ML13079A216

Letter from Kelly Mescher the Court in Sherman V. the Curators of the University of Missouri

ML13079A216
Person / Time
Site:	University of Missouri-Columbia
Issue date:	02/28/2013
From:	Mescher K Univ of Missouri - Columbia
To:	Office of Nuclear Reactor Regulation
References
TAC ME1580
Download: ML13079A216 (94)

Text

UNIVERSITY OF MISSOURICOLUMBIA 9 KANSAS CITY 9 ROLLA 9 ST. LOUISOFFICE OF THE GENERAL COUNSEL227 UNIVERSITY HALLCOLUMBIA, MO 65211TELEPHONE: (573) 882-3211FAX NUMBER: (573) 882-0050Stephen J. Owens, General Counsel Robert L. Hess II, CounselPhillip J. Hoskins, Deputy General Counsel Paul R. Maguffee, CounselKatharine S. Bunn, Counsel Kathleen Murphy Markie, CounselSusan M. Gardner, Counsel Kelly Mescher, CounselNancie D. Hawke, Counsel Matthew Volkert, CounselFebruary 28, 2013Director of Nuclear Reactor RegulationU.S. Nuclear Regulatory CommissionWashington, DC 20555-0001As a member of the Office of the General Counsel for the University of Missouri and theattorney who represents the Missouri University Research Reactor (MURA) I am able to statethat The Curators of the University of Missouri is a state university which was created by theMissouri Constitution in Article IX Section 9(a):Section 9 (a). The government of the state university shall be vested in a board ofcurators consisting of nine members appointed by the governor, by and with the adviceand consent of the senate.And enabled in Section 172.010 RSMo 2008:172.010. A university is hereby instituted in this state, the government whereof shall bevested in a board of curators.The state is constitutionally required to provide funding to the University in Article IX Section9(b):Section 9(b). The general assembly shall adequately maintain the state university andsuch other educational institutions as it may deem necessary.Section 172.020 RSMo 2008 establishes that the University has all the necessary powers tooperate as a state entity:172.020. Pursuant to sections 9(a) and 9(b) of article IX of the Missouri Constitution, thestate university is hereby incorporated and created as a body politic and shall be knownby the name of "The Curators of the University of Missouri", and by that name shall haveperpetual succession, power to sue and be sued, complain and defend in all courts; tomake and use a common seal, and to alter the same at pleasure; to take, purchase and to February 28, 2013Page 2sell, convey and otherwise dispose of lands and chattels, except that the curators shall nothave the power to subdivide, sell or convey title to any land contained within a universitycampus or to subdivide, sell or convey title to any portion of any parcel of landcontaining in excess of twenty-five hundred contiguous acres unless such transaction isapproved by the general assembly by passage of a concurrent resolution signed by thegovernor. The curators shall not sell, trade or otherwise convey or permit the severance oftimber, minerals or other natural resources, unless the curators comply with biddingprocedures established by rule that mandate notice of the transaction be provided in amanner reasonably calculated to apprise prospective purchasers. Such rule or rules mustat a minimum require at least one notice of the transaction be published in a newspaper ofgeneral circulation where the resources are located. The curators may act as trustee in allcases in which there be a gift of property or property left by will to the university or forits benefit or for the benefit of students of the university; to condemn an appropriate realestate or other property, or any interest therein, for any public purpose within the scope ofits organization, in the same manner and with like effect as is provided in chapter 523,RSMo, relating to the appropriation and valuation of lands taken for telegraph, telephone,gravel and plank or railroad purposes; provided, that if the curators so elect, noassessment of damages or compensation under this law shall be payable and no executionshall issue before the expiration of sixty days after the adjournment of the next regularsession of the legislature held after such assessment is made, but the same shall bearinterest at the rate of six percent per annum from its date until paid; and provided further,that the curators may, at any time, elect to abandon the proposed appropriation ofproperty by an instrument of writing to that effect, to be filed with the clerk of the courtand entered on the minutes of the court, and as to so much as is thus abandoned, theassessment of damages or compensation shall be void.The federal courts have recognized that the. University is an arm of state government. The Courtin Sherman v. The Curators of the University of Missouri, 871 F.Supp. 344 (W.D.Mo. 1994),held the University is an alter-ego or instrumentality of the State, because the University does notenjoy a significant level of autonomy from the State, and any judgment against the Universitywould ultimately be derived from the state treasury. Id.It is my opinion that the language of the Missouri Constitution, statutes and relevant case lawmake clear that there is an obligation for the State of Missouri to provide financial support to theUniversity in its obligations, should decommissioning of the properties owned by the Universityof Missouri take place.Very Jruly yours,Kelly M j/cherCounselKM:lr 70.010 General Execution of Corporate or Board Instruments I Collected Rules I Rules an... Page 1 of 2University of Missouri SystemCOLuMBAU I KANSAS CTY I ROLuA I S. LOuISChapter 70: Execution of Instruments70.010 General Execution ofCorporate or Board Instruments172.390, R.S.Mo. 1959; Bd. Min. 4-11-58, p. 12,512; Amended 5-20-77, p. 37,690 and 3-28-80, p. 38,100; Revised Bd. Min. 6-14-85; 1-21-98, Revised Bd. Min. 5 06.A. All Instruments-All instruments affecting The Curators of the University of Missouri,the Board of Curators of the University of Missouri, or the University generally shall beexecuted on behalf thereof as provided in this section unless execution thereof shallhave otherwise been specifically provided for and directed by the Board.B. Real Estate1. Any of the lands donated by the Atlantic & Pacific Railroad Company to theState of Missouri by deed dated the sixteenth day of February, 1871, and allother lands conveyed by corporations or individuals to the State of Missouri forsale in aid of the state university, may be sold and conveyed by the board ofcurators, and deeds of conveyance to same shall be executed by the presidentof the board, signed by him, with the seal of the corporation attached thereto,and attested by the secretary of the board; and provided further, that anyconveyances of such lands heretofore made by said board in accordance withthe provisions of this section shall divest the State of Missouri of all title to thesame and vest said title in the grantees, their heirs and assigns forever.2. Instruments conveying title to real estate owned by The Curators of theUniversity of Missouri shall, upon approval of same by the Board of Curators orUniversity President as delegated by the Board, be executed in the name ofThe Curators of the University of Missouri and signed by the President of theUniversity or his/her designee, with the corporate seal affixed, attested by theSecretary.C. All Contracts, Other Instruments and Agreements-All contracts and otherinstruments and agreements of The Curators of the University of Missouri shall beexecuted in the name of The Curators of the University of Missouri and signed by thePresident thereof, the President of the University, the Vice President for Finance andAdministration, or such other officer as may be specifically designated by the Board,http://www.umsystem.edu/ums/rules/collectedrules/business/ch7O/70.0O10_general_executi... 3/5/2013 70.010 General Execution of Corporate or Board Instruments I Collected Rules I Rules an... Page 2 of 2and the corporate seal may be affixed, attested by the Secretary. The named officersmay, by written authorization, delegate special authority to sign specific instruments ontheir behalf to the Chancellor of each campus. The named officers and the Chancellorsreceiving delegation from such officers may, by specific written authorization, delegateto one or more designees all or partial authority to sign instruments on their behalf,such written authorization to be filed with the President, Vice President for Finance andAdministration, and Secretary of The Board of Curators.D. Agreements Binding on Board1. Any instrument heretofore or hereafter executed in conformity with this Section70.010 shall have the same force and validity as if executed by the President ofthe Board;2. No contract or other instrument or agreement which has not been dulyauthorized by The Board of Curators and executed in the manner hereinprovided or in a manner specifically provided and directed by the Board shall bebinding upon The Curators of the University of Missouri.http://www.umsystem.edu/ums/rules/collectedrules/business/ch7O/70.01 0_generalexecuti... 3/5/2013 MLkdvancinr AdvancingJissourITM2011FinancialReportUniversity of Missouri SystemCOLUMBIA I KANSAS CITY I ROLLA ST.LOUIS This page is intentionaLLy Left bLank

• __ TabLe oF Contents4 President's message5 Statewide reach and impactCurators of the University of Missouri(i 7 University of Missouri System general officersS8 The University of Missouri System13 Financial information14 Management responsibility of financial statementss1 Management's discussion and analysis30 Independent auditor's report32 Statement of net assets34 Statement of revenues, expenses and changes in net assets36 Statement of cash flow38 Statement of plan net assets39 Notes to financial statements69 Required supplementary information71 Statistical sectionAA Message From the PresidentThe University of Missouri System plays a unique and pivotal role in our state. Noother higher education institution in the state-public or private-has the breadth,reach and impact that advances Missouri in as many dimensions as our fourcampuses.This impact can be felt in every corner of Missouri, as the map to the right ofthis page shows. Whether it is educating more than 71,000 students; employingmore than 28,000 employees and generating $1.6 billion in salaries, wages andbenefits; providing more than $39 million in uncompensated care to Missouri'sneediest patients; or spurring economic development through start-up companiescreated around university-developed technologies, the University of Missouri is anunparalleled institution of higher education in this state.With our statewide impact comes a continued commitment to being good stewardsof state resources. Against a backdrop of declining state appropriations, we raisedin-state undergraduate tuition an average of 5.5 percent this current academic year-amodest increase after two years of flat tuition, but nonetheless a difficult choice as wecontinue to balance the need for affordable access to our quality programs. We tookadvantage of historically low interest rates in the bond markets to finance criticallyneeded building renovations and new facilities on all four campuses, resulting inimproved facilities for teaching, research and patient care. And we continued tobolster our financial position with assets totaling $6.1 billion and net assets of $4billion, an increase of approximately $335 million thanks in large part to increasedinvestment and endowment income compared to fiscal year 2010.Our accountability to the state of Missouri and our fellow citizens also remains atop priority. We provided our board of curators and other state leaders with our firstannual progress report on our Accountability Measures, a comprehensive list ofnearly 80 measures aligned with our mission, including best-in-class benchmarks,peer comparison data and three-year targets. These measures document ourperformance and serve as a guide for both our areas of excellence and need forcontinuing focus.Those measures and more are available on our Web site at www.umsystem.edu. Weinvite you to take a look and discover all the ways the four campuses and health careenterprise of the University of Missouri System are advancing the education of ourstudents, our state's economy, the health of our fellow citizens and the culture of ourrural and urban communities.Sincerly,StephenJ. OwensInterm President, University of Missouri System Statewide Reach and Impactlf -ý -' -.I-[-s() UKeyU M S st m C a p sS m all B u sin e ss T e c h no lo gT D e v e lo p m e fl C e n te rUM System CampusResearch Parks / Business Incubators 'MORnet Member SitesAgriculture Research Stations M Missouri Telesealth NetworkHealth Centers & Affiliatesiliats alh NeworkSitesExtension, Centers Curators of the University of MissouriThe Board of Curators, the governing body of the University of Missouri, consists of nine members who areappointed by the governor, by and with the advice and consent of the Senate; provided, that not more than oneperson shall be appointed from the same congressional district, and no person shall be appointed a curator whoshall not be a citizen of the United States, and who shall not have been a resident of the state of Missouri two yearsprior to his or her appointment. Not more than five curators shall belong to any one political party.Warren K. Erdman David R. Bradley Donald L. Cupps Don M. DowningKansas City, Chairman St.Joseph, Vice Chairman Cassville Webster GrovesTerm expires: Jan. 1,2013 Term expires: Jan. 1, 2015 Term expires: Jan. 1, 2017 Term expires: Jan. 1, 2015Wayne Goode Judith G. Haggard David L. Steward Laura ConferSt. Louis Kennett St. Louis Student RepresentativeTerm expires: Jan. 1, 2015 Term expires:Jan. 1,2013 Term expires: Jan. 1,2017 to the board of curators,Missouri S&TTerm expires: Jan. 1,2012Two Seats are Vacant.3 6 A* -0 University of Missouri System General OFficersStephenJ. Owens Philullj. Iloskins. Gary K. Allen, Ph.D., Steven W. Graham, Ph.D.Interim President Acting General Counsel Vice President fbr Senior Associate Vice PresidentInformation Technology for Academic AflfirsStephen C. Knorr, Natalie "Nikki" Krawitz, Michael F. Nichols, Ph.l)., Elizabeth "Betsy" Rodriguez,Vice President for Vice President for Finance Vice President for Research Vice President for HumnanGovernment Relatiois & Administration & Economic Development ResourcesBradyJ. Deaton Thomas F. George Leo M. Morton Warren K. WrayChancellor, University of Chancellor, University of Chancellor, University of Interim Chancellor,Missouri-Colu( bia Missouri-St. Louis Missouri-Kansas City Missouri University ofScience and TechnologyFinance StaffNatalie "Nikki" Krawitz, Vice President for finance & administrationJane E. Closterman, ControllerTom Richards, TreasurerCuba Plain, Assistant Vice President for Budget Planning and Development The University oF Missouri -CoLumbiais the leading choice for higher education in the state with one-third of college-bound high school graduatesjoin-ing the Mizzou family each year. As one of only 34 public U.S. universities -and one of only two institutions inMissouri -invited to membership in the prestigious Association of American Universities, it is among a handfulof universities nationwide to have programs in law, medicine, veterinary medicine and a research reactor on onecampus. Its economic impact on the state is far reaching, attracting approximately $200 million in federal grants andcontracts to the state each year, ultimately generating $500 million in economic activity.

The University of Missouri -Kansas Cityis home to the nationally ranked Institute for Entrepreneurship and Innovation in the Bloch School of Managementand has recognized performing arts programs. It has four health science schools on one campus and is widely knownfor KC SourceLink, a program that helps small business development.

CENTERMissouri University of Science and TechnoLogyin Rolla is one of the nation's most focused technological research universities. With 15 accredited undergraduateengineering programs, it provides more engineering degree options than MIT, Purdue, Illinois or Michigan, andthree times the average number found at other U.S. universities. Its graduates are highly sought by the businesscommunity, averaging the second-highest starting salaries.

UMULThe University of Missouri -Saint Louisis the largest university in the St. Louis region and third largest in Missouri. It boasts several nationally rankeddepartments and programs, including the Department of Criminology and Criminal Justice and InternationalBusiness. With the largest university alumni population in the region, it is ranked 14"I' nationally for having oneof the Best College and University Civic Partnerships, which measures economic, social and cultural impact onmetropolitan regions.

The University of Missouri HeaLth Systemprovides exceptional care for patients around the state and beyond. In partnership with the Tiger Institute for HealthInnovations, it is equipping health professionals with the most advanced technology to provide safe and effectivecare. The hospital is one of only four in Missouri and 74 in the nation to be recognized for its heart and stroke care,and was recognized as one of the nation's "most wired" hospitals by Hospital & Health Networks magazine.

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• 0inancialInformationUniversity of Missouri SystemCOLUMBIA I KANSAS CITY I ROLLA I ST.LOUIS MANAGEMENT RESPONSIBILITY FOR FINANCIAL STATEMENTSOctober 11, 2011The management of the University of Missouri System (the "University") is responsible for thepreparation, integrity, and fair presentation of the financial statements. The financial statements,presented on pages 32 to 38, have been prepared in conformity with accounting principles generallyaccepted in the United States of America and, as such, include amounts based on judgments andestimates by management.The financial statements have been audited by the independent accounting firm KPMG LLP, which wasgiven unrestricted access to all financial records and related data, including minutes of all meetings of theBoard of Curators. The University believes that all representations made to the independent auditorsduring their audit were valid and appropriate. KPMG's audit opinion is presented on pages 30-31.The University maintains a system of internal controls over financial reporting, which is designed toprovide reasonable assurance to the University's management and Board of Curators regarding thepreparation of reliable published financial statements. Such controls are maintained by the establishmentand communication of accounting and financial policies and procedures, by the selection and training ofqualified personnel, and by an internal audit program designed to identify internal control weaknesses inorder to permit management to take appropriate corrective action on a timely basis. There are, however,inherent limitations in the effectiveness of any system of internal control, including the possibility ofhuman error and the circumvention of controls.The Board of Curators, through its Audit Committee, is responsible for engaging the independent auditorsand meeting regularly with management, internal auditors, and the independent auditors to ensure thateach is carrying out their responsibilities and to discuss auditing, internal control, and financial reportingmatters. Both internal auditors and the independent auditors have full and free access to the AuditCommittee.Based on the above, I certify that the information contained in the accompanying financial statementsfairly presents, in all material respects, the financial condition, changes in net assets and cash flows of theUniversity.Natalie "Nikki" KrawitzVice President for Finance and AdministrationUniversity of Missouri System COLUMBIA I KANSAS CITY I ROLLA I ST. LOUIS215 University Hall .Columbia, MO 65211 .573-882-3611 www.umsystem.edulq2011 FinanciaL ReporL UNIVERSITY OF MISSOURI SYSTEMMANAGEMENT'S DISCUSSION AND ANALYSISJune 30, 2011 and 2010 (unaudited)Management's Discussion and Analysis provides anoverview of the financial position and activities of theUniversity of Missouri System (the "University") for thefiscal years ended June 30, 2011 and 2010, and shouldbe read in conjunction with the financial statementsand notes. The University is a component unit of thestate of Missouri and an integral part of the state'sComprehensive Annual Financial Report.This report includes five financial statements:" The three financial statements for the University ofMissouri and its Discretely Presented ComponentUnit include the Statement of Net Assets, theStatement of Revenues, Expenses, and Changes inNet Assets, and the Statement of Cash Flows,where applicable." The two financial statements for the University'sfiduciary fund, which includes the Retirement andthe Other Postemployment Benefits Trust Funds,are the Statement of Plan Net Assets and theStatement of Changes in Plan Net Assets.The University's financial statements are prepared inaccordance with U.S. generally accepted accountingprinciples as prescribed by the GovernmentalAccounting Standards Board (GASB), which establishesfinancial reporting standards for public colleges anduniversities. The University's significant accountingpolicies are summarized in Note 1 to the financialstatements of this report, including further informationon the financial reporting entity. In addition, a moredetailed unaudited financial report that includescampus-level financial statements is available at theUniversity of Missouri, 1000 W Nifong, Building 7, Suite300, Columbia, MO 65211, and at www.umsystem.eduthrough the Finance and Administration page.FINANCIAL HIGHLIGHTSAt June 30, 2011, the University's financial positionremained sound, with Total Assets of $6.1 billion. NetAssets, which represent the residual value of theUniversity's assets after deducting liabilities, totaled$4.0 billion. When operating, non-operating, and otherchanges are included, Net Assets increased byapproximately $335 million in fiscal year (FY) 2011,driven primarily by a $93.8 million increase inInvestment and Endowment income as compared to FY2010.2011 FinanciaL Reportis UNIVERSITY OF MISSOURI SYSTEMMANAGEMENT'S DISCUSSION AND ANALYSISJune 30, 2011 and 2010 (unaudited)The following charts compare Total Assets, Liabilities, and Net Assets at June 30, 2011, 2010 and 2009, and themajor components of changes in Net Assets for the years ended June 30, 2011, 2010 and 2009:STAEMET O NE ASET02009 02010 M 2011$7,000$6,131$6,000$5,0005453 72 $4,0000o_= $3,365$3,000$2,000 $1856$1,000soo$0Total AssetsTotal Liabiliti2sNet AssetsSTATEMEN OF REEUS XESEADCAGSNNTAST02009 02010 02011$3,000$2,500 -$2,000.$ $1,500$1,000-$500$316 $335$54 $58 $50 ($65)Nonoperating Revenues, Capital Contributions, Increase (Decrease) inNet* Endowment Additions & Net AssetsExtraordinary Items$0IOperating RevenuesOperating Expenses*includes State Appropriations and Cumulative Effects of Changes in Accounting Principles162011 Financial Report UNIVERSITY OF MISSOURI SYSTEMMANAGEMENT'S DISCUSSION AND ANALYSIS3une 30, 2011 and 2010 (unaudited)CONDENSED STATEMENT OF NET ASSETSThe Statement of Net Assets presents the University'sfinancial position at the end of the fiscal year, includingall assets and liabilities of the University andsegregating them into current and noncurrentcomponents. Total Net Assets is an indicator offinancial condition and changes in Total Net Assetsindicate if the overall financial condition has improvedor worsened. Assets and liabilities are generallymeasured using current values with certain exceptions,such as capital assets which are stated at cost lessaccumulated depreciation, and long-term debt which isstated at cost.The following table summarizes the University's assets, liabilities and net assets at June 30, 2011, 2010 and 2009:CODESE STATEM~ ~i ~~ENT OF NE ASSETS(i 0huad ofd .aSAs of June 30, 2011AssetsCurrent Assets $ 869,091Noncurrent AssetsEndowment and Other Long-Term Investments 2,519,102Capital Assets, Net 2,642,196Other 82,128Deferred Outflow of Resources 19,023Total Assets and Deferred Outflow of Resources $ 6,131,540LiabilitiesCurrent LiabilitiesCurrent Portion of Long-Term Debt $ 29,107Long-Term Debt Subject to Rema rketi ng 220,885Other 563,676Noncurrent LiabilitiesLong-Term Debt 1,140,934Other 160,694Total Liabilities 2,115,296Net AssetsInvested in Capital Assets, Net of Related Debt 1,516,095Restricted -Nonexpenda bl e 788,876Expendable 373,910Unrestricted 1,337,363Total Net Assets 4,016,244Total Liabilities and Net Assets $ 6,131,540ASSETSTotal Assets increased by $595 million, or 10.7%, to$6.1 billion as of June 30, 2011, compared to the prioryear. The increase during FY 2011 was driven primarilyby the strong performance of the University'sInvestments. At the same time, the Universitycontinued to expand Capital Assets across all of itscampuses to meet housing, educational, and patientcare needs. From FY 2009 to FY 2010, Total Assetsincreased by 14.5%, primarily due to strongperformance of Investments.At June 30, 2011, the University's working capital,which is current assets less current liabilities, was$55.4 million, an increase of $18.6 million over theprevious year. The largest driver of the increase was a$129.4 million increase in short-term investments2011 FinanciaL Report17 UNIVERSITY OF MISSOURI SYSTEMMANAGEMENT'S DISCUSSION AND ANALYSISJune 30, 2011 and 2010 (unaudited)which was primarily related to a change in mixbetween short-term and long-term investments withinthe portfolio.As a measurement of actual liquidity, working capital isadversely impacted by the inclusion, per accountingguidelines, of Long-Term Debt Subject to Remarketingas these balances are not contractually due within oneyear. If Long-Term Debt Subject to Remarketing wereexcluded from Current Liabilities, working capitalwould be $276.3 million at June 30, 2011, alsoexpressed as Current Assets of 1.47 times CurrentLiabilities.The following table illustrates actual working capital, as well as working capital adjusted for Long- Term DebtSubject to Remarketing:SU M R OF WOKNGCPIAAs of June 30, 2011Current Assets $ 869,091Current Li a bil i ties 813,668Working Capital, Unadjusted $ 55,423Ratio of Current Assets to Current Liabilities (Unadjusted) 1.07Current Assets 869,091Current Liabilities 813,668Less: Long-Term Debt Subject to Rema rketi ng (220,885)Current Liabilities, As Adjusted 592,783Working Capital, As Adjusted $ 276,308Ratio of Current Assets to Current Liabilities (As Adjusted) 1A7182011 Financial Report UNIVERSITY OF MISSOURI SYSTEMMANAGEMENT'S DISCUSSION AND ANALYSISJune 30, 2011 and 2010 (unaudited)At June 30, 2011, the University held $221.3 million inCash and Cash Equivalents, a decrease of $106.0million from June 30, 2010. The June 30, 2010 cashbalances of $327.3 million were $74.4 million higherthan June 30, 2009. The decrease in cash at June 30,2011 is largely due to increased working capital beinginvested at June 30, 2011 as compared to June 30,2010. Long-Term and Short-Term Investments totaled$2.7 billion as of June 30, 2011, representing anincrease of 27.4% over the prior year as compared to a27.7% increase from FY 2009 to FY 2010. The increasein investment balances during FY 2011 primarilyreflects positive investment returns and unspent bondproceeds related to projects under construction atJune 30, 2011. The financial markets continued toimprove during FY 2011; net realized and unrealizedgains and losses improved by $72.5 million, going froma net gain of $119.6 million in FY 2010 to a net gain of$192.1 million in FY 2011. The overall change ininvestment returns was most evident in the BalancedPool, which experienced a net gain of 21.5% in FY 2011as compared to a net gain of 11.4% in FY 2010.Composition and returns of the University's various investment pools for the years ended June 30, 2011 and 2010were as follows:CASH, CASHI EQUIjVALENTS AND j ~INVESTMENT(i thuad of **~asJune 30, 2011Short-Term and BenchmarkCash and Cash Long-Term Total IndexEquivalents Investments Total Return Return (A)General PoolShort-Term Funds $ 166,839 $ 1,127,038 $ 1,293,877 2.1% 1.7%Balanced Pool 13,478 294,197 307,675 21.5% 22.3%Treasury TIPs 375 137,553 137,928 7.5% 7.5%Endowment FundsBalanced Pool 44,411 969,376 1,013,787 21.5% 22.3%Fixed Income Pool 2,751 69,737 72,488 2.1% 3.7%Other (6,567) 121,535 114,968 N/A N/ATotal $ 221,287 $ 2,719,436 $ 2,940,723(A) Benchmark index returns are calculated by independent investment consultants based on returns of market indicies.2011 FinanciaL Report119 UNIVERSITY OF MISSOURI SYSTEMMANAGEMENT'S DISCUSSION AND ANALYSISJune 30, 2011 and 2010 (unaudited)At June 30, 2011, Accounts Receivable, Net of $255.6million included a $30.8 million receivable related tomedical resident FICA refund claims and accruedinterest income on the claims, for periods endingbefore April 1, 2005 due to notification for the InternalRevenue Service (IRS) of it is intent to honor theseclaims. The net FICA refund to the University, aftersettlements of $21.0 million to former medicalresidents and other third-party entities, is $6.8 millionplus $3.0 million in interest income.At June 30, 2011, the University's investment in CapitalAssets totaled $2.6 billion compared to $2.5 billion atJune 30, 2010. The University added $262.9 million incapital assets, net of retirements, during FY 2011,offset by depreciation of $155.1 million for the year. FY2010 capital asset additions of $293.6 million, net ofretirements, were offset by $152.1 million indepreciation and transfers.Note 6 presents additional information on changes by asset classification; major capital projects eithersubstantially completed in FY 2011 or ongoing are shown in the following table:ExpendituresPrject ThrughCampus Budget June 30, 2011 Source of FundingColumbia:Renovation of Mark Twain Hall $ 19,900,000 $ 1,300,000 Revenue Bonds, Campus ReservesRenovation of Hudson, Gillett and Rollins Halls 42,000,000 35,800,000 Revenue Bonds, Campus ReservesPower Plant -Combined Heat & Power Upgrade 75,800,000 23,900,000 Revenue Bonds, Campus ReservesPatient CareTower (University Health System) 203,000,000 29,000,000 Revenue Bonds, Campus Reserves, GiftsKansas City:Oak Street Parking Structure 23,100,000 3,300,000 Revenue BondsMissouri S&T:Geothermal Energy Project $ 32,400,000 $ 300,000 Revenue BondsTotal Liabilities were $259.5 million higher at June 30,2011 as compared to June 30, 2010, and $384.1 millionhigher at June 30, 2010 as compared to June 30, 2009.Significant changes in Current Liabilities at June 30,2011 include a $9.7 million increase in Funds Held forOthers; a $5.4 million increase in InvestmentSettlements Payable for purchases of investmentsoccurring on or before June 30, but settling after June30; and a $10.5 million decrease in Collateral Held forSecurities Lending. Accounts Payable increased $7.0million which includes a $21.0 million payable for FICArefund and related inters on refund due to formermedical residents and third-party entities discussedabove. Issuance of new bonds in FY 2011, discussedbelow, represented the largest increase in liabilities atJune 30, 2011.Current Liabilities include long-term variable ratedemand bonds subject to remarketing totaling $220.9million, $223.7 million and $224.9 million at June 30,2011, 2010 and 2009, respectively, with finalcontractual maturities ranging from fiscal years 2031to 2036. Despite contractual maturities beyond oneyear, these variable rate demand bonds are classifiedas current liabilities because the University isultimately the sole source of liquidity should theoption to tender be exercised by the bondholder.Non Current Liabilities represent those commitmentsbeyond one year. On December 21, 2010, theUniversity issued $252.3 million in taxable Series2010A System Facilities Revenue Bonds designated as"Build America Bonds" under the Internal RevenueCode of 1986, as amended. The Series 2010A bondscarry a weighted average coupon rate of 5.79%. Withrespect to the Series 2010A bonds, the University willreceive a cash subsidy payment from the United StatesTreasury in an amount equal to 35% of the interestpayable on each interest payment date. The all-in-trueinterest cost of the Series 2010A bonds, after takinginto account the 35% interest payment from thefederal government is 3.8%. The Series 2010A bondswere Aal and AA+ rated by Moody's and Standard &Poor's, respectively. Proceeds from issuance of the202011 Financial Report UNIVERSITY OF MISSOURI SYSTEMMANAGEMENT'S DISCUSSION AND ANALYSISJune 30, 2011 and 2010 (unaudited)Series 2010A bonds are being used to financeconstruction or renovation of housing facilities on theColumbia, Kansas City, and Missouri Science andTechnology (Missouri S&T) campuses, energymanagement improvements on the Columbia andMissouri S&T campuses, construction of a new parkingstructure on the Kansas City campus, new patient caretower and Ellis Fischel Cancer Center relocation at theHealth System, and renovation, furnishing andequipping various other facilities, and to financecapitalized interest and certain costs of issuance.In July 2009, the University issued $332.1 million ofSystem Facilities Revenue Bonds, consisting of $256.3million in taxable Series 2009A Bonds designated as"Build America Bonds" under the Internal RevenueCode of 1986, as amended, and $75.8 million intraditional tax exempt Series 2009B Bonds. The Series2009A and 2009B bonds carry weighted averagecoupon rates of 5.96% and 4.16%, respectively. Withrespect to the Series 2009A bonds, the University willreceive a cash subsidy payment from the United StatesTreasury in an amount equal to 35% of the interestpayable on each interest payment date. The all-in-true interest cost of the Series 2009A bonds, aftertaking into account the 35% interest payment from thefederal government is 3.95%. The Series 2009A and2009B bonds were Aal and AA+ rated by Moody's andStandard & Poor's, respectively. Proceeds fromissuance of the Series 2009A and 2009B bonds arebeing used to finance construction or renovation ofhousing facilities on the Columbia, Kansas City, andMissouri S&T campuses, renovation of power plantand other energy management improvements on theColumbia campus, construction of a new student unionfacility on the Kansas City campus, Research Park officefacility on the Missouri S&T campus, new patient caretower and Missouri Orthopaedic Institute at the HealthSystem, and renovation, furnishing and equippingvarious other facilities, and to finance capitalizedinterest and certain costs of issuance.The following is a summary of long-term debt by type of debt instrument:LONG-TEjRMEBAs of June 30, 2011System Facilities Revenue Bonds $ 1,367,925Unamortized Premium and Losson Defeasance 14,300Total Bonds Payable 1,382,225Capital Lease Obligations 7,405Notes Payable 1,296Total Long-Term Debt $ 1,390,926Contractual Maturities Within One YearBonds Payable -Fixed Rate $ 25,195Bonds Payable -Variable Rate Demand 2,795Notes Payable 328Capital Lease Obligations 789Total Contractual Maturities Within One Year $ 29,107H2011 FinanciaL Report21 UNIVERSITY OF MISSOURI SYSTEMMANAGEMENT'S DISCUSSION AND ANALYSISJune 30, 2011 and 2010 (unaudited)NET ASSETSNet Assets represent the value of the University'sassets after liabilities are deducted. The University'stotal Net Assets increased by $335.5 million during theyear ended June 30, 2011, after increasing by $316.0million in the year ended June 30, 2010. In FY 2010and FY 2009 changes in total Net Assets include theeffects of changes in accounting principles as follows: adecrease of $6.2 million in FY 2010 (GASB StatementNo. 53, Accounting and Financial Reporting forDerivative Instruments); and an increase of $13.3million in FY 2009 (GASB Statement No. 52, Land andOther Real Estate Held as Investments byEndowments).The distribution of the Net Asset balances, including additional details on unrestricted net assets by fund type, asof June 30, 2011, are as follows:TOA NET ASES-$4. ILOTotal Net Assets are reflected in the four componentcategories as follows:Invested in Capital Assets, Net of Related Debt,represents the University's investment in capitalassets, net of accumulated depreciation andoutstanding debt related to acquisition, constructionor improvement of those assets. This categoryincreased by $31.0 million to $1.5 billion in FY 2011after decreasing by $55.6 million in FY 2010. Suchchanges are largely driven by the timing of debtissuance and the completion of associatedconstruction projects.Restricted Nonexpendable Net Assets includeendowment and similar assets that are subject toexternally imposed stipulations for the principal to bemaintained in perpetuity by the University. Realizedand unrealized market gains contributed to a $109.4million, or 16.1%, increase in Restricted Non-expendable Net Assets during FY 2011. Realized andunrealized market gains were largely responsible for a$67.4, or 11.0%, increase during FY 2010.222011 Financial Report UNIVERSITY OF MISSOURI SYSTEMMANAGEMENT'S DISCUSSION AND ANALYSISJune 30, 2011 and 2010 (unaudited)Restricted Expendable Net Assets are resources thatare subject to externally imposed stipulationsregarding their use, but are not required to bemaintained in perpetuity. This category increased by$21.7 million, or 6.2%, during FY 2011 and $8.4 million,or 2.5%, in FY 2010. As of June 30, 2011, this categoryincludes:-$264.6 million of net assets restricted foroperations and endowment purposes compared to$244.2 million at June 30, 2010;-$77.3 million for student loan programs comparedto $75.6 million at June 30, 2010; and-$32.0 million for facilities compared to $32.4 millionat June 30, 2010.Unrestricted Net Assets are not subject to externallyimposed stipulations although these resources may bedesignated for specific purposes by the University'smanagement or Board of Curators. This categoryincreased by $173.4 million, or 14.9%, to $1.3 billion atJune 30, 2011 after increasing by $295.7 million, or34.1%, in FY 2010. Maintaining adequate levels ofunrestricted net assets is one of several key factorsthat have enabled the University to maintain its Aalcredit rating. As of June 30, 2011 and 2010, UniversityHealth System designated funds totaled $353.7 millionand $319.2 million, respectively; capital project-designated funds totaled $215.7 million and $188.5million, respectively; student loan program-designatedfunds totaled $8.5 million and $8.0 million,respectively; and unrestricted funds functioning asendowments totaled $118.3 million and $100.8million, respectively. The remaining Unrestricted NetAssets which are available for the University'sinstructional and public service missions and itsgeneral operations totaled $641.1 million and $547.4million at June 30, 2011 and 2010, respectively.2011 FinanciaL Report23 UNIVERSITY OF MISSOURI SYSTEMMANAGEMENT'S DISCUSSION AND ANALYSISJune 30, 2011 and 2010 (unaudited)STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETSThe Statement of Revenues, Expenses, and Changes in Net Assets presents the University's results of operations.The Statement distinguishes revenues and expenses between operating and non-operating categories, andprovides a view of the University's operating margin.CONDENISED ~ m~~ b e~: '~~ STATEMENT~. OF REEUS EXPENSE AN CHANGE IN NE ASET-IFiscal Year Ended June 30, 2011Operating RevenuesNet Tuition and Fees n e c (502 453sef s6Gr ants aEnd Contr acts 36,24Patient Med icaF P Services, Net and Ote ,uiirOther Auxilianry Enterprises sgicat to theOther Oati Revenues rudoeaTot al Operating Revenues 2,le25,77iOperating ExpensesSa lar ies, Wages a nd Ben efi ts1,056 5343Supplies, Services and Other Operating Expenses be r e n y isOther Operating Expenses 42 i 0tTotal Expenses 2,30,503Operating Loss Before State Appropriations(5476State Appropriations 47631 4 iIncome (Loss) after State Appropriations, beforeNonoperating Revenues (Expenses) ......,155Nonoperating Revenues (Expenses)Investment and Endowment Income (Losses), Net of Fees 26,3P ri vate Gifts ...52 '564Inter es t Ex pen se (491S07)Other Nonoperati ng Revenues, Net 8,8Net Nonoperati inl Revenues (Expenses)35,7Income (Loss) before Capital Contributions, Additionsto Permanent Endowments and Extraordinary Item28,3State Ca pitalI Appropriations8,4Ca pitalI Gifts and Grants 15,46Private Gifts for Endowment Purposes 2,7Extra ordi na ry ItemIncrease (Decrease) in Net Assets 335,508....Net Assets, Beginning of Year3,876Cumulative Effect of Chang~e in Accounting Principles .........Net Assets, Beginning of Year, as Adjusted3,876Net Assets, End of Year$4,124 fi PREVENUES Fees, Patient Medical Services and Other AuxiliaryOpeatig Rvenes eprsen reoures eneate by Enterprises contributed most significantly to thethe University in fulfilling its instruction, research, and inraeopatgrvnuinF201wleGnspublic service missions. Total Operating Revenues adCnrcsadPtetMdclSrie a hincreased by $84.9 million, or 4.4% in FY 2011, and by lreticessi h rvosya.Nnprtn$78. milio, o 4.2 inFY 010 NetTuiionand Revenues are those not generated by the University's2/42011 FinanciaL ReporL UNIVERSITY OF MISSOURI SYSTEMMANAGEMENT'S DISCUSSION AND ANALYSISJune 30, 2011 and 2010 (unaudited)core missions and include such funding sources asState and Federal Appropriations, Pell Grants, PrivateGifts and Investment and Endowment Income.The following is a graphic illustration of operatingrevenues by source for FY 2011:TT O REVENUS : 0Iboth fiscal years 2011 and 2010 at $26.9 million, or3.6%, and $34.4 million, or 4.9%, respectively.Nonoperating RevenuesTotal State Appropriations received for Universityoperations, University Health System operations, andother special programs decreased by $60.7 million, or12.2%, in FY 2011, and increased by $18.9 million, or3.9%, in FY 2010. The decrease was largely related to a5.2% reduction in state appropriations for operationsin FY 2011 and one-time funding in FY 2010 in theamount of $23.5 million that was received for theCaring for Missourians initiative. Additionally, statefunding was cut or eliminated for other curator'sprograms such as MOREnet, the Health System andMid-Missouri Mental Health Center.As one of the more volatile sources of nonoperatingrevenues, Investment and Endowment Incomeincludes interest and dividend income as well asrealized and unrealized gains and losses. Realized andunrealized market value gains, losses and other activityaffecting Investment and Endowment Income resultedin a net gain of $266.6 million in FY 2011 as comparedto a net gain of $172.8 million in FY 2010. This includesan increase in Investment and Endowment Income of$93.8 million for the year ended June 30, 2011, ascompared to a $346.2 million increase for the yearended June 30, 2010.Gift income is reflected in three categories: PrivateGifts, Capital Gifts and Grants (which are restricted foradding or improving capital assets) and Private Giftsfor Endowments (which are restricted for establishingendowments). Private Gifts and Grants can fluctuatesignificantly from year to year due to the voluntarynature of donors' gifts. In FY 2011, the Universityreceived gifts totaling $94.4 million, as compared to$92.8 million and $86.7 million for FY 2010 and FY2009, respectively.Operating RevenuesTuition and Fees, net of Scholarshipincreased by $29.2 million, or 6.3%, in FY$13.1 million, or 2.9%, in FY 2010. Theboth FY 2011 and FY 2010 were drivenincreases in student enrollment.Allowances,2011 and byincreases inprimarily byAs a research institution, the University receives asubstantial amount of funding through Federal, Stateand Private Grants and Contracts. Overall, sponsoredfunding increased by $2.4 million, or 0.8%, in FY 2011compared to an increase of 7.2% in FY 2010. A 6.7%increase in Federal grants offset declines in State andLocal and Private grants in FY 2011.The University's auxiliary enterprises include theUniversity Health System, Housing and Dining Services,campus Bookstores, and other such supplementalactivities. Total operating revenues generated by theseauxiliary enterprises increased by $51.6 million, or4.8%, in FY 2011 as compared to an increase of $47.8million, or 4.6%, in FY 2010. Patient Medical Services,which includes fees for services provided by theUniversity Health System, had the largest increase in2011 FinanciaL Report25 UNIVERSITY OF MISSOURI SYSTEMMANAGEMENT'S DISCUSSION AND ANALYSISJune 30, 2011 and 2010 (unaudited)Total Interest Expense during the years ended June 30,2011 and 2010 was $59.7 million and $53.4 million,respectively. Interest expense associated withfinancing projects during construction, net of anyinvestment income earned on bond proceeds duringconstruction, is capitalized. For the years ended June30, 2011 and 2010, capitalization of interest earned onunspent bond proceeds totaled $10.2 million and $7.3million, respectively, resulting in net interest expenseof $49.5 million and $46.1 million, respectively.The following is a summary of interest expense associated with Long-Term Debt:INTEREST EXPENSE(in thousands of dol [a rs )Fiscal Year Ended June 30, 2011System Facilities Revenue Bonds $ 53,563Net Payment on Interest Rate Swaps 5,129Total System Facilities Revenue Bonds 58,692Capital Project NotesCapitalized Lease Obligations 986Notes Payable 45Total Interest Expense BeforeCapitalization of Interest 59,723Capitalization of Interest, Net of InterestEarned on Unspent Bond Proceeds (10,216)Total Interest Expense $ 49,507In FY 2011, Other Nonoperating Revenues, Net of$83.1 million increased $15.0 million over FY 2010largely due to increases in Federal Appropriations andFederal Pell Grants of $7.0 million, or 32.4%, and $9.7million, or 20.0%, respectively. In FY 2011 and FY 2010,Federal Appropriations include cash subsidy paymentsfrom the United States Treasury totaling $7.2 millionand $5.0 million, respectively, for designated BuildAmerica Bonds outstanding. Pell Grants increased by$9.7 million and were largely drivenenrollment and student need.by increasedIn FY 2011, State Capital Appropriations of $8.0million represented a decrease of $6.2 million from FY2010. FY 2011 State Capital Appropriations included$2.6 million for the Mexico Plant Science ResearchCenter (Columbia campus) and $2.8 million forMissouri Psychiatric Center (Columbia campus).262011 FinanciaL Report UNIVERSITY OF MISSOURI SYSTEMMANAGEMENT'S DISCUSSION AND ANALYSISJune 30, 2011 and 2010 (unaudited)OPERATING EXPENSESTotal Operating Expenses increased by $111.7 million,or 4.6%, in FY 2011 compared to an increase of $53.1million or 2.2% in FY 2010. The following graphillustrates the University's operating expenses bynatural classification for FY 2011:OPRAIN EXESSBAUALCASFCTO$.BIOgrowth in revenue. Other contributing factors relateto necessary expenses in the current fiscal year thatwere deferred in prior fiscal years due to budgetaryconstraints.The following illustrates the University's operatingexpenses by function for FY 2007 through FY 2011:IF 207-FY21Supplies,Services and_Other28% jBenefitsj13%Scholarshipsand-Fellowships3%Depreciation6%Salaries andWages50%2007 2008 2009 2010 2011100%90%80%70%60%50%40%30%20%10%0%During FY 2011 and FY 2010, Salaries, Wages andBenefits increased approximately 3.9% and 1.8%,respectively, over the prior fiscal year. The increases inin FY 2011 were largely driven by increases in StaffBenefit costs. Staff Benefits as of June 30, 2011,increased by $25.0 million, or 8.2%, as compared toJune 30, 2010. Contributing to this was an increase inthe employer contributions rate for the retirementplan and increases in claims and administrative feespaid to medical and dental providers. These increaseswere partially offset by a $6.8 million refund of theemployer portion of FICA tax paid for medical residentsbetween the years of 1995 and 2005. Excluding themedical resident FICA refund, Staff Benefits increased$31.8 million or 10.5% over FY 2010. For FY 2011,beyond a small pool for faculty and staff promotions,increases in salaries were primarily attributable tosalaries funded by increased grant support andassociated activities, as well as auxiliary enterprisegrowth driven by increased enrollment.In FY 2011 and FY 2010, the University's Supplies,Services, and Other Operating expenses of $716.0million and $676.4 million increased by $39.6 million,or 5.9%, and $3.7 million, or 0.5%, respectively, overthe prior fiscal year. These increases are primarilydriven by Auxiliary Enterprises and their related" Instructson" Research1 Public Service" Academic Support* Student Services* Institutional Support* Operation & Maintenance of Plant* Health System" Other Auilhary EnterprisesScholarshps & Fellowships" DepreciationThe core missions of instruction, research, and publicservice account for the largest proportion of OperatingExpenses at 36.4% for FY 2011. The University HealthSystem constitutes the next highest proportion at29.2% of expenses for FY 2011. Excluding the HealthSystem, instruction, research, and public serviceaccount for 51.3% of Operating Expenses for FY 2011.Institutional support, which represents the coreadministrative operations of the University, was lessthan 5 cents of each dollar spent during this 5-yearperiod.2011 Financial Report27 UNIVERSITY OF MISSOURI SYSTEMMANAGEMENT'S DISCUSSION AND ANALYSISJune 30, 2011 and 2010 (unaudited)STATEMENT OF CASH FLOWSThe Statement of Cash Flows provides information about the University's sources and uses of cash and cashequivalents during the fiscal year. The following summarizes sources and uses of cash and cash equivalents for thethree years ended June 30, 2011, 2010 and 2009:CONDENSED~~ STTMN6FCS LWFiscal Year Ended June 30, 2011Net Cash Used in Operating Activities (332,797)Net Cash Provided by Noncapital Financing Activities 617,306Net Cash Provided by (Used in) Capital andRelated Financing Activities (64,886)Net Cash Provided by (Used in) Investing Activities (325,649)Net Increase (Decrease) in Cash and Cash Equivalents (106,026)Cash and Cash Equivalents, Beginning of Year 327,313Cash and Cash Equivalents, End of Year 221287LLNet Cash Used in Operating Activities reflects thecontinued need for funding from the state of Missouri,as funding received from tuition and fees and relatedsales and services of auxiliary and educational activitiesare not sufficient to cover operational needs. In FY2011, cash used in operating activities increased by$67.9 million as compared to FY 2010 due primarily toincreased cash outflows from payroll and benefits andpayments to suppliers. In FY 2009, cash used inoperating activities decreased by $62.1 million from FY2009.The University's most significant source of cash, NetCash Provided by Noncapital Financing Activities,includes funding from State and Federalappropriations, Pell grants and noncapital private gifts.Cash from these sources totaling $617.3 million,$622.4 million and $595.3 million in FY 2011, FY 2010and FY 2009, respectively, directly offset the additionalcash needs resulting from operations.Net Cash Provided by (Used In) Capital and RelatedFinancing Activities decreased by $70.6 million in FY2011 due largely to a decrease in the amount of bondsissued in FY 2011. Net Cash Used in Capital andRelated Financing Activities of $5.7 million in FY 2010was due largely to the bond issue in July 2009 andrelated unspent bond proceeds associated with capitalprojects still under construction at June 30, 2010.Net Cash Provided by (Used In) Investing Activitiesreflects net cash outflows of $325.6 million and $288.9million in FY 2011 and FY 2010, respectively. This isconsistent with growth in the University's investments,which includes the temporary investment of unspentbond proceeds.ECONOMIC OUTLOOKThe University of Missouri is the state's public,research, land grant University committed to servingthe students, patients, and citizens of the state ofMissouri while being cognizant of the University'sresponsibility to use resources wisely. The Universitycontinues to successfully navigate through the financialchallenges related to the general economic climateand uncertainties surrounding the state's financialsupport for higher education. State appropriations foroperations decreased by 5.2% in FY 2011 and willfurther decrease by 8.1% in FY 2012. Withoutsignificant increases in general revenues, the state willcontinue to be challenged to increase funding forhigher education for FY 2013 and beyond.The University has experienced a significant amount ofenrollment growth, over 28% growth between fall2000 and fall 2010. However, enrollment growth isprojected to slow given flattening in-statedemographics.282011 Financial Report UNIVERSITY OF MISSOURI SYSTEMMANAGEMENT'S DISCUSSION AND ANALYSISJune 30, 2011 and 2010 (unaudited)The University is now educating 17,000 more studentseach year on less state support than received in 2001.Approximately 70% of the state's growth inundergraduate enrollment among four-yearinstitutions over the last 10 years has occurred at theUniversity of Missouri. While this has increasedrevenue support to the operating budget it hassignificantly eroded the state appropriations per full-time equivalent student. These factors required theUniversity to increase tuition and fees by an average of5.5% for FY 2012. Future increases in tuition willlargely be driven by the level of state support available.Despite the challenges generated by decreased statefunding and increased enrollment, the University hasbeen able to strengthen its financial position due todiversified funding sources, historically low borrowingcosts and cost containment measures. The Universitycontinues to increase private gifts, with an increase of7.9% in FY 2011 and a focus on improving in FY 2012.The increase in giving along with strong investmentperformance in FY 2011 will help provide additionalresources to meet the future budget needs of theUniversity.The University continues to grow and improve upon itsstrong research base. Research expenditurescontinued to increase in FY 2011. It is expected thiswill remain relatively flat in FY 2012 as the fundingprovided by the American Recovery and ReinvestmentAct begins to wane. Additionally, federal agencies arebeing faced with shrinking budgets as part of thebroader reductions in the Federal budget.To offset these decreases the University is looking forother opportunities to partner with federal agencies inother grant and contracts areas. For example, theUniversity has partnered with the Department ofHealth and Human Services to establish the MissouriHealth Information Technology Assistance Center,which is a public-private partnership that bringstogether leading health care and informationtechnology experts from health care organizations,academia, industry, and government and is focused onproviding resources to promote meaningful use ofhealth information technology.The University is aware of its responsibility to controlcosts and provide an affordable education forMissourians. The University has continued to controlexpenditures and is in the process of implementingbusiness process redesigns to achieve greater costsavings and efficiencies. Additionally, the Universityhas benefited from historically low borrowing costs.This has allowed the University to move forward onsome much needed capital improvements despitedeclining state support for capital improvementsFor fiscal year 2011, the University Health Systemcontinued to see increasing revenues, even during atime of economic instability. As in prior years, theUniversity Health System is focusing on improvingpatient care, customer service and quality. The Stateappropriation funding approved for fiscal year 2012 isslightly below fiscal year 2011. In April 2011, a 5% feeincrease was implemented and continues into fiscalyear 2012 with pricing revisions made throughout theyear as needed. For the future, the University HealthSystem continues to pursue growth and its academicmission. Currently under construction is a $203 millionpatient care tower, which includes a replacement ofthe Ellis Fischel Cancer Center. The patient tower isscheduled to be completed in fiscal year 2013. Thesecapital investments will assist in providing quality careto patients and enhanced facilities for physicianrecruitments with the University of Missouri-ColumbiaSchool of Medicine.In March 2010, the federal government passed thePatient Protection and Affordable Care Act and theHealth Care and Education Reconciliation Act,collectively referred to as "Health Care Reform." Thislegislation will significantly impact the future of healthcare. As the final regulations and requirements of theActs are prepared, University Health Systemmanagement continues to review and monitor theeffect that the legislation will have on the organization.The University Health System has not determined thefull financial statement effect of this new Health CareReform legislation.As noted in prior years, the national and stateeconomy will continue to pose budgetary challengesfor the University in the future. However, strongstudent demand, highly successful capital campaigns,robust research funding, economic developmentprograms and a financially stable and growinghealthcare system are all factors in the positiveoutlook for the University of Missouri.2011 Financial ReporL29 INDEPENDENT AUDITORS' REPORTKPMG LLPSuite 90010 South BroadwaySt. Louis, MO 63102-1761The Board of CuratorsUniversity of Missouri System:We have audited the accompanying financial statements of the business-type activities, thediscretely presented component unit, and the aggregate remaining fund information of theUniversity of Missouri System, a component unit of the State of Missouri, as of and for the yearsended June 30, 2011 and 2010, which collectively comprise the University of Missouri System'sbasic financial statements as listed in the table of contents. These financial statements are theresponsibility of the University of Missouri System's management. Our responsibility is toexpress opinions on these financial statements based on our audits.We conducted our audits in accordance with auditing standards generally accepted in the UnitedStates of America and the standards applicable to financial audits contained in GovernmentAuditing Standards, issued by the Comptroller General of the United States. Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An audit includes consideration ofinternal control over financial reporting as a basis for designing audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the University of Missouri System's internal control over financial reporting.Accordingly, we express no such opinion. An audit also includes examining, on a test basis,evidence supporting the amounts and disclosures in the financial statements, assessing theaccounting principles used and significant estimates made by management, as well as evaluatingthe overall financial statement presentation. We believe that our audits provide a reasonablebasis for our opinions.In our opinion, the financial statements referred to above present fairly, in all material respects,the respective financial position of the business-type activities, the discretely presentedcomponent unit, and the aggregate remaining fund information of the University of MissouriSystem as of June 30, 2011 and 2010, and the respective changes in financial position, andwhere applicable, cash flows thereof for the years then ended, in conformity with U.S. generallyaccepted accounting principles.In accordance with Government Auditing Standards, we have also issued our report datedOctober 11, 2011 on our consideration of the University of Missouri System's internal controlover financial reporting and on our tests of its compliance with certain provisions of laws,regulations, contracts, and grant agreements, and other matters. The purpose of that report is todescribe the scope of our testing of internal control over financial reporting and compliance andthe results of that testing, and not to provide an opinion on the internal control over financialreporting or on compliance. That report is an integral part of an audit performed in accordancewith Government Auditing Standards and should be considered in assessing the results of ouraudit.St. Louis OfficeKPMG LLP is a Delaware limited liability partnership. I M Celebratingthe U.S. member firm of KPMG International Cooperative ye a19114-011("KPMG International"), a Swiss entity.2011 Financial Report30 INDEPENDENT AUDITORS' REPORTThe management's discussion and analysis on pages 15 through 29 and the schedules ofemployer contributions and the schedules of funding progress on pages 69 and 70 are not arequired part of the basic financial statements but are supplementary information required byU.S. generally accepted accounting principles. We have applied certain limited procedures,which consisted principally of inquiries of management regarding the methods of measurementand presentation of the required supplementary information. However, we did not audit theinformation and express no opinion on it.Our audit was conducted for the purpose of forming opinions on the financial statements thatcollectively comprise the University of Missouri System's basic financial statements. Thestatistical section on pages 72 through 86 are presented for purposes of additional analysis andare not a required part of the basic financial statements. The statistical section has not beensubjected to the auditing procedures applied in the audit of the basic financial statements, andaccordingly, we express no opinion on it.KýMC, LL-PSt. Louis, MissouriOctober 11,20112011 Financial Report31 UNIVERSITY OF MISSOURI SYSTEMSTATEMENT OF NET ASSETSAs of ]une 30, 2011 and 2010 (in thousands)Discretely PresentedUniversity Component Unit2011 2010 2011 2010AssetsCurrent AssetsCash and Cash Equivalents $ 44,249 $ 149,515 $ 8,433 $ 7,318Restricted Cash and Cash Equivalents 177,038 177,798 -Short-Term Investments 151,070 40,268 -Restricted Short-Term Investments 49,264 30,619 -Investment of Cash Collateral 101,047 111,557 -Accounts Receivable, Net 255,589 249,460 16,566 16,927Pledges Receivable, Net 12,374 14,505 -Investment Settlements Receivable 15,634 6,200Notes Receivable, Net 8,532 9,046 -Due From (To) Component Units (6,658) (5,285) 6,658 5,285I nventori es 35,193 28,401 3,228 3,058Prepaid Expenses and Other Current Assets 25,759 25,604 1,825 1,541Total Current Assets 869.091 837.688 36.710 34.129Noncurrent AssetsRestricted Cash and Cash EquivalentsPledges Receivable, NetNotes Receivable, NetDeferred Charges and Other AssetsRestricted Other AssetsLong-Term InvestmentsRestricted Long-Term InvestmentsCapital Assets, NetTotal Noncurrent AssetsDeferred Outflow of Resources14,89554,01513,2181,357,9181,161,1842,642,1965,243,42619.0234,34616,25650,63512,3741,171,998891,0672,534,3654,676,69522.1921,7883,27955,62769,021134,0613,8381,7983,56348,22973,684131,112Total Assets and DeferredOutflow of Resources $6,131,540 $5,536,575 $ 170,771 $ 165,241LiabilitiesCurrent LiabilitiesAccounts Payable $ 130,803 $ 123,809 $ 5,156 $ 3,974Accrued Liabilities 143,347 138,309 13,879 12,707Deferred Revenue 78,209 78,200 -Funds Held for Others 62,951 53,245 -Investment Settlements Payable 47,319 41,931 -Collateral Held for Securities Lending 101,047 111,557 -Current Portion of Long-Term Debt 29,107 30,139 2,263 2,154Long-Term Debt Subject to Rema rketi ngAgreements 220,885 223,680 --Total Current Liabilities 813,668 800,870 21,298 18,835(continued)322011 FinanciaL Report UNIVERSITY OF MISSOURI SYSTEMSTATEMENT OF NET ASSETSAs oF June 30, 2011 and 2010 (in thousands)Discretely PresentedUniversity Component Unit2011 2010 2011 2010Liabilities, ContinuedNoncurrent LiabilitiesLong-Term Debt 1,140,934 915,906 34,447 36,679Deferred Revenue 1,519 1,925 --Derivative Instrument Liability 26,702 30,680Other Postemployment Benefits Liability 83,306 52,613 --Other Noncurrent Liabilities 49,167 53,845 1,156 959Total Noncurrent Liabilities 1,301,628 1,054,969 35,603 37,638Total Liabilities 2,115,296 1,855,839 56,901 56,473Net AssetsInvested in Capital Assets, Net of Related Debt 1,516,095 1,485,090 32,615 35,209RestrictedNonexpendable -Endowment 788,876 679,494 --Expendable -Scholarship, Research, Instruction and Other 264,605 244,226 3,279 3,562Loans 77,300 75,637 --Capital Projects 32,005 32,373 --Unrestricted 1,337,363 1,163,916 77,976 69,997Total Net Assets 4,016,244 3,680,736 113,870 108,768Total Liabilities and Net Assets $6,131,540 $5,536,575 $ 170,771 $ 165,241See notes to the financial statements.2011 FinanciaL Report33 UNIVERSITY OF MISSOURI SYSTEMSTATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETSFor the Years Ended June 30, 2011 and 2010 (in thousands)Discretely PresentedUniversity Component Unit2011 2010 2011 2010Operating RevenuesTuition and Fees (Net of Provision for DoubtfulAccounts of $5,739 in 2011 and$6,459 in 2010) $ 671,419 $ 630,498 $ -$Less Scholarship Allowances 175,917 164,187 -Net Tuition and Fees 495,502 466,311 -Federal Grants and Contracts 196,122 183,885 -State and Local Grants and Contracts 57,375 66,194 -Private Grants and Contracts 67,025 68,044 -Sales and Services of Educational Activities 21,671 22,560 -Auxiliary Enterprises -Patient Medical Services, Net 763,674 736,799 164,760 164,746Housing and Dining Services (Net ofScholarship Allowance of $614 in 2011and $542 in 2010) 93,724 89,743 -Bookstores 58,591 59,288 -Other Auxiliary Enterprises (Net ofScholarship Allowance of $7,704 in2011 and $7,466 in 2010) 220,162 198,748 -Other Operating Revenues 51,871 49,250 -Total Operating Revenues 2,025,717 1,940,822 164,760 164,746Operating ExpensesSalaries and Wages 1,272,226 1,236,965 68,021 64,048Benefits 328,340 303,300 14,655 15,115Supplies, Services and Other Operating Expenses 716,044 676,362 65,177 63,156Scholarships and Fellowships 58,790 55,469 -Depreciation 155,103 146,753 10,943 11,098Total Operating Expenses 2,530,503 2,418,849 158,796 153,417Operating Income (Loss) before StateAppropriations (504,786) (478,027) 5,964 11,329State Appropriations 437,631 498,358 -Operating Income (Loss) after State Appropriations,before Nonoperating Revenues (Expenses) (67,155) 20,331 5,964 11,329Nonoperating Revenues (Expenses)Federal Appropriations 28,416 21,455 -Federal Pell Grants 57,951 48,281 -Investment and Endowment Income (Losses),Net of Fees 266,633 172,833 652 789Private Gifts 52,564 48,695 -21Interest Expense (49,507) (46,103) (1,954) (1,950)Other Nonoperating Revenues (Expenses) (3,279) (1,659) 440 761Net Nonoperating Revenues (Expenses) 352,778 243,502 (862) (379)3112011 FinanciaL Report UNIVERSITY OF MISSOURI SYSTEMSTATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETSFor the Years Ended June 30, 2011 and 2010 (in thousands)Discretely PresentedUniversity Component Unit2011 2010 2011 2010Income before Capital Contributions andAdditions to Permanent Endowments 285,623 263,833 5,102 10,950State Capital Appropriations 8,043 14,205 --Capital Gifts and Grants 15,466 19,381Private Gifts for Endowment Purposes 26,376 24,703 --Increase in Net Assets 335,508 322,122 5,102 10,950Net Assets, Beginning of Year 3,680,736 3,364,777 108,768 97,818Cumulative Effect of Change in AccountingPrinciples -(6,163) --Net Assets, Beginning of Year, as Adjusted 3,680,736 3,358,614 108,768 97,818Net Assets, End of Year $4,016,244 $3,680,736 $ 113,870 $ 108,768See notes to the financial statements.2011 FinanciaL Report35 UNIVERSITY OF MISSOURI SYSTEMSTATEMENT OF CASH FLOWSFor the Years Ended June 30, 2011 and 2010 (in thousands)2011 2010Cash Flows from Operating ActivitiesTuition and Fees $ 496,091 $ 467,230Federal, State and Private Grants and Contracts 329,542 316,720Sales and Services of Educational Activities and Other Auxiliaries 245,570 216,403Patient Care Revenues 765,991 739,231Student Housing Fees 93,747 89,585Bookstore Collections 58,439 59,300Payments to Suppliers (741,245) (639,376)Payments to Employees (1,269,544) (1,233,160)Payments for Benefits (304,408) (274,326)Payments for Scholarships and Fellowships (58,790) (55,469)Student Loans Issued (9,608) (8,190)Student Loans Collected 8,665 7,848Student Loan Interest and Fees 1,601 1,657Other Receipts, Net 51,152 47,690Net Cash Used in Operating Activities (332,797) (264,857)Cash Flows from Noncapital Financing ActivitiesState Appropriations 437,631 498,358Federal Appropriations and Pell Grants 88,242 65,473Private Gifts 56,056 48,547Endowment and Similar Funds Gifts 26,376 24,703Direct Lending Receipts 347,237 225,429Direct Lending Disbursements (347,237) (225,429)PLUS Loan Receipts 81,683 56,246PLUS Loan Disbursements (81,683) (56,246)Other Receipts, Net (705) (1,502)Deposits (Receipts) of Affiliates 9,706 (13,158)Net Cash Provided by Noncapital Financing Activities 617,306 622,421Cash Flows from Capital and Related Financing ActivitiesCapital State Appropriations 14,691 11,569Capital Gifts and Grants 15,466 19,381Proceeds from Sales of Capital Assets 1,050 589Purchase of Capital Assets (269,172) (289,012)Proceeds from Issuance of Capital Debt, Net 252,285 337,604Principal Payments on Capital Debt (29,400) (24,093)Proceeds from Capital Project Notes -122,500Payments on Capital Project Notes -(125,000)Payments on Capital Lease (739) (829)Payments of Bond Issuance Costs (1,551) (3,344)Interest Payments on Capital Debt (47,516) (43,632)Net Cash Provided by (Used in) Capital and Related Financing Activities (64,886) 5,733(continued)362011 FinanciaL Report UNIVERSITY OF MISSOURI SYSTEMSTATEMENT OF CASH FLOWSFor the Years Ended June 30, 2011 and 2010 (in thousands)2011 2010Cash Flows from Investing ActivitiesInterest and Dividends on Investments, Net 70,091 56,028Purchase of Investments, Net of Sales and Maturities (397,113) (346,338)Other Investing Activities 1,373 1,385Net Cash Used in Investing Activities (325,649) (288,925)Net Increase (Decrease) in Cash and Cash Equivalents (106,026) 74,372Cash and Cash Equivalents, Beginning of Year 327,313 252,941Cash and Cash Equivalents, End of Year $ 221,287 $ 327,313Reconciliation of Operating Loss to Net Cash Used in Operating ActivitiesOperating Loss $ (504,786) $ (478,027)Adjustments to Net Cash Used in Operating ActivitiesDepreciation Expense 155,103 146,753Changes in Assets and Liabilities:Accounts Receivable, Net (3,052) (1,236)Inventory, Prepaid Expenses and Other Assets (6,947) 894Notes Receivable (252) 407Accounts Payable (1,606) 31,778Accrued Liabilities 28,824 37,013Deferred Revenue (81) (2,439)Net Cash Used in Operating Activities (332,797) $ (264,857)Supplemental Disclosure of Noncash ActivitiesNet Increase in Fair Value of InvestmentsNoncash Gifts$ 170,549 $ 93,91222,820 20,103See notes to the financial statements.2011 FinanciaL Report37 UNIVERSITY OF MISSOURI SYSTEMSTATEMENT OF PLAN NET ASSETSAs of June 30, 2011 and 2010 (in thousands)2011 2010AssetsCash and Cash Equivalents $ 116,216 $ 88,450Investment of Cash Col lateral 257,463 277,747Investment Settlements Receivable 27,006 13,935I nvestments:Debt Securities 984,980 906,562Equity Securities 607,800 471,853Commingled Funds 985,435 806,264Nonmarketa ble Alternative Investments 174,899 136,502Other 15,022 19,442Total Assets 3,168,821 2,720,755LiabilitiesAccounts Payable and Accrued Liabilities 119 1,758Collateral Held for Securities Lending 257,463 277,747Investment Settlements Payable 152,057 63,134Total Liabilities 409,639 342,639Net Assets Held in Trust for Retirement and OPEB $2,759,182 $2,378,116UNIVERSITY OF MISSOURI SYSTEMSTATEMENT OF CHANGES IN PLAN NET ASSETSFor the Years Ended June 30, 2011 and 2010 (in thousands)2011 2010Net Revenues and Other AdditionsInvestment Income:Interest& Dividend Income, Net of Fees $ 61,723 $ 54,988Net Appreciation in Fair Value of Investments 379,667 228,528Net Investment Income 441,390 283,516Contributions:University 87,783 71,829Members 26,000 22,734Total Contributions 113,783 94,563Other Revenues 695Total Net Revenues and Other Additions 555,868 378,079Expenses and Other DeductionsAdministrative Expenses 2,621 2,722Payments to Retirees and Beneficiaries 172,181 162,947Total Expenses and Other Deductions 174,802 165,669Increase in Net Assets Held in Trust for Retirement and OPEB 381,066 212,410Net Assets Held in Trust for Retirement and OPEB, Beginning of Year 2,378,116 2,165,706Net Assets Held in Trust for Retirement and OPEB, End of Year $2,759,182 $2,378,116See notes to the financial statements382011 Financial Report UNIVERSITY OF MISSOURI SYSTEMNOTES TO FINANCIAL STATEMENTSFor the Years Ended June 30, 2011 and 20101. ORGANIZATION AND SUMMARY OFSIGNIFICANT ACCOUNTING POLICIESUNIVERSITY OF MISSOURI SYSTEMOrganization -The University of Missouri System (the"University"), a Federal land grant institution, conductseducation, research, public service, and relatedactivities, which include the University Health Systemand related health care facilities, principally at its fourcampuses in Columbia, Kansas City, Rolla and St. Louis.The University also administers a statewidecooperative extension service with centers located ineach county in the State. The University is acomponent unit of the state of Missouri (the "State")and is governed by a nine-member Board of Curatorsappointed by the state's Governor.The income generated by the University, as aninstrumentality unit of the State, is generally excludedfrom federal income taxes under Section 115 of theInternal Revenue Code. However, the Universityremains subject to income taxes on any net incomethat is derived from a trade or business, regularlycarried on and not in furtherance of the purpose forwhich it is exempt. No income tax provision has beenrecorded as the net income, if any, from unrelatedtrade or business income, is not material to thefinancial statements.Reporting Entity -As defined by generally acceptedaccounting principles established by the GovernmentalAccounting Standards Board ("GASB"), the financialreporting entity consists of the primary governmentand its component units. Component units are legallyseparate organizations for which the primarygovernment is financially accountable or the natureand significance of their relationships with the primarygovernment are such that exclusion would cause theprimary government's financial statements to bemisleading or incomplete.The University of Missouri-Columbia Medical Alliance(the "Medical Alliance") is considered a componentunit of the University according to the criteria in GASBStatement No. 14, The Financial Reporting Entity, andis discretely presented in the University's financialstatements. The Medical Alliance, a not-for-profitcorporation, provides an integrated health caredelivery system for mid-Missouri by establishingaffiliations with various medical facilities. The purposeof the Medical Alliance is to develop a network ofhealth care providers to support the missions of theUniversity Health System. The Capital Region MedicalCenter ("CRMC") in Jefferson City, Missouri, operatesas an affiliate of the Medical Alliance and providesinpatient, outpatient, and emergency care services tothe surrounding community. CRMC, a not-for-profitorganization that follows generally acceptedaccounting principles under the Financial AccountingStandards Board ("FASB"), is a discretely presentedcomponent unit of the Medical Alliance. The Universityappoints the Board of Directors of the Medical Allianceand can impose its will on the organization. Financialstatements for the Medical Alliance are not available.The University operates the University of MissouriRetirement, Disability, and Death Benefit Plan (the"Retirement Plan") and the University of MissouriOther Postemployment Benefits Plan (the "OPEB Plan,"which collectively with the Retirement Plan representthe "Pension Trust Funds"), which are single employer,defined benefit plans. The assets of the RetirementPlan and OPEB Plan are held in the Retirement Trustand OPEB Trust, respectively.Financial Statement Presentation -In accordance withGASB Statement No. 20, Accounting and FinancialReporting for Proprietary Funds and OtherGovernmental Entities That Use Proprietary FundAccounting, the University follows all applicable GASBpronouncements. In addition, the University applies allapplicable FASB Statements and Interpretations,Accounting Principles Board Opinions and AccountingResearch Bulletins issued on or before November 30,1989, except those that conflict with a GASBpronouncement. The University has elected not toapply FASB pronouncements issued after November30, 1989.Pursuant to GASB Statement No. 35, Basic FinancialStatement-and Management's Discussion and Analysis-for Public Colleges and Universities, the University'sactivities are considered to be a single business-typeactivity and accordingly, are reported in a singlecolumn in the financial statements. Business-typeactivities are those that are financed in whole or partby funds received by external parties for goods orservices.Basis of Accounting -The University's financialstatements have been prepared using the economic2011 Financial Report39 UNIVERSITY OF MISSOURI SYSTEMNOTES TO FINANCIAL STATEMENTSFor the Years Ended June 30, 2011 and 2010resource measurement focus and the accrual basis ofaccounting. Under the accrual basis, revenues arerecognized when earned and expenses are recordedwhen an obligation has been incurred, regardless ofthe timing of cash flows.On the Statement of Revenues, Expenses and Changesin Net Assets, the University defines operatingactivities as those generally resulting from an exchangetransaction. Nearly all of the University's expenses arefrom exchange transactions, which involve theexchange of equivalent values such as payments forgoods or services. Non-operating revenues orexpenses are those in which the University receives orgives value without directly giving or receiving equalvalue, such as State and Federal appropriations,Federal Pell grants, private gifts, and investmentincome.The financial statements for the Pension Trust Fundshave been prepared using the accrual basis ofaccounting, Benefits and refunds are recognized whendue and payable. Investments are reported at fairvalue. Combining financial statements for these fundsare presented in Note 15.Cash, Cash Equivalents and Investments -Cash andcash equivalents consist of the University's bankdeposits, repurchase agreements, money marketfunds, and other investments with original maturitiesof three months or less. Cash equivalents in fiscal year2010 also include variable rate demand notes, whichare debt securities with an original maturity beyondthree months, but with a demand feature that allowsfor liquidity with advance notice of no more thanseven days. For fiscal year 2011 the University did nothold any variable rate demand notes. Investmentassets are carried at fair value based primarily onmarket quotations. Purchases and sales ofinvestments are accounted for on the trade date basis.Investment settlements receivable and investmentsettlements payable represent investment transactionsoccurring on or before June 30, which settle after thatdate. Investment income is recorded on the accrualbasis. Net unrealized gains (losses) are included ininvestment and endowment income in the Statementof Revenues, Expenses and Changes in Net Assets.Nonmarketable alternative investments and certaincommingled funds are recorded based on valuationsprovided by the general partners of the respectivepartnerships. The University believes that the carryingvalue of these investments is a reasonable estimate offair value. Because alternative investments are notreadily marketable, the estimated value is subject touncertainty and therefore may differ materially fromthe value that would have been used had a readymarket for investments existed.Derivative instruments such as forward foreigncurrency contracts are recorded at fair value. TheUniversity enters into forward foreign currencycontracts to reduce the foreign exchange rateexposure of its international investments. Thesecontracts are marked to market, with the changes inmarket value being reported in investment andendowment income on the Statement of Revenues,Expenses, and Changes in Net Assets.Pledges Receivable -The University receivesunconditional promises to give through privatedonations (pledges) from corporations, alumni andvarious other supporters of the University. Revenue isrecognized when a pledge is received and all eligibilityrequirements, including time requirements, are met.These pledges have been recorded as pledgesreceivable on the Statement of Net Assets and asprivate or capital gift revenues on the Statement ofRevenues, Expenses, and Changes in Net Assets, at thepresent value of the estimated future cash flows. Anallowance of $6,482,000 and $5,761,000 as of June 30,2011 and 2010, respectively, has been made foruncollectible pledges based upon management'sexpectations regarding the collection of the pledgesand the University's historical collection experience.Inventories -These assets are stated at the lower ofcost or market. Cost is determined on an average costbasis except for University Health System's inventories,for which cost is determined using the first-in, first-outmethod.Capital Assets -If purchased, these assets are carriedat cost or, if donated, at fair value at the date of gift.Depreciation expense is computed using the straight-line method over the assets' estimated useful lives -generally ten to forty years for buildings andimprovements, eight to twenty-five years forinfrastructure, three to fifteen years for equipmentand twenty years for library materials. Net interestexpense incurred during the construction of debt-financed facilities is included when capitalizingZ402011 Financial Report UNIVERSITY OF MISSOURI SYSTEMNOTES TO FINANCIAL STATEMENTSFor the Years Ended June 30, 2011 and 2010resulting assets. The University capitalizes works ofart as these collections generally consist of historicalartifacts and artworks, they are consideredinexhaustible and not subject to depreciation. TheUniversity does not capitalize collections of historicaltreasures held for public exhibition, education,research, and public service. These collections are notdisposed of for financial gain and, accordingly, are notcapitalized for financial statement purposes. Proceedsfrom the sale, exchange, or other disposal of suchitems must be used to acquire additional items for thesame collection. Land is considered inexhaustible andis not subject to depreciation.Deferred Revenue -Deferred revenues are recognizedfor amounts received prior to the end of the fiscal yearbut related to the subsequent period, including certaintuition, fees, and auxiliary revenues. Deferredrevenues also include grant and contract amounts thathave been received but not yet earned.Net Assets -The University's net assets are classifiedas follows:Invested in Capital Assets, Net of Related Debtrepresents capital assets, net of accumulateddepreciation and outstanding principal debt balancesrelated to the acquisition, construction orimprovement of those assets.Restricted Nonexpendable net assets are subject toexternally imposed stipulations that the principal bemaintained in perpetuity, such as the University'spermanent endowment funds. The University's policypermits any realized and unrealized appreciation toremain with these endowments after the spendingdistribution discussed in Note 3.Restricted Expendable net assets are subject toexternally imposed stipulations on the University's useof the resources.Unrestricted net assets are not subject to externallyimposed stipulations, but may be designated forspecific purposes by the University's management orthe Board of Curators. Unrestricted net assets arederived from tuition and fees, sales and services,unrestricted gifts, investment income, and other suchsources, and are used for academics and the generaloperation of the University. When both restricted andunrestricted resources are available for expenditure,the University's policy is to first apply restrictedresources, and then the unrestricted resources.Tuition and Fees, Net of Scholarship Allowances -Student tuition and fees, housing, dining, and othersimilar auxiliary revenues are reported net of anyrelated scholarships and fellowships applied to studentaccounts. However, scholarships and fellowships paiddirectly to students are separately reported asscholarship and fellowship expenses.Patient Medical Services, Net -Patient medicalservices are primarily provided through University ofMissouri Hospitals and Clinics, Ellis Fischel CancerResearch Center, Columbia Regional Hospital, MissouriRehabilitation Center and University Physicians(collectively, the "University Health System"). TheUniversity Health System has agreements with third-party payors that provide for payments at amountsdifferent from established rates. Paymentarrangements include prospectively determined ratesper discharge, reimbursed costs, discount charges, andper diem payments. Net patient service revenue isreported at the estimated net realizable amounts frompatients, third-party payors, and others for servicesrendered, including estimated retroactive adjustmentsunder reimbursement agreements with third-partypayors. Retroactive adjustments are accrued on anestimated basis in the period the related services arerendered and adjusted in future periods as estimatesare refined and final settlements are determined. Netpatient service revenue is also shown net of estimateduncollectible accounts.Amounts receivable under Medicare and Medicaidreimbursement agreements are subject to examinationand certain retroactive adjustments by the relatedprograms. These adjustments decreased net patientservices revenues by $1,086,000 and $560,000 for theyears ended June 30, 2011, and 2010, respectively.The Medicaid program reimburses inpatient serviceson a prospective established per diem rate. TheMedicaid program reimburses outpatient servicesunder a combination of prospective and fee scheduleamounts.2011 FinanciaL Report141 UNIVERSITY OF MISSOURI SYSTEMNOTES TO FINANCIAL STATEMENTSFor the Years Ended June 30, 2011 and 2010For the years ended June 30, 2011 and 2010, theUniversity Health System's percentage of gross patientaccounts receivable classified by major payor is asfollows:Table 1.1 -Percentage of Gross Patient AccountsReceivable (by Major Payor)2011 2010Medicare 24% 23%Commercial Insurance 7% 4%Medicaid 22% 25%Self Pay & Other 18% 17%Managed Care Agreements 29% 31%100% 100%Patient services revenue includes the State of MissouriFederal Reimbursement Allowance Program (FRAProgram) for uncompensated care. The Health Systemrecognizes FRA Program revenue in the period earned.The Statement of Revenues, Expenses and Changes inNet Assets reflect the gross to net patient medicalservices revenue as follows:Table 1.2 -Gross to Net Patient Medical ServicesRevenue (in thousands)2011 2010Patient Medical ServicesRevenue, Gross $1,657,707 $ 1,561,797Deductions for Contractuals (818,601) (773,731)Deductions for Bad Debt (75,432) (51,267)Patient Medical ServicesRevenue, Net $ 763,674 $ 736,799New Accounting Pronouncements -Effective for fiscalyear 2011, the University adopted GASB Statement No.59, Financial Instruments Omnibus, which updates andimproves existing standards regarding financialreporting and disclosure requirements of certainfinancial instruments and external investment pools.Adoption of GASB Statement No. 59 had no effect onthe University's financial statements.Effective for fiscal year 2010, the University adoptedGASB Statement No. 53, Accounting and FinancialReporting for Derivative Instruments. In adopting thisstandard, University recognized the effect of a changein accounting principle, which decreased net assets by$6,163,000 for the prior periods decrease in fair valueof the qualifying derivative instrument. Changes in fairvalue in reporting periods subsequent to fiscal year2010 are reported as current year investment income.Use of Estimates -The preparation of financialstatements, in conformity with U.S. generally acceptedaccounting principles, requires management to makeestimates and assumptions that affect the reportedamounts of assets and liabilities and disclosure ofcontingent assets and liabilities at the date of thefinancial statements, and the reported amounts ofrevenues and expenses during the reporting period.Actual results could differ from those estimates.DISCRETELY PRESENTED COMPONENT UNIT-MEDICAL ALLIANCENature of Operations -The Curators of the Universityof Missouri, for and on behalf of the University HealthSystem, and CRMC entered into an AffiliationAgreement dated August 5, 1997. Pursuant to theAffiliation Agreement, the University created theMedical Alliance. The Medical Alliance then becamethe sole member of CRMC. The Medical Alliance'spurpose is to develop a network of healthcareproviders to support the missions of the UniversityHealth System.CRMC operates as a two-hospital system, whichconsists of the Southwest Campus and MadisonCampus complemented by community medical clinics.CRMC primarily earns revenues by providing inpatient,outpatient, and emergency care services to patients inJefferson City, Missouri. It also operates medicalclinics in the surrounding communities. The operatingresults of the facilities and clinics are included in thesefinancial statements. CRMC is served by a group ofadmitting physicians that account for a significantportion of CRMC's net revenues. Additionally, CRMC isalso associated with the Capital Region MedicalFoundation, which is intended to support the interestof CRMC through its fundraising activities.Net Assets -As a not-for-profit organization, theMedical Alliance records its net assets in accordancewith Financial Accounting Standards Board AccountingStandards Codification 958-205 Not-for-Profit EntitiesPresentation of Financial Statements. For presentationwithin the accompanying basic financial statements,the net assets are redistributed amongst the net assetcomponents defined by GASB Statement No. 34.Capital Assets -Capital Assets are recorded at costand depreciated on a straight-line basis over theestimated useful life of each asset following guidelines2011 Financial. Report UNIVERSITY OF MISSOURI SYSTEMNOTES TO FINANCIAL STATEMENTSFor the Years Ended ]une 30, 2011 and 2010of the American Hospital Association. Equipmentunder capital lease obligations is amortized on thestraight-line basis over the shorter period of the leaseterm or the estimated useful life of the equipment.Interest cost incurred on borrowed funds during theperiod of construction of capital assets is capitalized asa cost of acquiring those assets.Net Patient Medical Service Revenue -Net patientmedical service revenue is reported at the netamounts to be realized from patients, third-partypayers, and others for services rendered, includingestimated retroactive adjustments for reimbursementagreements with third-party payers. Retroactiveadjustments are estimated and accrued in the periodthe related services are provided, and these amountsare adjusted in future periods as final settlements aredetermined.2. CASH AND CASH EQUIVALENTSCustodial Credit Risk -The custodial credit risk fordeposits is the risk that in the event of bank failure, theUniversity's deposits may not be recovered. State lawrequires collateralization of all deposits with federaldepository insurance, bonds and other obligations ofthe U.S. Treasury, U.S. Agencies and instrumentalitiesof the state of Missouri; bonds of any city, county,school district or special road district of the state ofMissouri; bonds of any state; or a surety bond havingan aggregate value at least equal to the amount of thedeposits. The University's cash deposits were fullyinsured or collateralized at June 30, 2011 and 2010,respectively.3. INVESTMENTSInvestment policies are established by the Board ofCurators ("the Board"). The policies ensure that fundsare managed in accordance with Section 105.688 ofthe Revised Statutes of Missouri and prudentinvestment practices. Additionally, investment policiesestablished by the Board with respect to theRetirement Trust and Other Postemployment Benefit("OPEB") Trust (collectively referred to as "PensionTrust Funds") and the Endowment Funds specificallyrecognize the fiduciary duties set forth in Section105.688 of the Revised Statutes of Missouri. The useof external investment managers has been authorizedby the Board.Substantially all University cash and investments aremanaged centrally, generally in the followinginvestment pools:General Pool -General Pool contains short-termUniversity funds, including but not limited to cash andreserves, operating funds, bond funds, and plant funds.Subject to various limitations contained within thecorresponding investment policy, the University'sinternally managed General Pool may be invested inthe following instruments: U.S. Governmentsecurities; U.S. Government Agency securities; U.S.Government guaranteed securities; investment gradecorporate bonds; certificates of deposit; repurchaseagreements; commercial paper; and other similarshort-term investment instruments of like or betterquality. A limited component of the General Pool maybe invested in the University's Balanced Pool; at June30, 2011 and 2010, 17.7% and 18.0%, respectively, ofGeneral Pool funds were invested in the Balanced Pool(refer to "Endowment Funds" below). The GeneralPool's total return, including unrealized gains andlosses, was 5.7% and 5.2% for the years ended June 30,2011 and 2010, respectively.Endowment Funds -When appropriate andpermissible, endowment and similar funds are pooledfor investment purposes, with the objective ofachieving long-term returns sufficient to preserveprincipal by protecting against inflation and to meetendowment spending targets.The Balanced Pool, which is externally managed, is theprimary investment vehicle for endowment funds.Subject to various limitations contained within thecorresponding investment policy, the Balanced Pool isallowed to invest in the following asset sectors: U.Sand international equity, emerging markets debt andequity, absolute return strategies, private equity, realestate, global fixed income, high yield fixed income,bank loans, and Treasury inflation-protected securities.The Balanced Pool's total return, including unrealizedgains and losses, was 21.5% and 11.4% for the yearsended June 30, 2011 and 2010, respectively.The Fixed Income Pool, which is internally managed, isan additional investment vehicle for endowmentfunds. Fixed Income Pool asset sectors include debtsecurities issued by the U.S. government and itsagencies, corporate bonds, commercial paper, andrepurchase agreements. The Fixed Income Pool's total2011 Financial. Report3/A3 UNIVERSITY OF MISSOURI SYSTEMNOTES TO FINANCIAL STATEMENTSFor the Years Ended 3une 30, 2011 and 2010return, including unrealized gains and losses, was 2.1%and 6.9% for the years ended June 30, 2011 and 2010,respectively.If a donor has not provided specific restrictions, statelaw permits the Board to appropriate an amount of theEndowment Funds' net appreciation, realized andunrealized, as the Board considers to be prudent. Inestablishing this amount, the Board is required toconsider the University's long- and short-term needs,present and anticipated financial requirements,expected total return on investments, price leveltrends, and general economic conditions. Further, anyexpenditure of net appreciation is required to be forthe purposes for which the endowment wasestablished. Inclusive of both realized and unrealizedgains and losses on investments, donor-restrictedendowments experienced net appreciation ofapproximately $105,184,000 in fiscal year 2011, ascompared to approximately $52,142,000 in fiscal year2010.The Board has adopted the total return concept (yieldplus change in market value) in determining thespendable return for endowments and similar funds.Annually, the spending formula distributes 5% of atrailing 12-quarter average of the endowment's totalmarket value, with the understanding that thisspending rate over the long term will not exceed thetotal real return (net of inflation). However, to achieveuniformity from year to year, the actual amount madeavailable in any given year will be not less than 96% ormore than 106% of the prior year's expenditure. Inaddition, the University distributes 1% of the trailing12-quarter average of the endowment's total marketvalue to support internal endowment administrationand development functions.PENSION TRUST FUNDSThe Retirement Trust and the OPEB Trust hold theassets of the Retirement Plan and OPEB Plan,respectively. Subject to various limitations containedwithin the corresponding investment policy, theexternally-managed Retirement Trust is allowed toinvest in the following asset sectors: U.S andinternational equity, emerging markets debt andequity, absolute return strategies, private equity, realestate, global fixed income, high yield fixed income,bank loans, and Treasury inflation-protected securities.The Retirement Trust's total return, includingunrealized gains and losses, was 18.9% and 12.7% forthe years ended June 30, 2011 and 2010, respectively.The OPEB Trust held $45,748,000 and $38,417,000 atJune 30, 2011 and 2010, respectively. The OPEB Trustis invested in a money market mutual fund rated AAAand a global bond fund. The OPEB Trust has no otherinvestments.LA42011 Financial Report UNIVERSITY OF MISSOURI SYSTEMNOTES TO FINANCIAL STATEMENTSFor the Years Ended 3une 30, 2011 and 2010At June 30, 2011 and 2010, the University and Pension Trust Funds held the following types of investments:Table 3.1 -Investments by Type (in thousands)University of MissouriUniversity of Missouri Pension Trust FundsAs of June 30, 2011 2010 2011 2010Debt Securities:U.S. Treasury Obligations $ 273,832 $ 282,345 $ 382,163 $ 408,769U.S. Agency Obligations 779,507 688,890 3,829 1,030Asset-Backed Securities 263,093 21,029 97,335 43,899Government- Foreign 60,503 68,633 124,731 145,515Corporate -Domestic 255,279 253,453 201,846 174,629Corporate -Foreign 69,365 57,539 175,076 132,720Equity Securities:Domestic 212,457 161,762 261,413 226,780Foreign 192,201 154,454 346,387 245,073Commingled Funds:Absolute Return 62,819 56,984 139,068 127,788Debt Securities -Global -17,614Debt Securities -Domestic 42,190 33,568 146,099 139,757Debt Securities -Foreign 63,891 55,745 142,197 124,241Equity Securities -Domestic 146,424 73,118 190,315 140,390Equity Securities -Foreign 169,426 127,763 297,546 228,139Real Estate 18,387 13,933 52,596 45,949Nonma rketable Alternative Investments:Real Estate 29,786 21,465 67,445 60,766Private Equity 47,747 31,160 107,454 75,736Other 32,529 32,111 15,022 19,442Total Investments 2,719,436 2,133,952 2,768,136 2,340,623Money Market Funds 33,715 124,216 50,199 76,768Commercial Paper 162,100 160,275 -Va ri a bl e Rate Demand Notes -29,700 -Other 25,472 13,122 66,017 11,682Total Cash and Cash Equivalents 221,287 327,313 116,216 88,450Total Investments and Cash andCash Equivalents $ 2,940,723 $ 2,461,265 $ 2,884,352 $ 2,429,073Custodial Credit Risk -For investments, custodialcredit risk is the risk that in the event of failure of thecounterparty to a transaction, the University will notbe able to recover the value of the investments held byan outside party. In accordance with its policy, theUniversity minimizes custodial credit risk byestablishing limitations on the types of instrumentsheld with qualifying institutions. Repurchaseagreements must be collateralized by U.S. Governmentissues and/or U.S. Government Agency issues. AllUniversity and Pension Trust Fund investments areinsured or registered and are held by the University,the Pension Trust Funds or an agent in its name.Concentration of Credit Risk -Concentration of creditrisk is the risk associated with a lack of diversification,such as having substantial investments in a fewindividual issuers, thereby exposing the organization togreater risks resulting from adverse economic,political, regulatory, geographic or creditdevelopments. The investment policies for theGeneral Pool, Endowment Funds, and Retirement Trustall specify diversification requirements across assetsectors. The investment policy for the General Poolhas specific single issuer limits in place for corporatebonds and commercial paper.2011 Financiat Report UNIVERSITY OF MISSOURI SYSTEMNOTES TO FINANCIAL STATEMENTSFor the Years Ended June 30, 2011 and 2010As of June 30, 2011, of the University's totalinvestments and cash and cash equivalents, 16.0% areissues of the Federal Home Loan Bank (FHLB) and 9.4%are issues of Federal National Mortgage Association(FNMA). As of June 30, 2010, of the University's totalinvestments and cash and cash equivalents, 15.3% areissues of FHLB and 10.2% are issues of FNMA.At June 30, 2011 and 2010, the Pension Trust Fundsdid not contain investments from any single issuer thatexceeded 5% of the total portfolio.Investments issued or guaranteed by the U.S.government as well as investments in mutual fundsand other pooled investments are excluded fromconsideration when evaluating concentration risk.Credit Risk -Debt securities are subject to credit risk,which is the chance that an issuer will fail to payinterest or principal in a timely manner, or thatnegative perceptions of the issuer's ability to makethese payments will cause security prices to decline.These circumstances may arise due to a variety offactors such as financial weakness, bankruptcy,litigation and/or adverse political developments.Certain debt securities, primarily obligations of the U.S.government or those explicitly guaranteed by the U.S.government, are not considered to have credit risk.Nationally recognized statistical rating organizations,such as Moody's and Standard & Poor's (S&P), assigncredit ratings to security issues and issuers thatindicate a measure of potential credit risk to investors.Debt securities considered investment grade are thoserated at least Baa by Moody's and BBB by S&P. ForGeneral Pool investments, the following minimumcredit ratings have been established to manage creditrisk: minimum long-term rating of A or better by S&P,with minimum rating of A-i/P-1 for commercial paperand other short-term securities. For EndowmentFunds and Retirement Trust investments, therespective investment policies allow for a blend ofdifferent credit ratings, subject to certain restrictionsby asset sector. In all cases, disposition of securitieswhose ratings have been downgraded after purchase isgenerally left to the discretion of the respectiveinvestment manager after consideration of individualfacts and circumstances.All holdings of commercial paper and variable ratedemand notes were rated A-i/P-1 or better at June 30,2011 and 2010. All holdings of money market fundswere rated AAA at June 30, 2011 and 2010.2011 FinanciaL Report UNIVERSITY OF MISSOURI SYSTEMNOTES TO FINANCIAL STATEMENTSFor the Years Ended 3une 30, 2011 and 2010Based on investment ratings provided by Moody's or S&P, the University's and Pension Trust Funds' credit riskexposure as of June 30, 2011 and 2010, is as follows:Table 3.2 -Debt Securities by Type and Credit Rating (in thousands)As of June 30,U.S. Treasury ObligationsU.S. Agency ObligationsAsset-Backed SecuritiesMortgage Backed SecuritiesGuaranteed by U.S. AgenciesAa a /AAAAa /AAA/ABaa/BBBBa/BB and lowerUnratedGovernment -ForeignAa a /AAAAa/AAA/ABaa/BBBBa/BB and lowerUnratedCorporate -DomesticAa a/AAAAa/AAA/ABaa/BBBBa/BB and lowerUnratedCorporate -ForeignAa a/AAAAa/AAA/ABaa/BBBBa/BB and lowerUnratedUniversity of Missouri2011 2010$ 273,832 $ 282,345779,507 688,890University of MissouriPension Trust Funds2011 2010$ 382,163 $ 408,7693,829 1,030253,7213,8595351,6425709791,78717,6418,9959,5363,13521,1967,62859,483151,6931,11132,0663,29810,9424,5207961,7142519531,85335,67413,83610,1081,9897,0267,73767,545145,02899128,5543,59869,67017,1964,7662,279532,75561638,00817,94117,7878854,09246,0186,24110,68428,6646,207144,7155,33561,63828,11540,3029,01113,61822,39218,66315,2133,4383,0761,0182,49183,67922,29019,7932,38317,3702,9706,83325,9665,953124,7408,16765,99014,24724,1983,0259,46615,79432,3768,53517,4652,6812,7615,54730,8645,68212,7979232,1605,113Total $ 1,701,579 $ 1,371,889 $ 984,980 $ 906,562Interest Rate Risk -Interest rate risk is the risk thatchanges in interest rates over time will adversely affectthe fair value of an investment. Debt securities withlonger maturities are likely to be subject to morevariability in their fair values as a result of futurechanges in interest rates. Neither the University northe Pension Trust Funds have a formal policy thataddresses interest rate risk; rather, such risk ismanaged by each individual investment manager, asapplicable.The University and Pension Trust Funds haveinvestments in asset-backed securities, which consistprimarily of mortgage-backed securities guaranteed byU.S. agencies and corporate collateralized mortgageobligations. These securities are based on cash flowsfrom principal and interest payments on theunderlying securities. An asset-backed security mayhave repayments that vary significantly with changes inmarket interest rates.2011 FinanciaL ReportL47 UNIVERSITY OF MISSOURI SYSTEMNOTES TO FINANCIAL STATEMENTSFor the Years Ended 3une 30, 2011 and 2010Table 3.3 presents the contractual final maturities of the University's and Pension Trust Funds' debt securities,which are not intended to reflect actual projected cash flows, as of June 30, 2011 and 2010, respectively:Table 3.3 -Debt Securities by Type and Maturity (in thousands)University of MissouriUniversity of Missouri Pension Trust FundsAs of June 30, 2011 2010 2011 2010U.S. Treasury ObligationsLess than 1 Year $ 10,247 $ 3,822 $ 18,988 $ 2,1511-5 Years 117,493 119,210 125,645 135,4756-10 Years 107,028 116,229 110,596 137,655More than 10 Years 39,064 43,084 126,934 133,488Total U.S Treasury Obligations 273,832 282,345 382,163 408,769U.S. Agency ObligationsLess than 1 Year 144,797 30,023 50 5 Years 301,861 342,720 2,814 516-10 Years 255,763 214,343 965 979More than 10 Years 77,086 101,804 --Total U.S. Agency Obligations 779,507 688,890 3,829 1,030Asset-Backed SecuritiesLess than 1 Year 24 -73 5 Years 266 1,091 502 3,1746-10 Years 16,818 1,018 14,697 2,376More than 10 Years 245,985 18,920 82,063 38,349Total Asset-Backed Securities 263,093 21,029 97,335 43,899Government -ForeignLess than 1 Year 1,733 3,306 3,910 17,1391-5 Years 21,961 23,377 44,877 43,1326-10 Years 27,119 28,376 55,098 56,595More than 10 Years 9,690 13,574 20,846 28,649Total Government- Foreign 60,503 68,633 124,731 145,515Corporate -DomesticLess than 1 Year 33,377 28,620 3,798 4,2771-5 Years 154,297 172,229 54,400 51,4606-10 Years 58,197 48,272 121,242 105,798More than 10 Years 9,408 4,332 22,406 13,094Tota Corporate- Domestic 255,279 253,453 201,846 174,629Corporate -ForeignLess than 1 Year 10,156 5,116 22,466 13,8671-5 Years 39,248 37,319 103,927 82,3286-10 Years 12,406 9,614 36,824 25,131More than 10 Years 7,555 5,490 11,859 11,394Total Corporate -Foreign 69,365 57,539 175,076 132,720Total Debt Securities $1,701,579 $1,371,889 $ 984,980 $ 906,562Foreign Exchange Risk -Foreign exchange risk is therisk that investments denominated in foreigncurrencies may lose value due to adverse fluctuationsin the value of the U.S. dollar relative to foreigncurrencies.University and Retirement Trust investment policiesallow for exposure to non-U.S. dollar denominatedequities and fixed income securities, which may befully or partially hedged using forward foreign currencyexchange contracts.1482011 Financial Report UNIVERSITY OF MISSOURI SYSTEMNOTES TO FINANCIAL STATEMENTSFor the Years Ended June 30, 2011 and 2010At June 30, 2011 and 2010, 17.3%, of the University'stotal investments and cash and cash equivalents weredenominated in foreign currencies. Forward foreigncurrency contracts with notional amounts totaling$143,522,000 and $138,042,000 were in place at June30, 2011 and 2010, respectively. At June 30, 2011 and2010, 34.7% and 32.7%, respectively, of the PensionTrust Funds' total investments and cash equivalentswere denominated in foreign currencies. Forwardforeign currency contracts with notional amountstotaling $268,761,000 and $310,673,000 were in placeat June 30, 2011 and 2010, respectively.The University's and Pension Trust Funds' exposure to foreign exchange risk as of June 30, 2011 and 2010:Table 3.4 -Foreign Exchange Risk (in thousands)University of Missouri2011 2010University of MissouriPension Trust Funds2011 2010As of June 30,Debt SecuritiesEuroAustralian DollarCanadian DollarBritish Pound SterlingJapanese YenDanish KroneMalaysian RinggitSouth Korean WonSingapore DollarMexican New PesoSwedish KronaOther$ 46,2848,0973,8348,5146,2441,9092,1953,1362,2092,9342,9405,65793.953$51,6259,8406,1266,5288,5872,9002,6032,2402,2012,1455264,27099.591$ 118,21615,89710,85417,7779,8933,3703,8975,7593,5425,1785,65311,857211.893$ 123,65819,94017,63113,72411,0195,3564,5173,9423,6523,4861,0597,047215.031Equity SecuritiesEuro 60,033 49,195 105,903 75,677Japanese Yen 34,461 30,136 60,967 47,141British Pound Sterling 37,169 26,514 68,568 41,599Australian Dollar 8,119 7,078 16,739 10,501Canadian Dollar 8,966 5,210 13,340 8,733Swiss Franc 15,001 10,868 28,455 19,256Hong Kong Dollar 6,868 4,891 13,540 8,459Swedish Krona 1,646 1,321 4,296 3,135Other 4,653 3,064 13,691 5,936176,916 138,277 325,499 220,437Commingled FundsVarious currency denominations:Debt Securities -Global --17,614 -Debt Securities -Foreign 63,891 55,745 142,197 124,241Equity Securities -Foreign 169,426 127,763 297,546 228,139233,317 183,508 457,357 352,380Cash and Cash EquivalentsEuro 2,529 4,311 4,197 5,357Japanese Yen 605 147 474 365British Pound Sterling 364 179 163 477Other 419 223 825 7083,917 4,860 5,659 6,907Total Exposure to Foreign Exchange Risk $ 508,103 $ 426,236 $1,000,408 $ 794,7552011 Financial. ReportZ49 UNIVERSITY OF MISSOURI SYSTEMNOTES TO FINANCIAL STATEMENTSFor the Years Ended June 30, 2011 and 2010Commingled Funds -Includes Securities and ExchangeCommission regulated mutual funds and externallymanaged funds, limited partnerships, and corporatestructures which are generally unrated andunregulated. Certain commingled funds may usederivatives, short positions and leverage as part oftheir investment strategy. These investments arestructured to limit risk exposure to the amount ofinvested capital. Commingled funds have liquidity(redemption) provisions, which enable the Universityand Pension Trust Funds to make full or partialwithdrawals with notice, subject to restrictions on thetiming and amount.Of the University's and Pension Trust Funds'commingled funds at June 30, 2011, approximately87% and 85%, respectively, are redeemable within 90days, with the remaining redeemable within one year.Nonmarketable Alternative Investments -Consists oflimited partnerships involving an advance commitmentof capital called by the general partner as needed anddistributions of capital and return on invested capitalas underlying strategies are concluded during the lifeof the partnership. The committed but unpaidobligation to these limited partnerships is furtherdiscussed in Note 11.Securities Lending Transactions -The University andPension Trust Funds each participate in an externalinvestment pool securities lending program toaugment income. The program is administered by thecustodial agent bank, which lends equity, governmentand corporate securities for a predetermined period oftime to an independent broker/dealer (borrower) inexchange for collateral. Collateral may be cash, U.S.Government securities, defined letters of credit orother collateral approved by the University or PensionTrust Funds. Loaned domestic securities are initiallycollateralized at 102% of their fair value, while loanedinternational securities are collateralized at 105% offair value. Exposure to credit risk from borrowerdefault has been minimized by having the custodialagent bank determine daily that required collateralmeets a minimum of 100% of the fair value of loaneddomestic securities and 105% for loaned internationalsecurities.For the University, at June 30, 2011 and 2010, therewere a total of $101,582,000 and $120,792,000,respectively, of securities out on loan to borrowers.The value of collateral received from the borrower forthese securities consisted of $101,047,000 cash and$3,687,000 noncash collateral at June 30, 2011 and$111,557,000 cash and $12,553,000 noncash collateralat June 30, 2010.For the Pension Trust Funds, at June 30, 2011 and2010, there were a total of $272,633,000 and$302,918,000, respectively, of securities out on loan toborrowers. The value of collateral received from theborrower for these securities consisted of$257,463,000 cash and $15,525,000 noncash collateralat June 30, 2011 and $277,747,000 cash and$31,925,000 noncash collateral at June 30, 2010.Cash collateral received from the borrower is investedby the custodial agent bank in investment pools in thename of the University and Pension Trust Funds, withguidelines approved by each. These investments areshown as Investment of Cash Collateral in theStatement of Net Assets and reported at fair value,with changes in market value recorded in Investmentand Endowment Income on the Statement ofRevenues, Expenses, and Changes in Net Assets.Noncash collateral received for securities lendingactivities is not recorded as an asset because theUniversity and Pension Trust Funds do not have theability to pledge or sell such collateral unless theborrower defaults.The University and Pension Trust Funds continue toreceive interest and dividends during the loan period.The maturities of the investments made with the cashcollateral generally match the maturities of thesecurities lent. At June 30, 2011 and 2010, neither theUniversity nor the Pension Trust Funds have any creditrisk exposure arising from the actual securities lendingtransactions since the collateral received from theborrower exceeds the value of the securities lent.Further, the University and Pension Trust Funds arefully indemnified by the custodial bank against anylosses incurred as a result of borrower default.so2011 Financial Report UNIVERSITY OF MISSOURI SYSTEMNOTES TO FINANCIAL STATEMENTSFor the Years Ended June 30, 2011 and 2010DISCRETELY PRESENTED COMPONENT UNIT-MEDICAL ALLIANCEInvestments -The investment policies of MedicalAlliance are established by its board of directors. Thepolicies are established to ensure that Medical Alliancefunds are managed in accordance with the "PrudentMan Rule."Medical Alliance investments are presented at fairvalue in accordance with FASB Accounting StandardsUpdate 820, which establishes a fair value hierarchythat prioritizes the inputs to valuation techniques usedto measure fair value. The hierarchy gives the highestpriority to unadjusted quoted prices in active marketsfor identical assets or liabilities and the lowest priorityto measurements involving significant unobservableinputs. The three levels of the fair value hierarchy areas follows: Level 1 -Quoted prices in active marketsfor identical assets that the Medical Alliance has theability to access at the measurement date; Level 2 -Inputs other than quoted market prices included inLevel 1, that are observable for the asset, eitherdirectly or indirectly; and, Level 3 -Inputs that areunobservable for the asset. The level in the fair valuehierarchy within which a fair value measurement in itsentirety falls is based on the lowest level input that issignificant to the fair value measurement in itsentirety.At June 30, 2011 and 2010, Medical Alliance held thefollowing investments:Table 3.5 -Medical Alliance Cash, CashEquivalents, and InvestmentsAsofJune30, (in thousands) 2011 2010Fair Value- Level 1Money Market Accounts $ 19,671 $ 21,982Federal Farm Callable Note 4,996 -Certificates of Deposit 13,614 10,641Corporate Bonds 5,025 3,173U.S. Treasury Obligations 74 74Cash and Other Cash Equivalents 7,020 5,944Total Fair Value- Level 1 50,400 41,814Fair Value- Level 2Mortgage-Backed Securities 18,006 14,500Repurchase Agreements -3,071Total Fair Value- Level 2 18,006 17,571Total Cash, Cash Equivalents,and Investments $ 68,406 $ 59,385L4. ACCOUNTS RECEIVABLEAccounts receivable at June 30, 2011 and 2010, aresummarized as follows:Table 4.1 -Accounts Receivable (in thousands)2011 2010Grants and Contracts $ 57,256 $ 68,687Federal Appropriations 5,277 7,152State Appropriations and StateBond Funds 573 7,221Student Fees and Other AcademicCharges 91,035 93,850University Health System PatientServices, Net of ContractualAllowances 100,939 103,110Medical Resident FICA Refundand Related Income 30,787Subtotal 285,867 280,020Less Provisions for Loss:Grants & Contracts 730 445University Health System PatientServices 23,809 23,656Student Fees and OtherAcademic Charges 5,739 6,459Subtotal 30,278 30,560Total Accounts Receivable, Net $255,589 $249,4605. NOTES RECEIVABLENotes receivable generally consist of resourcesavailable for financial loans to students. Theseresources are provided through Federal loan programsand University loan programs generally funded byexternal sources. Notes receivable at June 30, 2011and 2010, are summarized as follows:Table 5.1 -Notes Receivable (in thousands)2011 2010Federal Health Profession Loans $ 16,097 $ 14,643Carl D. Perkins National Loans 28,992 30,381University Loan Programs 18,501 18,225Other 2,614 -Subtotal 66,204 63,249Less Provisions for Loss 3,657 3,568Total Notes Receivable, Net $ 62,547 $ 59,6812011 Financial Report51 UNIVERSITY OF MISSOURI SYSTEMNOTES TO FINANCIAL STATEMENTSFor the Years Ended June 30, 2011 and 20106. CAPITAL ASSETSUNIVERSITY OF MISSOURICapital assets activity for the years ended June 30, 2011 and 2010, is summarized as follows:Table 6.1 -Capital Assets (in thousands)2011 2011Beginning EndingBalance Additions Retirements BalanceCapital Assets, Nondepreciable:Land $ 72,857 $ 2,231 $ -75,088Artwork and Historical Artifacts 12,624 116 12,740Construction in Progress 156,601 (26,385) 130,216Total Capital Assets, Nondepreciable 242,082 (24,038) 218,044Capital Assets, Depreciable:Buildings and Improvements 2,754,619 167,452 (2,603) 2,919,468Infrastructure 267,063 50,851 (363) 317,551Equipment 634,360 64,944 (18,982) 680,322Library Materials 240,590 7,349 -247,939Total Capital Assets, Depreciable 3,896,632 290,596 (21,948) 4,165,280Less Accumulated Depreciation:Buildings and Improvements 937,541 79,662 (1,641) 1,015,562Infrastructure 113,990 12,129 (175) 125,944Equipment 402,165 55,357 (16,508) 441,014Library Materials 150,653 7,955 -158,608Total Accumulated Depreciation 1,604,349 155,103 (18,324) 1,741,128Total Capital Assets, Depreciable, Net 2,292,283 135,493 (3,624) 2,424,152Total Capital Assets, Net $2,534,365 $ 111,455 $ (3,624) $ 2,642,1962010 2010Beginning Additions/ EndingBalance Transfers Retirements BalanceCapital Assets, Nondepreciable:Land $ 69,325 $ 3,758 $ (226) $ 72,857Artwork and Historical Artifacts 11,854 775 (5) 12,624Construction in Progress 118,895 37,706 -156,601Total Capital Assets, Nondepreciable 200,074 42,239 (231) 242,082Capital Assets, Depreciable:Buildings and Improvements 2,587,249 168,782 (1,412) 2,754,619Infrastructure 252,454 14,622 (13) 267,063Equipment 592,429 64,890 (22,959) 634,360Library Materials 235,517 5,073 -240,590Total Capital Assets, Depreciable 3,667,649 253,367 (24,384) 3,896,632Less Accumulated Depreciation:Buildings and Improvements 858,606 80,053 (1,118) 937,541Infrastructure 102,703 11,287 -113,990Equipment 369,360 54,290 (21,485) 402,165Library Materials 144,202 6,451 -150,653Total Accumulated Depreciation 1,474,871 152,081 (22,603) 1,604,349Total Capital Assets, Depreciable, Net 2,192,778 101,286 (1,781) 2,292,283Total Capital Assets, Net $2,392,852 $ 143,525 $ (2,012) $2,534,365522011 Financial Report UNIVERSITY OF MISSOURI SYSTEMNOTES TO FINANCIAL STATEMENTSFor the Years Ended June 30, 2011 and 2010The estimated cost to complete construction inprogress at June 30, 2011, is $582,808,000 of which$231,306,000 is available from unrestricted net assets.The remaining costs are expected to be funded from$31,927,000 of gifts, $16,186,000 of grants, and$303,389,000 of bond proceeds.Capital assets include a building facility under a capitallease of $8,332,000 and related accumulateddepreciation of $4,895,000 and $4,478,000 at June 30,2011 and 2010, respectively, and equipment under acapital lease of $964,000 and related accumulateddepreciation of $362,000 and $181,000 at June 30,2011 and 2010, respectively.DISCRETELY PRESENTED COMPONENT UNIT-MEDICAL ALLIANCECapital assets at June 30, 2011 and 2010 aresummarized as follows:Table 6.2 -Medical Alliance -Capital Assets(in thousands) 2011 2010Land & Improvements $ 6,670 $ 6,482Buildings 113,990 112,740Movable Equipment 73,931 72,899Construction in Progress 734 702195,325 192,823Less Accumulated Depreciation 126,304 119,139Total Capital Assets, Net $ 69,021 $ 73,6848. OTHER NONCURRENT LIABILITIESTable 8.1 -Other Noncurrent Liabilities (in thousands)7. ACCRUED LIABILITIESAccrued liabilities at June 30, 2011 and 2010, aresummarized as follows:Table 7.1 -Accrued Liabilities (in thousands)2011 2010Accrued Salaries, Wages & Benefits $ 52,831 $ 51,095Accrued Vacation 42,877 42,393Accrued Self Insurance Claims 37,592 37,004Accrued Interest Payable 10,047 7,817Total Accrued Liabilities $143,347 $138,309Beginning of Total End of Less Current NoncurrentFiscal Year 2011 Year Additions Payments Year Portion End of YearAccrued Vacation $ 55,741 $ 40,111 $ (39,165) $ 56,687 $ (42,877) $ 13,810Accrued Self-Insurance Claims 77,501 194,051 (198,603) 72,949 (37,592) 35,357$ 133,242 $ 234,162 $ (237,768) $ 129,636 $ (80,469) $ 49,167Beginning of Total End of Less Current NoncurrentFiscal Year 2010 Year Additions Payments Year Portion End of YearAccrued Vacation $ 54,986 $ 39,602 $ (38,847) $ 55,741 $ (42,393) $ 13,348Accrued Self-Insurance Claims 73,266 191,350 (187,115) 77,501 (37,004) 40,497$ 128,252 $ 230,952 $ (225,962) $ 133,242 $ (79,397) $ 53,8452011 Financial. Report53 UNIVERSITY OF MISSOURI SYSTEMNOTES TO FINANCIAL STATEMENTSFor the Years Ended June 30, 2011 and 20109. LONG-TERM DEBTThe University's outstanding debt at June 30, 2011 and 2010, with corresponding activity, is as follows:Table 9.1 -Long-Term Debt (in thousands)Beginning Ending CurrentAs of June 30, 2011 Balance Additions Reductions Balance PortionSystem Facilities Revenue Bonds -Fixed $ 919,725 $ 252,285 $ (27,765) $1,144,245 $ 25,195System Facilities Revenue Bonds -Variable 224,925 -(1,245) 223,680 2,795Unamortized Premium 25,000 -(1,538) 23,462 -Unamortized Loss on Defeasance (9,755) -593 (9,162) -Net System Facilities Revenue Bonds 1,159,895 252,285 (29,955) 1,382,225 27,990Notes Payable 1,686 -(390) 1,296 328Capital Lease Obligations 8,144 -(739) 7,405 789Total Long-Term Debt $1,169,725 $ 252,285 $ (31,084) $1,390,926 $ 29,107Beginning Ending CurrentAs of June 30, 2010 Balance Additions Reductions Balance PortionSystem Facilities Revenue Bonds -Fixed $ 610,185 $ 332,060 $ (22,520) $ 919,725 $ 27,765System Facilities Revenue Bonds -Variable 226,120 -(1,195) 224,925 1,245Unamortized Premium 20,967 5,544 (1,511) 25,000 -Unamortized Loss on Defeasance (10,348) -593 (9,755) -Net System Facilities Revenue Bonds 846,924 337,604 (24,633) 1,159,895 29,010Capital Project Notes -125,000 (125,000) --Notes Payable 2,064 -(378) 1,686 390Capital Lease Obligations 8,973 -(829) 8,144 739Total Long-Term Debt $ 857,961 $ 462,604 $ (150,840) $1,169,725 $ 30,139System Facilities Revenue BondsSystem Facilities Revenue Bonds have providedfinancing for capital expansion or renovation of variousUniversity facilities. The principal and interest of thebonds are payable from, and secured by a first lien onand pledge of, designated revenues which include thefollowing: a portion of tuition and fees, sales andservices from the financed facilities, such as bookstorecollections, housing and dining charges, patientservices, and parking collections, as well as certainassessed fees, such as the recreational facility fees,stadium surcharges, and student center fees.On December 21, 2010, the University issued$252,285,000 in taxable Series 2010A System FacilitiesRevenue Bonds designated as "Build America Bonds"under the Internal Revenue Code of 1986, as amended.With respect to the Series 2010A bonds, the Universitywill receive a cash subsidy payment from the UnitedStates Treasury in an amount equal to 35% of theinterest payable on each interest payment date. Theall-in-true interest cost of the Series 2010A bonds,after taking into account the 35% interest paymentfrom the federal government is 3.8%.Proceeds from issuance of the Series 2010A bonds arebeing used to finance construction or renovation ofhousing facilities on the Columbia, Kansas City, andMissouri Science and Technology (Missouri S&T)campuses, energy management improvements on theColumbia and Missouri S&T campuses, construction ofa new parking structure on the Kansas City campus,new patient care tower and Ellis Fischel Cancer Centerrelocation at the Health System, and renovation,furnishing and equipping various other facilities, and tofinance capitalized interest and certain costs ofissuance.On July 23, 2009, the University issued $332,060,000 ofSystem Facilities Revenue Bonds, consisting of$256,300,000 in taxable Series 2009A Bondsdesignated as "Build America Bonds" under theInternal Revenue Code of 1986, as amended, and$75,760,000 in traditional tax exempt Series 2009BBonds. With respect to the Series 2009A bonds, theUniversity will receive a cash subsidy payment fromthe United States Treasury in an amount equal to 35%of the interest payable on each interest payment date.The all-in-true interest cost of the Series 2009A bonds,after taking into account the 35% interest paymentfrom the federal government is 3.95%. The all-in-trueinterest cost of the Series 2009B bonds is 3.13%.5142011 Financial. Report UNIVERSITY OF MISSOURI SYSTEMNOTES TO FINANCIAL STATEMENTSFor the Years Ended June 30, 2011 and 2010Interest expense associated with financing projectsduring construction, net of any investment incomeearned on bond proceeds during construction, iscapitalized. Total interest expense during the yearsended June 30, 2011 and 2010 was $59,723,000 and$53,384,000, respectively. Interest expense associatedwith financing projects during construction, net of anyinvestment income earned on bond proceeds duringconstruction, is capitalized. For the years ended June30, 2011 and 2010, capitalization of interest earned onunspent bond proceeds totaled $10,216,000 and$7,281,000, respectively, resulting in net interestexpense of $49,507,000 and $46,103,000, respectively.* For the years ended June 30, 2011 and June 30, 2010,the University earned cash subsidy payments from theUnited States Treasury totaling $7,193,000 and$5,020,000, respectively for designated Build AmericaBonds outstanding, which was recorded as FederalAppropriations on the Statement of Revenues,Expenses, and Changes in Net Assets.Table 9.2 -System Facilities Revenue Bonds (in thousands)Weighted Balance June 30,Series Type Average Coupon Final Maturity Original Issue 2011 20101998 Fixed 4.966% 11/1/2017 $ 65,010 $ 9,985 $ 11,1552000A Fixed 5.20% 11/1/2010 28,950 -3,6202001B Fixed 5.103% 11/1/2027 44,975 40,635 42,0602003A Fixed 4.532% 11/1/2014 118,080 9,520 11,6202003B Fixed 4.657% 11/1/2023 37,085 27,030 28,5752006A Fixed 4.745% 11/1/2028 260,975 227,385 235,1952007A Fixed 4.916% 11/1/2037 262,970 250,450 255,4402009A (1) Fixed 5.960% 11/1/2039 256,300 256,300 256,3002009B Fixed 4.160% 11/1/2021 75,760 70,655 75,7602010A (1) Fixed 5.792% 11/1/2041 252,285 252,285 -Total Fixed Rate Bonds 1,402,390 1,144,245 919,7252000B Variable 0.03% (2) 11/1/2030 50,000 50,000 50,0002001A Variable 0.03% (2) 11/1/2031 39,225 32,825 33,6852006B Variable 0.03% (2) 11/1/2035 39,705 39,705 39,7052007B Variable 0.05% (2) 11/1/2031 102,250 101,150 101,535Total Variable Rate Demand Bonds 231,180 223,680 224,925Total System Facilities Revenue Bonds $ 1,633,570 $ 1,367,925 $ 1,144,650(1) Taxable issue designated as Build America Bonds under the Internal Revenue Code of 1986, as amended.(2) As of June 30, 2011; rates are determined daily or weekly by the remarketing agents. The rate is usually within a range at or near theSecurities Industry and Financial Markets Association Municipal Swap Index (SIFMA Index) rate, which resets weekly.System Facilities Revenue Bonds, Series 2000B, Series2001A, Series 2006B, and Series 2007B are variablerate demand bonds with remarketing features whichallow bondholders to put debt back to the University.Because the University is the sole source of liquidityshould the option to tender be exercised by thebondholder, these variable rate demand bonds areclassified in their entirety as current liabilities on theStatement of Net Assets, with the balance in excess ofactual current principal maturities reported as Long-Term Debt Subject to Remarketing.In-substance defeased bonds aggregating $96,965,000are outstanding at both June 30, 2011 and 2010.Interest Rate Swap AgreementsWith an objective of lowering the University'sborrowing costs, when compared against fixed-ratebonds at the time of issuance, the University enteredinto interest rate swap agreements in connection withcertain variable-rate System Facilities Revenue Bonds.Under each of the swap agreements, the Universitypays the swap counterparty a fixed interest ratepayment and receives a variable rate interest ratepayment that effectively changes a component of theUniversity's variable interest rate bonds to fixed ratedebt. Table 9.3 presents the terms of the outstandingswaps and their fair values at June 30, 2011.2011 FinanciaL Report55 UNIVERSITY OF MISSOURI SYSTEMNOTES TO FINANCIAL STATEMENTSFor the Years Ended 3une 30, 2011 and 2010Table 9.3 -Interest Rate Swaps (in thousands)Notional Effective Maturity CounterpartyType Amount Date Date Terms Fair Value Credit RatingPayfixed; $ 40,000 7/18/2002 11/1/2032 Pay 3.950%; receive $ (7,679) Aal/AA-receive variable SIFMA IndexPay fixed; 101,150 7/26/2007 11/1/2031 Pay 3.798%; receive 68% (19,023) Aal/AA-receive variable of 1-Month LIBORTotal $ 141,150 $ (26,702)The 2002 swap does not specifically hedge any The notional amount of the 2007 swap is equal to thecurrently outstanding bond issue; rather, it serves to outstanding balance of the Series 2007B bonds.reduce the overall exposure to interest rate risk on theUniversity's variable bonds not otherwise specifically The University recognizes the fair value andhedged. The notional amount is fixed at $40,000,000 corresponding changes in fair value of the outstandingover the life of the agreement. The 2007 swap swaps in the University's financial statements.specifically hedges System Facilities Revenue Bond Changes in fair value of the outstanding swaps, withSeries 2007B, the effectiveness of which has been respective financial statement presentation, aredetermined using the synthetic instrument method. presented in Table 9.4:Table 9.4 -Interest Rate Swaps -Change in Fair Value (in thousands)Fair Value at June 30, Change inType 2011 2010 Fair Value Presentation of Change in Fair Value2002 Swap -Investment Derivative $ (7,679) $ (8,488) $ 809 Investment and Endowment Income, Net2007 Swap -Cash Flow Hedge (19,023) (22,192) 3,169 Deferred Outflow of ResourcesTotal $ (26,702) $ (30,680) $ 3,978Fair Value. There is a risk that the fair value of a swapcould be adversely affected by changing marketconditions. The fair values, developed using the zerocoupon method with proprietary models, wereprepared by the counterparty, JPMorgan Chase Bank,N.A., a major U.S. financial institution. The zerocoupon method calculates the future net settlementpayments required by the swap, assuming that thecurrent forward rates implied by the yield curvecorrectly anticipate future spot interest rates. Thesepayments are then discounted using the spot ratesimplied by the current yield curve for hypotheticalzero-coupon bonds due on the date of each netsettlement of the swap. The fair value of the interestrate swaps is the estimated amount the Universitywould have either (paid) or received if the swapagreements were terminated on June 30, 2011.Credit Risk. Although the University has entered intothe interest rate swaps with a creditworthy financialinstitution, there is credit risk for losses in the event ofnon-performance by the counterparty. Subject toapplicable netting arrangements, swap contracts withpositive fair values are exposed to credit risk. TheUniversity faces a maximum possible loss equivalent tothe amount of the derivative's fair value. Subject toapplicable netting arrangements, swaps with negativefair values are not exposed to credit risk. Collateralrequirements apply to both parties and aredetermined by a combination of credit ratings and theaggregate fair value of all outstanding swapagreements as presented in Table 9.5-Table 9.5 -Swap Collateral RequirementsFair ValueCredit Rating Threshold(S&P / Moody's) (in thousands)AAA/Aa a $ 50,000AA+/Aa 1 30,000AA/Aa 2 30,000AA-/Aa 3 20,000A+/A1 20,000A/A2 10,000A-/A3 10,000BBB+/Ba a 1 5,000If the aggregate fair value is positive and exceeds thefair value threshold for the applicable credit rating, the562011 Financial Report UNIVERSITY OF MISSOURI SYSTEMNOTES TO FINANCIAL STATEMENTSFor the Years Ended 3une 30, 2011 and 2010counterparty is required to post collateral. If theaggregate fair value is negative and exceeds the fairvalue threshold for the applicable credit rating, theUniversity is required to post collateral. Permittedcollateral for either party includes U.S. Treasuries, U.S.government agencies, cash, and commercial paperrated A1/P1 by S&P or Moody's, respectively. On June30, 2011, the negative aggregate fair value was below$30,000,000, which is the current fair value thresholdfor the University given a Moody's rating of Aal.Basis Risk. The variable-rate payments received by theUniversity on the 2007 swap are determined by 68% ofone month LIBOR, whereas the interest rates paid bythe University on its variable-rate bonds correspond tothe SIFMA Index. The University is exposed to basisrisk only to the extent that the historical relationshipbetween these variable market rates changes goingforward, resulting in a variable-rate payment receivedon the 2007 swap that is significantly less than thevariable-rate interest payment on the bonds.Termination Risk. The University is exposed totermination risk for both interest rate swaps as thecounterparty has the right to terminate theagreements in certain circumstances. For the 2002swap, the counterparty has a contractual right toterminate the agreement if the daily weighted averageof the SIFMA Index for the preceding 30 calendar dayperiod is greater than 7.00%. With regard to the 2007swap, the counterparty has a contractual right toterminate the agreement if the daily weighted averageof the SIFMA Index for the preceding 180 days isgreater than 6.00%. The SIFMA Index was .09% at June30, 2011.Pledged Revenues and Debt Service RequirementsFor fiscal years 2011 and 2010, annual debt service,including net payments on associated interest rateswaps, totaled $88,237,000 and $76,142,000,respectively. For fiscal years 2011 and 2010, SystemFacilities Pledged Revenue was eleven and twelvetimes greater than the annual debt service. NetSystem Facilities Revenue was 122% and 151% ofannual debt service, respectively. Table 9.6 providesthe System Facilities pledged revenues and operatingexpenses.Table 9.6 -System Facilities Pledged Revenues andOperating Expenses (in thousands)2011 2010Pledged Revenues:Net Patient Revenue $ 745,010 $ 718,687Housing and Related Food Service 93,744 89,744Bookstores 58,382 59,288Net Tuition and Fees 24,950 18,180Other Operating Revenue 36,914 35,704Pledged Revenues 959,000 921,603Operating Expenses 851,729 806,439Net Revenues $ 107,271 $ 115,164Table 9.7 provides future debt service requirementsfor the System Facilities Revenue Bonds, including theimpact of both interest rate swap agreements. Withrespect to the inclusion of variable rate bond interestpayments and net payments on swaps, the followingdata was based upon variable rates in effect at June30, 2011. As market rates vary, variable rate bondinterest payments and net swap payments will vary.Table 9.7 -Future Debt Service -System Facilities Revenue Bonds (in thousands)Total BeforeHedging Investment Investment Total FutureFiscal Year Principal Interest Derivatives, Net Derivatives Derivatives, Net Debt Service2012 27,990 59,641 3,701 91,332 1,544 92,8762013 29,510 58,514 3,685 91,709 1,544 93,2532014 30,825 57,305 3,670 91,800 1,544 93,3442015 31,805 56,048 3,653 91,506 1,544 93,0502016 33,720 54,769 3,571 92,060 1,544 93,6042017-2021 187,230 252,806 15,887 455,923 7,720 463,6432022-2026 235,755 210,668 12,179 458,602 7,720 466,3222027-2031 253,425 160,862 5,472 419,759 7,720 427,4792032-2036 182,065 121,997 119 304,181 2,059 306,2402037-2041 271,505 73,668 -345,173 -345,1732042 84,095 2,436 -86,531 -86,531$ 1,367,925 $ 1,108,714 $ 51,937 $ 2,528,576 $ 32,939 $ 2,561,5152011 Financial Report57 UNIVERSITY OF MISSOURI SYSTEMNOTES TO FINANCIAL STATEMENTSFor the Years Ended 3une 30, 2011 and 2010Capital Project NotesDuring the year ended June 30, 2011, the Universitydid not sell or have any capital project notesoutstanding.During the year ended June 30, 2010, the Universitysold $125,000,000 of capital project notes at aneffective interest rate of 0.4%. The maximum amountof notes outstanding was $125,000,000 and all wererepaid in full by June 30, 2010. Proceeds from theissuance of the capital project notes were used to fundvarious construction projects.Capital Projects Notes are secured by the University'sunrestricted revenues (generally state appropriationsfor general operations, student fee revenue, and otheroperating revenues), plus unencumbered balancesfrom prior fiscal years. These balances totaledapproximately $2,000,000,000 by the end of fiscal year2011. Excluded are revenues from auxiliary enterprises(such as bookstore and housing operations), the HealthSystem, and other such facilities pledged to repaySystem Facilities Revenue Bonds.Notes PayableNotes payable consist of two loans from the stateDepartment of Natural Resources Energy EfficiencyLeveraged Loan Program. Interest is payablesemiannually and ranges from 3.0% to 3.2%. One ofthese loans matures in February 2012, while thesecond loan matures in February 2016.Capital Lease ObligationsThe University leases various facilities and equipmentthrough capital leases. Facilities and equipment undercapitalized leases are recorded at the present value offuture minimum lease payments.The future minimum payments on all capital leases atJune 30, 2011, are as follows:Table 9.8 -Future Capital Lease PaymentsAmountYear Ending June 30 (in thousands)2012 1,7182013 1,5632014 1,5632015 1,5632016 1,5632017-2020 5,078Total Future Minimum Payments 13,048Less: Amount Representing Interest (5,643)Present Value of Future MinimumLease Payments $ 7,405DISCRETELY PRESENTED COMPONENT UNIT -MEDICAL ALLIANCEThe Medical Alliance's outstanding debt at June 30, 2011 and 2010, with corresponding activity, is as follows:Table 9.9 -Long-Term Debt -Medical Alliance (in thousands)Beginning Ending CurrentAs of June 30, 2011 Balance Additions Reductions Balance PortionHealth Facilities Revenue Bonds Series 1998 $ 19,510 $ $ (635) $ 18,875 $ 660Health Facilities Revenue Bonds Series 2004 15,570 (420) 15,150 445Total Bonds Payable 35,080 (1,055) 34,025 1,105Capital Lease Obligations 3,753 (1,068) 2,685 1,158Total Long-Term Debt $ 38,833 $ $ (2,123) $ 36,710 $ 2,263Beginning Ending CurrentAs of June 30, 2010 Balance Additions Reductions Balance PortionHealth Facilities Revenue Bonds Series 1998 $ 20,110 $ -(600) $ 19,510 $ 635Health Facilities Revenue Bonds Series 2004 15,980 (410) 15,570 420Total Bonds Payable 36,090 (1,010) 35,080 1,055Capital Lease Obligations 4,832 (1,079) 3,753 1,099Total Long-Term Debt $ 40,922 $ $ (2,089) $ 38,833 $ 2,154582011 FinanciaL Report UNIVERSITY OF MISSOURI SYSTEMNOTES TO FINANCIAL STATEMENTSFor the Years Ended June 30, 2011 and 2010Bonds PayableIn June 2004, the Medical Alliance issued $17,500,000of tax-exempt Health Facilities Revenue Bonds Series2004 through the Health and Educational FacilitiesAuthority of the state of Missouri. The bonds proceedswere used primarily to pay or reimburse the costs ofacquiring, constructing and equipping certain healthfacilities of Medical Alliance.Similar to the Series 1998 bonds, the Series 2004bonds were issued pursuant to the Master TrustIndenture dated December 1, 1998, as supplementedon June 1, 2004. Under the terms of the Master TrustIndenture (the "Master Indenture"), Medical Alliance isrequired to make payments of principal, premium, ifany, and interest on the bonds. The Series 1998 and2004 bonds are secured by the unrestrictedreceivables of Medical Alliance. In addition, theMaster Indenture contains certain restrictions on theoperations and activities of Medical Alliance, including,among other things, covenants restricting theincurrence of additional indebtedness and the creationof liens on property, except as permitted by theMaster Indenture.The Master Indenture has mandatory sinking fundredemption requirements in which funds are requiredto be set aside beginning in 2014 and 2025 for theSeries 1998 bonds and Series 2004 bonds, respectively.Interest expense incurred on the bonds during theyears ended June 30, 2011 and 2010 was $1,830,000and $1,867,000, respectively, of which $0 and $93,000were capitalized during the years ended June 30, 2011and 2010, respectively.As of June 30, 2011, the total of principal and interestdue on bonds during the next five years and insubsequent five-year periods is as follows:Table 9.10 -Future Debt Service -Medical Alliance (in thousands)Fiscal Year Principal Interest Total2012 1,105 1,779 2,8842013 1,155 1,725 2,8802014 1,210 1,669 2,8792015 1,270 1,607 2,8772016 1,330 1,542 2,8722017-2021 6,045 5,429 11,4742022-2026 9,520 4,766 14,2862027-2030 12,390 1,803 14,193$ 34,025 $ 20,320 $ 54,345Capital LeasesThe Medical Alliance leases certain equipment throughcapital leases. Equipment under capitalized leases isrecorded at the present value of future minimum leasepayments.The future minimum payments on all capital leases atJune 30, 2011, are as follows:Table 9.11 -Future Capital Lease PaymentsMedical Alliance (in thousands)Year Ending June 30 Amount2012 $ 1,2432013 1,2402014 328Total Future Minimum Payments 2,811Less: Amount Representing Interest (126)Present Value of Future MinimumLease Payments $ 2,6852011 FinanciaL Report59 UNIVERSITY OF MISSOURI SYSTEMNOTES TO FINANCIAL STATEMENTSFor the Years Ended June 30, 2011 and 201010. RISK MANAGEMENTThe University is exposed to various risks of lossrelated to torts; theft of, damage to, and destruction ofassets; injuries to employees; natural disasters; andvarious medically related benefit programs foremployees. The University funds these losses througha combination of self-insured retentions andcommercially purchased insurance. The amount ofself-insurance funds and commercial insurancemaintained are based upon analysis of historicalinformation and actuarial estimates. Settled claimshave not exceeded commercial coverage in any of thepast three fiscal years.The liability for self-insurance claims at June 30, 2011and 2010 of $72,949,000 and $77,501,000,respectively, represents the present value of amountsestimated to have been incurred by those dates, usingdiscount rates ranging from 2.0% to 3.4% for fiscal year2011 and 2.5% to 3.6% for fiscal year 2010, based onexpected future investment yield assumptions.Changes in the self-insurance liability during fiscalyears 2011, 2010, and 2009 were as follows:Table 10.1 -Self-Insurance ClaimsLiability (in thousands)2011 and 2010 were $20,251,000 and $19,162,000,respectively.Future minimum payments on all significant operatingleases with initial or remaining terms of one year ormore at June 30, 2011, are as follows:Table 11.1 -Future Operating Lease PaymentsFiscal Year Amount2012 $ 4,2182013 3,1202014 2,6972015 1,7192016 1,0372017-2020 304Total Future Lease Payments $ 13,095In addition to the above lease obligations, theUniversity has outstanding commitments for the usageand ongoing support of University Health System'sinformation technology environment. As of January2010, the University Health System began contractingfor software usage and maintenance fees, as well as,labor costs for approximately 100 full-time equivalentemployees, with the Cerner Corporation. Thisagreement, called IT Works, represents the labor andsoftware component of a cooperative relationshipbetween the University Health System and CernerCorporation referred to as the Tiger Institute forHealth Innovation (the Tiger Institute). The TigerInstitute provides continued development ofinformation technology within the clinical areas, aswell as developing new technology initiatives in healthinformation systems.As of June 30, 2011, these commitments totaled$136,646,000 and will be paid in the followingamounts: $13,002,000 in 2012, $14,938,000 in 2013,$15,386,000 in 2014, $15,847,000 in 2015,$16,322,000 in 2016 and $61,151,000 thereafter.Fiscal Year201120102009Beginningof Year$ 77,50173,26667,238New Claimsand Changesin Estimates$ 194,051191,350177,386ClaimPayments$ (198,603)(187,115)(171,358)End ofYear$72,94977,50173,26611. COMMITMENTS AND CONTINGENCIESEndowment and Pension Trust FundsThe University Endowment Fund and Pension TrustFunds have made commitments to make investmentsin certain investment partnerships pursuant toprovisions in the various partnership agreements.These commitments totaled $33,535,000 and$67,775,000 for the University and the Pension TrustFunds, respectively, at June 30, 2011.University Operating LeasesThe University leases various facilities and equipmentunder agreements recorded as operating leases.Operating lease expenses for the years ended June 30,602011 FinanciaL Report UNIVERSITY OF MISSOURI SYSTEMNOTES TO FINANCIAL STATEMENTSFor the Years Ended 3une 30, 2011 and 2010Medical Resident FICA RefundsIn March 2010, the United States Internal RevenueService accepted the position that medical residentsare excepted from FICA taxes based upon the "studentexception" for tax periods ending before April 1, 2005when new regulations became effective. In December2010, the University of Missouri perfected its claimsfor the refund of taxes withheld for the relevantperiods. As of June 30, 2011, the University hasrecorded a receivable for this refund and relatedaccrued interest income in the amounts of$19,187,000 and $11,600,000, respectively, whichreflects the estimated total refund from the InternalRevenue Service. In addition, accounts payableincreased by $21,026,000 representing the portion ofthe refund and accrued interest income due toindividual medical residents and third-party entities. Anet amount of $6,761,000 was recorded as a contraexpense to benefits and $3,000,000 as investmentincome.Pollution RemediationThe University has been working with the VoluntaryCleanup Program of the Missouri Department ofNatural Resources (MDNR) to characterize subsurfacecontamination on a University owned property. Theresults have been reported to MDNR and theUniversity is awaiting direction on how to proceed. Asa result, the University is unable to estimate futurecosts to clean up the site at this time.2011 Financial. Report61 UNIVERSITY OF MISSOURI SYSTEMNOTES TO FINANCIAL STATEMENTSFor the Years Ended June 30, 2011 and 201012. RETIREMENT, DISABILITY AND DEATHBENEFIT PLANPlan Description -the Retirement Plan is a singleemployer, defined benefit plan for all qualifiedemployees. As authorized by Section 172.300, RevisedStatutes of Missouri, the University's Board of Curatorsadministers the Retirement Plan and establishes itsterms. Full-time employees vest in the Retirement Planafter five years of credited service and become eligiblefor benefits based on age and years of service. Avested employee who retires at age 65 or older iseligible for a lifetime annuity calculated at 2.2% timesthe credited service years times the compensationbase (average compensation for the five highestconsecutive salary years). Academic members whoprovide summer teaching and research service receiveadditional summer service credit. The Board ofCurators may periodically approve increases to thebenefits paid to existing pensioners. However, vestedmembers who leave the University prior to eligibilityfor retirement are not eligible for these pensionincreases.Table 12.1 -Retirement Plan Membership2011 2010Active MembersVested 10,758 10,538Nonvested 7,634 7,688Pensioners 7,323 7,092Former Employees withDeferred Pensions 4,211 3,158Total Members 29,926 28,476Vested employees who are at least age 55 and haveten years or more of credited service or age 60 with atleast five years of service may choose early retirementwith a reduced benefit. However, if the employeeretires at age 62 and has at least 25 years of creditedservice, the benefit is not reduced. Up to 30% of theretirement annuity can be taken in a lump sumpayment. In addition, the standard annuity can beexchanged for an actuarially-equivalent annuityselected from an array of options with joint andsurvivor, period certain, and guaranteed annualincrease features.Vested employees who terminate prior to retirementeligibility may elect to transfer the actuarial equivalentof their benefit to an Individual Retirement Account orinto another employer's qualified plan that acceptssuch rollovers. If the actuarial equivalent is less than$20,000, it may instead be taken in the form of a lumpsum payment.In addition, the Retirement Plan allows vestedemployees who become disabled to continue accruingservice credit until they retire. It also provides a pre-retirement death benefit for vested employees.The Retirement Plan provides a minimum valuefeature for vested employees who terminate or retire.The minimum value is calculated as the actuarialequivalent of 5% of the employee's eligiblecompensation invested at 7.5% per credited serviceyear or the regularly calculated benefit.Contributions -The University's contributions to theRetirement Plan are equal to the actuariallydetermined employer contribution requirement, as apercent of payroll, which averaged 5.7% and 4.9% forthe years ended June 30, 2011 and 2010, respectively.Employees are required to contribute 1% of theirsalary up to $50,000 in a calendar year and 2% of theirsalary in excess of $50,000. An actuarial valuation ofthe Plan is performed annually and the University'scontribution rate is updated at the beginning of theUniversity's fiscal year on July 1, to reflect theactuarially determined funding requirement from themost recent valuation, as of the preceding October 1.This actuarial valuation reflects the adoption of anyRetirement Plan amendments during the previousfiscal year.622011 Financial. Report UNIVERSITY OF MISSOURI SYSTEMNOTES TO FINANCIAL STATEMENTSFor the Years Ended June 30, 2011 and 2010The University's annual pension cost and net pension obligation to the Retirement Plan for the current year,excluding the impact of employee contributions, along with three-year trend information, were as follows:Table 12.2 -Three-Year Trend Information (in thousands)Annual Required Percentage ofContribution Annual Pension Contributions APC Net PensionFiscal Year Ending (ARC) Cost (APC) Made Contributed Obligation6/30/2009 $ 56,663 $ 56,663 $ 56,663 100%6/30/2010 48,040 48,040 48,040 100%6/30/2011 57,541 57,541 57,541 100%Basis of Accounting -The Retirement Plan'saccounting records are prepared using the accrualbasis of accounting. Employer contributions to theRetirement Plan are recognized when due and theemployer has made a formal commitment to providethe contributions. Benefits and refunds are recognizedwhen due and payable in accordance with terms of theRetirement Plan. The Retirement Plan does not issue aseparate financial report.Investment Valuation -Investments are reported atfair value.Funded Status -As of the most recent actuarialvaluation date, October 1, 2010, the Retirement Planwas 96.3% funded. The actuarial accrued liability (AAL)for benefits was $2,960,832,000 and the actuarialvalue of the assets was $2,851,957,000, resulting inunfunded AAL of funding of $108,875,000. Thecovered payroll (annual payroll of active employeescovered by the plan) was $979,888,000, and the ratioof unfunded AAL funding to covered payroll was11.1%.The Schedule of Funding Progress, presented asrequired supplementary information (RSI) followingthe notes to the financial statements, presentsmultiyear trend information about whether theactuarial values of plan assets are increasing ordecreasing over time relative to the actuarial accruedliability for benefits.Actuarial Methods and Assumptions -In the October1, 2010 actuarial valuation, the entry age actuarial costmethod was used. Actuarial assumptions included (1)an 8% rate of investment return net of administrativeexpenses, and (2) projected salary increases rangingfrom 4.5% to 5.3% per year. The assumptions did notinclude postretirement benefit increases. The actuarialvalue of assets was determined using techniques thatspread effects of short-term volatility in the marketvalue of investments over a 5-year period. On May 1,2011, an approved plan amendment increasing theamount of summer session salary that can berecognized was implemented, and resulted in a$6,423,000 increase in the actuarial accrued liabilityand an additional .09%, or $891,000, in the annualemployer contribution rate effective for fiscal year2012. The underfunded actuarial accrued liability isbeing amortized as a level dollar amount on an openbasis over 20 years from the October 1, 2010 valuationdate.13. OTHER POSTEMPLOYMENT BENEFITSPlan Description -In addition to the pension benefitsdescribed in Note 12, the University operates a single-employer, defined benefit postemployment plan. TheUniversity's Other Postemployment Benefits (OPEB)Plan provides postretirement medical, dental, and lifeinsurance benefits to employees who retire from theUniversity after attaining age 55 and before reachingage 60 with ten or more years of service, or afterattaining age 60 with five or more years of service. Asof June 30, 2011 and 2010, 6,080 and 5,881 retirees,respectively, were receiving benefits, and an estimated18,452 active University employees may becomeeligible to receive future benefits under the plan.Postemployment medical, dental and life insurancebenefits are also provided to long-term disabilityclaimants who were vested in the University'sRetirement Plan at the date the disability began,provided the onset date of the disability was on orafter September 1, 1990. As of June 30, 2011 and2010, 227 and 232 long-term disability claimants,respectively, met those eligibility requirements.2011 FinanciaL Report63 UNIVERSITY OF MISSOURI SYSTEMNOTES TO FINANCIAL STATEMENTSFor the Years Ended 3une 30, 2011 and 2010The terms and conditions governing thepostemployment benefits to which employees areentitled are at the sole authority and discretion of theUniversity's Board of Curators.Basis of Accounting -The OPEB Plan's accountingrecords are prepared using the accrual basis ofaccounting, in accordance with GASB Statements No.43 and No. 45, which established requirements forfinancial reporting for postemployment benefits otherthan pension plans. The assets of the OPEB Trust Fundare irrevocable and legally protected from creditorsand dedicated to providing postemployment benefitsin accordance with terms of the plan. The OPEB Plandoes not issue a separate financial report.Contributions and Reserves -Contributionrequirements of employees and the University areestablished and may be amended by the University'sBoard of Curators. For employees retiring prior toSeptember 1, 1990, the University contributes towardpremiums at the same rate as for active employees,which is 2/3 of the medical benefits premium and 1/2of the dental plan premium. For employees whoretired on or after September 1, 1990, the Universitycontributes toward premiums based on theemployee's length of service and age at retirement.The University makes available two group term lifeinsurance options. Option A coverage is equal to theretiree's salary at the date of retirement, while OptionB is equal to two times that amount. For each Option,graded decreases in coverage are made when theretiree attains specific age levels. The University paysthe full cost of Option A and approximately 91% of thecost of Option B coverage. Coverage for group term lifeinsurance ends on January 1 following the retiree's70th birthday.For the year ended June 30, 2011, participantscontributed $12,994,000 or approximately 47.6% oftotal premiums through their required contributions,which vary depending on the plan and coverageselection.The University makes available two long-term disabilityoptions to its employees. Option A coverage is equal to60% of the employee's salary on the date the disabilitybegan, when integrated with benefits from all othersources. Option B coverage is equal to 66-2/3% of theemployee's salary, integrated so that benefits from allsources will not exceed 85% of the employee's salary.Both options have a 149-day waiting period andprovide benefits until age 65. The University pays thefull cost of the Option A premium, while employeesenrolled in Option B pay the additional cost over theOptional A premium.The Annual Required Contribution (ARC) represents alevel of funding that an employer is projected to needin order to prefund its obligations for postemploymentbenefits over its employees' years of service. TheUniversity has no obligation to make contributions inadvance of when insurance premiums or claims aredue for payment and currently funds postemploymentbenefits at a level no less than the pay-as-you-go basis.In fiscal year 2011, the University contributed$30,242,000, or 50.0% of the ARC, which was$60,484,000 and represented 6% of annual coveredpayroll. In fiscal year 2010, the University contributed$23,789,000, or 45.3% of the ARC, which was$52,563,000 and represented 5.2% of annual coveredpayroll.Table 13.1 presents the OPEB cost for the year, theamount contributed, and changes in the OPEBobligation for fiscal year 2011:Table 13.1 -Changes in Net OPEBObligation (in thousands)Annual Required Contribution $ 60,485Interest on Existing Net OPEB Obligation 3,025ARC Adjustment (2,575)Annual OPEB Cost 60,935Contributions Made (30,242)Increase in net OPEB obligation 30,693Net OPEB obligation -beginning of year 52,613Net OPEB obligation -June30,2011 $ 83,306Funding Status and Funding Progress -As of July 1,2009, the date of the last valuation, the OPEB Plan was5.7% funded. The actuarial accrued liability (AAL) forpostemployment benefits was $646,655,000, with$37,171,000 in actuarial value of assets, resulting in anunfunded actuarial accrued liability (UAAL) of$609,484,000. The covered payroll (annual payroll ofactive employees covered by the plan) was$1,009,800,000, and the ratio of UAAL to coveredpayroll was 60.4%.6z42011 Financial Report UNIVERSITY OF MISSOURI SYSTEMNOTES TO FINANCIAL STATEMENTSFor the Years Ended June 30, 2011 and 2010Actuarial valuations involve estimates of the value ofreported amounts and assumptions about theprobability of events far into the future. Examplesinclude assumptions about future employment,mortality, and the healthcare cost trend. Actuariallydetermined amounts are subject to continual revisionof actual results, are compared to past expectationsand new estimates are made about the future. TheSchedule of Funding Progress, presented as requiredsupplementary information following the notes to thefinancial statements, will present multiyear trendinformation about whether the actuarial value of planassets is increasing or decreasing over time relative tothe actuarial accrued liabilities for benefits.Benefit projections for financial reporting purposes arebased on the benefits provided under the terms of thesubstantive plan in effect at the time of each valuationand the historical pattern of cost sharing between theemployer and plan members to that point. Theprojection of benefits for financial reporting purposesdoes not explicitly incorporate the potential effects oflegal or contractual funding limitations on the patternof cost sharing between the University and planmembers in the future.The University's annual OPEB cost and net OPEB obligation to the OPEB Plan for the current year, along with three-year trend information, were as follows:Table 13.2 -OPEB Plan Three-Year Trend Information (in thousands)Fiscal Year Ending6/30/20096/30/20106/30/2011AnnualRequiredContribution47,57852,56360,485Annual OPEBCost (AOC)$ 47,57852,76360,935ContributionsMade$ 23,78923,78930,242Percentage ofAOCContributed50.0%45.1%49.6%Net OPEBObligation(Asset)$ 23,63952,61383,306Actuarial Methods and Assumptions -Consistent withthe long-term perspective of actuarial calculations, theactuarial methods and assumptions used includetechniques that are designed to reduce short-termvolatility in actuarial accrued liabilities and theactuarial value of assets. The projected unit creditactuarial cost method was used in the July 1, 2009actuarial valuation. Actuarial assumptions included a5.75% investment rate of return, net of administrativeexpenses. The projected annual healthcare trend rateis 6.0% to 10.0% initially, reduced by 0.5% decrementsto an ultimate rate of 5.0%. The UAAL is beingamortized as a level dollar amount on an open basis,level percent of pay, over a 30-year amortizationperiod.2011 FinanciaL Report65 UNIVERSITY OF MISSOURI SYSTEMNOTES TO FINANCIAL STATEMENTSFor the Years Ended June 30, 2011 and 20101i4. OPERATING EXPENSES BY FUNCTIONThe operating expenses of the University are presented based on natural expenditure classifications. TheUniversity's operating expenses by functional classification are as follows:Table 14.1 -Operating Expenses by Functional and Natural Classifications (in thousands)Supplies, ScholarshipsSalaries and Services and andFiscal Year Ended June 30, 2011 Wages Benefits Other Fellowships Depreciation TotalInstruction $ 394,945 $ 105,048 $ 57,088 $ $ $ 557,081Research 113,872 24,441 81,590 219,903Public Service 73,888 20,139 49,519 143,546Academic Support 75,563 22,321 29,972 127,856Student Services 38,454 10,971 20,567 69,992Institutional Support 94,518 28,840 (25,424) 97,934Operation and Maintenanceof Plant 34,614 10,901 24,467 69,982Auxiliary Enterprises 446,372 105,679 478,265 1,030,316Scholarships and Fellowships ---58,790 58,790Depreciation ---155,103 155,103Total Operating Expenses $ 1,272,226 $ 328,340 $ 716,044 $ 58,790 $ 155,103 $2,530,503Supplies, ScholarshipsSalaries and Services and andFiscal Year Ended June 30, 2010 Wages Benefits Other Fellowships Depreciation TotalInstruction $ 386,089 $ 91,532 $ 60,192 $ -$ $ 537,813Research 111,710 23,648 79,182 -214,540Public Service 74,007 19,783 52,929 -146,719Academic Support 75,057 19,816 29,246 -124,119Student Services 39,795 9,742 21,134 -70,671Institutional Support 91,654 25,404 (7,565) -109,493Operation and Maintenanceof Plant 34,329 9,840 11,709 -55,878Auxiliary Enterprises 424,324 103,535 429,535 -957,394Scholarships and Fellowships ---55,469 55,469Depreciation ---146,753 146,753Total Operating Expenses $1,236,965 $ 303,300 $ 676,362 $ 55,469 $ 146,753 $2,418,849662011 Financial Report UNIVERSITY OF MISSOURI SYSTEMNOTES TO FINANCIAL STATEMENTSFor the Years Ended June 30, 2011 and 201015. FIDUCIARY FUNDS -PENSION TRUST FUNDS COMBINING STATEMENTSCombining financial statements for the Fiduciary Funds -Pension Trust Funds, which encompass the RetirementTrust and OPEB Trust, are as follows:Table 15.1 -Statement of Plan Net Assets (in thousands)2011 2010Retirement OPEB Total Retirement OPEB TotalAssetsCash and Cash Equivalents $ 88,085 $ 28,131 $ 116,216 $ 50,033 $ 38,417 $ 88,450Investment of Cash Collateral 257,463 -257,463 277,747 -277,747Investment Settl ements Recei va bl e 27,003 3 27,006 13,935 13,935Investments:Debt Securities 984,980 -984,980 906,562 906,562Equity Securities 607,800 -607,800 471,853 471,853Commingled Funds 967,821 17,614 985,435 806,264 806,264Nonmarketable Alternative Investments 174,899 -174,899 136,502 136,502Other 15,022 -15,022 19,442 19,442Total Assets 3,123,073 45,748 3,168,821 2,682,338 38,417 2,720,755LiabilitiesAccounts Payable andAccrued Liabilities 119 119 1,758 -1,758Collateral Held forSecurities Lending 257,463 -257,463 277,747 277,747InvestmentSettlements Payable 152,054 3 152,057 63,134 63,134Total Liabilities 409,636 3 409,639 342,639 342,639Net Assets Held in Trust forRetirement and OPEB $2,713,437 $ 45,745 $2,759,182 $2,339,699 $ 38,417 $2,378,116Table 15.2 -Statement of Changes in Plan Net Assets (in thousands)2011 2010Retirement OPEB Total Retirement OPEB TotalNet Revenues and Other AdditionsInvestment Income:Interest and Dividend Income,Net of Fees $ 61,718 $ 5 $ 61,723 $ 54,983 $ 5 $ 54,988Net Appreciation inFair Value of Investments 379,606 61 379,667 228,528 -228,528Net Investment Income (Loss) 441,324 66 441,390 283,511 5 283,516Contributions:University 57,541 30,242 87,783 48,040 23,789 71,829Members 12,610 13,390 26,000 10,198 12,536 22,734Total Contributions 70,151 43,632 113,783 58,238 36,325 94,563Other Revenues -695 695 ---Total Net Revenues andOther Additions 511,475 44,393 555,868 341,749 36,330 378,079Expenses and Other DeductionsAdministrative Expenses 2,297 324 2,621 2,391 331 2,722Payments to Retirees and Beneficiaries 135,440 36,741 172,181 128,194 34,753 162,947Total Expenses andOther Deductions 137,737 37,065 174,802 130,585 35,084 165,669Increase in Net Assets Heldin Trust for Retirement and OPEB 373,738 7,328 381,066 211,164 1,246 212,410Net Assets Held i n Trust forRetirement& OPEB, Beginning of Year 2,339,699 38,417 2,378,116 2,128,535 37,171 2,165,706Net Assets Held in Trust forRetirement and OPEB, End of Year $2,713,437 $ 45,745 $2,759,182 $2,339,699 $ 38,417 $2,378,1162011 FinanciaL Report67 UNIVERSITY OF MISSOURI SYSTEMNOTES TO FINANCIAL STATEMENTSFor the Years Ended June 30, 2011 and 201016. SUBSEQUENT EVENTOn August 3, 2011, the University issued$54,125,000 of Series 2011 System FacilitiesRevenue Bonds with average coupon rate of 4.6%.The Series 2011 bonds and other funds of theUniversity were used to refund all of SystemFacilities Revenue Bonds, Series 1998A, which wereoutstanding in the principal amount of $9,985,000,all of the System Facilities Revenue Bonds, Series2001B, which were outstanding in the principalamount of $40,635,000, and $9,035,000 principalamount of the System Facilities Revenue Bonds,Series 2003B, which were outstanding in theprincipal amount of $27,030,000. The averagecoupon for the refunded bonds was 5.0% andgenerated net present value savings of $6.5 millionfor the University.682011 FinanciaL Report UNIVERSITY OF MISSOURI SYSTEMREQUIRED SUPPLEMENTARY INFORMATIONFor the Years Ended June 30, 2011 and 2010 (unaudited)Retirement Plan -Schedule of Funding Progress (in thousands)ActuarialValuationDateActuarialValuation ofAssets(a)ActuarialAccruedLiability(AAL)(b)UnfundedAAL/(ExcessFunding)(b-a)FundedRatio(a / b)AnnualCoveredPayroll(c)UAAL(Excess) as a% ofCoveredPayroll([b-a] /c)10/1/2005 $2,125,656 $2,271,230 $ 145,574 93.6% $ 795,758 18.3%10/1/2006 2,325,264 2,400,807 75,543 96.9% 846,884 8.9%10/1/2007 2,651,535 2,555,592 (95,943) 103.8% 891,648 -10.8%10/1/2008 2,808,126 2,733,032 (75,094) 102.7% 954,430 -7.9%10/1/2009 2,843,422 2,819,524 (23,898) 100.8% 970,060 -2.5%10/1/2010 2,851,957 2,960,832 108,875 96.3% 979,888 11.1%Retirement Plan -Schedule of Employer Contributions (in thousands)Actuarial Annual Net PensionValuation Required Percentage ObligationYear Ended Date Contribution Contributed (Asset)6/30/2006 10/1/2004 $ 64,399 100% $6/30/2007 10/1/2005 74,736 100%6/30/2008 10/1/2006 72,284 100% -6/30/2009 10/1/2007 56,663 100% -6/30/2010 10/1/2008 48,040 100% -6/30/2011 10/1/2009 57,541 100% -See independent auditors' report.2011 Financial Report69 OPEB Plan -Schedule of Funding Progress (in thousands)ActuarialActuarial Accrued Annual UAAL as a %Actuarial Valuation of Liability Unfunded Funded Covered of CoveredValuation Assets (AAL) AAL Ratio Payroll PayrollDate (a) (b) (b-a) (a / b) (c) ([b-a] /c)7/1/2006 $ $ 546,058 $ 546,058 0.0% $ 883,614 61.8%7/1/2007 (a) 560,340 560,340 0.0% 930,365 60.2%7/1/2009 (b) 37,171 646,655 609,484 5.7% 1,009,800 60.4%(a) The 7/1/2007 Actuarial Valuation was revised based on a change in the discount rate from 6.75% to 5.75%.(b) Date of last valuation providedOPEB Plan -Schedule of Employer Contributions (in thousands)Actuarial Annual Net PensionValuation Required Percentage ObligationYear Ended Date Contribution Contributed (Asset)6/30/2009 7/1/2007 47,578 50% 23,6396/30/2010 7/1/2007 (a) 52,563 45% 52,6136/30/2011 7/1/2009 60,485 50% 83,306(a) The 7/1/2007 Actuarial Valuation was revised based on a change in the discount rate from 6.75%to 5.75%.See independent auditors' report.702011 FinanciaL Report AdvancingM Issourin0 0Statistical0SectionUniversity of Missouri SystemCOLUMBIA KANSAS CITY ROLLA ST.LOUIS STTMN OFNTAST ttsia etoSupplementary Information -Unaudited -See Accompanying Independent Auditars' RepartFiscal Year Ended June 30, 2011 2010 2009 2008 2007 2006AssetsCurrent AssetsCash and Cash Equivalents $ 44,249 $ 149,515 $ 115,919 $ 57,987 $ 164,919 $ 146,169Restricted Cash and Cash Equivalents 177,038 177,798 137,022 109,022 163,582 68,978Short-Term Investments 151,070 40,268 124,609 172,294 104,032 75,830Restricted Short-Term Investments 49,264 30,619 25,882 91,800 86,222 87,983Investment of Cash Collateral 101,047 111,557 111,719 106,360 138,014 100,618Accounts Receivable, Net 255,589 249,460 241,325 249,654 235,975 198,087Pledges Receivable, Net 12,374 14,505 13,382 9,796 12,980 11,562Investment Settlements Receivable 15,634 6,200 15,800 72,878 3,617 6,266Notes Receivable, Net 8,532 9,046 12,564 13,747 14,599 14,848Due To Component Units (6,658) (5,285) (3,900) (4,355) (4,062) (3,976)Inventories 35,193 28,401 33,009 33,063 33,121 31,886Prepaid Expenses and Other Current Assets 25,759 25,604 21,618 18,636 18,248 13,313Total Current Assets 869,091 837,688 848,949 930,882 971,247 751,564Noncurrent AssetsPledges Receivable, Net 14,895 16,256 17,231 21,147 23,000 29,437Notes Receivable, Net 54,015 50,635 47,524 46,898 45,425 44,052Deferred Charges and Other Assets 13,218 12,374 9,836 10,397 9,340 9,868Lang-Term Investments 1,357,918 1,171,998 778,538 810,655 707,333 708,052Restricted Long-Term Investments 1,161,184 891,067 741,556 919,364 767,332 743,326Capital Assets, Net 2,642,196 2,534,365 2,392,852 2,227,427 2,039,069 1,926,942Total Noncurrent Assets 5,243,426 4,676,695 3,987,537 4,035,888 3,591,499 3,461,677Deferred Outflow of Resources 19,023 22,192 ----Total Assets and DeferredOutflow of Resources $ 6,131,540 $ 5,536,575 $ 4,836,486 $ 4,966,770 $4,562,746 $ 4,213,241LiabilitiesCurrent LiabilitiesAccounts Payable $ 130,803 $ 123,809 $ 94,531 $ 105,024 $ 101,330 $ 114,302Accrued Liabilities 143,347 138,309 130,837 120,967 114,976 111,646Deferred Revenue 78,209 78,200 80,703 67,821 64,030 60,814Funds Held for Others 62,951 53,245 66,403 70,744 77,148 67,840Investment Settlements Payable 47,319 41,931 50,318 136,606 41,021 19,582Collateral Held for Securities Lending 101,047 111,557 115,291 106,360 138,014 100,618Current Portion of Long-Term Debt 29,107 30,139 24,922 21,697 17,437 15,185Long-Term Debt Subject to Remarketing 220,885 223,680 224,925 226,120 164,990 165,730Total Current Liabilities 813,668 800,870 787,930 855,339 718,946 655,717Noncurrent LiabilitiesLang-Term Debt 1,140,934 915,906 608,114 631,742 479,712 496,318Deferred Revenue 1,519 1,925 1,603 1,876 2,162 2,460Derivative Instrument Liability 26,702 30,680 ----Other Post Employment Benefits Liability 83,306 52,613 23,639 ---Other Noncurrent Liabilities 49,167 53,845 50,423 47,371 58,720 63,765Total Noncurrent Liabilities 1,301,628 1,054,969 683,779 680,989 540,594 562,543Total Liabilities 2,115,296 1,855,839 1,471,709 1,536,328 1,259,540 1,218,260Net AssetsInvested in Capital Assets, Net of Related Debt $1,516,095 $ 1,485,090 $ 1,540,654 $ 1,439,753 $ 1,379,098 $ 1,263,187RestrictedNonexpendlable -EndowmentExpendable -Scholarship, Research, Instruction & OtherLoansCapital ProjectsUnrestricted788,876 679,494 612,119 718,314 738,153 624,821264,605 244,226 235,405 262,266 270,238 267,51477,300 75,637 78,357 77,656 75,785 74,82532,005 32,373 30,043 27,597 24,593 23,6971,337,363 1,163,916 868,199 904,856 815,339 740,9374,016,244 3,680,736 3,364,777 3,430,442 3,303,206 2,994,981$6,131,540 $ 5,536,575 $ 4,836,486 $ 4,966,770 $ 4,562,746 $ 4,213,241Total Net AssetsTotal Liabilities & Net Assets7272 2011 FinanciaL Report Supplementary Information -Unaudited -See Accompanying Independent Auditors' ReportFiscal Year Ended June 30, 2011 2010 2009 2008 2007 2006Operating RevenuesTuition and Fees, Net $ 671,419 $ 630,498 $ 601,742 $ 557,085 $ 537,832 $ 501,347Less: Scholarship Allowances 175,917 164,187 148,578 139,880 136,527 126,421Net Tuition and Fees 495,502 466,311 453,164 417,205 401,305 374,926Federal Grants and Contracts 196,122 183,885 172,669 184,416 163,517 176,442State and Local Grants and Contracts 57,375 66,194 53,042 54,414 47,045 41,255Private Grants and Contracts 67,025 68,044 71,034 60,318 54,268 46,310Sales and Services of Educational Activities 21,671 22,560 22,088 19,569 22,346 18,267Auxiliary Enterprises -Patient Medical Services, Net 763,674 736,799 702,424 681,312 648,802 620,577Housing and Dining Services, Net 93,724 89,743 81,939 72,503 66,828 61,548Bookstores 58,591 59,288 62,113 61,423 56,930 54,308Other Auxiliary Enterprises, Net 220,162 198,748 190,315 181,893 154,113 133,135Other Operating Revenues 51,871 49,250 53,681 46,968 53,523 49,851Total Operating Revenues 2,025,717 1,940,822 1,862,469 1,780,021 1,668,677 1,576,619Operating ExpensesSalaries and Wages 1,272,226 1,236,965 1,213,837 1,153,676 1,101,867 1,044,462Benefits 328,340 303,300 299,586 310,375 272,923 248,688Supplies, Services and Other Operating Expenses 716,044 676,362 672,711 662,331 608,134 606,617Scholarships and Fellowships 58,790 55,469 48,456 39,485 38,602 35,090Depreciation 155,103 146,753 131,167 125,996 119,069 110,924Total Operating Expenses 2,530,503 2,418,849 2,365,757 2,291,863 2,140,595 2,045,781Operating Loss before State Appropriations (504,786) (478,027) (503,288) (511,842) (471,918) (469,162)State Appropriations 437,631 498,358 479,478 462,281 440,855 428,893Operating Income (Loss) after StateAppropriations, Before NonoperatingRevenues (Expenses) (67,155) 20,331 (23,810) (49,561) (31,063) (40,269)Nonoperating Revenues (Expenses)Federal Appropriations 28,416 21,455 14,858 14,277 14,105 14,203Federal Pell Grants 57,951 48,281 31,649 27,232 23,613 22,994Investment and Endowment Income (Losses), Net 266,633 172,833 (173,355) 45,629 202,633 111,675Private Gifts 52,564 48,695 52,552 51,680 53,268 64,483Interest Expense (49,507) (46,103) (31,432) (43,055) (29,497) (28,563)Other Nonoperating Revenues (Expenses) (3,279) (1,659) (3,930) (4,750) (3,147) (4,971)Net Nonooerating Revenues (Expenses) 352.778 243.502 (109,6581 91,013 260.975 179,821Income (Loss) before Capital Contributions,Additions to Permanent Endowments andExtraordinary ItemState Capital AppropriationsCapital Gifts and GrantsPrivate Gifts for Endowment PurposesExtraordinary Item:Net Proceeds from Sale of Missouri CareIncrease (Decrease) in Net AssetsNet Assets, Beginning of YearCumulative Effect of Change in AccountingPrinciples285,623 263,833 (133,468) 41,452 229,912 139,5528,043 14,205 17,817 15,532 18,138 8,50315,466 19,381 13,009 17,341 12,941 16,28526,376 24,703 21,093 32,995 27,917 26,607--2,550 -19,317 -335,508 322,122 (78,999) 107,320 308,225 190,9473,680,736 3,364,777 3,430,442 3,303,206 2,994,981 2,804,034-(6,163) 13,334 19,916 --3,680,736 3,358,614 3,443,776 3,323,122 2,994,981 2,804,034$ 4,016,244 $ 3,680,736 $ 3,364,777 $ 3,430,442 $ 3,303,206 $ 2,994,981Net Assets, Beginning of Year, as AdjustedNet Assets, End of Year2011 FinanciaL Report73 Supplementary Information -Unaudited -See Accompanying Independent Auditors' ReportFiscal Year Ended June 30, 2011 2010 2009 2008 2007 2006Operating RevenuesTuition and Fees, Net 6.5% 4.8% 8.0% 3.6% 7.3% 6.4%Less: Scholarship Allowances 7.1% 10.5% 6.2% 2.5% 8.0% 9.2%Net Tuition and Fees 6.3% 2.9% 1.8% 1.1% -0.7% -2.9%Federal Grants and Contracts 6.7% 6.5% -6.4% 12.8% -7.3% 4.7%State and Local Grants and Contracts -13.3% 24.8% -2.5% 15.7% 14.0% -5.5%Private Grants and Contracts -1.5% -4.2% 17.8% 11.1% 17.2% -18.4%Sales and Services of Educational Activities -3.9% 2.1% 12.9% -12.4% 22.3% 1.9%Auxiliary Enterprises -Patient Medical Services, Net 3.6% 4.9% 3.1% 5.0% 4.5% 9.6%Housing and Dining Services, Net 4.4% 9.5% 13.0% 8.5% 8.6% 6.6%Bookstores -1.2% -4.5% 1.1% 7.9% 4.8% 7.7%Other Auxiliary Enterprises, Net 10.8% 4.4% 4.6% 18.0% 15.8% -8.0%Other Operating Revenues 5.3% -8.3% 14.3% -12.2% 7.4% 7.7%Total Operating Revenues 4.4% 4.2% 4.6% 6.7% 5.8% 4.6%Operating ExpensesSalaries and Wages 2.9% 1.9% 5.2% 4.7% 5.5% 5.8%Benefits 8.3% 1.2% -3.5% 13.7% 9.7% 9.6%Supplies, Services and Other Operating Expenses 5.9% 0.5% 1.6% 8.9% 0.3% 2.5%Scholarships and Fellowships 6.0% 14.5% 22.7% 2.3% 10.0% 14.0%Depreciation 5.7% 11.9% 4.1% 5.8% 7.3% 8.3%Total Operating Expenses 4.6% 2.2% 3.2% 7.1% 4.6% 5.5%Operating Loss before State Appropriations 5.6% -5.0% -1.7% 8.5% 0.6% 8.7%State Appropriations -12.2% 3.9% 3.7% 4.9% 2.8% -0.3%Operating Income (Loss) after StateAppropriations, Before NonoperatingRevenues (Expenses) -430.3% -185.4% -52.0% 59.5% -22.9% 2797.1%Nonoperating Revenues (Expenses)Federal Appropriations 32.4% 44.4% 4.1% 1.2% -0.7% -10.0%Federal Pell Grants 20.0% 52.6% 16.2% 15.3% 2.7% -7.9%Investment and Endowment Income (Losses), Net 54.3% -199.7% -479.9% -77.5% 81.4% 25.1%Private Gifts 7.9% -7.3% 1.7% -3.0% -17.4% -15.5%Interest Expense 7.4% 46.7% -27.0% 46.0% 3.3% 21.6%Other Nonoperating Revenues (Expenses) 97.6% -57.8% -17.3% 50.9% -36.7% -12.8%Net Nonoperating Revenues (Expenses) 44.9% -322.1% -220.5% -65.1% 45.1% 1.6%Income (Loss) before Capital Contributions,Additions to Permanent Endowments andExtraordinary Item 8.3% -297.7% -422.0% -82.0% 64.8% -20.6%State Capital Appropriations -43.4% -20.3% 14.7% -14.4% 113.3% 81.5%Capital Gifts and Grants -20.2% 49.0% -25.0% 34.0% -20.5% 24.7%Private Gifts for Endowment Purposes 6.8% 17.1% -36.1% 18.2% 4.9% -15.7%Extraordinary Item:Net Proceeds from Sale of Missouri Care ----Increase (Decrease) in Net Assets 4.2% -507.8% -173.6% -65.2% 61.4% -15.1%Net Assets, Beginning of Year 9.4% -1.9% 3.9% 10.3% 6.8% 8.7%Cumulative Effect of Change in AccountingPrinciples -100.0% -146.2% -33.0% 100.0% 0.0% 0.0%Net Assets, Beginning of Year, as Adjusted 9.6% -2.5% 3.6% 11.0% 6.8% 8.7%Net Assets, End of Year 9.1% 9.4% -1.9% 3.9% 10.3% 6.8%7412011 FinanciaL Report CO PO IT FIA CA IN E Sttsial etoSupplementary Information -Unaudited -See Accompanying Independent Auditors' ReportFiscal Year Ended June 30, 2011 2010 2009 2008 2007 2006+ Primary Reserve Ratio 0.67 0.62 0.50 0.54 0.54 0.53/ Conversion Factor 0.133 0.133 0.133 0.133 0.133 0.133= Strength Factor 5.01 4.63 3.78 4.08 4.10 3.99x Weighting Factor 35% 35% 35% 35% 35% 35%= Ratio Subtotal 1.75 1.62 1.32 1.43 1.43 1.40Primary Reserve Ratio -measures the financial strength of the institution by indicating how long the institution could function using itsexpendable reserves to cover operations should additional net assets not be available. A positive ratio and an increasing amount over timedenotes strength.+ Return on Assets Ratio 8.7% 9.2% -2.3% 3.2% 9.8% 6.6%/ Conversion Factor 0.020 0.020 0.020 0.020 0.020 0.020= Strength Factor 4.36 4.58 (1.16) 1.59 4.89 3.29x Weighting Factor 20% 20% 20% 20% 20% 20%Ratio Subtotal 0.87 0.92 (0.23) 0.32 0.98 0.66Return on Assets Ratio -measures total economic return. While an increasing trend reflects strength, a decline may be appropriate and evenwarranted if it represents a strategy on the part of the institution to fulfill its mission.+ Net Operating Revenues Ratio 5.1% 7.7% 6.0% 4.0% 5.2% 5.1%/ Conversion Factor 0.013 0.013 0.013 0.013 0.013 0.013Strength Factor 3.96 5.89 4.60 3.10 4.00 3.95x Weighting Factor 10% 10% 10% 10% 10% 10%Ratio Subtotal 0.40 0.59 0.46 0.31 0.40 0.40Net Operating Revenues Ratio -measures whether the institution is living within available resources. A positive ratio and an increasingamount over time generally reflects strength.+ Viability Ratio 1.21 1.27 1.38 1.42 1.75 1.60/ Conversion Factor 0.417 0.417 0.417 0.417 0.417 0.417= Strength Factor 2.90 3.04 3.30 3.39 4.21 3.84x Weighting Factor 35% 35% 35% 35% 35% 35%= Ratio Subtotal 1.01 1.06 1.16 1.19 1.47 1.34Viability Ratio -measures the ability of the institution to cover its debt as of the balance sheet date, should the institution need to do so. Apositive ratio greater than 1.00 generally denotes strength.Composite Financial Index 4.03 4.19 2.71 3.24 4.28 3.79Composite Financial Index -Three Year Average 3.64 3.38 3.41 3.77 4.11 4.06Composite Financial Index (CFI) -provides a methodology for a single overallfinancial measurement of the institution's health based on thefour core ratios. The CFI uses a reasonable weighting plan and allows for a weakness or strength in a specific ratio to be offset by anotherratio result, which provides a more balanced measure. The CFI provides a more holistic approach to understanding the financial health of theinstitution. The CFI scores are not intended to be precise measures; they are indicators of ranges of financial health that can be indicators ofoverall institutional well-being when combined with non-financial indicators.2011 FinanciaL Report75 MA KE RA IO SttsialetoSupplementary Information -Unaudited -See Accompanying Independent Auditors' ReportNet Tuition per StudentFiscal Year Ended June 30, 2011 2010 2009 2008 2007 2006Gross Tuition and Fees $ 671,419 $ 630,498 $ 601,742 $ 557,085 $ 537,832 $ 501,347Less: Scholarship Discounts / Allowances (175,917) (164,187) (148,578) (139,880) (136,527) (126,421)Less: Scholarship / Fellowship Expenses (58,790) (55,469) (48,456) (39,485) (38,602) (35,090)Net Tuition $ 436,712 $ 410,842 $ 404,708 $ 377,720 $ 362,703 $ 339,836Net Tuition $ 436,712 $ 410,842 $ 404,708 $ 377,720 $ 362,703 $ 339,836Number of Students -Fall Semester (FTEs) 55,272 53,292 51,025 48,994 48,431 47,752Net Tuition per Student $ 7,901 $ 7,709 $ 7,932 $ 7,710 $ 7,489 $ 7,117State Appropriations per StudentFiscal Year Ended June 30, 2011 2010 2009 2008 2007 2006State Appropriations $ 437,631 $ 498,358 $ 479,478 $ 462,281 $ 440,855 $ 428,893Number of Students -Fall Semester (FTEs) 55,272 53,292 51,025 48,994 48,431 47,752State Appropriations per Student $ 7,918 $ 9,351 $ 9,397 $ 9,435 $ 9,103 $ 8,982Educational Expenses per StudentFiscal Year Ended June 30, 2011 2010 2009 2008 2007 2006Total Operating Expenses $ 2,530,503 $ 2,418,849 $ 2,365,757 $ 2,291,863 $ 2,140,595 $ 2,045,781Less: Scholarships / Fellowships Expense (58,790) (55,469) (48,456) (39,485) (38,602) (35,090)Less: Auxiliary Operating Expenses (1,028,491) (956,455) (901,089) (886,774) (829,830) (771,976)Interest Expense 49,507 46,103 31,432 43,055 29,497 28,563Less: Auxiliary Interest Expense (9,006) (9,197) (7,437) (7,905) (8,380) (9,307)Net Educational Expenses $ 1,483,723 $ 1,443,831 $ 1,440,207 $ 1,400,754 $ 1,293,280 $ 1,257,971Net Educational Expenses $ 1,483,723 $ 1,443,831 $ 1,440,207 $ 1,400,754 $ 1,293,280 $ 1,257,971Number of Students -Fall Semester (FTEs) 55,272 53,292 51,025 48,994 48,431 47,752Educational Expenses per Student $ 26,844 $ 27,093 $ 28,226 $ 28,590 $ 26,704 $ 26,344Total Tuition DiscountFiscal Year Ended June 30, 2011 2010 2009 2008 2007 2006Scholarship Allowances $ 175,917 $ 164,187 $ 148,578 $ 139,880 $ 136,527 $ 126,421Scholarships / Fellowships Expense 58,790 55,469 48,456 39,485 38,602 35,090Total Tuition Discounts ($) $ 234,707 $ 219,656 $ 197,034 $ 179,365 $ 175,129 $ 161,511Total Tuition Discounts ($) $ 234,707 $ 219,656 $ 197,034 $ 179,365 $ 175,129 $ 161,511Tuition and Fees, Net $ 671,419 $ 630,498 $ 601,742 $ 557,085 $ 537,832 $ 501,347Total Tuition Discount (%)35.0% 34.8% 32.7% 32.2% 32.6% 32.2%762011 Financial Report CA IA RA IO Sttstcl SetoSupplementary Information -Unaudited -See Accompanying Independent Auditors' ReportUnrestricted Financial Resources to Direct DebtFiscal Year Ended June 30, 2011 2010 2009 2008 2007 2006Current Portion of Long-Term Debt $ 29,107 $ 30,139 $ 24,922 $ 21,697 $ 17,437 $ 15,185Long-Term Debt Subject to Remarketing 220,885 223,680 224,925 226,120 164,990 165,730Long-Term Debt 1,140,934 915,906 608,114 631,742 479,712 496,318Total Direct Debt $ 1,390,926 $ 1,169,725 $ 857,961 $ 879,559 $ 662,139 $ 677,233Net Assets -Unrestricted $ 1,337,363 $ 1,163,916 $ 868,199 $ 904,856 $ 815,339 $ 740,937Total Direct Debt $ 1,390,926 $ 1,169,725 $ 857,961 $ 879,559 $ 662,139 $ 677,233Unrestricted Financial Resourcesto Direct Debt 0.96 1.00 1.01 1.03 1.23 1.09Expendable Financial Resources to Direct Debt (Viability Ratio)Fiscal Year Ended June 30, 2011 2010 2009 2008 2007 2006Net Assets -Unrestricted $ 1,337,363 $ 1,163,916 $ 868,199 $ 904,856 $ 815,339 $ 740,937Net Assets -Restricted Expendable -Scholarships,Research, Instruction and Other 264,605 244,226 235,405 262,266 270,238 267,514Net Assets -Restricted Expendable -Loans 77,300 75,637 78,357 77,656 75,785 74,825Expendable Net Assets $ 1,679,268 $ 1,483,779 $ 1,181,961 $ 1,244,778 $ 1,161,362 $ 1,083,276Expendable Net Assets $ 1,679,268 $ 1,483,779 $ 1,181,961 $ 1,244,778 $ 1,161,362 $ 1,083,276Total Direct Debt $ 1,390,926 $ 1,169,725 $ 857,961 $ 879,559 $ 662,139 $ 677,233Viability Ratio 1.21 1.27 1.38 1.42 1.75 1.60Total Financial Resources to Direct DebtFiscal Year Ended June 30, 2011 2010 2009 2008 2007 2006Net Assets -Unrestricted $ 1,337,363 $ 1,163,916 $ 868,199 $ 904,856 $ 815,339 $ 740,937Net Assets -Restricted Expendable -Scholarships,Research, Instruction and Other 264,605 244,226 235,405 262,266 270,238 267,514Net Assets -Restricted Expendable -Loans 77,300 75,637 78,357 77,656 75,785 74,825Net Assets -Restricted Nonexpendable 788,876 679,494 612,119 718,314 738,153 624,821Total Financial Resources $ 2,468,144 $ 2,163,273 $ 1,794,080 $ 1,963,092 $ 1,899,515 $ 1,708,097Total Financial Resources $ 2,468,144 $ 2,163,273 $ 1,794,080 $ 1,963,092 $ 1,899,515 $ 1,708,097Total Direct Debt $ 1,390,926 $ 1,169,725 $ 857,961 $ 879,559 $ 662,139 $ 677,233Total Financial Resourcesto Direct Debt 1.77 1.85 2.09 2.23 2.87 2.52Direct Debt per StudentFiscal Year Ended June 30, 2011 2010 2009 2008 2007 2006Total Direct Debt $ 1,390,926 $ 1,169,725 $ 857,961 $ 879,559 $ 662,139 $ 677,233Number of Students -End of Fiscal Year (FTEs) 56,795 55,272 53,292 51,025 48,994 48,431Direct Debt per Student2011 Financial Report$ 24,490 $ 21,163 $ 16,099 $ 17,238 $ 13,515 $ 13,98377 CA IA A IS Sttstcl SetoSupplementary Information -Unaudited -See Accompanying Independent Auditors' ReportActual Debt Service to OperationsFiscal Year Ended June 30, 2011 2010 2009 2008 2007 2006Debt Service -Principal $ 29,010 $ 24,922 $ 21,987 $ 17,437 $ 15,185 $ 13,877Debt Service -Interest 49,507 46,103 31,432 43,055 29,497 28,563Total Debt Service $ 78,517 $ 71,025 $ 53,419 $ 60,492 $ 44,682 $ 42,440Operating Expenses $ 2,530,503 $ 2,418,849 $ 2,365,757 $ 2,291,863 $ 2,140,595 $ 2,045,781Less: Scholarships & Fellowships Expense (58,790) (55,469) (48,456) (39,485) (38,602) (35,090)Interest Expense 49,507 46,103 31,432 43,055 29,497 28,563Adjusted Total Operating Expense $ 2,521,220 $ 2,409,483 $ 2,348,733 $ 2,295,433 $ 2,131,490 $ 2,039,254Total Debt Service $ 78,517 $ 71,025 $ 53,419 $ 60,492 $ 44,682 $ 42,440Adjusted Total Operating Expense $ 2,521,220 $ 2,409,483 $ 2,348,733 $ 2,295,433 $ 2,131,490 $ 2,039,254Actual Debt Service to Operations 3.1% 2.9% 2.3% 2.6% 2.1% 2.1%Capital Expense to OperationsFiscal Year Ended June 30, 2011 2010 2009 2008 2007 2006Depreciation Expense $ 155,103 $ 146,753 $ 131,167 $ 125,996 $ 119,069 $ 110,924Interest Expense 49,507 46,103 31,432 43,055 29,497 28,563Total Capital Expense $ 204,610 $ 192,856 $ 162,599 $ 169,051 $ 148,566 $ 139,487Operating Expenses $ 2,530,503 $ 2,418,849 $ 2,365,757 $ 2,291,863 $ 2,140,595 $ 2,045,781Less: Scholarships & Fellowships Expense (58,790) (55,469) (48,456) (39,485) (38,602) (35,090)Interest Expense 49,507 46,103 31,432 43,055 29,497 28,563Adjusted Total Operating Expense $ 2,521,220 $ 2,409,483 $ 2,348,733 $ 2,295,433 $ 2,131,490 $ 2,039,254Total Capital Expense $ 204,610 $ 192,856 $ 162,599 $ 169,051 $ 148,566 $ 139,487Adjusted Total Operating Expense $ 2,521,220 $ 2,409,483 $ 2,348,733 $ 2,295,433 $ 2,131,490 $ 2,039,254Capital Expense to Operations8.1% 8.0%6.9%7.4%7.0%6.8%782011 Financial Report SHEE RATIOS Sttstcl SecioSupplementary Information -Unaudited -See Accompanying Independent Auditors' ReportUnrestricted Financial Resources to OperationsFiscal Year Ended June 30, 2011 2010 2009 2008 2007 2006Net Assets -Unrestricted $ 1,337,363 $ 1,163,916 $ 868,199 $ 904,856 $ 815,339 $ 740,937Operating Expenses $ 2,530,503 $ 2,418,849 $ 2,365,757 $ 2,291,863 $ 2,140,595 $ 2,045,781Less: Scholarships & Fellowships Expense (58,790) (55,469) (48,456) (39,485) (38,602) (35,090)Interest Expense 49,507 46,103 31,432 43,055 29,497 28,563Adjusted Total Operating Expense $ 2,521,220 $ 2,409,483 $ 2,348,733 $ 2,295,433 $ 2,131,490 $ 2,039,254Net Assets -Unrestricted $ 1,337,363 $ 1,163,916 $ 868,199 $ 904,856 $ 815,339 $ 740,937Adjusted Total Operating Expense $ 2,521,220 $ 2,409,483 $ 2,348,733 $ 2,295,433 $ 2,131,490 $ 2,039,254Unrestricted Financial Resourcesto Operations 0.53 0.48 0.37 0.39 0.38 0.36Expendable Financial Resources to Operations (Primary Reserve Ratio)Fiscal Year Ended June 30, 2011 2010 2009 2008 2007 2006Net Assets -Unrestricted $ 1,337,363 $ 1,163,916 $ 868,199 $ 904,856 $ 815,339 $ 740,937Net Assets -Restricted Expendable -Scholarships,Research, Instruction and Other 264,605 244,226 235,405 262,266 270,238 267,514Net Assets -Restricted Expendable -Loans 77,300 75,637 78,357 77,656 75,785 74,825Expendable Net Assets $ 1,679,268 $ 1,483,779 $ 1,181,961 $ 1,244,778 $ 1,161,362 $ 1,083,276Operating Expenses $ 2,530,503 $ 2,418,849 $ 2,365,757 $ 2,291,863 $ 2,140,595 $ 2,045,781Less: Scholarships & Fellowships Expense (58,790) (55,469) (48,456) (39,485) (38,602) (35,090)Interest Expense 49,507 46,103 31,432 43,055 29,497 28,563Adjusted Total Operating Expense $ 2,521,220 $ 2,409,483 $ 2,348,733 $ 2,295,433 $ 2,131,490 $ 2,039,254Expendable Net Assets $ 1,679,268 $ 1,483,779 $ 1,181,961 $ 1,244,778 $ 1,161,362 $ 1,083,276Adjusted Total Operating Expense $ 2,521,220 $ 2,409,483 $ 2,348,733 $ 2,295,433 $ 2,131,490 $ 2,039,254Primary Reserve Ratio 0.67 0.62 0.50 0.54 0.54 0.53Total Financial Resources per StudentFiscal Year Ended June 30, 2011 2010 2009 2008 2007 2006Net Assets -Unrestricted $ 1,337,363 $ 1,163,916 $ 868,199 $ 904,856 $ 815,339 $ 740,937Net Assets -Restricted Expendable -Scholarships,Research, Instruction and Other 264,605 244,226 235,405 262,266 270,238 267,514Net Assets -Restricted Expendable -Loans 77,300 75,637 78,357 77,656 75,785 74,825Net Assets -Restricted Nonexpendable 788,876 679,494 612,119 718,314 738,153 624,821Total Financial Resources $ 2,468,144 $ 2,163,273 $ 1,794,080 $ 1,963,092 $ 1,899,515 $ 1,708,097Total Financial Resources $ 2,468,144 $ 2,163,273 $ 1,794,080 $ 1,963,092 $ 1,899,515 $ 1,708,097Number of Students -End of Fiscal Year (FTE) 56,795 55,272 53,292 51,025 48,994 48,431Total Financial Resources per Student$ 43,457 $ 39,139 $ 33,665 $ 38,473$ 38,770 $ 35,2692011 FinanciaL Report79 OPRA IN RATIS Sttstcl SetoSupplementary Information -Unaudited -See Accompanying Independent Auditors' ReportAnnual Operating Margin (Net Operating Revenues Ratio)Fiscal Year Ended June 30, 2011 2010 2009 2008 2007 2006Operating Inc (Loss) After State Appropriations $ (67,155) $ 20,331 $ (23,810) $ (49,561) $ (31,063) $ (40,269)Federal Appropriations 28,416 21,455 14,858 14,277 14,105 14,203Federal Pell Grants 57,951 48,281 31,649 27,232 23,613 22,994Normalized Investment Income 114,592 107,236 105,498 95,963 86,504 77,538Private Gifts 52,564 48,695 52,552 51,680 53,268 64,483Interest Expense (49,507) (46,103) (31,432) (43,055) (29,497) (28,563)Net Operating Surplus (Deficit) $ 136,861 $ 199,895 $ 149,315 $ 96,536 $ 116,930 $ 110,386Total Operating Revenues $ 2,025,717 $ 1,940,822 $ 1,862,469 $ 1,780,021 $ 1,668,677 $ 1,576,619Less: Scholarship & Fellowships Expense (58,790) (55,469) (48,456) (39,485) (38,602) (35,090)State Appropriations 437,631 498,358 479,478 462,281 440,855 428,893Federal Appropriations 28,416 21,455 14,858 14,277 14,105 14,203Federal Pell Grants 57,951 48,281 31,649 27,232 23,613 22,994Normalized Investment Income (a) 114,592 107,236 105,498 95,963 86,504 77,538Private Gifts 52,564 48,695 52,552 51,680 53,268 64,483Total Operating Revenues $ 2,658,081 $ 2,609,378 $ 2,498,048 $ 2,391,969 $ 2,248,420 $ 2,149,640(a) Normalized investment income is equal to 5% of the rolling average balance of total cash and investments over the previous three fiscal years.Net Operating Surplus (Deficit) $ 136,861 $ 199,895 $ 149,315 $ 96,536 $ 116,930 $ 110,386Total Operating Revenues $ 2,658,081 $ 2,609,378 $ 2,498,048 $ 2,391,969 $ 2,248,420 $ 2,149,640Net Operating Revenues Ratio 5.1% 7.7% 6.0% 4.0% 5.2% 5.1%Debt Service CoverageFiscal Year Ended June 30, 2011 2010 2009 2008 2007 2006Total Debt Service $ 78,517 $ 71,025 $ 53,419 $ 60,492 $ 44,682 $ 42,440Net Operating Surplus (Deficit) $ 136,861 $ 199,895 $ 149,315 $ 96,536 $ 116,930 $ 110,386Add Back: Interest Expense 49,507 46,103 31,432 43,055 29,497 28,563Add Back: Depreciation Expense 155,103 146,753 131,167 125,996 119,069 110,924Adjusted Net Operating Surplus (Deficit) $ 341,471 $ 392,751 $ 311,914 $ 265,587 $ 265,496 $ 249,873Adjusted Net Operating Surplus (Deficit) $ 341,471 $ 392,751 $ 311,914 $ 265,587 $ 265,496 $ 249,873Total Debt Service $ 78,517 $ 71,025 $ 53,419 $ 60,492 $ 44,682 $ 42,440Debt Service Coverage 4.35 5.53 5.84 4.39 5.94 5.89Return on Net AssetsFiscal Year Ended June 30, 2011 2010 2009 2008 2007 2006Change in Net Assets $ 335,508 $ 322,122 $ (78,999) $ 107,320 $ 308,225 $ 190,947Average Net Assets $ 3,848,490 $ 3,519,675 $ 3,404,277 $ 3,376,782 $ 3,149,094 $ 2,899,508Return on Net Assets Ratio8.7%9.2% -2.3% 3.2% 9.8%6.6%802011 Financial Report Supplementary Information -Unaudited -See Accompanying Independent Auditors' ReportContribution RatiosFiscal Year Ended June 30, 2011 2010 2009 2008 2007 2006State Appropriations $ 437,631 $ 498,358 $ 479,478 $ 462,281 $ 440,855 $ 428,893Tuition and Fees, Net of Scholarship Allow/Exp 436,712 410,842 404,708 377,720 362,703 339,836Auxiliary Enterprises 372,477 347,779 334,367 315,819 277,871 248,991Grants and Contracts 320,522 318,123 296,745 299,148 264,830 264,007Federal Pell Grants 57,951 48,281 31,649 27,232 23,613 22,994Gifts 52,564 48,695 52,552 51,680 53,268 64,483Normalized Investment Income (a) 114,592 107,236 105,498 95,963 86,504 77,538Patient Care 763,674 736,799 702,424 681,312 648,802 620,577Other 101,958 93,265 90,627 80,814 89,974 82,321Total $ 2,658,081 $ 2,609,378 S 2,498,048 $ 2,391,969 $ 2,248,420 $ 2,149,640State Appropriations 16.5% 19.1% 19.2% 19.3% 19.6% 20.0%Tuition and Fees, Net of Scholarship Allow/Exp 16.4% 15.7% 16.2% 15.8% 16.1% 15.8%Auxiliary Enterprises 14.0% 13.3% 13.4% 13.2% 12.4% 11.6%Grants and Contracts 12.1% 12.2% 11.9% 12.5% 11.8% 12.3%Federal Pell Grants 2.2% 1.9% 1.3% 1.1% 1.1% 1.1%Gifts 2.0% 1.9% 2.1% 2.2% 2.4% 3.0%Normalized Investment Income (a) 4.3% 4.1% 4.2% 4.0% 3.8% 3.6%Patient Care 28.7% 28.2% 28.1% 28.5% 28.9% 28.9%Other 3.8% 3.6% 3.6% 3.4% 4.0% 3.8%Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%(a) Normalized investment income is equal to 5% of the rolling average balance of total cash and investments over the previous three fiscal years.Operating Expenses by Functional ClassificationsFiscal Year Ended June 30, 2011 2010 2009 2008 2007 2006Instruction $ 556,631 $ 537,613 $ 544,025 $ 513,970 $ 475,366 $ 455,134Research 219,903 214,540 214,491 206,803 204,421 207,504Public Service 143,546 146,719 173,627 163,203 151,735 145,257Academic Support 127,856 124,119 108,626 120,071 116,275 107,041Student Services 69,992 70,671 69,234 69,669 74,797 72,305Institutional Support 97,934 109,493 104,198 116,672 65,382 74,778Operation and Maintenance of Plant 69,982 55,878 70,002 47,796 63,432 62,100Auxiliary Enterprises 1,030,316 957,394 901,931 888,198 831,516 775,648Scholarships and Fellowships 58,790 55,469 48,456 39,485 38,602 35,090Depreciation 155,103 146,753 131,167 125,996 119,069 110,924Total Operating Expenses $ 2,530,053 $ 2,418,649 $ 2,365,757 $ 2,291,863 $ 2,140,595 $ 2,045,781Instruction 22.0% 22.2% 23.0% 22.4% 22.2% 22.2%Research 8.7% 8.9% 9.1% 9.0% 9.5% 10.1%Public Service 5.7% 6.1% 7.3% 7.1% 7.1% 7.1%Academic Support 5.1% 5.1% 4.6% 5.2% 5.4% 5.2%Student Services 2.8% 2.9% 2.9% 3.0% 3.5% 3.5%Institutional Support 3.9% 4.5% 4.4% 5.1% 3.1% 3.7%Operation and Maintenance of Plant 2.8% 2.3% 3.0% 2.1% 3.0% 3.0%Auxiliary Enterprises 40.7% 39.6% 38.1% 38.8% 38.8% 37.9%Scholarships and Fellowships 2.3% 2.3% 2.0% 1.7% 1.8% 1.7%Depreciation 6.1% 6.1% 5.5% 5.5% 5.6% 5.4%Total Operating Expenses 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%2011 FinanciaL Report81 ST D N IN O M TO -CO SO IA E Sttstcl SectioSupplementary Information -Unaudited -See Accompanying Independent Auditors' ReportEnrollmentFall Semester 2010 2009 2008 2007 2006 2005Undergraduate Students (Head Count) 53,358 51,352 49,510 47,864 47,841 47,739Graduate Students (Head Count) 15,232 15,080 14,336 13,846 13,158 12,875Professional Students (Head Count) 3,006 2,952 2,873 2,830 2,784 2,770Total Students (Head Count) 71,596 69,384 66,719 64,540 63,783 63,384Undergraduate Students (FTE) 43,737 41,974 40,294 38,642 38,381 37,927Graduate Students (FTE) 8,571 8,401 7,890 7,553 7,299 7,095Professional Students (FTE) 2,964 2,917 2,841 2,799 2,751 2,730Total Students (FTE) 55,272 53,292 51,025 48,994 48,431 47,752Acceptance Rate -First-time Freshmen 80% 80% 81% 80% 79% 81%Acceptance Rate -Undergraduate Transfers 73% 72% 72% 70% 80% 86%Matriculation -First-time Freshmen 42% 41% 46% 47% 45% 45%Matriculation -Undergraduate Transfers 67% 68% 68% 64% 61% 60%DemographicsFall Semester 2010 2009 2008 2007 2006 2005Male 47% 47% 46% 47% 47% 46%Female 53% 53% 54% 53% 53% 54%Undergraduate Residence -Missouri 83% 84% 84% 85% 86% 86%Undergraduate Residence -Out of State 17% 16% 16% 15% 14% 14%Undergraduate Full-Time 77% 77% 76% 76% 75% 74%Undergraduate Part-Time 23% 23% 24% 24% 25% 26%Graduate Full-Time 45% 40% 38% 39% 41% 40%Graduate Part-Time 55% 60% 62% 61% 59% 60%white 76.5% 77.1% 78.2% 78.6% 79.1% 79.5%Black or African American 9.8% 9.9% 9.3% 9.3% 9.0% 9.0%Non-Resident Alien 6.2% 6.1% 6.0% 5.6% 5.5% 5.2%Asian / Pacific Is. 3.5% 3.5% 3.4% 3.6% 3.6% 3.5%Hispanic 2.8% 2.6% 2.5% 2.3% 2.2% 2.3%Other 1.2% 0.8% 0.6% 0.6% 0.6% 0.5%Degrees AwardedFiscal Year Ended June 30, 2011 2010 2009 2008 2007 2006Baccalaureate 9,703 9,605 9,291 8,997 9,038 8,535Graduate Certificate 539 520 438 321 293 259Master's 3,870 3,608 3,620 3,432 3,193 3,227Educational Specialist 100 123 148 102 106 91Doctoral 557 519 487 510 479 470First Professional Degree 818 800 763 749 771 741Total 15,587 15,175 14,747 14,111 13,880 13,323822011 FinanciaL Report ST D N IF R ATO -COUM I Sttsia SetoSupplementary Information -Unaudited -See Accompanying Independent Auditors' ReportEnrollmentFall Semester 2010 2009 2008 2007 2006 2005Undergraduate Students (Head Count) 24,834 23,799 22,980 21,586 21,484 21,335Graduate Students (Head Count) 6,310 6,288 6,024 5,708 5,598 5,512Professional Students (Head Count) 1,197 1,150 1,126 1,111 1,102 1,083Total Students (Head Count) 32,341 31,237 30,130 28,405 28,184 27,930Undergraduate Students (FTE) 22,899 21,943 21,197 19,847 19,781 19,441Graduate Students (FTE) 3,765 3,721 3,536 3,340 3,319 3,198Professional Students (FTE) 1,174 1,134 1,108 1,094 1,083 1,066Total Students (FTE) 27,838 26,798 25,841 24,281 24,183 23,705Acceptance Rate -First-time Freshmen 83% 83% 85% 85% 78% 83%Acceptance Rate -Undergraduate Transfers 67% 69% 71% 67% 79% 91%Matriculation -First-time Freshmen 42% 41% 47% 48% 47% 46%Matriculation -Undergraduate Transfers 66% 66% 68% 71% 67% 70%DemographicsFall Semester 2010 2009 2008 2007 2006 2005Male 47% 46% 46% 46% 47% 47%Female 53% 54% 54% 54% 53% 53%Undergraduate Residence -Missouri 81% 83% 84% 85% 86% 86%Undergraduate Residence -Out of State 19% 17% 16% 15% 14% 14%Undergraduate Full-Time 94% 94% 94% 94% 94% 94%Undergraduate Part-Time 6% 6% 6% 6% 6% 6%Graduate Full-Time 58% 48% 46% 48% 50% 48%Graduate Part-Time 42% 52% 54% 52% 50% 52%White 81.8% 82.9% 83.6% 83.8% 83.8% 84.2%Black or African American 6.6% 6.4% 5.9% 5.8% 5.7% 5.6%Non-Resident Alien 5.4% 5.4% 5.4% 5.3% 5.3% 5.1%Asian / Pacific Is. 2.4% 2.5% 2.5% 2.7% 2.8% 2.8%Hispanic 2.5% 2.2% 2.0% 1.8% 1.8% 1.8%Other 1.3% 0.6% 0.6% 0.6% 0.6% 0.5%Degrees AwardedFiscal Year Ended June 30, 2011 2010 2009 2008 2007 2006Baccalaureate 5,087 4,963 4,855 4,779 4,736 4,461Graduate Certificate 162 142 88 69 68 84Master's 1,513 1,515 1,506 1,421 1,350 1,314Educational Specialist 53 59 57 34 36 21Doctoral 365 322 306 326 293 277First Professional Degree 306 304 307 303 289 292Total 7,486 7,305 7,119 6,932 6,772 6,4492011 FinanciaL Report83 I !S UD N IN O M TO --AS SCT ttsia etoSupplementary Information -Unaudited -See Accompanying Independent Auditors'ReportEnrollmentFall Semester 2010 2009 2008 2007 2006 2005Undergraduate Students (Head Count) 9,850 9,381 9,261 9,094 9,383 9,487Graduate Students (Head Count) 3,771 3,795 3,651 3,800 3,321 3,296Professional Students (Head Count) 1,638 1,623 1,569 1,548 1,509 1,523Total Students (Head Count) 15,259 14,799 14,481 14,442 14,213 14,306Undergraduate Students (FTE) 7,395 6,972 6,662 6,400 6,528 6,540Graduate Students (FTE) 2,030 2,021 1,936 1,909 1,776 1,755Professional Students (FTE) 1,618 1,604 1,555 1,535 1,495 1,500Total Students (FTE) 11,043 10,597 10,153 9,844 9,799 9,795Acceptance Rate -First-time Freshmen 71% 72% 73% 66% 82% 81%Acceptance Rate -Undergraduate Transfers 72% 70% 66% 61% 80% 86%Matriculation -First-time Freshmen 39% 40% 42% 44% 36% 39%Matriculation -Undergraduate Transfers 65% 68% 67% 67% 57% 57%DemographicsFall Semester 2010 2009 2008 2007 2006 2005Male 43% 43% 43% 42% 42% 42%Female 57% 57% 57% 58% 58% 58%Undergraduate Residence -Missouri 75% 75% 77% 78% 77% 79%Undergraduate Residence -Out of State 25% 25% 23% 22% 23% 21%Undergraduate Full-Time 68% 67% 63% 61% 61% 60%Undergraduate Part-Time 32% 33% 37% 39% 39% 40%Graduate Full-Time 33% 33% 33% 30% 35% 34%Graduate Part-Time 67% 67% 67% 70% 65% 66%White 67.7% 67.6% 68.9% 71.1% 71.5% 72.0%Black or African American 12.6% 12.7% 12.5% 12.0% 12.1% 12.1%Non-Resident Alien 7.1% 7.4% 7.3% 6.3% 5.9% 5.5%Asian/ Pacific Is. 6.4% 6.5% 6.2% 6.2% 6.1% 5.8%Hispanic 4.7% 4.3% 4.4% 3.8% 3.6% 3.9%Other 1.5% 1.4% 0.7% 0.7% 0.7% 0.8%Degrees AwardedFiscal Year Ended June 30, 2011 2010 2009 2008 2007 2006Baccalaureate 1,523 1,633 1,496 1,289 1,428 1,425Graduate Certificate 24 18 20 24 19 23Master's 972 911 917 852 769 791Educational Specialist 25 33 49 40 39 41Doctoral 77 83 68 59 71 61First Professional Degree 468 455 412 408 438 415Total 3,089 3,133 2,962 2,672 2,764 2,7568 12011 FinanciaL Report ST D N INF R ATO -MISO R S& Sttsia etoSupplementary Information -Unaudited -See Accompanying Independent Auditors' ReportEnrollmentFall Semester 2010 2009 2008 2007 2006 2005Undergraduate Students (Head Count) 5,503 5,206 4,911 4,752 4,515 4,311Graduate Students (Head Count) 1,702 1,608 1,456 1,414 1,343 1,289Professional Students (Head Count) ------Total Students (Head Count) 7,205 6,814 6,367 6,166 5,858 5,600Undergraduate Students (FTE) 5,127 4,886 4,622 4,483 4,200 4,000Graduate Students (FTE) 1,036 979 831 840 783 800Professional Students (FTE)Total Students (FTE) 6,163 5,865 5,453 5,323 4,983 4,800Acceptance Rate -First-time Freshmen 87% 89% 88% 90% 90% 92%Acceptance Rate -Undergraduate Transfers 67% 74% 74% 76% 77% 80%Matriculation -First-time Freshmen 47% 47% 49% 49% 49% 48%Matriculation -Undergraduate Transfers 80% 71% 67% 73% 66% 81%Note: Rolla's pre-application advising process encourages unqualified students to apply elsewhere, thereby producing misleadingacceptance rate figures.DemographicsFall Semester 2010 2009 2008 2007 2006 2005Male 78% 78% 78% 77% 77% 78%Female 22% 22% 22% 23% 23% 22%Undergraduate Residence -Missouri 80% 81% 81% 81% 81% 81%Undergraduate Residence -Out of State 20% 19% 19% 19% 19% 19%Undergraduate Full-Time 91% 92% 93% 92% 91% 90%Undergraduate Part-Time 9% 8% 7% 8% 9% 10%Graduate Full-Time 59% 59% 52% 54% 56% 60%Graduate Part-Time 41% 41% 48% 46% 44% 40%White 75.7% 76.4% 78.3% 78.7% 78.9% 79.3%Black or African American 4.6% 5.4% 4.9% 4.6% 4.4% 4.4%Non-Resident Alien 13.9% 12.6% 11.0% 10.4% 10.4% 10.6%Asian / Pacific Is. 2.5% 2.7% 3.1% 3.3% 3.5% 3.0%Hispanic 2.4% 2.3% 2.2% 2.3% 2.4% 2.4%Other 0.9% 0.6% 0.5% 0.7% 0.4% 0.3%Degrees AwardedFiscal Year Ended June 30, 2011 2010 2009 2008 2007 2006Baccalaureate 1,001 998 922 913 835 744Graduate Certificate 282 278 250 164 127 75Master's 517 411 426 430 356 392Educational Specialist ------Doctoral 65 51 50 63 63 74First Professional Degree ------Total 1,865 1,738 1,648 1,570 1,381 1,2852011 FinanciaL Report85 ST D N IN O M TO -S .L US Sttsia etoSupplementary Information -Unaudited -See Accompanying Independent Auditors' ReportEnrollmentFall Semester 2010 2009 2008 2007 2006 2005Undergraduate Students (Head Count) 13,171 12,966 12,358 12,432 12,459 12,606Graduate Students (Head Count) 3,449 3,389 3,205 2,924 2,896 2,778Professional Students (Head Count) 171 179 178 171 173 164Total Students (Head Count) 16,791 16,534 15,741 15,527 15,528 15,548Undergraduate Students (FTE) 8,317 8,172 7,814 7,912 7,873 7,947Graduate Students (FTE) 1,740 1,681 1,587 1,464 1,422 1,341Professional Students (FTE) 171 179 178 171 173 164Total Students (FTE) 10,228 10,032 9,579 9,547 9,468 9,452Acceptance Rate -First-time Freshmen 58% 60% 59% 62% 64% 62%Acceptance Rate -Undergraduate Transfers 78% 77% 79% 78% 81% 84%Matriculation -First-time Freshmen 37% 39% 38% 38% 39% 43%Matriculation -Undergraduate Transfers 66% 69% 69% 57% 60% 54%DemographicsFall Semester 2010 2009 2008 2007 2006 2005Male 39% 38% 35% 40% 39% 39%Female 61% 62% 65% 60% 61% 61%Undergraduate Residence -Missouri 93% 93% 93% 93% 93% 93%Undergraduate Residence -Out of State 7% 7% 7% 7% 7% 7%Undergraduate Full-Time 46% 46% 47% 48% 47% 47%Undergraduate Part-Time 54% 54% 53% 52% 53% 53%Graduate Full-Time 28% 23% 23% 26% 24% 24%Graduate Part-Time 72% 77% 77% 74% 76% 76%White 73.7% 74.2% 75.4% 75.1% 76.9% 77.5%Black or African American 16.4% 16.6% 15.6% 15.8% 14.4% 14.3%Non-Resident Alien 3.7% 3.6% 3.9% 3.7% 3.6% 3.1%Asian / Pacific Is. 3.2% 3.2% 3.0% 3.3% 3.1% 3.2%Hispanic 2.1% 1.9% 1.7% 1.8% 1.7% 1.7%Other 0.9% 0.5% 0.4% 0.3% 0.3% 0.2%Degrees AwardedFiscal Year Ended June 30, 2011 2010 2009 2008 2007 2006Baccalaureate 2,092 2,011 2,018 2,016 2,039 1,905Graduate Certificate 71 82 80 64 79 77Master's 868 771 771 729 718 730Educational Specialist 22 31 42 28 31 29Doctoral 50 63 63 62 52 58First Professional Degree 44 41 44 38 44 34Total 3,147 2,999 3,018 2,937 2,963 2,833862011 Financial ReporL (Page intentionally left blank)2011 FinanciaL Report87 AdvancingMissou FIT.University of Missouri SystemCOLUMBIA I KANSAS CITY I ROLLA I ST.LOUIS201 Fiania. 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