The University of Texas at San Antonio FY 07 Annual Financial Report Highlights January, 2008

2 Annual Financial Report Highlights The Annual Financial Report (AFR) is made up of three primary statements with many supporting schedules. 1. Balance Sheet – Explains what we own, our obligations and what is available. 2. Statement of Revenues, Expenses and Changes in Net Assets (SRECNA) – Shows the results of operations for the year. 3. Statement of Cash Flows – Shows what revenue came in, what was expended and what is left. Review pie charts and ratios that help explain our financial condition

3 UTSA FY 07 Balance Sheet The Balance Sheet has three sections: Assets: What we own - Items that are available to meet operating costs of the Institution, plus buildings, land, equipment, etc.  Investments increased by $53.5M due to additions, investment income and appreciation.  Capital Assets increased by $106.2M predominantly due to the construction of Rec Center II, Laurel Village, BSE – II, Thermal Energy Plant and University Center – III. Liabilities: Our obligations -Amounts due and payable within one year or beyond. Net Assets: What’s available - Capital Assets net of depreciation, endowment funds and other unrestricted funds.  Amount invested in Capital Assets increased predominately by $106.2M due to construction.  Unrestricted Net Assets grew by $27.0M due to increase in Tuition & Fees.

4 UTSA Operating Revenues ($ in millions) Student Tuition and Fees-Net of Discounts Sponsored Programs Sales and Services of Educational Activities Auxiliary Enterprises Other Total Operating Revenues Total Operating Expenses Operating Loss(75.0) NonoperatingRevenues (Expenses): State Appropriations Gift Contributions Net Investment Income (Loss) Net Inc. (Dec.) in Fair Value of Investments Gain/(Loss) on State of Capital Assets(0.1) OtherNonoperatin g Revenues/Expenses0.0 Income (Loss) Before Other Revenues, Expenses, Gains or Losses Gifts and Sponsored Programs Additions to Permanent Endowments ReclassFrom (To) Other Institutions(48.7)19.8 Mandatory Transfers-Comp & Sys Admin -Debt Svc(19.7)(16.6) NonmandatoryTransfers-Comp & Sys Admin Transfers From (To) Other State entities(1.4) Change in Net Assets Net Assets, Beginning of the Year Net Assets, End of the Year UTSA Operating Revenues ($ in millions) Student Tuition and Fees-Net of Discounts Sponsored Programs Sales and Services of Educational Activities Auxiliary Enterprises Other Total Operating Revenues Total Operating Expenses Operating Loss (75.0)(78.5) NonoperatingRevenues (Expenses): State Appropriations Gift Contributions Net Investment Income (Loss) Net Inc. (Dec.) in Fair Value of Investments Income (Loss) Before Other Revenues, Expenses, Gains or Losses Gifts and Sponsored Programs Additions to Permanent Endowments ReclassFrom (To) Other Institutions(48.7)19.8 Mandatory Transfers (19.7)(16.6) NonmandatoryTransfers Transfers From (To) Other State entities(1.4)(0.8) Change in Net Assets Net Assets, Beginning of the Year Net Assets, End of the Year The Statement of Revenue, Expenses, and Changes in Net Assets (SRECNA). This statement is called the “Operating Statement” as it reports the results of operations for the year.  Tuition and Fees increased by $24.8M.  Operating loss is calculated before state appropriations. Tuition and fees increased more than operating expenses causing a slight change.  The increase is predominantly due to a $8.3M increase in FV of investments and increase in net investment income of $4.8M.  Mandatory Transfers represent amounts transferred to System Admin to pay debt service, and nonmandatory transfers represent anticipated bond proceeds transferred to UTSA to fund construction projects.  As on the previous exhibit, Change in Net Assets was $126.2M. In the current year operations, this is most dramatically impacted by the transfers from system of bond proceeds for capital improvement projects. 4

5 UTSA FY 07 Statement of Cash Flows  Cash from operations includes tuition and fees and expenditures for operations includes salaries, depreciation, scholarship/fellowship and supplies.  Noncapital financing activities include State appropriations and Gifts.  Capital and related financing activities include purchase of equipment and construction of buildings.  Investing Activities include the purchase/sale of investments, interest income and endowment income distribution.  Cash & Cash Equivalents decreased slightly.

6 UTSA FY 2007 Sources of Revenue by Category

UTSA FY 07 Sources of Revenue 7

8 UTSA FY 07 Uses of Funds

9 UTSA FY 07 Analysis of Financial Condition Composite Financial Index  Composite Financial Index measures the overall financial health by combining four core ratios into a single score: primary reserve ratio, expendable resources to debt ratio, return on net assets ratio and the annual operating margin ratio.  The CFI increased by.8 primarily due to increase in interest earnings and appreciation on investments, as well as higher net operating income.  System’s benchmark is 3.0 or greater.

10 UTSA FY 07 Analysis of Financial Condition Operating Expense Coverage Ratio  Measures an institution’s ability to cover future operating expenses with available year-end balances. Ratio is expressed in number of months coverage.  Increase from 4.2 months to 5.0 months is due to increase in unrestricted net assets as a result of increases in Tuition & Fees attributable to enrollment growth and rate increases.  System Satisfactory rating is at two months or above and should be stable or improve.

11 UTSA FY 07 Analysis of Financial Condition Debt Service Coverage Ratio  This ratio measures the actual margin of protection provided to investors by annual operations. Calculation is used by Moody’s Investment Services, system-wide to determine bond rating. This is watched very closely so UT System can maintain AAA bond rating.  Trend helps to determine if an institution has assumed more debt than it can afford to service.  Our trend is growing exceeding UT System’s benchmark of greater than 2.4. This means that our net resources are 3.1 times what we are currently expending for debt payments. The ratio increased slightly due to operating performance off-set by increased debt service.

12 UTSA FY 07 Analysis of Financial Condition Expendable Resources to Debt Ratio  This ratio measures an institution’s ability to fund outstanding debt with existing net asset balances should an emergency occur.  UTSA’s debt ratio changed slightly due to a decrease in expendable net assets restricted for capital projects as a result of completion of capital improvement projects.  This ratio basically shows that more and more of our resources are going towards paying off debt. System’s Satisfactory benchmark is 0.7x or greater. Restated

13 UTSA FY07 Analysis of Financial Condition Debt Burden Ratio  This ratio examines the institution’s dependence on borrowed funds and cost of borrowing relative to overall expenses.  UTSA’s debt burden ratio increased as a result of a major capital improvements program resulting in increased debt service payments. The institution is heavily reliant on debt to fund cost.  System’s Satisfactory benchmark is less than 4.3%.

14 UTSA FY 07 AFR Summary  UTSA continues to receive a “Satisfactory” rating from UT System as a result of a healthy financial condition.  UTSA’s operating margin ratio of 8.4% is strong but not sustainable; future expenditures are expected to exceed revenue growth as new positions are hired and needed infrastructure is purchased to meet growth demands. We will have to closely monitor our debt as we continue to require additional facilities.