1. (a) Intent. The comptroller is required by Government Code, §403.1041, to administer the Tobacco Settlement Permanent Trust Account (trust account) and manage the assets of the trust account with the advice of and in consultation with the Tobacco Settlement Permanent Trust Account Investment Advisory Committee (investment advisory committee). The comptroller is also required to adopt rules necessary to implement the comptroller's duties under Government Code, §403.1041, including rules distinguishing the net earnings of the trust account that may be distributed from earnings used for investment expenses and from the money and assets that are the corpus of the trust account. A rule adopted by the comptroller under this subsection must be submitted to the investment advisory committee and may not become effective before the investment advisory committee approves the rule. If the investment advisory committee disapproves a proposed rule, the investment advisory committee is required to provide the comptroller the specific reasons that the rule was disapproved.

2. (b) Purpose. The purpose of these rules is to determine:

   1. (1) the net earnings of the trust account that may be distributed;
   2. (2) the net earnings of the trust account that may be used for investment expenses; and
   3. (3) the money and assets that are the corpus of the trust account.

3. (c) Definitions. The following words and terms, when used in this chapter, shall have the following meanings, unless the context clearly indicates otherwise.

   1. (1) Actual distribution amount--the aggregate dollar amount achieved by multiplying the average market value of the corpus by the annual distribution rate.
   2. (2) Adjusted net earnings--the net earnings reduced by the dollar amount achieved by multiplying the inflation adjustment factor by the average market value of the corpus.
   3. (3) Annual distribution rate--the percentage of the average market value of the corpus approved for use each year by the investment advisory committee.
   4. (4) Average market value--the quarterly average value of the corpus calculated over the life of the corpus not to exceed the most recent 12 calendar quarters.
   5. (5) Corpus--the value of the initial contributions to the Tobacco Settlement Permanent Trust Account and any future contributions and donations upon receipt by the comptroller.
   6. (6) Distribution stabilization account--a separate account consisting of any amount of adjusted net earnings that exceed the distributions as determined by the investment advisory committee. These amounts are available for distribution in years when the adjusted net earnings of the account are below the actual distribution amount. These amounts are accounted for separately from the corpus and will not be part of the corpus unless otherwise directed by the investment advisory committee.
   7. (7) Inflation adjustment factor--the average annual percentage change in the United States Consumer Price Index (CPI) for the most recent 12 quarters as published by the United States Bureau of Labor Statistics.
   8. (8) Investment advisory committee--the Tobacco Settlement Permanent Trust Account Investment Advisory Committee as defined by Government Code, §403.1041.
   9. (9) Investment expenses--the portion of the total earnings of the trust account that may be used to pay investment related expenses not to exceed 0.75% of the average market value of the corpus including, but not limited to, transaction fees, custodial fees, and fees for outside money managers, investment consultants, or auditors.
   10. (10) Net earnings--the total earnings of the trust account less investment expenses.
   11. (11) Political subdivision--has the meaning assigned by Government Code, §403.1041.
   12. (12) Total earnings--the sum of all changes in value from an investment including interest, dividends, and market value increases and decreases.
   13. (13) Trust account--the Tobacco Settlement Permanent Trust Account as defined by Government Code, §403.1041.

Source Note:The provisions of this §18.1 adopted to be effective November 16, 2000, 25 TexReg 11292.