used) by Operating Activities                                         328,904,051.71        200,944,821.29


Cash Flows from Noncapital Financing Activities:
Proceeds from State Appropriations                                                         179,750,042.51        171,823,218.38
Proceeds from Operating Gifts                                                              101,205,305.94         68,113,522.83
Proceeds from Private Gifts for Endowment and Annuity Life Purposes                          7,689,321.79          7,291,094.37
Proceeds from Other Nonoperating Revenues                                                      136,080.77              68,602.29
Payments / Receipts for Transfers to / from System or Other Agencies                         2,221,400.89         12,456,493.08
Payments for Other Uses                                                                         (1,041.14)           (86,754.70)
Proceeds from Nonexchange Sponsored Programs                                                 1,081,727.00            224,403.81
   Net Cash Provided by Noncapital Financing Activities                                    292,082,837.76        259,890,580.06


Cash Flows from Capital and Related Financing Activities:
Proceeds from Capital Debt Transferred from System (Nonmandatory)                           214,633,231.64       270,912,951.95
Proceeds from Capital Appropriations, Grants, and Gifts                                       6,651,905.30         1,761,759.33
Proceeds from Sale of Capital Assets                                                            266,487.06            73,061.84
Payments for Additions to Capital Assets                                                  (394,021,169.75)     (474,932,848.58)
Mandatory Transfers to System for Capital Related Debt                                     (94,222,581.73)      (90,664,760.52)
   Net Cash Provided (Used) by Capital and Related Financing Activities                   (266,692,127.48)     (292,849,835.98)


Cash Flows from Investing Activities
Proceeds from Sales of Investments                                                           14,325,524.54         59,496,760.16
Proceeds from Sales of Investments Invested by System                                                    -          6,740,775.10
Proceeds from Interest and Investment Income                                                 21,584,544.22          4,392,508.13
Proceeds from Interest and Investment Income Invested by System                              48,272,171.49         28,451,270.52
Payments to Acquire Investments                                                            (34,000,028.10)       (75,373,769.44)
Payments to Acquire Investments Invested by System                                        (538,303,693.56)                     -
Net Cash Provided (Used) by Investing Activities                                          (488,121,481.41)         23,707,544.47


Net Increase (Decrease) in Cash                                                          (133,826,719.42)        191,693,109.84
Cash and Cash Equivalents (Beginning of the Year)                                          261,502,654.28         69,809,544.44
Cash and Cash Equivalents (End of the Year)                                              $ 127,675,934.86      $ 261,502,654.28


Reconciliation of Net Operating Revenues (Expenses) to Net Cash
Provided (Used) by Operating Activities
Operating Income (Loss)                                                                     32,841,771.22        (49,782,224.81)
Adjustments to Reconcile Operating Results to Net Cash:
   Depreciation and Amortization Expense                                                   226,960,748.66        224,844,269.56
Changes in Assets and Liabilities:
   Accounts Receivable                                                                      (3,954,318.90)         24,949,393.67
   Inventories                                                                              (2,050,752.78)          5,926,092.84
   Other Current and Noncurrent Assets                                                      (6,836,187.46)       (11,266,122.60)
   Accounts Payable                                                                         71,273,580.26           1,893,904.92
   Due to System                                                                              1,023,521.88            484,150.38
   Deferred Revenue                                                                           8,777,642.32            207,650.44
   Employees' Compensable Leave                                                               (304,685.15)          6,577,189.34
   Other Current and Noncurrent Liabilities                                                   1,172,731.66        (2,889,482.45)
      Total Adjustments                                                                    296,062,280.49        250,727,046.10
Net Cash Provided (Used) by Operating Activities                                         $ 328,904,051.71      $ 200,944,821.29


Non Cash Transactions
Net Increase (Decrease) in Fair Value of Investments                                       107,831,605.56      (160,215,939.46)
Miscellaneous Noncash Transactions                                                           2,707,658.11          (972,964.18)
                                                                     UNAUDITED

The University of Texas Health Science Center at Tyler
Exhibit A Balance Sheet
As of August 31, 2010



                                                                                     Current Year          Prior Year
                                                                                        Totals               Totals


ASSETS AND DEFERRED OUTFLOWS

Current Assets and Deferred Outflows:
 Cash & Cash Equivalents                                                         $          2,621,925.20        10,742,669.80
 Restricted Cash & Cash Equivalents                                                         9,470,513.38         3,567,279.04
 Balance in State Appropriations                                                            1,071,812.14           552,704.28
 Accounts Receivable, Net:
    Federal (allow. of $0.00 in 2010 & $0.00 in 2009)                                       2,362,227.22         2,202,486.73
    Patient (allow. of $27,335,530.00 in 2010 & $21,406,354.00 in 2009)                     8,126,451.70         7,526,898.33
    Contributions (allow. of $0.00 in 2010 & $0.00 in 2009)                                   209,810.97            48,247.47
    Other (allow. of $0.00 in 2010 & $0.00 in 2009)                                           830,144.20         1,309,313.51
 Due From Other Funds                                                                         349,326.73
 Due From System Administration                                                            19,692,845.83         9,159,955.70
 Due From Other Agencies                                                                      192,166.27
 Inventories                                                                                1,825,360.30         2,401,251.60
 Other Current Assets                                                                         119,672.56            34,491.61
   Total Current Assets and Deferred Outflows                                              46,872,256.50        37,545,298.07


Noncurrent Assets and Deferred Outflows:
 Restricted:
   Investments (Restricted)                                                                   292,872.24         5,768,897.66
   Funds Held by System Administration                                                     37,703,587.90        35,010,348.36
 Contributions Rec. (allow. of $0.00 in 2010 & $0.00 in 2009)                                 348,482.78
 Unrestricted Investments                                                                  20,993,912.16        13,983,250.71
 Other Noncurrent Assets                                                                       45,657.75
 Gross Capital/Intangible Assets                                                         187,045,988.41       169,497,491.92
   Accumulated Depreciation/Amortization                                                 (99,084,195.60)      (92,841,801.56)
     Total Noncurrent Assets and Deferred Outflows                                       147,346,305.64       131,418,187.09
Total Assets and Deferred Outflows                                               $       194,218,562.14       168,963,485.16


LIABILITIES AND DEFERRED INFLOWS
Current Liabilities and Deferred Inflows:
 Accounts Payable and Accrued Liabilities                                                   6,409,292.97         6,780,577.15
 Salaries Payable                                                                           1,873,655.43         2,200,315.97
 Due To Other Funds                                                                           349,326.73
 Due To System Administration                                                                 906,211.03           836,848.77
 Deferred Revenue                                                                           2,125,027.27         2,604,190.62
 Employees' Compensable Leave - Current Portion                                             2,672,905.62         2,525,723.48
 Payable From Restricted Assets                                                               394,646.09           506,003.31
   Total Current Liabilities and Deferred Inflows                                          14,731,065.14        15,453,659.30


Noncurrent Liabilities and Deferred Inflows:
 Employees' Compensable Leave                                                                 465,899.16         1,241,570.69
 Liability to Beneficiaries Held by System                                                     66,338.07            65,644.58
 Other Noncurrent Liabilities                                                                  45,657.75
   Total Noncurrent Liabilities and Deferred Inflows                                          577,894.98         1,307,215.27
Total Liabilities and Deferred Inflows                                                     15,308,960.12        16,760,874.57


 NET ASSETS
 Invested in Capital Assets, Net of Related Debt                                           87,961,792.81        76,655,690.36
 Restricted for:
   Nonexpendable
    Permanent Health, True Endowments, and Annuities                                       32,408,607.06        32,288,969.97
   Expendable
    Capital Projects                                                                      15,603,290.87          7,356,848.18
    Funds Functioning as Endowment (Restricted)                                              681,384.37            656,455.48
    Other Expendable                                                                      13,000,550.95          9,975,866.30
 Unrestricted Net Assets                                                                  29,253,975.96         25,268,780.30
Total Net Assets                                                                         178,909,602.02        152,202,610.59


Total Liabilities, Deferred Inflows and Net Assets                               $       194,218,562.14        168,963,485.16
                                                                UNAUDITED


The University of Texas Health Science Center at Tyler
Exhibit B Statement of Revenues, Expenses, and Changes in Net Assets
For the Year Ended August 31, 2010



                                                                            Current Year                Prior Year
                                                                               Totals                     Totals



Operating Revenues:
Federal Sponsored Programs                                                            7,850,196.32               7,445,894.35
Federal Sponsored Programs Pass-Through from State Agencies                           2,572,294.95               2,107,141.92
State Sponsored Programs Pass-Through from State Agencies                             1,260,046.58               1,332,070.30
Local Sponsored Programs                                                                                         1,822,570.96
Private Sponsored Programs                                                            3,376,266.86               2,365,600.07
Sales and Services of Educational Activities                                          1,385,994.78               1,419,776.36
Sales and Services of Hospitals                                                    136,059,282.92             146,399,688.54
 Discounts and Allowances Sales and Services of Hospitals                          (90,714,141.24)            (95,074,466.21)
Professional Fees (Patient Charges)                                                  31,844,519.92              36,257,545.30
 Discounts and Allowances Professional Fees (Patient Charges)                      (21,192,726.12)            (23,663,781.22)
Auxiliary Enterprises                                                                   223,880.67                 234,114.13
Other Operating Revenues                                                                878,523.46                 509,312.18
Total Operating Revenues                                                             73,544,139.10              81,155,466.68


Operating Expenses:
Instruction                                                                           7,847,055.31               7,271,938.42
Research                                                                             12,168,889.86              12,290,517.98
Public Service                                                                              974.60
Hospitals / Clinics                                                                  71,591,800.72              77,494,560.15
Academic Support                                                                        709,833.10                 699,842.65
Institutional Support                                                                 8,636,594.93               8,720,981.16
Operations and Maintenance of Plant                                                  10,019,541.78               9,227,152.29
Scholarships and Fellowships                                                             18,974.80
Auxiliary Enterprises                                                                   200,179.26                 213,731.73
Depreciation and Amortization                                                         7,643,478.14               9,858,449.59
Total Operating Expenses                                                           118,837,322.50             125,777,173.97
Operating Income (Loss)                                                            (45,293,183.40)            (44,621,707.29)


Nonoperating Revenues (Expenses):
State Appropriations                                                                 42,770,985.11              42,176,629.70
Federal Nonexchange Pass-Through                                                          80,210.00
Gift Contributions for Operations                                                       720,777.76                  204,820.66
Investment Income                                                                     3,950,638.28                3,183,952.90
Net Increase (Decrease) in Fair Value of Investments                                  4,132,754.32              (9,529,696.63)
Gain (Loss) on Sale of Capital Assets                                                   (46,639.49)                 (54,258.85)
Other Nonoperating Revenues                                                                  900.38                    1,171.21
Net Nonoperating Revenues (Expenses)                                                 51,609,626.36              35,982,618.99

Income/(Loss) Before Other Revenue, Expenses, Gains/(Losses), and                     6,316,442.96              (8,639,088.30)
Transfers

Gifts and Sponsored Programs for Capital Acquisitions                                      559,596.04                190,246.12

Additions to Permanent Endowments / Annuities                                               73,847.03                179,645.15
Reclass from/(to) Other Institutions                                                 22,061,063.65            (26,971,003.76)
Transfers Between Institutions & System, Debt Service - Mandatory                    (4,451,353.87)            (4,388,895.83)
Transfers Between Institutions & System Admin. - Non mandatory                        2,148,107.42              41,348,412.83
Transfers From Other State Agencies                                                   4,174,750.00              15,991,299.04
Transfers to Other State Agencies                                                    (4,175,461.80)           (15,991,299.04)
Change in Net Assets                                                                 26,706,991.43               1,719,316.21


Beginning Net Assets                                                                152,202,610.59             150,483,294.38
                                                                                    178,909,602.02             152,202,610.59
Ending Net Assets                                                     $
                                                                          UNAUDITED

The University of Texas Health Science Center at Tyler
EXHIBIT C - STATEMENT OF CASH FLOWS
For the Year Ended August 31, 2010
                                                                                      Current Year Totals     Prior Year Totals

Cash Flows from Operating Activities:
Proceeds from Patients and Customers                                                         55,339,665.32          61,891,387.80
Proceeds from Sponsored Programs                                                             14,770,241.27          17,306,174.05
Proceeds from Auxiliaries                                                                       224,160.67             234,474.13
Proceeds from Other Revenues                                                                  2,264,518.24           1,929,088.54
Payments to Suppliers                                                                      (43,032,377.78)        (49,257,031.18)
Payments to Employees                                                                      (69,071,032.09)        (67,688,137.82)
   Net Cash Provided (Used) by Operating Activities                                        (39,504,824.37)        (35,584,044.48)


Cash Flows from Noncapital Financing Activities:
Proceeds from State Appropriations                                                          42,251,877.25          44,391,431.54
Proceeds from Operating Gifts                                                                  494,589.76             556,653.43
Proceeds from Private Gifts for Endowment and Annuity Life Purposes                             73,847.03             179,645.15
Proceeds from Other Nonoperating Revenues                                                          900.38               1,171.21
Payments / Receipts for Transfers to / from System or Other Agencies                           171,021.18             382,542.28
Proceeds from Nonexchange Sponsored Programs                                                    80,210.00                      -
   Net Cash Provided by Noncapital Financing Activities                                     43,072,445.60          45,511,443.61


Cash Flows from Capital and Related Financing Activities:
Proceeds from Capital Debt Transferred from System (Nonmandatory)                            13,505,453.04           7,457,667.85
Proceeds from Capital Appropriations, Grants, and Gifts                                         275,730.76             141,993.65
Proceeds from Sale of Capital Assets                                                              5,381.40               1,290.00
Payments for Additions to Capital Assets                                                   (18,976,360.06)        (11,838,270.88)
Mandatory Transfers to System for Capital Related Debt                                      (4,451,353.87)         (4,388,895.83)
   Net Cash Provided (Used) by Capital and Related Financing Activities                     (9,641,148.73)         (8,626,215.21)


Cash Flows from Investing Activities
Proceeds from Sales of Investments Invested by System                                                     -                648.38
Proceeds from Interest and Investment Income                                                      14,071.65              6,118.16
Proceeds from Interest and Investment Income Invested by System                               3,937,066.84           3,160,959.42
Payments to Acquire Investments Invested by System                                              (95,121.25)                     -
Net Cash Provided (Used) by Investing Activities                                              3,856,017.24           3,167,725.96


Net Increase (Decrease) in Cash                                                             (2,217,510.26)          4,468,909.88
Cash and Cash Equivalents (Beginning of the Year)                                           14,309,948.84           9,841,038.96
Cash and Cash Equivalents (End of the Year)                                               $ 12,092,438.58        $ 14,309,948.84


Reconciliation of Net Operating Revenues (Expenses) to Net Cash
Provided (Used) by Operating Activities
Operating Income (Loss)                                                                    (45,293,183.40)        (44,621,707.29)
Adjustments to Reconcile Operating Results to Net Cash:
   Depreciation and Amortization Expense                                                      7,643,478.14           9,858,449.59
Changes in Assets and Liabilities:
   Accounts Receivable                                                                        (472,290.82)             241,573.47
   Inventories                                                                                  575,891.30           (523,467.95)
   Other Current and Noncurrent Assets                                                        (130,838.70)             334,887.54
   Accounts Payable                                                                           (835,248.16)         (1,404,815.88)
   Due to System                                                                                 69,362.26               29,110.65
   Deferred Revenue                                                                           (479,163.35)             (44,815.14)
   Employees' Compensable Leave                                                               (628,489.39)             686,201.55
   Other Current and Noncurrent Liabilities                                                      45,657.75           (139,461.02)
      Total Adjustments                                                                       5,788,359.03           9,037,662.81
Net Cash Provided (Used) by Operating Activities                                         $ (39,504,824.37)      $ (35,584,044.48)


Non Cash Transactions
Net Increase (Decrease) in Fair Value of Investments                                          4,132,754.32         (9,529,696.63)
Donated Capital Assets                                                                                 7.00                   5.00
Miscellaneous Noncash Transactions                                                              (47,351.29)            (54,258.85)

				
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