FINAL OFFICIAL STATEMENT DATED SEPTEMBER 21, 2012

NEW ISSUE BOOK-ENTRY ONLY

NOT BANK-QUALIFIED NON-RATED

With respect to the $5,207,000 Certificates of Participation, Series 2012C, dated October 1, 2012, (the “Certificates”), in the opinion of Knutson, Flynn & Deans, P.A., Bond Counsel, based on present federal and Minnesota laws, regulations, rulings and assuming compliance with certain covenants, interest to

be paid on the Certificates is excluded from gross income for federal income tax purposes and from taxable net income of individuals, estates, and trusts for

Minnesota income tax purposes and is not an item of tax preference for federal or Minnesota alternative minimum tax purposes. Such interest is included in taxable income for purposes of the Minnesota franchise tax on corporations and financial institutions and in adjusted current earnings of corporations for

federal alternative minimum tax purposes. Such interest is included in taxable income for purposes of the Minnesota franchise tax on corporations and

financial institutions.” See “Tax Exemption” and “Related Tax Considerations” herein for additional information.

TECHNOLOGY AND INFORMATION EDUCATION SERVICES

ST. PAUL, MINNESOTA

$5,207,000

Certificates of Participation, Series 2012C

(In a Lease Purchase Agreement between U.S. Bank, National Association, as Trustee and

Technology and Information Education Services, Minnesota)

Dated Date: October 1, 2012 Interest Due: Each February 1 and August 1

Commencing August 1, 2013

Amount Rate Maturity Yield Price Amount Rate Maturity Yield Price

$413,000 1.80% 2/01/2014 1.80% 100.00% $511,000 3.00% 2/01/2018 3.00% 100.00%

475,000 2.25 2/01/2015 2.25 100.00 527,000 3.25 2/01/2019 3.25 100.00

485,000 2.50 2/01/2016 2.50 100.00 544,000 3.50 2/01/2020 3.50 100.00

498,000 2.75 2/01/2017 2.75 100.00 563,000 3.75 2/01/2021 3.75 100.00

$1,191,000 4.00% Term Bond due February 1, 2023 Yield 4.00% Price 100.00%

The Certificates maturing on February 1, 2019, and thereafter, are subject to redemption and prepayment at the option of the Technology

and Information Education Services, Minnesota (“TIES”) on February 1, 2018 and any date thereafter, at a price of par plus accrued

interest. The Certificates are also subject to mandatory redemption, as described herein under Description of the Certificates.

The Certificates represent a proportionate interest in certain Lease Payments (the “Lease Payments”) to be made by Technology

Information Education Services , Minnesota (“TIES” or the “Lessee”) under a Lease-Purchase Agreement (the “Lease”), dated October 1,

2012, by and between U.S. Bank, National Association (the “Lessor” or “Trustee”) and TIES. The Certificates are issued pursuant to a

Trust Agreement (the “Trust Agreement”), dated October 1, 2012, by the Trustee and joined in by TIES. The Lease and the Certificates

are not a general obligation of TIES. The full faith and credit and taxing powers of TIES are not pledged to payment of Lease

Payments. The Lease is subject to termination by TIES at the end of any Fiscal Year of TIES if the governing body does not

appropriate or budget moneys sufficient to pay the Lease Payments coming due in the next Fiscal Year. In such event the Lease is

terminated and there is no obligation of TIES for future Lease Payments. Proceeds will be used to: finance the betterment of the Site,

betterment of the TIES conference center facility, and the fixtures, furniture and equipment to be installed on or in the Site and the facility

(the “Improvements” or the “Project”) and pay for the costs associated with the issuance of the Certificates. See Authority and Purpose

herein for additional information.

Principal due with respect to the Certificates is payable annually on February 1, commencing February 1, 2014. Interest due with respect to

the Certificates is payable semiannually on February 1 and August 1, commencing August 1, 2013. The Certificates will be registered in

the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York. Individual purchases will be made in

book-entry form only, in the principal amount of $1,000 or any whole multiple thereof. Purchasers will not receive physical delivery of the

Certificates. See “Book-Entry System” in Description of the Certificates herein for additional information. The Paying Agent/Registrar and

Trustee will be U.S. Bank, National Association, St. Paul, Minnesota.

Date Principal Coupon Interest Total P+I Fiscal TotalCUSIP 878678

10/04/2012 - - - - - -08/01/2013 - - 136,826.25 136,826.25 - -02/01/2014 413,000.00 1.800% 82,095.75 495,095.75 631,922.00 AM308/01/2014 - - 78,378.75 78,378.75 - -02/01/2015 475,000.00 2.250% 78,378.75 553,378.75 631,757.50 AN108/01/2015 - - 73,035.00 73,035.00 - -02/01/2016 485,000.00 2.500% 73,035.00 558,035.00 631,070.00 AP608/01/2016 - - 66,972.50 66,972.50 - -02/01/2017 498,000.00 2.750% 66,972.50 564,972.50 631,945.00 AQ408/01/2017 - - 60,125.00 60,125.00 - -02/01/2018 511,000.00 3.000% 60,125.00 571,125.00 631,250.00 AR208/01/2018 - - 52,460.00 52,460.00 - -02/01/2019 527,000.00 3.250% 52,460.00 579,460.00 631,920.00 AS008/01/2019 - - 43,896.25 43,896.25 - -02/01/2020 544,000.00 3.500% 43,896.25 587,896.25 631,792.50 AT808/01/2020 - - 34,376.25 34,376.25 - -02/01/2021 563,000.00 3.750% 34,376.25 597,376.25 631,752.50 AU508/01/2021 - - 23,820.00 23,820.00 - -02/01/2022 584,000.00 4.000% 23,820.00 607,820.00 631,640.00 -08/01/2022 - - 12,140.00 12,140.00 - -02/01/2023 607,000.00 4.000% 12,140.00 619,140.00 631,280.00 AV3

Total $5,207,000.00 - $1,109,329.50 $6,316,329.50 - -

Dated 10/01/2012Delivery Date 10/04/2012First Coupon Date 8/01/2013First available call date 2/01/2018Call Price 100.00000% Net Interest Cost (NIC) 3.80908%True Interest Cost (TIC) 3.82785%

Technology and Information Education Services, St. Paul, Minnesota

Certificates of Participation, Series 2012C

Debt Service Schedule

– 2 –

TABLE OF CONTENTS

Page

SUMMARY OF OFFERING .....................................................................................................................................3

PRINCIPAL OFFICIALS ..........................................................................................................................................4

INTRODUCTORY STATEMENT ............................................................................................................................5

AUTHORITY AND PURPOSE .................................................................................................................................6

SECURITY/SOURCES AND USES OF FUNDS .....................................................................................................6

DESCRIPTION OF THE CERTIFICATES...............................................................................................................7

LIMITED CONTINUING DISCLOSURE ..............................................................................................................10

UNDERWRITING ...................................................................................................................................................10

INVESTMENT CONSIDERATIONS/RISK FACTORS ........................................................................................11

LEASE PURCHASE AGREEMENT ......................................................................................................................12

TRUST AGREEMENT ............................................................................................................................................16

GROUND LEASE....................................................................................................................................................17

FUTURE FINANCING............................................................................................................................................18

CERTIFICATE RATING ........................................................................................................................................18

LITIGATION ...........................................................................................................................................................18

CERTIFICATION ....................................................................................................................................................19

LEGALITY ..............................................................................................................................................................19

TAX EXEMPTION ..................................................................................................................................................19

RELATED TAX CONSIDERATIONS ...................................................................................................................20

GENERAL INFORMATION ..................................................................................................................................21

APPENDIX A – PROPOSED FORM OF LEGAL OPINION

APPENDIX B – CONTINUING DISCLOSURE CERTIFICATE

APPENDIX C – TIES FINANCIAL STATEMENT

APPENDIX D – TIES ORGANIZATIONAL CHART

THE CERTIFICATES ARE OFFERED, SUBJECT TO PRIOR SALE, WHEN, AS AND IF ACCEPTED BY THE UNDERWRITER(S) NAMED ON THE FRONT COVER OF

THIS OFFICIAL STATEMENT AND SUBJECT TO AN OPINION AS TO VALIDITY OF THE CERTIFICATES BY BOND COUNSEL. SUBJECT TO APPLICABLE

SECURITIES LAWS AND PREVAILING MARKET CONDITIONS, THE UNDERWRITER(S) INTENDS BUT IS NOT OBLIGATED, TO AFFECT SECONDARY

MARKET TRADING FOR THE CERTIFICATES. CLOSING DATE IS OCTOBER 4, 2012.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS

OFFICIAL STATEMENT IN CONNECTION WITH THE OFFERS MADE HEREBY, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST

NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY TIES OR THE UNDERWRITER(S). NEITHER THE DELIVERY OF THIS OFFICIAL STATEMENT NOR

ANY SALE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF

TIES SINCE THE DATE HEREOF. THIS OFFICIAL STATEMENT DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY JURISDICTION IN WHICH

SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO,

OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. THE INFORMATION SET FORTH HEREIN HAS BEEN

OBTAINED FROM TIES AND OTHER SOURCES WHICH ARE BELIEVED TO BE RELIABLE, BUT IT IS NOT GUARANTEED AS TO ACCURACY OR

COMPLETENESS BY, AND IS NOT TO BE CONSTRUED AS A REPRESENTATION BY, THE UNDERWRITER(S).

– 3 –

SUMMARY OF OFFERING

$5,207,000

Technology and Information Education Services, St. Paul, Minnesota

Certificates of Participation, Series 2012C (Book-Entry Only)

AMOUNT - $5,207,000

ISSUER - Technology and Information Education Services, St. Paul, Minnesota (“TIES”)

PURCHASE DATE - Wednesday, September 19, 2012

UNDERWRITER - Northland Securities, Inc., 45 South 7th Street, Suite 2000, Minneapolis, Minnesota 55402, telephone: 612-851-5900 or 800-851-2920

TYPE OF ISSUE - Certificates of Participation, Series 2012C (the “Certificates”). See Authority and Purpose as well as Security/Sources and Uses of Funds herein for additional information.

AUTHORITY & PURPOSE/ SECURITY - TIES is entering into the Lease under authority of and pursuant to Minnesota Statutes, Section 465.71, as amended.

Proceeds will be used to: finance the betterment of the Site, betterment of the TIES conference center facility, and the

fixtures, furniture and equipment to be installed on or in the Site and the facility (the “Improvements” or the “Project”)

and pay for the costs associated with the issuance of the Certificates. The Lease and the Certificates are not a general

obligation of TIES, and the full faith and credit and ad valorem taxing powers of TIES are not pledged to the payment of

the Lease Payments. Lease Payments are unconditional and due from annual appropriations of the governing body of TIES. See Authority and Purpose as well as Security/Sources and Uses of Funds herein for additional information.

DATE OF ISSUE - October 1, 2012

INTEREST PAYABLE - Semiannually on February 1 and August 1, commencing August 1, 2013 to registered owners of the Certificates

appearing of record in the bond register as of the close of business on the fifteenth day (whether or not a business day) of the calendar month next preceding such interest payment date (the “Record Date”)

MATURITIES -

2/01/2014 $413,000 2/01/2019 $527,000

2/01/2015 475,000 2/01/2020 544,000

2/01/2016 485,000 2/01/2021 563,000

2/01/2017 498,000 2/01/2023 1,191,000

2/01/2018 511,000

REDEMPTION - The Certificates maturing on February 1, 2019, and thereafter, are subject to redemption and prepayment at the option of

TIES on February 1, 2018 and any date thereafter, at a price of par plus accrued interest. The Certificate maturing on

February 1, 2023 is subject to mandatory redemption prior to maturity.

BOOK-ENTRY - Certificates will be issued as fully registered and, when issued, will be registered in the name of Cede & Co., as nominee

of The Depository Trust Company, New York, New York, to which principal and interest payments will be made. Individual purchases will be made in book-entry form only, in the principal amount of $1,000 or any whole multiple

thereof. Purchasers will not receive physical delivery of Certificates.

TRUSTEE/PAYING AGENT - U.S. Bank, National Association, St. Paul, Minnesota

TAX DESIGNATIONS - NOT Private Activity Certificates – The Certificates are not “private activity bonds” as defined in Section 141 of the

Internal Revenue Code of 1986, as amended (the “Code”).

Not Qualified Tax-Exempt Obligations - TIES will not designate the Certificates as “qualified tax-exempt obligations”

for purposes of Section 265(b)(3) of the Code.

LEGAL OPINION - Knutson, Flynn & Deans, P.A., St. Paul, Minnesota (“Bond Counsel”)

CERTIFICATE RATING - The Certificates are non-rated.

CLOSING - October 4, 2012

PRIMARY CONTACTS - Betty Schweizer, Chief Executive Officer, Technology and Information Education Services, Minnesota 651-999-6253

Mike Hoheisel, Senior Vice President, Northland Securities, Inc., 612-851-5900

– 4 –

TECHNOLOGY AND INFORMATION EDUCATION SERVICES

SAINT PAUL, MINNESOTA

PRINCIPAL OFFICIALS

Elected Executive Committee

Name Position Term Expires

Joe Grafft Chair 06/30/2013

Dan Luth Vice Chair 06/30/2014

John Schultz Treasurer 06/30/2016

Marci Anderson Clerk N/A

Peggy Flathmann Member 06/30/2015

Ric Dressen Member 06/30/2013

Deirdre Wells Member 06/30/2015

Jane Berenz Member 06/30/2014

Jim Skelly Member 06/30/2016

Primary Contacts

Betty Schweizer Executive Director / Chief Executive Officer

Del Jentz Senior Accountant

BOND COUNSEL

Knutson, Flynn & Deans, P.A.

St. Paul, Minnesota

UNDERWRITER

Northland Securities, Inc.

Minneapolis, Minnesota

– 5 –

INTRODUCTORY STATEMENT

Technology and Information Education Services, St. Paul, Minnesota

$5,207,000

Certificates of Participation, Series 2012C

(In a Lease Purchase Agreement between U.S. Bank, National Association as Trustee and

Technology and Information Education Services, Minnesota)

General

The purpose of this Official Statement, including the cover pages and appendices hereto, is to provide information

in connection with the offering, sale and delivery of $5,207,000 in aggregate principal amount of the Certificates

of Participation, Series 2012A (the “Certificates”) described herein which represent the proportionate interest of

the owners of the Certificates in Lease Payments to be made by Technology and Information Educational

Services (“TIES”) under the Lease Purchase Agreement (the “Lease”) with U.S. Bank, National Association (the

“Trustee”) dated October 1, 2012.

Pursuant to a Ground Lease dated October 1, 2012 (the “Ground Lease”) TIES is the owner of certain land located

in Ramsey County, Minnesota, as legally described in the Ground Lease (the “Site”), upon which TIES has

determined to better the Site, to construct renovations and improvements to the TIES conference center facility,

and to acquire and install fixtures, furniture and equipment in or on the Site and the facility (the “Improvements”

or the “Project”) to serve the needs of TIES and its member school districts. TIES intends that the Trustee’s

interest in the Site and the Improvements to be constructed to the Site and the facility (together, the “Premises”)

provide security to the Trustee for the Lease Purchase Agreement by and between TIES and U.S. Bank, National

Association. The Trustee’s interest in the Site and Improvements to be constructed thereon provide security to the

Trustee for the financing of the construction of the Improvements.

TIES will issue the Certificates pursuant to the Resolution, adopted September 19, 2012 (the “Resolution”) and

the Trust Agreement (the “Trust Agreement”) between TIES and the Trustee, dated October 1, 2012. Lease

Payments are payable by TIES to the Trustee, pursuant to the provisions of the Lease. Lease Payments due with

respect to the Site and Improvements are absolute and unconditional and subject to annual appropriations by the

governing body of TIES in each year sufficient to pay such Lease Payments as described herein.

TIES will lease the Site and Improvements from the Trustee. If TIES fails to appropriate an amount sufficient to

make Lease Payments in any Fiscal Year for any part of the Improvements, TIES will forfeit all rights and obli-

gations of the Lease to the Trustee.

The Lease provides that TIES’s obligation to make Lease Payments is absolute and unconditional, subject to and

dependent upon yearly appropriations being made by the governing body of TIES for such purpose, and that each

Lease Payment is payable without any right of set-off or counterclaim, regardless of any contingencies, and

whether or not TIES possesses or uses the Improvements, but subject to TIES’s right to terminate the Lease. If

TIES does not make a Rental Payment, the Trustee may terminate the Lease, and in such event TIES is required to

surrender the Site and Improvements to the Trustee, all in accordance with and subject to the provisions of the

Lease.

THE OBLIGATION OF TIES UNDER THE LEASE TO MAKE LEASE PAYMENTS SUFFICIENT TO PAY

THE PRINCIPAL OF AND INTEREST ON THE CERTIFICATES WHEN DUE IS A SPECIAL, LIMITED

OBLIGATION OF TIES, SUBJECT TO THE ANNUAL APPROPRIATION IN EACH FISCAL YEAR BY

THE GOVERNING BODY OF TIES FUNDS SUFFICIENT TO PAY SUCH LEASE PAYMENTS. TIES IS

NOT OBLIGATED TO MAKE ANY SUCH APPROPRIATION AND HAS THE RIGHT TO CANCEL AND

TERMINATE THE LEASE AT THE END OF ANY FISCAL YEAR OF TIES IF THE GOVERNING BODY

DOES NOT APPROPRIATE MONEYS SUFFICIENT TO PAY LEASE PAYMENTS COMING DUE IN THE

NEXT FISCAL YEAR.

– 6 –

The Certificates are subject to the Statutory Debt Limit pursuant to Minnesota Statutes 465.71, which states that

any lease revenue or public project revenue bond/certificate issues/agreements of $1,000,000 or more are subject

to the statutory debt limit. Lease revenue or public project revenue bond/certificate issues/agreements less than

$1,000,000 are not subject to the statutory debt limit.

Brief descriptions of the Lease, Trust Agreement and Ground Lease are included in this Official Statement. Such

descriptions do not purport to be comprehensive or definitive. Copies of the documents in their entirety are

available from Northland Securities, 45 South 7th Street, Suite 2000, Minneapolis, Minnesota 55402. All

references to the Certificates are qualified in their entirety by the definitive forms thereof and the information with

respect thereto included in the above-mentioned documents.

TIES is a public body corporate and a political subdivision duly organized under and pursuant to the Constitution

and laws of the State of Minnesota. TIES has good right and lawful authority to lease property, and to finance or

refinance and lease the Site and Improvements pursuant to the Trust Agreement, in accordance with the terms of

the Lease and as provided in the Resolution. TIES is authorized to enter into the Lease, Trust Agreement, Ground

Lease and other related agreements.

AUTHORITY AND PURPOSE

TIES is entering into the Lease under authority of and pursuant to Minnesota Statutes, Sections 465.71, as

amended. Proceeds will be used to finance the betterment of the Site, betterment of the TIES conference center

facility, and the fixtures, furniture and equipment to be installed on or in the Site and the facility (the

“Improvements” or the “Project”) and pay for the costs associated with the issuance of the Certificates.

The Project will consist of various renovations and improvements to the main campus including, but not limited

to, bringing elevators in B and D wing up to code, reroofing of entire complex, re-grade and resurface all parking

surfaces, updating the fire detection system, construction of a new loading dock, structural repairs to the parking

garage, replacing steps, sidewalks and other fractured surfaces, and upgrading HVAC and lighting systems. In

addition, numerous changes will be made to the conference center including, but not limited to, structural

upgrades, handicap and public access improvements to the entry of the conference center, electrical and lighting

changes, HVAC updates and improvements, addition of fire control sprinklers, and repair of building glass.

SECURITY/SOURCES AND USES OF FUNDS

Security

On the day of closing, Bond Counsel will render an opinion that the Certificates are special, limited obligations of

TIES. The Lease and the Certificates are not a general obligation of TIES, and the full faith and credit and ad

valorem taxing powers of TIES or its member school districts are not pledged to the payment of the Lease

Payments. The Lease is subject to termination by TIES at the end of any Fiscal Year of TIES if the governing

body does not appropriate monies sufficient to continue the Lease for the ensuing Fiscal Year. In such event the

Lease is terminated and there is no obligation of TIES for future Lease Payments. See Appendix A – Proposed

Form of Legal Opinion.

Security Interest

The Trustee holds in trust, for the benefit of the Owners of the Certificates, all of its right, title and interest in and

to the Lease, the Lease Payments and other amounts due under the Lease, the Site and Improvements, and the

right to exercise all rights of Trustee under the Lease; and in consideration of the execution of the Trust

Agreement, the Trustee has agreed to execute and deliver the Certificates, each evidencing a proportionate

undivided interest of the Owner thereof in the Lease and the Lease Payments due thereunder.

– 7 –

At the request of TIES, the Trustee shall create a trust for the benefit of the Owners of the Certificates issued

under the Trust Agreement. The trust created thereunder shall be irrevocable while any Certificates are

Outstanding. The corpus of the trust shall consist of (i) all of the Trustee’s right, title and interest in and to the

Lease, except the rights of the Trustee to compensation, reimbursement or indemnity from TIES, which rights are

specifically reserved by the Trustee, (ii) the Trust Fund created in Article III of the Trust, including all money and

securities held in the accounts created therein and (iii) any other property or rights hereafter assigned or

contributed to the trust by TIES or the Trustee by amendment or supplement thereto.

TIES intends that the Trustee's interest in the Site and the Improvements to be acquired, constructed and installed

thereon (together, the "Premises") provide security to the Trustee for the financing of the acquisition, construction

and installation of the Improvements.

Sources and Uses of Funds

Following are the sources and uses of funds in connection with the issuance of the Certificates.

Sources of Funds

Par Amount of Certificates $ 5,207,000

Accrued Interest 1,368

Total Sources of Funds: $ 5,208,368

Uses of Funds

Deposit to Construction Fund $ 5,085,860

Estimated Costs of Issuance / Underwriter’s Discount 121,140

Deposit to Debt Service Fund 1,368

Total Uses of Funds: $ 5,208,368

DESCRIPTION OF THE CERTIFICATES

Details of Certain Terms

The Certificates will be dated, as originally issued, as of October 1, 2012, and will be issued as fully registered

Certificates in the denominations of $1,000 or any integral multiple thereof. Principal will be payable annually

February 1, commencing February 1, 2014. Interest on the Certificates will be payable semiannually on February 1

and August 1, commencing August 1, 2013. The Certificates when issued, will be registered in the name of Cede

& Co. (the “Registered Holder”), as nominee of The Depository Trust Company, New York, New York (“DTC”),

the initial custodian for the Certificates, to which principal and interest payments on the Certificates will be made

so long as Cede & Co. is the Registered Holder of the Certificates. See “Book-Entry System” in Description of

the Certificates herein for additional information. So long as the Book-Entry Only System is used, individual

purchases of the Certificates will be made in book-entry form only, in the principal amount of $1,000 or any

integral multiple thereof (“Authorized Denominations”). Individual purchasers (“Beneficial Owners”) of the

Certificates will not receive physical delivery of Certificates, and registration, exchange, transfer, tender and

redemption of the Certificates with respect to Beneficial Owners shall be governed by the Book-Entry Only

System.

So long as the Book-Entry Only System is used, payments from Cede & Co., as the Record Holder, to the

Beneficial Owners shall be governed by the Book-Entry Only System. If the Book-Entry Only System is

discontinued, the principal of and premium, if any, on the Certificates will be payable upon presentation and sur-

render at the offices of the Paying Agent and Registrar or a duly appointed successor. Interest on the Certificates

– 8 –

will be paid by check or draft mailed by the Bond Registrar to the registered holders thereof as such appear on the

registration books maintained by the Bond Registrar on the fifteenth day (whether or not a business day) of the

calendar month next preceding such interest payment date (the “Record Date”).

Registration, Transfer and Exchange

So long as the Book-Entry Only System is used, payments from Cede & Co., as the Record Holder, to the

Beneficial Owners shall be governed by the Book-Entry Only System. If the Book-Entry Only System is

discontinued, the Certificates may be transferred upon surrender of the Certificates at the principal office of the

Bond Registrar, duly endorsed for transfer or accompanied by an assignment duly executed by the registered

owner or his or her attorney duly authorized in writing. The Certificates, upon surrender thereof at the principal

office of the Bond Registrar may also be exchanged for other Certificates of the same series, of any authorized

denominations having the same form, terms, interest rates and maturities as the Certificates being exchanged. The

Bond Registrar will require the payment by the Certificateholder requesting such exchange or transfer of any tax

or governmental charge required to be paid with respect to such exchange or transfer. The Bond Registrar is not

required to (i) issue, transfer or exchange any Certificates during a period beginning at the opening of business

fifteen days before any selection of Certificates of a particular stated maturity for redemption in accordance with

the provisions of the Resolution and ending on the day of the first mailing of the relevant notice of redemption or

(ii) to transfer any Certificate or portion thereof selected for redemption.

Optional Redemption

The Certificates maturing on February 1, 2019, and thereafter, are subject to redemption and prepayment at the

option of TIES on February 1, 2018 and any date thereafter, at a price of par plus accrued interest. If redemption

is in part, the selection of the amounts and maturities of the Certificates to be prepaid shall be at the discretion of

TIES. Notice of redemption shall be given by registered mail to the registered owner of the Certificates not less

than 30 days prior to such redemption date.

Mandatory Redemption

The Certificate maturing on February 1, 2023 (the “Term Bond”) is subject to mandatory redemption prior to

maturity, in part, by lot within a maturity, at a redemption price equal to 100% of the principal amount thereof,

together with accrued interest thereon, to the date fixed for redemption, on February 1 of each of the years and in

the principal amounts as set forth below:

Term Bond due February 1, 2023 Year Amount

2022 $584,000 2023* 607,000

Book-Entry System

The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the Certificates.

The Certificates will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s

partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-

registered certificate will be issued for the Certificates, in the aggregate principal amount of such issue, and will

be deposited with DTC.

DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York

Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the

* Maturity

– 9 –

Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial

Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange

Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity

issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s

participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct

Participants of sales and other securities transactions in deposited securities, through electronic computerized

book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical

movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and

dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned

subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC,

National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered

clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also

available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and

clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either

directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules

applicable to its Participants are on file with the Securities and Exchange Commission. More information about

DTC can be found at www.dtcc.com and www.dtc.org.

Purchases of Certificates under the DTC system must be made by or through Direct Participants, which will

receive a credit for the Certificates on DTC’s records. The ownership interest of each actual purchaser of each

Certificate (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records.

Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are,

however, expected to receive written confirmations providing details of the transaction, as well as periodic

statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered

into the transaction.

Transfers of ownership interests in the Certificates are to be accomplished by entries made on the books of Direct

and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates

representing their ownership interests in Certificates, except in the event that use of the book-entry system for the

Certificates is discontinued.

To facilitate subsequent transfers, all Certificates deposited by Direct Participants with DTC are registered in the

name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized

representative of DTC. The deposit of Certificates with DTC and their registration in the name of Cede & Co. or

such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual

Beneficial Owners of the Certificates; DTC’s records reflect only the identity of the Direct Participants to whose

accounts such Certificates are credited, which may or may not be the Beneficial Owners. The Direct and Indirect

Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to

Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed

by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to

time.

Redemption notices shall be sent to DTC. If less than all of the Certificates within an issue are being redeemed,

DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be

redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Certificates

unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures,

DTC mails an Omnibus Proxy to TIES as soon as possible after the record date. The Omnibus Proxy assigns Cede

& Co.’s consenting or voting rights to those Direct Participants to whose accounts the Certificates are credited on

the record date (identified in a listing attached to the Omnibus Proxy).

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Redemption proceeds, distributions, and dividend payments on the Certificates will be made to Cede & Co., or

such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit

Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from TIES or

Agent, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by

Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the

case with Certificates held for the accounts of customers in bearer form or registered in “street name,” and will be

the responsibility of such Participant and not of DTC, Agent, or TIES, subject to any statutory or regulatory

requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend

payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is

the responsibility of TIES or Agent, disbursement of such payments to Direct Participants will be the

responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of

Direct and Indirect Participants.

DTC may discontinue providing its services as depository with respect to the Certificates at any time by giving

reasonable notice to TIES or Agent. Under such circumstances, in the event that a successor depository is not

obtained, bond certificates are required to be printed and delivered.

TIES may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor

securities depository). In that event, bond certificates will be printed and delivered to DTC.

The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources

that TIES believes to be reliable, but TIES takes no responsibility for the accuracy thereof.

LIMITED CONTINUING DISCLOSURE

In order to assist the Underwriter(s) in complying with SEC Rule 15c2-12 (the “Rule”), pursuant to a resolution

awarding the Issue and a Continuing Disclosure Certificate (the “Certificate”) to be executed on behalf of TIES

on or before Bond Closing, TIES has and will covenant for the benefit of holders of the Bonds to annually provide

certain financial and operating data, which information is customarily prepared by TIES and is publicly available,

to the Municipal Securities Rulemaking Board (“MSRB”) in an electronic format prescribed by the MSRB, and to

provide notices of the occurrence of certain events enumerated in the Rule to the MSRB. The specific nature of

the Certificate, as well as the information to be contained in the annual report or the notices of material events is

set forth in the Continuing Disclosure Certificate in substantially the form attached hereto as Appendix B. TIES

has never failed to comply in all material respects with any previous undertakings under the Rule to provide

annual reports or notices of material events. A failure by TIES to comply with the Certificate will not constitute

an event of default on the Bonds (although holders will have an enforceable right to specific performance).

Nevertheless, such a failure must be reported in accordance with the Rule and must be considered by any broker,

dealer or municipal securities dealer before recommending the purchase or sale of the Bonds in the secondary

market. Consequently, such a failure may adversely affect the transferability and liquidity of the Bonds and their

market price. Please see Appendix B – Continuing Disclosure Certificate herein for additional information.

UNDERWRITING

The Certificates are being purchased from TIES by Northland Securities, Inc. (the “Underwriter”). The

Underwriter will receive total compensation of $104,140 in connection with the purchase of the Certificates

assuming all Certificates are sold at the rates and yields set forth on the cover page of this Official Statement,

which compensation is 2.00% of the par value. The obligation to make such purchase is subject to certain terms

and conditions, the approval of certain legal matters by counsel and certain other conditions. The initial public

offering prices set forth on the cover page hereof may be changed from time to time by the Underwriter.

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INVESTMENT CONSIDERATIONS/RISK FACTORS

No person should purchase any Certificates without carefully reviewing the following information that

summarizes factors that should be considered before such purchase.

Non-appropriation

If the Governing Board of TIES (the "Governing Board") does not appropriate or budget moneys sufficient to pay

the Lease Payments and reasonably estimated Additional Lease Payments coming due in the next Fiscal Year, as

determined by a specific provision in TIES’s budget for the Fiscal Year in question so stating, TIES shall be

deemed to have terminated the Lease. TIES may effect such termination by giving the Trustee a written notice of

termination, as evidenced by a resolution of the Governing Board specifically determining not to provide moneys

to pay Lease Payments for the succeeding Fiscal Year, and stating the Governing Board’s determination to

terminate the Lease at the end of the then current Fiscal Year, and by paying to the Trustee any Lease Payments

and Additional Lease Payments which are due and have not been paid at or before the end of its then current

Fiscal Year. TIES shall endeavor to give notice to the Trustee of any anticipated termination not less than sixty

(60) days prior to the end of such Fiscal Year. In the event of termination of the Lease as provided in the Lease,

TIES shall surrender possession of the Premises to the Trustee in accordance with Section 4.4 of the Lease and

convey to the Trustee or release its interest in the Premises within ten (10) days after the expiration of the current

Fiscal Year.

Failure of TIES to make Lease Payments under Lease

In the event TIES fails to make the Lease Payments as required under the Lease, the Trustee has the right to

terminate the Lease and exclude TIES from possession of the Premises. The Trustee can attempt to sublease the

Premises to another entity or can attempt to sell the Premises; however, there is no assurance that the Trustee will

be able to lease or sell the Premises or that the Premises could be leased or sold for amounts equal to Lease

Payments required to be made by TIES under the Lease.

Damage, Destruction and/or Condemnation

If the Premises or any element thereof is destroyed (in whole or in part) or is damaged by fire or other casualty or

title to or the temporary use of the Premises or any part thereof, or the interest of TIES or the Trustee in the

Premises or any part thereof shall be taken under the exercise of the power of eminent domain by any

governmental body or by any person, firm or corporation acting under governmental authority, TIES shall have

the rights with respect to the Net Proceeds of any insurance or condemnation award specified in Section 6.1 of the

Lease, but TIES shall be obligated to continue to pay the Lease Payments and Additional Lease Payments due

with respect to the Premises. All Net Proceeds shall be deposited in the Insurance and Casualty Award Account in

the Trust Agreement and shall be applied to the prompt repair, restoration, modification, improvement or

replacement of the Premises by TIES or if TIES elects not to repair or rebuild, all Net Proceeds shall be applied to

prepay the Lease Payments.

Inadequacy of Other Revenues

The primary security and sources of revenue for the payment of the Certificates are the Lease and Lease

Payments, respectively. In the event the Lease is canceled by TIES, the Trustee may attempt to lease the Premises

so as to produce revenues to pay the principal and interest on the Certificates. Potential purchasers should be

aware that the Trustee may be unable to lease the Improvements for an amount or at the times sufficient to pay the

principal and interest on the Certificates when due.

Remedies

Remedies provided for in the Lease may be unenforceable, or enforcement may be delayed or be subject to

judicial discretion, as a result of the application of principles of equity or of state and federal laws relating to

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bankruptcy, other forms of debtor relief, and creditors’ rights generally.

Inability or Delay in Selling or Leasing the Site and Improvements

An Event of Default or nonappropriation under the Lease gives the Trustee the right to possession of and the right

to treat the Site and Improvements and each element thereof as being severable from the Premises, and to

remove part or all of the elements of the Site and Improvements from the Premises and sell or lease the Site and

Improvements subject to encumbrances allowed by the Lease. The enforceability of the Certificates and the

Resolution are subject to applicable bankruptcy laws, equitable principles affecting the enforcement of creditors’

rights generally and liens securing such rights. A potential purchaser should not anticipate that the sale or leasing

could be accomplished rapidly. Any delays in the ability of the Trustee to obtain unencumbered title to the Site

and Improvements will result in delays in the payment of Certificates. No assurance can be given that any

amounts received upon sale or lease of the Site and Improvements would be sufficient to pay the principal of the

Certificates and interest accrued thereon.

Effect of Termination of Lease on the Certificates

Bond Counsel has rendered no opinion with respect to the applicability or inapplicability of the registration

requirements of the Securities Act of 1933, as amended, to any Certificates subsequent to a termination of the

Lease by reason of nonappropriation or an Event of Default. If the Lease is terminated by reason of either such

event, there is no assurance that the Certificates may be transferred by an owner thereof without compliance with

the registration provisions of the Securities Act of 1933, as amended, or the availability of an exemption

therefrom.

Loss of Tax Exemption

If, at any time during the term of the Certificates, the interest on the Certificates were to become subject to

taxation, no provision has been made for redemption and investors would not be entitled to any additional interest

exceeding the rate printed on the Certificates. The Holder would subsequently then be holding a security with a

substantially lower interest rate return than that of a comparable taxable security.

LEASE PURCHASE AGREEMENT

This summary does not purport to be a complete description of the terms of the Lease Purchase Agreement (the

“Lease”) and, accordingly, is qualified by reference thereto. Copies of the Lease may be obtained from TIES or its

Underwriter.

Term of Lease or Lease Term. The Lease shall be in effect for a Term commencing October 1, 2012 hereof and

extending until the date upon which TIES has made all Lease Payments, unless terminated as provided upon the

occurrence of the first of the following events:

(a) Non-appropriation by TIES;

(b) the payment by TIES of the Purchase Price for the Premises pursuant to Article VIII;

(c) the prepayment by TIES of the Lease Payments and Additional Lease Payments;

(d) the discharge by TIES of its obligation to pay the Lease Payments and Additional Lease Payments; or

(e) a default by TIES and the termination of the Lease pursuant to Article X.

Covenants of TIES. TIES represents, covenants and warrants as follows:

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(a) TIES is authorized under the Constitution and laws of the State to enter into the Lease, the Ground Lease,

and the Trust Agreement and to perform all of its obligations thereunder;

(b) The officers of TIES executing the Lease, the Ground Lease, and the Trust Agreement have been duly

authorized to execute and deliver such documents;

(c) TIES will not pledge, mortgage or assign the Lease, or its duties and obligations thereunder to any other

person, firm or corporation except as provided under the terms of the Lease; and

(d) TIES will use the Premises during the Lease Term primarily to carry out the governmental or proprietary

purposes of TIES.

Trustee’s Interest in the Premises. Upon payment or prepayment of the Lease Payments and Additional Lease

Payments due thereunder or discharge of TIES's obligation to make the Lease Payments and Additional Lease

Payments in accordance with Article VIII of the Lease, and in either event upon defeasance of the Certificates in

accordance with the Trust Agreement, the Trustee shall have no further interest in the Premises except as

otherwise provided in the Trust Agreement. In such event the Trustee and its officers shall take all actions

necessary to authorize, execute and deliver to TIES any and all documents necessary to vest in TIES, all of the

Trustee's right, title and interest in and to the Premises, including, if necessary, a release of any and all interests or

liens created under the provisions of the Lease and the Ground Lease. The Trustee shall not, however, have any

obligation to incur any expense or take any action in order to discharge or remove any such mortgage, pledge,

lien, charge, encumbrance or claim.

Non-appropriation by TIES. If the Governing Board of TIES (the "Governing Board") does not appropriate or

budget moneys sufficient to pay the Lease Payments and reasonably estimated Additional Lease Payments

coming due in the next Fiscal Year, as determined by a specific provision in TIES’s budget for the Fiscal Year in

question so stating, TIES shall be deemed to have terminated the Lease. TIES may effect such termination by

giving the Trustee a written notice of termination, as evidenced by a resolution of the Governing Board

specifically determining not to provide moneys to pay Lease Payments for the succeeding Fiscal Year, and stating

the Governing Board’s determination to terminate the Lease at the end of the then current Fiscal Year, and by

paying to the Trustee any Lease Payments and Additional Lease Payments which are due and have not been paid

at or before the end of its then current Fiscal Year. TIES shall endeavor to give notice to the Trustee of any

anticipated termination not less than sixty (60) days prior to the end of such Fiscal Year. In the event of

termination of the Lease as provided in Section 4.7 of the Lease, TIES shall surrender possession of the Premises

to the Trustee in accordance with Section 4.4 thereof and convey to the Trustee or release its interest in the

Premises within ten (10) days after the expiration of the current Fiscal Year.

Maintenance and Modification of Project by TIES. During the Term of the Lease TIES shall, at its own

expense, maintain, preserve and keep the Premises in good repair, working order and condition, and shall from

time to time make all repairs, replacements and improvements necessary to keep the Premises in such condition.

The Trustee shall have no responsibility for any of these repairs, replacements or improvements. In addition, TIES

shall, at its own expense, have the right to remodel the Premises or to make additions, modifications and

improvements thereto. All such additions, modifications and improvements that affect an element of the

Improvements shall thereafter comprise part of the Premises and be subject to the provisions of the Lease. Such

additions, modifications and improvements shall not in any way damage the Premises; and the Premises, upon

completion of any additions, modifications and improvements made pursuant to Section 5.2 of the Lease, shall be

of a market value not less than the market value of the Premises immediately prior to the making of such

additions, modifications and improvements. Any property for which a substitution or replacement is made

pursuant to the Lease may be disposed of by TIES in such manner and on such terms as are determined by TIES.

TIES will not permit any mechanic's or other lien to be established or remain against the Premises for labor or

materials furnished in connection with any remodeling, additions, modifications, improvements, repairs, renewals

or replacements made by TIES pursuant to the Lease.

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Taxes, Other Governmental Charges and Utility Charges. During the Term of the Lease TIES shall also pay or

cause to be paid when due all gas, water, steam, electricity, heat, power and other charges incurred in the

operation, maintenance, use, occupancy and upkeep of the Premises. TIES shall also pay all property and excise

taxes and governmental charges of any kind whatsoever (including special assessments) which may at any time be

lawfully assessed or levied against or with respect to the Premises or any part thereof or the Lease Payments, and

which become due during the Term of the Lease with respect thereto; and all special assessments and charges

lawfully made by any governmental body for public improvements that may be secured by a lien on the Premises;

provided that with respect to special assessments or other governmental charges that may lawfully be paid in

installments over a period of years, TIES shall be obligated to pay only such installments as are required to be

paid during the Term of the Lease as and when the same become due. TIES shall not be required to pay any

federal, state or local income, inheritance, estate, succession, transfer, gift, franchise, gross receipts, profit, excess

profit, capital stock, corporate, or other similar tax payable by the Trustee, its successors or assigns, unless such

tax is made in lieu of or as a substitute for any real estate or other tax upon property.

Damage, Destruction and Condemnation. If the Premises or any element thereof is destroyed (in whole or in part)

or is damaged by fire or other casualty or title to or the temporary use of the Premises or any part thereof, or the

interest of TIES or the Trustee in the Premises or any part thereof shall be taken under the exercise of the power

of eminent domain by any governmental body or by any person, firm or corporation acting under governmental

authority, TIES shall have the rights with respect to the Net Proceeds of any insurance or condemnation award

specified in this Section, but TIES shall be obligated to continue to pay the Lease Payments and Additional Lease

Payments due with respect to the Premises. All Net Proceeds shall be deposited in the Insurance and Casualty

Award Account in the Trust Agreement and shall be applied to the prompt repair, restoration, modification,

improvement or replacement of the Premises by TIES or if TIES elects not to repair or rebuild, all Net Proceeds

shall be applied to prepay the Lease Payments.

Liability Insurance. During the Term of the Lease TIES shall procure and maintain continuously in effect with

respect to the Premises, insurance against liability for injuries to or death of any person or damage to or loss of

property arising out of or in any way relating to the maintenance, use or operation of the Premises or any part

thereof, in an amount of not less than the tort liability limits specified in Minnesota Statutes, Section 466.04, as

amended from time to time. The Net Proceeds of all such insurance shall be applied toward extinguishment or

satisfaction of the liability with respect to which the insurance proceeds may be paid. It is understood that with

respect to persons or entities other than the Trustee, this insurance covers any and all liability of TIES and its

officers, employees and agents.

Property Insurance. During the Term of the Lease, TIES shall procure and maintain continuously in effect during

the Term of the Lease with respect to the Premises, to the extent of the full insurable value of the Premises, other

than building foundations, but in an amount at least equal to the outstanding principal amount of the Certificates

from time to time, insurance against loss from or damage by vandalism and fire, with a uniform standard extended

coverage endorsement limited only as may be provided in the standard form of extended coverage endorsement at

the time in use in the State, in such amount as will be at least sufficient so that a claim may be made for the full

replacement cost of any part of the Premises damaged or destroyed. All policies (or endorsements or riders)

evidencing insurance required in Section 7.2 of the Lease shall be carried in the names of TIES and the Trustee as

their respective interests may appear. Each policy (or endorsement or rider) may be written with a deductible

amount which is customary for facilities comparable to the Premises. The Net Proceeds of Insurance required by

the Lease shall be applied as provided in Article VI of the Lease.

TIES’s Negligence. As between the Trustee and TIES, to the extent permitted under the laws of the State of

Minnesota, TIES assumes all risks and liabilities, whether or not covered by insurance, for loss or damage to the

Premises and for injury to or death of any person or damage to any property, whether such injury or death be with

respect to agents or employees of TIES, the Trustee or of third parties, and whether such property damage be to

TIES or the Trustee's property or the property of others, which is proximately caused by the negligent conduct of

TIES, its officers, employees, agents and lessees, or arising out of the operation, maintenance or use of the

Premises by TIES, its officers, employees, agents and lessees. TIES hereby assumes responsibility for and agrees

to reimburse the Trustee for all liabilities, obligations, losses, damages, penalties, claims, actions, costs and

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expenses (including reasonable attorney's fees) of whatsoever kind and nature, imposed on, incurred by or

asserted against the Trustee or its officers or employees that in any way relate to or arise out of a claim, suit or

proceeding based in whole or in part on the foregoing, to the maximum extent permitted by law.

Events of Default and Remedies Any one or more of the following events shall be “Events of Default” under the

Lease:

(a) Failure by TIES to pay any Lease Payment, Additional Lease Payments or other payment required to be

paid hereunder at the time and from the sources specified herein.

(b) Failure by TIES to observe and perform any covenant, condition or agreement on its part to be observed

or performed under the Lease or the Trust Agreement, other than as referred to in clause (a) of Section

10.1 of the Lease, for a period of forty-five (45) days after written notice specifying such failure and

requesting that it be remedied has been given to TIES by the Trustee, unless the Trustee shall agree in

writing to an extension of such time prior to its expiration; provided, however, if the failure stated in the

notice cannot be corrected within the applicable period, the Trustee shall not unreasonably withhold its

consent to an extension of such time if corrective action is instituted by TIES within the applicable period

and diligently pursued until the default is corrected.

(c) The occurrence of an Act of Bankruptcy.

With respect to an Event of Default or remedies on default: if by reason of force majeure either party is unable in

whole or in part to carry out its obligations under the Lease, it shall not be deemed in default during the

continuance of such inability or during any other delays which are a direct consequence of the force majeure

inability, and the time for such performance shall be extended to cover such delays. The term "force majeure" as

used herein shall mean, without limitation, the following: acts of God; strikes, lockouts or other industrial

disturbances; acts of public enemies; orders or restraints of any kind of the government of the United States of

America or any of its departments, agencies or officials, or any civil or military authority; orders or restraints of

any kind of the government of the State of Minnesota or any of its departments, agencies or officials;

insurrections; riots; landslides; earthquakes; fires; storms; droughts; floods; explosions; breakage or accident to

machinery, transmission pipes or canals; or any other cause or event not reasonably within the control of a party

and not resulting from its negligence. Each party agrees, however, to remedy with all reasonable dispatch the

cause or causes preventing it from carrying out its agreement.

Whenever any Event of Default by TIES shall have happened and be continuing, the Trustee shall have the right

but not the obligation, to take, but only upon not less than five (5) days written notice to TIES, one or any

combination of the following remedial steps:

(a) Without terminating the Lease, and subject to the rights of any entity subleasing all or a portion of the

Premises which is not in default under a sublease complying with Section 9.2 of the Lease, re-enter and

take possession of the Premises and exclude TIES from using them until the default is cured; or

(b) Subject to the provisions of Section 3.6 of the Lease, take whatever action at law or in equity may appear

necessary or desirable to: (i) collect the Lease Payments and Additional Lease Payments then due, (ii)

collect any Lease Payments to become due and payable during the current Fiscal Year, or (iii) enforce

performance and observance of any obligation, agreement or covenant of TIES under the Lease; or

(c) Terminate the Term of the Lease, exclude TIES from possession of the Premises, and use reasonable

efforts to lease the Premises to another for the account of TIES, holding TIES liable for the difference

between the rentals received and the Lease Payments and Additional Lease Payments which would have

been receivable hereunder for the Fiscal year then in effect, together with all amounts otherwise owing to

the Trustee under the Lease and/or the Trust Agreement.

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TRUST AGREEMENT

This summary does not purport to be a complete description of the terms of the Trust Agreement and,

accordingly, is qualified by reference thereto. Copies of the Trust Agreement may be obtained from TIES or its

Underwriter.

Employment of Trustee. TIES appoints and employs the Trustee to receive, hold, invest and disburse the money

to be paid to the Trustee pursuant to the Lease for credit to the various accounts established by the Trust

Agreement; to execute, deliver, transfer, exchange and otherwise deal with the Certificates as provided herein;

and to apply and disburse the Lease Payments and other amounts received from TIES pursuant to the Lease, and

any other money derived from the Premises pursuant hereto, to the Owners of the Certificates executed and

delivered with respect thereto; to enforce the Lease on behalf of such Owners; and to perform certain other

functions; all on and subject to the terms and conditions hereinafter provided. By executing and delivering the

Trust Agreement, the Trustee accepts the duties and obligations of the Trustee provided in the Trust Agreement,

but only upon the terms and conditions set forth in the Trust Agreement.

Application of Lease Payments. Lease Payments will be paid directly to the Trustee and will be deposited into the

Trust Fund and applied by the Trustee solely for the benefit of Certificate Owners.

Establishment and Application of Trust Fund. Within the Trust Fund, there are hereby established the

Construction and Acquisition Account, the Lease Payment Account, the Insurance and Casualty Award Account

and the Rebate Account.

Construction and Acquisition Account: The proceeds of the sale of the Certificates, less any accrued interest re-

ceived thereon, or other amounts directed for deposit into the Lease Payment Account, shall be credited to the

Construction Account. The Construction Account shall be used only to pay Construction and Acquisition Costs

and Costs of Issuance.

Lease Payment Account: Monies shall be deposited for Lease Payments received by the Trustee, made by TIES

under the Trust Agreement, or any other monies received by the Trustee for deposit in the Lease Payment

Account. Monies held by the Trustee in the Lease Payment Account shall be invested at the direction of TIES.

Insurance and Casualty Award Account: The Trustee shall deposit in the Insurance and Casualty Award Account

as received, all moneys; of any insurance claim or condemnation award paid to the Trustee in accordance with the

Lease. Moneys deposited in the Insurance and Casualty Award Account shall be applied to the prompt

replacement, repair, restoration, or improvement of the Premises by TIES, or transferred to the Lease Payment

Account and applied to the redemption of Certificates in accordance with the provisions of the Lease and the

Trust Agreement. Until so used, such moneys shall be held and invested at the direction of TIES. Upon

completion of the replacement, repair, restoration or improvement of the Premises by TIES, any remaining funds

shall be transferred to the Lease Payment Account.

Rebate Account: All money at any time deposited in the Rebate Account shall be held by the Trustee in trust, to

the extent required to satisfy the amount required to be rebated to the United States under the Code, and neither

TIES, the Trustee nor any Owner shall have any rights in or claims to such money. The Trustee shall make

information regarding the investments under the Trust Agreement available to TIES and shall make deposits in

and disbursements from the Rebate Account in accordance with the written instructions received from TIES, shall

invest the Rebate Account pursuant to said written instructions, and shall deposit income from such investments

immediately upon receipt thereof in the Rebate Account.

No Liability by TIES to Owners. Except for the payment of Lease Payments when due in accordance with the

Lease and the performance of its other covenants and agreements in the Lease, TIES shall have no obligation or

liability to any of the other parties or to the Owners of the Certificates with respect to the Trust Agreement or the

terms, execution, delivery or transfer of the Certificates, or the distribution of Lease Payments to the Owners by

the Trustee.

– 17 –

Trustee: Duties, Removal and Resignation. By executing and delivering the Trust Agreement, the Trustee accepts

the duties and obligations of the Trustee provided in the Trust Agreement, but only upon the terms and conditions

set forth in the Trust Agreement.

In carrying out its duties and exercising its powers under the Trust Agreement, the Trustee undertakes to perform

such duties and exercise such powers only as are specifically set forth in the Trust Agreement, and no implied

covenants or obligations shall be read into the Trust Agreement against the Trustee, provided that upon the

occurrence of an event of default under the Lease or termination of the Lease for nonappropriation, then the

Trustee shall exercise that degree of care under the circumstances then prevailing which people of prudence and

discretion exercise in the management of their own business affairs.

TIES may, or the holders of a majority of all Certificates Outstanding may by written request and agreement to

pay the fees of any successor trustee, remove the Trustee initially a party to the Trust Agreement and any

successor thereto upon thirty (30) days written notice, and may appoint a successor Trustee, but any such

successor shall (a) be a bank or trust company or part of a bank holding company having a combined capital

(exclusive of borrowed capital) and surplus of at least Fifty Million Dollars ($50,000,000) and (b) be subject to

supervision or examination by federal or state authority. If such bank or trust company or bank holding company

publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or

examining authority above referred to, then for the purposes of Section 5.01 of the Trust Agreement the combined

capital and surplus of such bank or trust company shall be deemed to be its combined capital and surplus as set

forth in its most recent report of condition so published.

The Trustee may at any time resign by giving written notice to TIES and by giving to the Certificate Owners

notice of such resignation by first class mail, postage prepaid, at the addresses reflected on the Certificate

Registrar. Upon receiving such notice of resignation, TIES shall promptly appoint a successor Trustee by an

instrument in writing; provided, however, that in the event TIES does not appoint a successor Trustee within

thirty (30) days following receipt of such notice of resignation, the resigning Trustee may petition the appropriate

court having jurisdiction to appoint a successor Trustee, and any resignation or removal of the Trustee and

appointment of a successor Trustee shall only become effective upon acceptance of appointment by the successor

Trustee and repayment by the Trustee of the unearned portion of its fees.

GROUND LEASE

This summary does not purport to be a complete description of the terms of the Ground Lease and, accordingly, is

qualified by reference thereto. Copies of the Ground Lease may be obtained from TIES or its Underwriter.

TIES is the owner of certain land located in Ramsey County, Minnesota, and legally described in EXHIBIT A of

the Ground Lease (the "Site"), upon which TIES has determined to better the Site, to construct renovations and

improvements to the TIES conference center facility, and to acquire and install fixtures, furniture and equipment

in or on the Site and the facility (the "Improvements" or the "Project") to serve the needs of TIES and its member

school districts. TIES intends that the Trustee's interest in the Site and the Improvements to be constructed to the

Site and the facility (together, the "Premises") provide security to the Trustee for the financing of the betterment

of the Site and the acquisition, construction and installation of the Improvements. The Trustee proposes to lease

from TIES the Site, and to lease back to TIES the Premises pursuant to the Lease-Purchase Agreement dated as of

October 1, 2012, by and between the Trustee, as lessor, and TIES, as lessee (the "Lease");

Warranties of TIES. TIES covenants and warrants to the Trustee that:

(1) TIES has good and merchantable title to the Site, has the authority to enter into, to execute and to

deliver the Ground Lease and has duly authorized the execution and delivery of the Ground

Lease;

– 18 –

(2) The Site is not subject to any dedication, easement, right of way, reservation in patent, covenant,

condition, restriction, lien or encumbrance that would prohibit or would interfere materially with

the Improvements or the use of the Site and the Improvements as security for the financing as

contemplated by the Lease;

(3) All taxes, assessments or impositions of any kind with respect to the Site, except current taxes,

have been paid in full;

(4) The Site is properly zoned for the uses thereof contemplated by the Lease;

(5) The Improvements are necessary to TIES in order for TIES to perform its essential governmental

functions; and

(6) TIES has authority to enter into, execute and deliver the Ground Lease, and has duly authorized

its execution and delivery.

Termination. Subject to the other provisions of the Ground Lease, the Ground Lease shall terminate upon the

occurrence of any one of the following events:

(a) The payment by TIES of all Lease Payments owing to the Trustee under the Lease.

(b) The exercise by TIES of its option to prepay by payment of the scheduled Purchase Price and other sums

due in accordance with the terms and conditions of the Lease.

(c) The termination of the Lease Term upon the occurrence of an Event of Default by TIES under Article IX

of the Lease and the receipt by the Trustee of amounts from the sublease of the Trustee's interest in the Premises

sufficient to:

(1) Reimburse the Trustee for all administrative costs and expenses, including reasonable attorney

fees, incurred by the Trustee in connection with the Lease or the exercise of the Trustee's

remedies thereunder; and

(2) Pay to the Trustee an amount that will equal the principal component of all Rent stated to become

due under the Lease through February 1, 2023.

FUTURE FINANCING

TIES does not anticipate the need to finance additional capital improvements with the issuance of general

obligation bonds or certificates of participation within the next six months.

CERTIFICATE RATING

The Certificates are non-rated. TIES did not apply for an underlying rating from Moody’s Investors Service or

Standard and Poor’s Ratings Service.

LITIGATION

As of May 22, 2012, TIES Clerk / Treasurer was not aware of any threatened or pending litigation that questions

the organization or boundaries of TIES or the right of any of its officers to their respective offices or in any

manner questioning their rights and power to execute and deliver these Bonds or otherwise questioning the

validity of these Bonds.

– 19 –

CERTIFICATION

TIES will furnish a statement to the effect that this Official Statement to the best of their knowledge and belief, as

of the date of sale and the date of delivery, is true and correct in all material respects, and does not contain any

untrue statements of a material fact or omit to state a material fact necessary in order to make the statements made

therein, in light of the circumstances under which they were made, not misleading.

TIES has always promptly met all payments of principal and interest on its indebtedness when due.

LEGALITY

Legal matters incident to the authorization and issuance of the Certificates are subject to the approving opinion of

Bond Counsel as to validity and tax exemption. A copy of such opinion will be available at the time of the deliv-

ery of the Certificates. See Appendix A – Proposed Form of Legal Opinion.

Bond Counsel has not participated in the preparation of this Official Statement and is not passing upon its

accuracy, completeness or sufficiency. Bond Counsel has not examined, nor attempted to examine, or verify, any

of the financial or statistical statements or data contained in this Official Statement, and will express no opinion

with respect thereto.

TAX EXEMPTION

General

In the opinion of Bond Counsel, under federal and Minnesota laws, regulations, rulings and decisions in effect on

the date of issuance of the Certificates, interest on the Certificates is excludable from gross income for federal

income tax purposes, and, to the same extent, from taxable net income of individuals, estates and trusts for

Minnesota income tax purposes. Interest on the Certificates is includable in taxable income of corporations and

financial institutions for purposes of the Minnesota franchise tax. Certain provisions of the Internal Revenue Code

of 1986, as amended (the “Code”), however, impose continuing requirements that must be met after the issuance

of the Certificates in order for interest thereon to be and remain excludable from federal gross income and, to the

same extent, from Minnesota taxable net income. Noncompliance with such requirements by TIES may cause the

interest on the Certificates to be includable in gross income for purposes of federal income taxation and, to the

same extent, in taxable net income for purposes of Minnesota income taxation, retroactive to the date of issuance

of the Certificates, irrespective in some cases of the date on which such noncompliance is ascertained. No

provision has been made for redemption of or for an increase in the interest rate on the Certificates in the event

that interest on the Certificates becomes includable in federal gross income or Minnesota taxable income.

Interest on the Certificates is not an item of tax preference includable in alternative minimum taxable income for

purposes of the federal alternative minimum tax applicable to all taxpayers or the Minnesota alternative minimum

tax applicable to individuals, estates and trusts, but is includable in adjusted current earnings in determining the

federal alternative minimum taxable income of corporations for purposes of the federal alternative minimum tax.

Interest on the Certificates may be includable in the income of a foreign corporation for purposes of the branch

profits tax imposed by Section 884 of the Code and is includable in the net investment income of foreign

insurance companies for purposes of Section 842(b) of the Code. In the case of an insurance company subject to

the tax imposed by Section 831 of the Code, the amount which otherwise would be taken into account as losses

incurred under Section 832(b)(5) of the Code must be reduced by an amount equal to fifteen percent of the

interest on the Certificates that is received or accrued during the taxable year. Section 86 of the Code requires

recipients of certain Social Security and railroad retirement benefits to take into account, in determining the

taxability of such benefits, receipts or accruals of interest on the Certificates.

– 20 –

Proposed Changes in Federal and State Tax Law

From time to time, there are Presidential proposals, proposals of various federal committees, and legislative

proposals in the Congress and in the states that, if enacted, could alter or amend the federal and state tax matters

referred to herein or adversely affect the marketability or market value of the Certificates or otherwise prevent

holders of the Certificates from realizing the full benefit of the tax exemption of interest on the Certificates.

Further, such proposals may impact the marketability or market value of the Certificates simply by being

proposed. No prediction is made whether such provisions will be enacted as proposed or concerning other future

legislation affecting the tax treatment of interest on the Certificates. In addition, regulatory actions are from time

to time announced or proposed and litigation is threatened or commenced which, if implemented or concluded in

a particular manner, could adversely affect the market value, marketability or tax status of the Certificates. It

cannot be predicted whether any such regulatory action will be implemented, how any particular litigation or

judicial action will be resolved, or whether the Certificates would be impacted thereby.

Not Qualified Tax-Exempt Obligations

TIES did not designate the Certificates as “qualified tax-exempt obligations” for purposes of Section 265(b)(3) of

the Code relating to the ability of financial institutions to deduct from income for federal income tax purposes,

interest expense that is allocable to carrying and acquiring tax-exempt obligations.

RELATED TAX CONSIDERATIONS

Interest on the Certificates is not an item of tax preference for federal or Minnesota alternative minimum tax

purposes, but is included in adjusted current earnings of corporations for purposes of the federal alternative

minimum tax. Section 86 of the Code and corresponding provisions of Minnesota law require recipients of certain

social security and railroad retirement benefits to take interest on the Certificates into account in determining the

taxability of such benefits. Passive investment income, including interest on the Certificates may be subject to

taxation under section 1375 of the Code, and corresponding provisions of Minnesota law, for an S corporation

that has accumulated earnings and profits at the close of the taxable year, if more than 25 percent of its gross

receipts is passive investment income. Section 265 of the Code denies a deduction for interest on indebtedness

incurred or continued to purchase or carry the Certificates (see “Qualified Tax-Exempt Obligations” above for

provisions relating to certain financial institutions), and Minnesota law similarly denies a deduction for such

interest in the case of individuals, estates, and trusts. Indebtedness may be allocated to the Certificates for this

purpose even though not directly traceable to the purchase of the Certificates. Federal and Minnesota laws also

restrict the deductibility of other expenses allocable to the Certificates. In the case of an insurance company

subject to the tax imposed by section 831 of the Code, the amount which otherwise would be taken into account

as losses incurred under section 832(b)(5) of the Code must be reduced by an amount equal to 15 percent of the

interest on the Certificates that is received or accrued during the taxable year. Interest on the Certificates may be

included in the income of a foreign corporation for purposes of the branch profits tax imposed by section 884 of

the Code, and is included in net investment income of foreign insurance companies under section 842(b) of the

Code.

Because of the Code’s basis reduction rules for amortizable bond premium, Certificateholders who acquire

Certificates at a premium may be required to recognize taxable gain upon sale of the Certificates, even if the

Certificates are sold for an amount equal to or less than their original cost.

THE FOREGOING IS NOT INTENDED TO BE AN EXHAUSTIVE DISCUSSION OF COLLATERAL TAX

CONSEQUENCES ARISING FROM OWNERSHIP OR DISPOSITION OF THE CERTIFICATES OR

RECEIPT OF INTEREST ON THE CERTIFICATES. PROSPECTIVE PURCHASERS OR

CERTIFICATEHOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO

COLLATERAL TAX CONSEQUENCES AND APPLICABLE STATE AND LOCAL TAX RULES IN STATES

OTHER THAN MINNESOTA.

– 21 –

TECHNOLOGY AND INFORMATION EDUCATION SERVICES

ST. PAUL, MINNESOTA

GENERAL INFORMATION

Introduction

TIES was organized in 1967 under Minnesota Statutes Section 471.59, known as the Joint Powers Act, as a Joint

Powers Board, currently owned by 46 Minnesota member school districts (“Member” or “Member Districts”), to

provide comprehensive technology solutions to schools, educators and administrators. TIES Member Districts

represent about 514 schools and one third of Minnesota’s student population, approximately 271,611 students.

Member enrollments range from 573 to 38,412 students, with a median of 3,734.

Governance

Two representatives of each Member District serve on the TIES Board. Present officers and members of the Joint

Board of TIES are as follows:

Anoka-Hennepin

Dennis Carlson, Superintendent

Marci Anderson, Executive Committee

Bloomington

Les Fujitake, Superintendent

Dick Bergstrom, Board Member

Brooklyn Center

Keith Lester, Superintendent

Arneuwell Benifield, Board Member

Buffalo-Hanover-Montrose

Scott Thielman, Ed.D., Superintendent

Patti Pokorney, Board Member

Burnsville-Eagan-Savage

Randall Clegg, Ed.D., Superintendent

Dan Luth, Executive Committee

Centennial

Keith Dixon, Ph.D. Interim Superintendent

Chisago Lakes

Mike McLoughlin, Superintendent

Tom Lawlor, Board Member

Columbia Heights

Kathy Kelly, Superintendent

Ted Landwehr, Board Member

East Central

Jack Almos, Interim Superintendent

Julie Domogalla, Board Member

Eden Prairie

John McBroom, Interim Superintendent

David Espe, Board Member

Edina

Ric Dressen, Ed.D., Executive Committee

Leny Wallen-Friedman, Board Member

Forest Lake

Linda Madsen, Ph.D., Superintendent

Joe Grafft, Executive Committee

Fridley

Peggy Flathmann, Ed.D., Exec Committee

Fred Bischke, Board Member

Hastings

Tim Collins, M.A., Superintendent

Dan Cater, Board Member

Hinckley-Finlayson

Rob Prater, Superintendent

Bonnie Vrudny, Board Member

Hopkins

John Schultz, Ph.D., Executive Committee

Steve Adams, Board Member

Howard Lake-Waverly-Winsted

Brad Sellner, Superintendent

Paul Weibel, Board Member

Intermediate District 287

Sandra Lewandowski, Ed.S., Superintendent

Ann Bremer, Board Member

Intermediate District 917

John Christiansen, Ed.D., Superintendent

Vanda Pressnall, Board Member

– 22 –

Inver Grove Heights

Deirdre Wells, Ed.D., Executive Committee

Bridget Sutton, Board Member

Jordan

Kirk Nelson, Superintendent

Dan Buresh, Board Member

Lakeville

Lisa Synder, Ed.D., Superintendent

Jim Skelly, Board Member

Mahtomedi

Mark Larson, Ph.D., Superintendent

Robert Donohoe, Board Member

Monticello

Jim Johnson, Superintendent

Scott Hill, Board Member

Mounds View

Dan Hoverman, Superintendent

Robert Helgeson, Board Member

New Prague

Larry Kauzlarich, Superintendent

Jerry Walerius, Board Member

North Branch

Deborah Henton, Ed.D., Superintendent

Jay Falk, Board Member

Orono

Karen Orcutt, Ed.D., Superintendent

Mike Bash, Board Member

Osseo

Kate Maguire, Ed.D., Superintendent

Jim Burgett, Osseo

Pine City

Dennis Fischer, Superintendent

Wendy Leibel, Board Member

Randolph

Michael Kelley, Superintendent

Glenn Woodhouse, Board Member

Red Wing

Karsten Anderson, Superintendent

Mike Christensen, Board Member

Richfield

Robert Slotterback, Ph.D., Superintendent

Todd Nollenberger, Board Member

Rosemount-Apple Valley-Eagan

Jane Berenz, Superintendent

Joel Albright, Board Member

Rush City

Vern Koepp, Superintendent

Carol Cook, Board Member

St. Anthony-New Brighton

Barbra Zakrajsek, Ed.D., Int. Superintendent

Andrea Scamehorn, Board Member

St. Francis

Edward Saxton, Superintendent

Harry Grams, Board Member

St. Louis Park

Debra Bowers, Ph.D., Superintendent

Rolf Peterson, Board Member

St. Michael-Albertville

James Behle, Superintendent

Douglas Birk, Board Member

Shakopee

Rod Thompson, Ph.D., Superintendent

Reggie Bowerman, Board Member

South St. Paul

Dave Webb, Ed.D., Superintendent

Ann Counihan, Board Member

Spring Lake Park

Jeff Ronneberg, Ed.D., Superintendent

Kelly Delfs, Board Member

Stillwater

Corey, Lunn, Ed.D., Superintendent

Tom Lehmann, Board Member

West Metro Education Program (WMEP)

Daniel Jett, Ph.D., Superintendent

Missy Lee, Board Member

West St. Paul-Mendota Hts.-Eagan

Tom Nelson, Interim Superintendent

Dewayne Dill, Board Member

Westonka

Kevin Borg, Superintendent

Keith Foerster, Board Member

– 23 –

The TIES Executive Committee consists of nine members of the Joint Board. The Executive Committee

implements and administers the policies of the Joint Board. Executive Committee members are as follows:

Name, Position, Rep Category Elected – Term Expires

Ms. Marci Anderson

Board Member, Group I

Anoka-Hennepin ISD 011

January 12, 2009 -- Perpetual

Ms. Jane Berenz

Superintendent, Group I

Rosemount-Apple Valley-Eagan ISD 196

June 16, 2010 – June 30, 2014

Dr. Ric Dressen

Superintendent, Group II

Edina ISD 273

June 17, 2009 – June 30, 2013

Dr. Peggy Flathmann

Superintendent, Group IV

Fridley ISD 014

June 15, 2011 – June 30, 2015

Mr. Joe Grafft

Board Member, Group III

Forest Lake ISD 831

June 15, 2001 – June 30, 2013

Mr. Dan Luth

Board Member, Group II

Burnsville-Eagan-Savage ISD 191

June 16, 2006 – June 30, 2014

Dr. John Schultz

Superintendent, Group III

Hopkins ISD 270

June 21, 2008 – June 30, 2016

Mr. Jim Skelly

Board Member, Group I

Lakevile ISD 194

June 21, 2012 - June 30, 2016

Dr. Deirdre Wells

Superintendent, Group IV

Inver Grove Hts ISD 199

June 15, 2011 – June 30, 2015

Ms. Betty Schweizer

TIES

(Ex-officio)

Ex-Officio

Officers of the TIES Executive Committee are elected annually. The current officers are as follows:

Chair: Joe Grafft, Board Member, Forest Lake (Term ends in 2013)

Vice Chair: Dan Luth, Board Member, Burnsville-Eagan-Savage (Term ends in 2014)

Treasurer: Dr. John Schultz, Board Member, Hopkins (Term ends in 2016)

Clerk: Marci Anderson, Board Member, Anoka (Perpetual Term)

– 24 –

Staff

The Executive Director of TIES is Elizabeth A Schweizer. She was appointed in April 1999 and previously

served as Director of Finance. A chart of the organizational structure of TIES is presented as Appendix D of the

Official Statement. TIES currently employs 116 people, 106 of whom are full-time and 10 are part-time.

Employees fall within the following functional categories:

Services

TIES brings together technology and education to create comprehensive solutions for school administrators,

educators and students. TIES’ mission is to ensure that its Members can mutually achieve their educational and

operational objectives by providing products and services for optimum student learning and effective

management; conducting focused research and development; and involving clients nationwide.

TIES helps Members meet their operational objectives by developing and supporting applications for student

record keeping, accounting, payroll and human resources. These applications are processed at TIES to provide

cost-effective information services. TIES also provides internet services and a variety of technical consulting

services to Members.

TIES also helps optimize student learning by keeping Members current with the uses of technology. TIES trains

administrative staff and teachers in the use of productivity tools at their district offices, in addition to offering

graduate-level credits. TIES also conducts technology audits to help Members determine their technology needs

and staff assessments to identify development opportunities.

TIES products and services fall into four separate categories. Listed below are examples of the products and

services within each category.

1. Software / Applications & Data

Human resources and payroll

Finance

Data warehouse

Systems management

Function Number of Employees

Management 8

Accounting 5

Administrative Support 18

Software Support 14

Training Consultants 6

Technical Engineers 19

Software Developers 19

Computer Operators 7

Internet Help Desk 4

Sales Representatives 4

Transportation Router 4

Maintenance 4

Receptionists 4

– 25 –

2. Technical Services

Hardware and software group sales

Consulting

ISP services

3. Learning and Technology

Professional development workshops

Education technology workshops

Web management tools

4. Transportation

Transportation management services

Special education transportation services

(Remainder of page intentionally left blank)

– 26 –

Member Districts

TIES Member Districts represent about 514 schools and one third of Minnesota’s student population,

approximately 271,611 students. The 46 Member Districts and their 2011/2012 total enrollment are set forth

below:

District District # County

2011/2012

Enrollment

Anoka-Hennepin 11 Anoka 38,016

Bloomington 271 Hennepin 10,313

Brooklyn Center 286 Hennepin 1,764

Buffalo-Hanover-Montrose 877 Wright 5,734

Burnsville-Eagan-Savage 191 Dakota 9,605

Centennial 12 Anoka 6,389

Chisago Lakes 2144 Chisago 3,365

Columbia Heights 13 Anoka 2,982

East Central  2580 Pine 779

Eden Prairie 272 Hennepin 9,289

Edina 273 Hennepin 8,249

Forest Lake 831 Washington 6,691

Fridley 14 Anoka 2,824

Hastings 200 Dakota 4,692

Hinckley-Finlayson 2165 Pine 969

Hopkins 270 Hennepin 7,200

Howard Lake-Waverly-Winsted 2687 Wright 1,031

Intermediate District 287 287 Hennepin 1,802

Intermediate District 917 917 Dakota 797

Inver Grove Heights 199 Dakota 3,709

Jordan 717 Scott 1,734

Lakeville 194 Dakota 10,889

Mahtomedi 832 Washington 3,268

Monticello 882 Wright 4,124

Mounds View 621 Ramsey 9,786

New Prague 721 Scott 3,824

North Branch 138 Chisago 3,236

Orono 278 Hennepin 2,716

Osseo 279 Hennepin 20,329

Pine City 578 Pine 1,582

Randolph 195 Dakota 573

Red Wing 256 Goodhue 2,820

Richfield 280 Hennepin 4,159

Rosemount-Apple Valley-Eagan 196 Dakota 26,976

Rush City 139 Chisago 901

Shakopee 720 Scott 7,346

South St. Paul 6 Dakota 3,245

Spring Lake Park 16 Anoka 4,994

St. Anthony-New Brighton 282 Hennepin 1,733

St. Francis 15 Anoka 5,135

St. Louis Park 283 Hennepin 4,369

St. Michael-Albertville 885 Wright 5,448

Stillwater 834 Washington 8,395

West Metro Education Program 6069 Hennepin 1,063

West St. Paul-Mendota Heights-Eagan 197 Dakota 4,536

Westonka 277 Hennepin 2,230

Total Enrollment 271,611

Total Number of Member Districts 46

– 27 –

Non-Member Customers

In addition to serving the 46 Member Districts, TIES provides products and services to 93 other non-member

customers including 23 independent school districts, 31 charter schools, three Minnesota school cooperatives, 24

private schools and 12 others.

Facilities

TIES facilities are located at 1667 Snelling Avenue, Falcon Heights, Minnesota. TIES consolidated their

operations into one facility in 2001, consisting of 111,000 square feet which includes a conference center, training

center, lobby and storage space.

Sources of TIES Operating Revenue

TIES is dependent upon fees paid by its Members and nonmember customers to finance its operations.

Membership fees, based on student enrollment, are paid annually by Members and represent approximately 24%

of TIES total annual revenues. This fee covers the costs of support services such as workshops, training of district

personnel in the use of a wide variety of software packages to be used for instruction purposes as well as district

administration, and technical consulting. Based on the number of students expected to be enrolled in a Member

District and the anticipated total costs of support services, TIES has established a $40.23 per student membership

fee for Fiscal Year 2012/13. The membership fee has held constant at $40.23 since Fiscal Year 2010/2011. TIES

membership fees are based on TIES’ cost of operations including administrative overhead, of which facility costs

are included. TIES also receives 57% of its revenue from service and product sales to member and nonmember

customers.

Members in Minnesota have been authorized to use a lease levy within their budget to levy for membership dues

of TIES. State law authorized in 2012 provides the Member Districts with the authority to levy up to a total of

$632,000 per year for eleven years to pay for additional improvement costs associated with the TIES facility.

Each Member is authorized to levy their proportionate share of the $632,000 annually for the improvements to the

facility. A portion of the membership dues received from the Members will be used to make the Lease Payments

on the Certificates.

TIES Audited Financial Statements for years ending June 20, 3011 and 2010 are included as Appendix C in this

Official Statement.

(Remainder of page intentionally left blank)

APPENDIX A

Form of Legal Opinion

KNUTSON, FLYNN & DEANS, P.A. 1155 Centre Pointe Drive, Suite 10

Mendota Heights, MN 55120

651.222.2811 fax 651.225.0600

www.kfdmn.com

Technology and Information Educational Services

1667 Snelling Avenue North

St. Paul, MN 55108

U.S. Bank National Association

Global Corporate Trust Services

Mailstation: EP-MN-WS3C

60 Livingston Avenue

St. Paul, MN 55107

Re: $5,207,000 Certificates of Participation, Series 2012C [Evidencing the

Proportionate Interest of the Registered Owners Thereof in Certain Lease Payments to

be Made by TIES Pursuant to a Lease-Purchase Agreement dated as of October 1,

2012, by and between U.S. Bank National Association, as trustee (the "Trustee"), and

Technology and Information Educational Services, St. Paul, Minnesota ("TIES")]

Ladies and Gentlemen:

We have acted as Bond Counsel with respect to the issuance and delivery of the

Certificates described above (the "Certificates"). In that capacity we have reviewed copies of

the Lease-Purchase Agreement described above (the "Lease") and the Exhibits attached

thereto; the Ground Lease Agreement dated as of October 1, 2012 (the "Ground Lease") by

and between the Trustee and TIES and the Exhibits attached thereto; the Trust Agreement

dated as of October 1, 2012 (the "Trust Agreement"), by and between TIES and the Trustee,

including the form of Certificate of Participation attached thereto; the Continuing Disclosure

Certificate executed by TIES, and certain proceedings taken and certain affidavits and

certificates furnished by TIES, the Trustee and others in connection with the authorization,

execution and delivery of the Lease, the Ground Lease, the Trust Agreement, the Continuing

Disclosure Certificate and the Certificates.

The Lease provides that it will be in effect for a term commencing as provided therein

and ending on February 1, 2023. Under the Lease, the Trustee is providing financing for the

betterment of the Site leased to it by TIES under the Ground Lease, the betterment of the

TIES conference center facility, and the fixtures, furniture and equipment to be installed on

or in the Site and the facility (the "Improvements" or the "Project") and is leasing and selling

its interest in the Site and the Improvements (collectively, the "Premises") to TIES, and TIES

has undertaken to pay to the Trustee Lease Payments with respect thereto. Under the Trust

Agreement, the Trustee has executed and delivered the Certificates evidencing the right of

the registered owners thereof to the portion of the Lease Payments as described therein.

As to questions of fact material to our opinion, we have relied upon the

representations of TIES and the Trustee contained in the Trust Agreement and the Lease and

the certified proceedings and other certifications of public officials and other parties involved

in the issuance of the Certificates furnished to us, without undertaking to verify the same by

independent investigation.

From our examination of such documents and other instruments, assuming the

genuineness of the signatures thereon and the accuracy of the facts and conclusions stated

therein, without undertaking to verify the same by independent investigation, it is our

opinion that:

1. TIES is a joint powers entity of the state of Minnesota (the State), duly

organized, existing and operating under the Constitution and laws of the State.

2. The Lease, the Ground Lease, the Trust Agreement, the Continuing Disclosure

Certificate and the Certificates have been duly authorized, approved, executed and delivered

by and on behalf of TIES, and are valid and binding contracts of TIES, enforceable against

TIES in accordance with their terms, except to the extent limited by state and federal law

affecting remedies and by bankruptcy, reorganization or other laws of general application

relating to or affecting the enforcement of creditor's rights.

3. The authorization, approval and execution of the Lease, the Ground Lease, the

Trust Agreement, the Continuing Disclosure Certificate, the Certificates and all other

proceedings of TIES relating to the transactions contemplated thereby have been performed

in accordance with all open meeting and other laws, rules and regulations of the State of

Minnesota.

4. There is no litigation, action, suit or proceeding pending or before any court,

administrative agency, arbitrator or governmental body, that challenges the organization or

existence of TIES; the authority of TIES or its officers or its employees to enter into the

Lease, the Ground Lease, the Trust Agreement, the Certificates or the Continuing Disclosure

Certificate; the proper authorization, approval and/or execution of the Lease, the Ground

Lease, the Trust Agreement, the Continuing Disclosure Certificate, the Certificates and the

other documents contemplated thereby; or the ability of TIES otherwise to perform its

obligations under the Lease, the Ground Lease, the Trust Agreement, the Certificates, the

Continuing Disclosure Certificate and the documents contemplated thereby; or that would

have a material adverse impact on the financial condition of TIES, the security for the

Certificates, the operation of the Premises or the transactions contemplated by the Official

Statement.

5. The amount of each Lease Payment designated as and comprising interest as

set forth on Lease EXHIBIT B and received by the registered owners of the Certificates (a) is

not includable in gross income for federal income tax purposes or in taxable net income of

individuals, estates and trusts for Minnesota income tax purposes; (b) is includable in taxable

income of corporations and financial institutions for purposes of the Minnesota franchise tax;

(c) is not an item of tax preference includable in alternative minimum taxable income for

purposes of the federal alternative minimum tax applicable to all taxpayers or the Minnesota

alternative minimum tax applicable to individuals, estates and trusts; and (d) interest on the

Certificates is taken into account in determining adjusted current earnings for purposes of

calculating federal alternative minimum taxes applicable to corporations. We express no

opinion as to other federal or state tax consequences arising with respect to the Certificates

and the Lease Payments.

6. The Lease and the Certificates have not been designated as "qualified tax-

exempt obligations" for the purposes of Section 265 of the Code relating to the deduction of

interest expenses allocable to the Certificates by financial institutions.

7. The Lease is a "triple net" agreement requiring TIES to pay all expenses,

taxes, fees, insurance premiums, rebate payments, and costs associated with the Premises and

the Lease without right of offset.

8. The opinions set forth above are subject to the following qualifications and

exceptions:

(a) Our opinions are limited to and assume the application of the existing

laws of the State of Minnesota and the federal laws of the United States of America.

(b) Our opinions are subject to the condition of TIES's compliance with all

requirements of the Internal Revenue Code of 1986, as amended (the "Code"), that

must be satisfied subsequent to the issuance of the Lease and the Certificates in order

that the interest portion of each Lease Payment received by the registered owners of

the Certificates be, or continue to be, excluded from gross income for federal income

tax purposes. Noncompliance by TIES with such requirements could result in the

inclusion of such interest portion in federal gross income and Minnesota taxable net

income retroactive to the date of the Lease and the Certificates.

(c) We express no opinion as to the treatment for federal and State of

Minnesota income tax purposes of any moneys received by an Owner of the

Certificates subsequent to a termination of the Lease by the Trustee or Owners of the

Certificates by reason of an Event of Default.

(d) We have not been asked, and have not undertaken, to review the

accuracy, completeness or sufficiency of the Official Statement or any offering

materials relating to TIES, the Lease and the Certificates, and, accordingly, we

express no opinion with respect thereto.

DATED at Mendota Heights, Minnesota, this 4th day of October, 2012.

KNUTSON, FLYNN & DEANS

Professional Association

By:

Thomas S. Deans

APPENDIX B

Continuing Disclosure Certificate

CONTINUING DISCLOSURE CERTIFICATE (Limited Disclosure)

This Continuing Disclosure Certificate (the "Disclosure Certificate") is executed and

delivered by Technology and Information Educational Services, State of Minnesota

("TIES"), in connection with the issuance of its Certificates of Participation, Series 2012C

(the "Certificates"). The Certificates are being issued pursuant to a Resolution adopted by

the Governing Board on September 19, 2012 (the "Resolution"). TIES covenants and agrees

as follows:

SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is

being executed and delivered by TIES for the benefit of the Certificateholders or beneficial

owners, if different, and in order to assist the Participating Underwriters in complying with SEC

Rule 15c2-12. This Disclosure Certificate constitutes the written Undertaking required by the

Rule and reflects TIES's obligations under the provisions of paragraph (d)(2) of the Rule.

SECTION 2. Definitions. In addition to the definitions set forth in the Resolution,

which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined

in this Section, the following capitalized terms shall have the following meanings:

"Audited Financial Statements" shall mean the financial statements of TIES audited

annually by an independent certified public accounting firm and prepared in accordance with

generally accepted accounting principles or as otherwise required by Minnesota law for the

preceding Fiscal Year, including a balance sheet and statement of revenues, expenditures and

changes in fund balances.

"Dissemination Agent" shall mean TIES, or any successor Dissemination Agent which

has been designated in writing by TIES and which has filed with TIES a written acceptance of

such designation.

"EMMA" shall mean the Electronic Municipal Market Access system:

www.emma.msrb.org, established by the MSRB and which contains a component that includes a

continuing disclosure service for the receipt and public availability of continuing disclosure

documents and related information to be submitted by issuers, obligated persons, and their agents

pursuant to continuing disclosure undertakings entered into consistent with the Rule.

"Fiscal Year" shall mean the fiscal year of TIES.

"Listed Events" shall mean any of the events listed in Section 4(a) of this Disclosure

Certificate.

"MSRB" shall mean the Municipal Securities Rulemaking Board.

"Participating Underwriter" shall mean any of the original underwriters of the Certificates

required to comply with the Rule in connection with the offering of the Certificates.

"Rule" shall mean Rule 15c2-12 adopted by the Securities and Exchange Commission

(the "SEC") under the Securities Exchange Act of 1934, as the same may be amended from time

to time, and including written interpretations thereof by the Securities and Exchange

Commission.

SECTION 3. Provision of Information.

TIES shall annually provide to the MSRB, in an electronic format through the use

of EMMA, or shall cause the Dissemination Agent to provide its Audited Financial Statements

for the most recent Fiscal Year, which is the only financial information or operating data which

is customarily prepared by TIES and publicly available. The Annual Financial Statements shall

be submitted when available, but not later than June 30, 2013, or twelve (12) months after the

end of each fiscal year during which the Certificates are outstanding, commencing with the fiscal

year ending June 30, 2012. If audited financial statements are not available by the date specified

above, TIES shall submit unaudited financial statements by that date to the MSRB and will

submit the audited financial statements as soon as they are available.

All documents provided to the MSRB shall be accompanied by identifying information as

prescribed by the MSRB.

Any or all of the items listed above may be incorporated by reference from other

documents, including official statements of debt issues of TIES or related public entities, which

have been submitted to the MSRB or the Securities and Exchange Commission. If the document

incorporated by reference is a final official statement, it must also be available from the

Municipal Securities Rulemaking Board (MSRB). TIES shall clearly identify each such other

document so incorporated by reference.

SECTION 4. Reporting of Significant Events.

(a) This Section 4 shall govern the giving of notices of the occurrence of any of

the following events, with respect to the Certificates:

1. Principal and interest payment delinquencies;

2. Non-payment related defaults, if material;

3. Unscheduled draws on debt service reserves reflecting financial difficulties;

4. Unscheduled draws on credit enhancements reflecting financial difficulties;

5. Substitution of credit or liquidity providers, or their failure to perform;

6. Adverse tax opinions, the issuance by the Internal Revenue Service of

proposed or final determinations of taxability, Notices of Proposed Issue (IRS

Form 5701-TEB) or other material notices or determinations with respect to the

tax status of the security, or other material events affecting the tax status of the

security;

7. Modifications to rights of security holders, if material;

8. Bond calls, if material, and tender offers;

9. Defeasances;

10. Release, substitution, or sale of property securing repayment of the securities,

if material;

11. Rating changes;

12. Bankruptcy, insolvency, receivership or similar event of the obligated person;

13. The consummation of a merger, consolidation, or acquisition involving an

obligated person or the sale of all or substantially all of the assets of the obligated

person, other than in the ordinary course of business, the entry into a definitive

agreement to undertake such an action or the termination of a definitive

agreement relating to any such action, other than pursuant to its terms, if material;

14. Appointment of a successor or additional trustee or the change of name of a

trustee, if material.

(b) Whenever a Listed Event occurs, TIES shall in a timely manner not in excess

of ten business days after the occurrence of the Listed Event file a notice of such occurrence with

the MSRB.

SECTION 5. Termination of Reporting Obligation. TIES's obligations under this

Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in

full of all the Certificates.

SECTION 6. Dissemination Agent. TIES may, from time to time, appoint or engage a

Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate

and may discharge any such Agent, with or without appointing a successor Dissemination Agent.

SECTION 7. Amendment; Waiver. Notwithstanding any other provision of this

Disclosure Certificate, TIES may amend this Disclosure Certificate, and any provision of this

Disclosure Certificate may be waived, if such amendment or waiver is supported by an opinion

of counsel expert in federal securities laws, to the effect that such amendment or waiver would

not, in and of itself, cause the undertakings herein to violate the Rule if such amendment or

waiver had been effective on the date hereof but taking into account any subsequent change in or

official interpretation of the Rule.

If this Disclosure Certificate is amended, TIES will disclose such amendment, together

with a narrative explanation of that amendment, to the MSRB with its annual financial

information disclosure.

SECTION 8. Additional Information. Nothing in this Disclosure Certificate shall be

deemed to prevent TIES from disseminating any other information, using the means of

dissemination set forth in this Disclosure Certificate or any other means of communication, or

including any other information in any report or notice of occurrence of a Listed Event, in

addition to that which is required by this Disclosure Certificate. If TIES chooses to include any

information in any report or notice of occurrence of a Listed Event in addition to that which is

specifically required by this Disclosure Certificate, TIES shall have no obligation under this

Disclosure Certificate to update such information or include it in any future report or notice of

occurrence of a Listed Event.

SECTION 9. Default. In the event of a failure of TIES to comply with any provision of

this Disclosure Certificate, any Certificateholder or beneficial owner may take such actions as

may be necessary and appropriate, including seeking mandate or specific performance by court

order, to cause TIES to comply with its obligations under this Disclosure Certificate. A default

under this Disclosure Certificate shall not be deemed an Event of Default under the Resolution or

with respect to the Certificates, and the sole remedy under this Disclosure Certificate in the event

of any failure of TIES to comply with this Disclosure Certificate shall be an action to compel

performance.

SECTION 10. Duties, Immunities and Liabilities of Dissemination Agent. The

Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure

Certificate, and TIES agrees, to the extent permitted by law, to indemnify and save the

Dissemination Agent, its officers, directors, employees and agents, harmless against any loss,

expense and liabilities which it may incur arising out of or in the exercise or performance of its

powers and duties hereunder, including the costs and expenses (including attorneys fees) of

defending against any claim of liability, but excluding liabilities due to the Dissemination

Agent's negligence or willful misconduct. The obligations of TIES under this Section shall

survive resignation or removal of the Dissemination Agent and payment of the Certificates.

SECTION 11. Beneficiaries. This Disclosure Certificate shall inure solely to the

benefit of TIES, the Dissemination Agent, the Participating Underwriters and Holders from time

to time of the Certificates or the beneficial owners, if different, and shall create no rights in any

other person or entity.

SECTION 12. Reserved Rights. TIES reserves the right to discontinue providing any

information required under the Rule if a final determination should be made by a court of

competent jurisdiction that the Rule is invalid or otherwise unlawful or to modify the

Undertaking under this Disclosure Certificate if TIES determines that such modification is

required by the Rule, or by a court of competent jurisdiction.

Dated as of this 4th day of October, 2012.

TECHNOLOGY AND INFORMATION

EDUCATIONAL SERVICES (TIES)

ST. PAUL, MINNESOTA

By: ____________________________________

Chair

And: ___________________________________

Clerk

APPENDIX C

Excerpts from TIES Financial Report

TECHNOLOGY AND INFORMATION EDUCATIONAL SERVICES (TIES)

Falcon Heights, Minnesota

Audit Report on Financial Statements

June 30, 2011 and 2010

TECHNOLOGY AND INFORMATION EDUCATIONAL SERVICES (TIES)

TABLE OF CONTENTS

Independent Auditors' Report

Management's Discussion and Analysis

BASIC FINANCIAL STATEMENTS

Statements of Net Assets

Statements of Revenues, Expenses and Changes in Net Assets

Statements of Cash Flows

Notes to Financial Statements

REQUIRED SUPPLEMENTARY INFORMATION

Other Postemployment Benefits Plan Schedule of Funding Progress

SUPPLEMENTARY INFORMATION

Schedule of Future Minimum Contractual Obligation Payments

OTHER REQUIRED REPORTS

Uniform Financial Accounting and Reporting Standards Compliance Table

Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards

Schedule of Findings and Responses

1

2-6

7

8

9- 10

11-23

24

25

26

27-28

29-30

INDEPENDENT AUDITORS' REPORT

To the Members of Technology and Information Educational Services (TIES)

Falcon Heights, Minnesota

~AKER TILLY

VIRCHOW KRAUSE, LLP

Baker Tilly Virchow Krause, LLP 225 S Sixth Sr, Sre 2300 Minneapolis, MN 55402-4661 rel612 876 4500 fax 612 238 8900 bakerrilly.com

We have audited the accompanying financial statements of Technology and Information Educational Services (TIES) as of and for the years ended June 30, 2011 and 2010, which comprise the organization's basic financial statements as listed in the table of contents. These financial statements are the responsibility of TIES' management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by TIES' management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of TIES as of June 30, 2011 and 2010, and the changes in financial position and cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

In accordance with Government Auditing Standards, we have issued our report dated December 12, 2011 on our consideration of Technology and Information Educational Services (TIES) internal control over 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 to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.

Accounting principles generally accepted in the United States of America require that the management's discussion and analysis on pages 2 through 6 and the schedule of funding progress on page 24 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Our audit was conducted for the purpose of forming an opinion on the financial statements of Technology and Information Educational Services (TIES) as a whole. The supplemental section identified in the table of contents is presented for purposes of additional analysis and are not a required part of the financial statements. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on the supplemental section.

~li;~:nl~~ ~,U9 December 12, 2011

~an1ndependentmemberof

BAKER TILLY INTERNATIONAL

Page 1

An Affirmative Action Equal Opportunity Employer

TIES

Management's Discussion and Analysis (Unaudited) Year Ended June 30,2011

This section of TIES annual financial report presents the management discussion and analysis of TIES financial performance during the fiscal year that ended on June 30, 2011. Please read it in conjunction with the organization's financial statements, which immediately follows this section.

The Management's Discussion and Analysis (MD&A) is an element of Required Supplementary Information specified in the Governmental Accounting Standard Board's (GASB) Statement No. 34 -Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments issued in June 1999.

The purpose of this section is to provide an objective, easy-to-read overview of the financial position and activities of TIES at June 30, 2011 and for the year then ended.

FINANCIAL HIGHLIGHTS

Key financial highlights for the 2011fiscal year include the following:

• Operating revenue is $4,830,544 greater than prior year. Product resale accounted for $3,361,400 ofthe increase. Revenue from FeePay product, conferences, annual license fees and service fees are also higher than prior year.

• Mounds View School District joined TIES as a full member in 2011. Chisago Lakes, East Central, North Branch, Pine City, and Rush City School Districts joined in fiscal2012.

• Net assets are higher by $155,950 to $2,654,738.

• The Certificates of Participation issued in 2001 for purchasing and improving the TIES building were fully paid off in fiscal 2011.

REQUIRED FINANCIAL STATEMENTS

The financial statements report information of the organization using accounting methods similar to those used by private sector companies. These statements offer short-term and long-term information about its activities. The Statement ofNet Assets includes all of the organization's assets and liabilities and provides information about the nature and amounts of investments in resources (assets) and the obligations to creditors (liabilities). It also provides the basis for evaluating the capital structure of the organization and assessing the organization's liquidity and financial flexibility.

All of the current year's revenues and expenses are accounted for in the Statement of Revenues, Expenses and Changes in Net Assets. This statement measures the success of TIES' operations over the past year and can be used to measure profitability and credit worthiness and to determine whether the organization has successfully covered all of its costs through user fees and other revenue sources.

The final required financial statement is the Statement of Cash Flow. The statement reports cash receipts, cash payments, and net changes in cash resulting from operations, investing, and financing activities and provides answers to such questions as where did cash come from, what was cash used for, and what was the change in the cash balance during the reporting period.

Page2

FINANCIAL ANALYSIS

An important question that is asked and needs to be answered is how this past year's activities have affected the overall financial health of the organization. The Statement of Net Assets and the Statement of Revenues, Expenses, and Changes in Net Assets will help to answer this question.

The Statement of Net Assets, which shows the difference between assets and liabilities, can be analyzed over a period oftime to help the reader determine whether the financial condition of TIES is improving or deteriorating.

TIES Statement of Net Assets

June 30,2011,2010 and 2009

2011 2010 2009

Current and other assets $ 5,248,775 $ 6,076,436 $ 4,888,816 Restricted assets-funds held by trustee 0 977,297 870,705 Restricted assets-funds held in escrow 33,398 260,711 23,356 Capital assets and intangibles 6,865,258 6.751,226 6,328,555

Total Assets $ 12.147.431 $ 14.065.670 $ 12.111.432

Current liabilities $ 7,369,168 $ 9,312,286 $ 7,607,926 Non-current liabilities 2,123,885 2,254,956 2,176,513

Total Liabilities 9,493,053 11,567,242 9,784,439

Invested in capital assets, net of debt 3,421,446 2,806,134 2,769,153 Restricted 0 977,297 870,705 Unrestricted (deficit) (767,068) (1,285,003) (1,312,865)

Total Liabilities and Net Assets $ 12.147.431 $ 14.065.670 $ 12.111.432

The following Statement of Revenues, Expenditures and Changes in Net Assets help explain the nature of the change in net assets during 2011.

TIES Statement of Revenues, Expenses and Changes in Net Assets

June 30,2011,2010 and 2009

2011 2010 2009

Operating revenues $ 32,447,612 $ 27,617,068 $ 23,909,228 Non-operating revenues 24,291 57,082 74 133

Total Revenues 32.471.903 27.674.150 23.983.361

Operating expenses 32,207,918 27,337,049 23,516,412 Non-operating expenses 108,035 165,666 184,375

Total Expenses 32,315,953 27,502,715 23,700,787

Increase in Net Assets 155,950 171,435 282,574

Total Net Assets- Beginning of Year 2,498,428 2,326,993 2,044.419

Total Net Assets- End of Year $ 2,654,378 $ 2,498,428 $ 2,326,993

Page 3

Operating revenues are up $4,830,544 in 2011. Product resale revenue is $3,361,400 greater than the prior year. TIES Conference revenue is $295,949 higher, High Speed Internet revenue is up $291,609, Fee Pay revenue is up $130,054 and Grant revenue is up $107,772.

Net profit from Fee Pay revenue is higher by $130,054 or 29.7% over the prior year. Net profit on Consulting/Managed Service revenue is $124,343 higher than last year, an increase of 12.7%. Net profit on TIES Depot and TIES Conference are slightly higher than last year.

Operating expenses increased by $4,870,869 in 2011, directly related to the increase in operating revenue. Product resale expenses are up $3,352,899, TIES Conference expenses are up $276,516, Telephone expenses (mostly related to high speed internet) are up $239,158. Also, software expenses increased by $228,518 and repairs and maintenance expenses are up $115,402 mostly due to contract payments for software and maintenance as we transition to the new generation of server equipment.

Interest expense is down $57,631 from last year as we progressed on the payment schedule of many of our obligations, interest rates for new leases were lower than expected and many purchases of equipment were pushed back.

The Liabilities/Equity Ratio is 3.58 on 6/30/11 as compared to 4.63 as of 6/30/10. This is a decrease of almost 23%.

A second indicator of financial position is the quick ratio, which is cash and accounts receivable divided by current liabilities less current maturities on debt. The organization's quick ratio on 6/30/11 is .764 versus .712 on 6/30/10. In addition to the accounts receivable balance on 6/30/11, $3,213,577 for invoices for the first half of the FY2011 annual membership are due on 7/01/11, as well as $1,271,382 of high speed internet invoices. Most districts paid their invoices for annual member fees and high speed internet by 7/18/11.

Current assets indicate the resources that are, or soon will be, available to meet the current obligations of the organization. A comparison of the current assets to the current liabilities, less the current portion of long-term debt, on the statement of net assets indicates the working capital position. With the current portion of long-term debt deducted from the current liabilities and restricted assets deducted from current assets, TIES working capital improved by $502,036 at 6/30/11 compared to 6/30/10.

Revenue Sources

2009 2010 2011 Annual Fees 7,503,041 7,748,565 7,745,848 Service Fees 9,991,651 13,670,118 18,542,540

Transportation 5,407,931 5,188,792 4,997,887 Grants/ Admin 1,080,738 1,066,675 1,185,628

Total Revenue 23,983,361 27,674,150 32,471,903

Enrollment

Total enrollment of TIES membership for the last three years is as follows:

2010 253,580

2011 262,996

2012 273,320

The number of students enrolled in TIES member districts increased in 2011 by 12,230 students with the additions of Mounds View and New Prague school districts. The number of district members increased to 41 in 2011 and 46 in 2012 with the addition of the SCRED districts.

Page4

CAPITAL ASSETS AND DEBT ADMINISTRATION

Capital Assets As of 6/30/011 the net book value of TIES property and equipment was $6,865,258. This is an increase of $123,580 from the previous year.

Debt As of 6/30/11, the total capital leases payable is $3,433,812, down from $3,596,255 last year.

The balance on the Certificates of Participation payable was reduced to zero as of6/30/ll.

BUDGET VARIANCE ANALYSIS

Operating & Non-operating Revenues Annual membership fees Service fees Product resale Transportation fees Internet fees Conference fees Grants Interest revenue Building Levy, Lease & Other Admin.

Total Revenues Operating & Non-operating Expenses

Salaries Employee benefits Busing contract Product resale Purchased services Telephone & communications Utilities Travel Insurance Supplies & materials Operating lease payments Repairs & maintenance Depreciation & salvage value impairments Interest expense Amortization of software & building closing costs Professional development Other software expense Technology conference costs Other equipment expenses E2T2 Grant

2010-11 ACTUAL

$ 7,745,848 3,132,257 12,419,572 4,997,887

2,048,531 942,180 158,108 24,291

1,003,229 $ 32,471,903

$ 7,156,991 2,413,747 4,504,657

11,295,317 811,591

1,163,542 309,254 128,233 72,897

143,592 101,662 621,026

1,421,240 108,035

9,548 154,041

1,188,092 595,689

20,002 45,169

2010-11 BUDGET

$ 7,769,087 3,641,140 9,455,449 4,760,125 1,953,000

589,000 42,000 20,000

956,637 $ 29,186,438

$ 7,342,117 2,533,029 4,259,000 8,203,096

653,419 1,058,718

245,000 79,172 87,400

130,972 131,218 597,926

1,721,040 356,233

18,107 186,773 951,874 284,700

73,544

Variance

(23,239) (508,883) 2,964,123

237,762 95,531

353,180 116,108

4,291 46,592

3,285,465

(185,126) (119,282) 245,657

3,092,221 158,172 104,824 64,254 49,061 (14,503) 12,620

(29,556) 23,100

(299,800) (248,198)

(8,559) (32,732)

236,218 310,989 (53,542) 45,169

Var.%

-0.30% -13.97% 31.35% 4.99% 4.89%

59.96% 276.45%

21.46% 4.92%

11.26%

-2.52% -4.71% 5.77%

37.70% 24.21%

9.90% 26.23% 61.97%

-16.59% 9.64%

-22.52% 3.86%

-17.42% -69.67% -47.27% -17.53% 24.82%

109.23% -72.80%

Real estate taxes 3,000 (3,000) -100.00% Bad debt and billing adjustments Building expense Miscellaneous

Total Expenses INCREASE IN NET ASSETS

51,628

$32,315,953 $ 155,950

5,000 194,000 71,100

$ 29,186,438

(5,000) (194,000)

(19,472) -27.39% 3,129,515 10.72%

Page 5

As the previous schedule demonstrates, total revenue is $3,285,465 higher than budget, due mostly to higher product resale revenue of $2,964,123. Service fees are $508,883 under budget as new sales were less than budget. Conference fees are $353,180 more than budget, Transportation billing is $237,762 over and Grant revenues are $116,1 08 more than budget.

Total expense is $3,129,515 higher than budget. This increase is almost directly related to the increase in total revenue. Product resale costs are $3,092,221 more than budget. Depreciation is $299,800 under budget as the purchase of capital assets was delayed. Busing expenses are $245,657 over budget, again almost directly related to busing revenue. Technology conference costs are $310,989 higher than budget; however, net for conference was $42,191 better than budget. Interest expense is $248,198 less than budget this year as capital equipment purchases were made later in the year or pushed back until next year. Also, interest rates were much lower than expected, resulting in much of the savings. Software expense is $236,218 more than budget this year mostly due to the transitions to new servers and other equipment in operations going slower than expected and higher fees on other software maintenance contracts.

FACTORS BEARING ON ORGANIZATION'S FUTURE

In addition to the five new SCRED members in 2012, we also have many new application customers and many new subscriber members for Learning and Technology. New subscriber members include Cretin Durham Hall, Crown of Life Lutheran, De LaSalle, Faithful Sheppard Catholic, Immaculate Heart of Mary, Maturity of Mary, Saint Thomas Academy and St Jude of the Lake. New customers for Test & Assessment/PLP include Academy of North Minneapolis, Bryan, Cambridge/Isanti, Ely, Ogilvie, St Croix Prep, Trio Wolf Center, Triton, and Waubun. New Eclipse customers include, Litchfield, Little Falls, Long Prairie and South Washington.

CONTACTING THE ORGANIZATION'S FINANCIAL MANAGEMENT

This financial report is designed to provide our member districts and creditors with a general overview of the organization's finances and to demonstrate the organization's accountability for the money it receives. If you have questions about this report or need additional financial information, contact the Business Office, TIES, 1667 Snelling Ave. N., St. Paul, MN 55108,651.999.6001.

Del Jentz Senior Accountant

Elizabeth A. Schweizer Executive Director

Page 6

TECHNOLOGY AND INFORMATION EDUCATIONAL SERVICES (TIES)

STATEMENTS OF NET ASSETS June 30, 2011 and 2010

ASSETS 2011 2010

CURRENT ASSETS Cash and cash equivalents $ 1 ,276,113 $ 1,438,410 Accounts receivable, less allowance for uncollectible accounts

of $20,000 in 2011 and $50,000 in 2010 3,305,246 3,780,615 Supplies inventory 87,429 81,282 Prepaid expenses 579,987 776,129 Restricted assets - funds held in escrow 33,398 260,711 Restricted assets - funds held by trustee 977,297

Total Current Assets 5,282,173 7,314,444

NONCURRENT ASSETS Property and equipment, net 6,865,258 6,741,678 Building closing costs 9,548

Total Noncurrent Assets 6,865,258 6,751,226

TOTAL ASSETS $ 12,147,431 $ 14,065,670

LIABILITIES AND NET ASSETS CURRENT LIABILITIES

Accounts payable $ 3,867,524 $ 3,994,709 Accrued expenses 967,657 866,456 Deferred revenue 1,165,085 2,468,798 Current maturities on noncurrent debt 1,368,902 1,982,323

Total Current Liabilities 7,369,168 9,312,286

NONCURRENT LIABILITIES Capital leases payable 3,443,812 3,596,255 Certificates of participation payable 600,000 Other postemployment benefits 48,975 41,024 Current maturities on noncurrent debt (1 ,368,902) {1 ,982,323)

Total Noncurrent Liabilities 2,123,885 2,254,956

TOTAL LIABILITIES 9,493,053 11,567,242

NET ASSETS Invested in capital assets, net of related debt 3,421,446 2,806,134 Restricted for debt service 977,297 Unrestricted (deficit) {767,068) {1 ,285,003)

Total Net Assets 2,654,378 2,498,428

TOTAL LIABILITIES AND NET ASSETS $ 12,147,431 $ 14,065,670

See accompanying notes to the financial statements.

Page 7

TECHNOLOGY AND INFORMATION EDUCATIONAL SERVICES (TIES)

STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS For the Years Ended June 30, 2011 and 2010

2011 2010

OPERATING REVENUES Annual membership fees $ 7,745,848 $ 7,748,565 Local district lease levy 632,000 632,000 Transportation fees 4,997,887 5,188,792 Product resale revenue 12,419,572 9,058,172 Service fees 3,132,257 2,208,793 Internet fees 2,048,531 1,756,922 Conference fees 942,180 646,231 E2T2 grant 158,108 50,336 Miscellaneous 371,229 327,257

Total Operating Revenues 32,447,612 27,617,068

OPERATING EXPENSES Salaries 7,156,991 6,684,486 Employee benefits 2,413,747 2,135,811 Busing contract 4,504,657 4,673,962 Product resale costs 11,295,317 7,942,418 Purchased services 811,591 750,522 Telephone and communications 1,163,542 924,384 Utilities 309,254 272,076 Travel 128,233 104,770 Insurance 72,897 75,230 Supplies and materials 143,592 123,963 Operating lease payments 101,662 95,849 Repairs and maintenance 621,026 505,624 Depreciation and salvage value impairments 1,421,240 1,474,397 Amortization of software and building closing costs 9,548 16,367 Professional development 154,041 117,076 Other software expense 1,188,092 959,574 Technology conference costs 595,689 319,173 E2T2 Grant 45,169 22,983 Other equipment expenses 20,002 27,382 Bad debt and billing adjustments 32,842 Miscellaneous 51,628 78,160

Total Operating Expenses 32,207,918 27,337,049

OPERATING INCOME 239,694 280,019

NONOPERATING REVENUES (EXPENSES) Interest income 24,291 57,082 Interest expense {108,035) (165,666)

Total Nonoperating Revenues (Expenses) (83,744) (108,584)

INCREASE IN NET ASSETS 155,950 171,435

Total Net Assets- Beginning of Year 2,498,428 2,326,993

TOTAL NET ASSETS- END OF YEAR $ 2,654,378 $ 2,498,428

See accompanying notes to financial statements. Page 8

TECHNOLOGY AND INFORMATION EDUCATIONAL SERVICES (TIES)

STATEMENTS OF CASH FLOWS For the Years Ended June 30, 2011 and 2010

CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Operating grants received Payments to suppliers for goods and services Payments for employees for services

Net Cash Flows from Operating Activities

CASH FLOWS FROM NONCAPIT AL FINANCING ACTIVITIES Proceeds from bank line of credit Principal payments on bank line of credit Interest paid

Net Cash Flows from Noncapital Financing Activities

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Purchase of property and equipment (Increase) decrease in restricted assets Proceeds from capital leases Principal payments on capital leases Principal payments on certificates of participation Interest paid

Net Cash Flows from Capital and Related Financing Activities

CASH FLOWS FROM INVESTING ACTIVITIES Interest income

Net Cash Flows from Investing Activities

Net Change in Cash and Cash Equivalents

CASH AND CASH EQUIVALENTS- Beginning of Year

CASH AND CASH EQUIVALENTS- END OF YEAR

Noncash investment and financing activities Property, plant and equipment acquired through accounts payable

See accompanying notes to financial statements.

2011 2010

$ 31,491 '160 $ 27,367,963 158,108 50,336

(21 '194, 143) (17,086,961) (9,491 ,357) (8, 702, 979)

963,768 1,628,359

2,200,000 640,000 (2,200,000) (640,000)

{1,794) (606) (1,794) (606)

(1 ,524,339) (1 ,879,837) 1,204,610 (343,947) 1,231,201 2,182,068

(1 ,383,644) (977,656) (600,000) (565,000)

(97,371) (149,901) (1,169,543) (1 '734,273)

45,272 57,082 45,272 57,082

(162,297) (49,438)

1,438,410 1,487,848

$ 1 ,276,113 $ 1,438,410

$ 20,481 $ 49,268

Page 9

TECHNOLOGY AND INFORMATION EDUCATIONAL SERVICES (TIES)

STATEMENTS OF CASH FLOWS For the Years Ended June 30, 2011 and 2010

RECONCILIATION OF OPERATING INCOME TO NET CASH FLOWS FROM OPERATING ACTIVITIES Operating income Adjustments to reconcile operating income to net cash flows

from operating activities: Depreciation Amortization of software and building closing costs Changes in current operating items:

Accounts receivable Allowance for uncollectible accounts Supplies inventory Prepaid expenses Accounts payable Accrued expenses Deferred revenue

NET CASH FLOWS FROM OPERATING ACTIVITIES

See accompanying notes to financial statements.

$

$

2011 2010

239,694 $ 280,019

1,421,240 1,474,397 9,548 16,367

505,369 (794,602) (30,000) (175,000)

(6,147) (40,405) 196,142 (227,051)

(147,666) 206,483 79,301 117,318

(1,303,713) 770,833

963,768 $ 1,628,359

Page 10

TECHNOLOGY AND INFORMATION EDUCATIONAL SERVICES (TIES)

NOTES TO FINANCIAL STATEMENTS June 30, 2011 and 2010

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial statements of Technology and Information Educational Services (TIES) have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) as applied to government units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The significant accounting principles and policies utilized by TIES are described b_elow:

A. REPORTING ENTITY

TIES is a consortium of Minnesota school districts organized to provide data processing and other services to member and other districts. TIES uses the criteria set forth by the Governmental Accounting Standards Board Statement No. 14 to determine the scope of the reporting entity. TIES' policy is to include in the financial statements all funds, account groups, departments, agencies, boards, commissions, and other organizations over which TIES officials exercise oversight responsibility and is considered to be financially accountable.

Oversight responsibility includes such aspects as appointment of governing body members, budget review, approval of property tax levies, outstanding debt secured by TIES full faith and credit or review, and responsibility for funding deficits.

TIES has no component units that must be included in the reporting entity because of the significance of their operational or financial relationships with TIES.

8. FINANCIAL STATEMENT PRESENTATION

For financial reporting purposes, TIES is considered a special purpose government engaged only in business­type activities and is therefore not required to present entity-wide financial statements. TIES is required to present only the fund financial statements.

C. FUND ACCOUNTING

Enterprise funds are used to account for operations that are financed and operated in a manner similar to private business enterprises, where the intent of TIES is that the costs of providing goods or services to its member districts on a continuing basis be financed or recovered primarily through user charges. TIES has one enterprise fund that is used to account for general operations.

D. MEASUREMENT FOCUS AND BASIS OF ACCOUNTING

TIES uses the "economic resources" measurement focus. With the economic resources measurement focus, all assets and liabilities are included in the statement of net assets. Net assets are segregated into invested in capital assets, restricted for debt service, and unrestricted, as applicable. The operating statement presents increases (revenues) and decreases (expenses) in total net assets.

TIES uses the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized when all eligibility requirements imposed by the provider have been met.

TIES applies restricted resources first when an expense is incurred for which both restricted and unrestricted resources are available.

TIES applies only those applicable pronouncements of the Financial Accounting Standards Board issued on or before November 30, 1989 in accounting and reporting for its proprietary operations.

The accounting policies of TIES conform to the State of Minnesota Uniform Financial Accounting and Reporting Standards (UFARS).

Page 11

TECHNOLOGY AND INFORMATION EDUCATIONAL SERVICES (TIES)

NOTES TO FINANCIAL STATEMENTS June 30, 2011 and 2010

NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES {continued)

E. ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures/expenses during the reporting period. Significant estimates are used as a basis for computing recorded values of capital assets. Actual results could differ from those estimates.

F. CASH AND INVESTMENTS

Cash and investments are invested to the extent available in various securities as authorized by state law. Investments are reported at fair value based on quoted market prices.

G. ACCOUNTS RECEIVABLE

Accounts receivable include unpaid invoices and claims for reimbursements from member districts, other governmental units and non-governmental organizations. An allowance for uncollectible accounts is established based on management's expectations of the collectability of the receivables.

H. PREPAID EXPENDITURES

Prepaid expenditures represent non-capital items for use in subsequent periods.

/. INVENTORIES

Purchased inventories are valued at the lower of cost or market basis using the first-in, first-out method. The costs of inventories are recorded as expenses when consumed.

J. COMPENSATED ABSENCES AND OTHER EMPLOYEE BENEFIT AMOUNTS

TIES compensates employees upon termination for unused vacation pay. The accumulated liability for unpaid vacation benefits at June 30, 2011 and 2010 was $440,681 and $396,341, respectively. TIES provides for certain of the employees a severance pay plan. The total estimated obligation as of June 30, 2011 and 2010 was $175,000 and $163,200, respectively. The liability for the vested portion of vacation leave and severance is recorded as an expense and accrued liability when earned by the employee. Such amounts are included in the accrued expenses on the balance sheet.

K. RESTRICTED ASSETS- FUNDS HELD BY TRUSTEE AND FUNDS HELD IN ESCROW

Certain proceeds of the certificates of participation and capital leases, as well as certain resources set aside for their repayment, are classified as restricted assets on the balance sheet because they are held by trustees or in escrow and their use is limited by applicable debt covenants and capital lease expenditures.

L. OTHER ASSETS

Building Closing Costs

In January 2001, TIES incurred $163,673 in closing costs with its purchase of the land and building at 1667 Snelling Avenue North. These costs were being amortized over the 10 year period of the certificates of participation financing arrangement. As of June 30, 2011, the costs are fully amortized.

Page 12

TECHNOLOGY AND INFORMATION EDUCATIONAL SERVICES (TIES)

NOTES TO FINANCIAL STATEMENTS June 30, 2011 and 2010

NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Software Development Costs

The various components of development costs are amortized over a period of 3 to 8 years.

M. PROPERTY

Property and equipment are stated at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the individual assets.

Building and improvements Data processing equipment Furniture and equipment

N. DEFERRED REVENUE

Estimated Useful Lives 10-45 years 4-8 years 10 years

Deferred revenue primarily represents collections of pre-billings to member school districts or other customers, for services to be performed in the fiscal year ending June 30, 2012.

0. NONCURRENT LIABILITIES

TIES issued Certificates of Participation, Series 2001, to finance the acquisition, improvements and equipping of land and buildings located in Falcon Heights, Minnesota. At June 30, 2011, these certificates were paid in full. TIES also enters into capital lease agreements for certain capital assets. The noncurrent liabilities also include the accrual for other postemployment benefits as required by GASB Statement No. 45 (see Note 9).

P. NET ASSETS

Net assets are classified according to restrictions or availability of assets for satisfaction of TIES obligations.

Invested in capital assets, net of related debt: Capital assets (land, buildings, equipment and property acquisition restricted assets) less the debt incurred to acquire or construct the assets (excluding any unspent debt proceeds).

Restricted net assets: Net assets subject to externally-imposed stipulations.

• Restricted net assets for debt service can only be used to repay debt service costs (principal and interest).

Unrestricted net assets (deficit): Net assets that are not subject to externally-imposed stipulation. These resources are used for transactions relating to the general operations of TIES and may be used at the discretion of the governing board to meet current expenses for any purpose.

Q. REVENUE CLASSIFICATION

TIES has classified revenues as operating or nonoperating based upon the following criteria:

• Operating revenues result from exchange activities. Exchange activities are transactions where the amount received approximates the fair market value of the goods or services given up. TIES considers membership fees, product resale, other service fees, and various grants and contracts to be exchange transactions.

• Nonoperating revenues represent nonexchange activities. The primary source of these revenues is interest income.

Page 13

TECHNOLOGY AND INFORMATION EDUCATIONAL SERVICES (TIES)

NOTES TO FINANCIAL STATEMENTS June 30, 2011 and 2010

NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

R. BILLINGS FOR SUPPLIES

TIES purchases certain supplies, primarily computer paper, and software for member districts. As TIES is reimbursed for these supplies in amounts approximating their costs, these billings are netted against the related expenditures in the Statement of Revenue, Expenses and Changes in Net Assets.

S. STATEMENT OF CASH FLOWS

For purposes of the Statement of Cash Flows, TIES considers all highly liquid instruments with an original maturity from the time of purchase of three months or less to be cash equivalents. Amounts held by trustee or in escrow are not considered to be cash equivalents.

NOTE 2 - DEPOSITS AND INVESTMENTS

Deposits in each local and area bank are insured by the FDIC in the amount of $250,000 for interest bearing accounts and unlimited for noninterest bearing accounts.

In accordance with Minnesota Statutes, TIES maintains cash deposits at those depository banks authorized by the Executive Committee of TIES. All such depositories are members of the Federal Reserve System.

Minnesota Statutes require that TIES cash deposits be protected by insurance, a surety bond, or collateral. The market value of collateral pledged must equal 110% of the deposits not covered by insurance or bonds and 140% in the case of mortgage notes pledged. Authorized collateral includes certain first mortgage notes, United States direct or guaranteed obligations, general obligations of the State of Minnesota, and other state and local government obligations rated "A" or better by Moody's Investor Service, Inc. or Standard & Poor's Corporation.

TIES also invests idle funds as authorized by Minnesota Statutes as follows:

(a) Direct obligations or obligations guaranteed by the United States or its agencies.

(b) Shares of investment companies registered under the Federal Investment Company Act whose only investments are securities described in (a) above.

(c) General obligations of the State of Minnesota or any of its municipalities.

(d) Banker's acceptances of United States banks eligible for purchase by the Federal Reserve System.

(e) Commercial paper issued by United States corporations, or their Canadian subsidiaries, of the highest quality and maturing in 270 days or less.

(f) Guaranteed investment contracts issued or guaranteed by the United States commercial banks or domestic branches of foreign banks or United States insurance companies or their subsidiaries.

(g) Repurchase or reverse repurchase agreements with banks that are members of the Federal Reserve System with capitalization exceeding $10,000,000, a primary reporting dealer in U.S. Government securities to the Federal Reserve Bank of New York, or certain Minnesota securities broker dealers.

(h) Futures contracts sold under authority of Minnesota Statutes 471.56, subdivision 5.

TIES does not have a formal investment policy but follows the state statute for allowable investments.

Page 14

TECHNOLOGY AND INFORMATION EDUCATIONAL SERVICES (TIES)

NOTES TO FINANCIAL STATEMENTS June 30, 2011 and 2010

NOTE 2- DEPOSITS AND INVESTMENTS (continued)

Custodial credit risk is the risk that in the event of a financial institution failure, TIES' deposits may not be returned to TIES. At June 30, 2011, TIES has no such deposits outstanding.

NOTE 3- ACCOUNTS RECEIVABLE

Accounts receivable consists of the following at June 30:

2011 2010

Member districts $ 2,437,293 $ 1,910,118 Other governmental units 840,708 1,767,670 Non-governmental organizations 47 245 152,827

3,325,246 3,830,615 Allowance for uncollectible accounts (20,000) (50,000)

Total accounts receivable :6 3,305,246 :6 3,780,615

NOTE 4 - PROPERTY AND EQUIPMENT

Property and equipment consists of the following at June 30:

2010 Increases Decreases 2011

Land $ 1,025,928 $ $ $ 1,025,928 Buildings and improvements 4,592,333 78,878 4,671,211 Equipment and software 23,266,108 1,448,495 24,714,603 Furniture and fixtures 1,100,173 17 447 1,117,620

29,984,542 1,544,820 31,529,362

Less accumulated depreciation 23,242,864 1,421,240 24,664,104

Total property and equipment, net :6 6 741,678 s 123,580 s s 6 865 258

NOTE 5 -ACCRUED LIABILITIES

Accrued expenses consist of the following at June 30:

2011 2010

Compensation and benefits $ 908,182 $ 777,130 Accrued interest 59475 89,326

Total accrued expenses $ 967,657 s 866 456

Page 15

NOTE 6 - NONCURRENT LIABILITIES

TECHNOLOGY AND INFORMATION EDUCATIONAL SERVICES (TIES)

NOTES TO FINANCIAL STATEMENTS June 30, 2011 and 2010

A summary of noncurrent obligations at June 30, 2011, and the changes during the fiscal year are as follows:

2010 Liabilities for:

Capital leases $ 3,596,255 Certificates of participation 600,000 Other postemployment benefits 41 024

4,237,279 Less current maturities 1.982.323

Total noncurrent liabilities $ 2,254,956

Future maturities under these agreements are as follows:

Year Ending June 30 2012 2013 2014 2015

Total future minimum payments

Less amounts representing interest

Total principal

NOTE 7 - LEASE COMMITMENTS

$

$

$

$

Increases Decreases 2011

1,231,201 $ 1,383,644 $ 3,443,812 600,000

51 008 43 057 48,975

1,282 2Q9 $ 2,026,701 3,492,787 1.368,902

$ 2,123,885

Capital Leases

1,461,930 1,072,222 1,072,222

26,245 3,632,619

(188,807)

3 443 812

TIES has entered into several lease agreements that are recorded as capital leases (see Note 6). These leases are outlined below:

Date of Balance Date of Interest Final Original Outstanding Issue Rate Maturity Amount 6/30/2011

UNISYS Leasing Corporation #20 12-12-05 5.50% 01-15-12 $ 357,294 $ 68,318 Wells Fargo Brokerage Svcs #2 07-24-07 4.30% 07-15-11 1,492,956 200,970 Wells Fargo Brokerage Svcs #3 07-24-07 4.60% 07-15-14 310,855 167,918 Wells Fargo Brokerage Svcs #4 06-19-09 3.45% 07-31-13 340,735 260,846 Wells Fargo Brokerage Svcs #5 07-05-09 3.45% 07-31-13 1,194,989 912,615 Wells Fargo Brokerage Svcs #6 05-21-10 3.89% 01-19-14 648,198 488,984 Bank of America 11-18-09 0.00% 11-18-11 338,880 112,960 Wells Fargo Brokerage Svcs #7 05-19-11 2.84% 01-15-14 1,231,201 1,231,201

Totals $ 3,443,812

Page 16

TECHNOLOGY AND INFORMATION EDUCATIONAL SERVICES (TIES)

NOTES TO FINANCIAL STATEMENTS June 30, 2011 and 2010

NOTE 7- LEASE COMMITMENTS {continued)

All capital leases are secured by equipment. The cost of assets under capital leases as of June 30, 2011 and 2010 are approximately $5,900,000 and $8,500,000, respectively, and the accumulated depreciation on these assets through June 30, 2011 and 2010 is approximately $3,000,000 and $3,500,000, respectively.

Total interest expense on capital lease obligations was approximately $95,000 and $117,000 for the years ending June 30, 2011 and 2010.

NOTE 8- CERTIFICATES OF PARTICIPATION PAYABLE

The certificates of participation were dated January 1, 2001 (see Note 6). The final payment was due on February 1, 2011 at an interest rate of 5.60%.

Total interest expense on the certificates of participation approximated $12,000 and $49,000 for the years ending June 30, 2011 and 2010.

In conjunction with the issuance of these certificates, a lease agreement was established whereby the ownership of the property is assigned to a trustee. TIES was responsible to make monthly lease payments to the trustee in amounts sufficient to accumulate adequate resources to make the debt payments. Monthly lease payments ranged from $52,500 to $52,800 and were due through January 1, 2011. These lease payments were not reported as expenses because they only represent a method to provide security for the certificate holders. Several investment accounts, presented as restricted assets on the balance sheet were established by the trustee to accumulate lease payments, to segregate certificates proceeds to be used for acquisition and improvements and to provide for reserves and collateral as required in the lease agreement as follows:

Certificates of participation lease revenue account Certificates of participation reserve account Certificates of participation acquisition account

Total Restricted Assets

2011

$

$

2010

$ 482,896 494,400

1

$ 977 297

Page 17

TECHNOLOGY AND INFORMATION EDUCATIONAL SERVICES (TIES)

NOTES TO FINANCIAL STATEMENTS June 30, 2011 and 2010

NOTE 9 - OTHER POSTEMPLOYMENT BENEFITS

TIES group health insurance plan provides coverage to active employees and retirees (or other qualified terminated employees) at blended premium rates. This results in another postemployment benefit (OPEB) for the retirees, commonly referred to as an implicit rate subsidy.

Contribution requirements are established through personnel policy guidelines and may be amended by the action of the governing body. Retired plan members are required to pay 100% of the premium. Administrative costs of the plan are financed by TIES.

TIES annual other postemployment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC). The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities over a period not to exceed thirty years. The following table shows the components of TIES annual OPEB cost for the year, the amount contributed to the plan, and changes in TIES net OPEB obligation to the retiree health plan:

Annual required contribution (ARC) Interest on net OPEB obligation Adjustment to ARC Annual OPEB cost Contributions during the year Increase in net OPEB obligation

Net OPEB- Beginning of Year

Net OPEB - End of Year

$

$

51,739 1,641

(2,372) 51,008

(43,057) 7,951

41,024

48,975

TIES annual OPEB cost, the percentage of annual OPEB cost contributed to the plan and the net OPEB obligation for 2011 and 201 0 were as follows:

Fiscal Year Ended

June 30, 2010 June 30, 2011

Annual OPEB Cost

$ 50,290 $ 51,008

Employer Contribution

32,329 43,057

Percentage Contributed

64% 84%

$

Net OPEB Obligation

41,024 48,975

The funded status of the plan as of July 1, 2008, the most recent actuarial valuation date, was as follows:

UAAL as a Actuarial Actuarial Unfunded Percentage of Value of Accrued Liability Actuarial Funded Covered Covered Assets (b) Accrued Ratio Payroll Payroll

Date (a) Liability (a/b) (c) ((b-a)/c)

7/1/2008 $ - $ 367,439 $ 367,439 0.00% $ 6,500,000 5.65%

Actuarial valuations of an ongoing plan involve estimates for the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future.

Page 18

TECHNOLOGY AND INFORMATION EDUCATIONAL SERVICES (TIES)

NOTES TO FINANCIAL STATEMENTS June 30, 2011 and 2010

NOTE 9- OTHER POSTEMPLOYMENT BENEFITS (continued)

Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing benefit costs between the employer and plan members to that point. The methods and assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.

In the actuarial valuation, the alternative measurement method for employers with under 100 plan members was used. The actuarial assumptions include a 4% discount rate (investment rate of return) and an annual healthcare cost trend rate of 10% initially, reduced by decrements to an ultimate rate of 5% in 2019. The plan's unfunded actuarial accrued liability is being amortized as a level percentage of projected payroll on an open basis.

NOTE 10- CAPITAL CONTRIBUTED BY MEMBER DISTRICTS

In prior years, the Joint Board purchased the land and building in which its operations were previously located, and financed the purchase by a special capital assessment to all existing member districts of $2.50 per student. Since then, all new member districts have likewise been assessed a $2.50 per student fee for major capital improvements. The capital assessments received had been recorded as capital contributed by member districts and now are included in unrestricted net assets.

NOTE 11 - EMPLOYEE RETIREMENT PLANS

Substantially all employees of TIES are required by state law to belong to pension plans administered by Teachers' Retirement Association (TRA) or Public Employees' Retirement Association (PERA}, both of which are administered on a statewide basis. Disclosures relating to these plans for the year ended June 30, 2010, the most recent information available, is as follows:

(a) Teachers' Retirement Association (TRA):

Plan Description

All teachers employed by TIES are covered by defined benefit plans administered by the Teachers Retirement Association (TRA). TRA members belong to either the Coordinated or the Basic Plan. Coordinated Plan members are covered by Social Security and Basic Plan members are not. All new members must participate in the Coordinated Plan. The plans are established and administered in accordance with Minnesota Statutes, Chapter 354 and 356.

TRA provides retirement benefits as well as disability benefits to members, and benefits to survivors upon death of eligible members. Benefits are established by Minnesota Statute and vest after three years of service credit. The defined retirement benefits are based on a member's highest average salary for any five consecutive years of allowable service, age, and a formula multiplier based on years of credit at termination of service.

Page 19

TECHNOLOGY AND INFORMATION EDUCATIONAL SERVICES (TIES)

NOTES TO FINANCIAL STATEMENTS June 30, 2011 and 2010

NOTE 11- EMPLOYEE RETIREMENT PLANS (continued)

Two methods are used to compute benefits for TRA's Coordinated and Basic Plan members. Members first employed before July 1, 1989, receive the greater of the Tier I or Tier II as described:

Tier 1: Step Rate Formula Coordinated Basic

151 ten years if service years are prior to July 1, 2006 1.2 percent per year

1st ten years if service years are July 1, 2.2 percent per year

2006 or after 1.4 percent per year 2. 7 percent per year All other years of service if service

years are prior to July 1, 2006 1. 7 percent per year All other years of service if service

years are July 1, 2006 or after 1.9 percent per year

With these provisions:

(a) Normal retirement age is 65 with less than 30 years of allowable service and age 62 with 30 or more years of allowable service.

(b) 3 percent per year early retirement reduction factors for all years under normal retirement age.

(c) Unreduced benefits for early retirement under a Rule-of-90 (age plus allowable service equals 90 or more).

or

Tier II: For years of service prior to July 1, 2006, a level formula of 1. 7 percent per year for coordinated members and 2. 7 percent per year for basic members. For years of service July 1, 2006 and after, a level formula of 1.9 percent per year for Coordinated members and 2. 7 for Basic members applies. Actuarially equivalent early retirement reduction factors with augmentation are used for early retirement before the normal age of 65. These reduction factors average approximately 4 to 5.5 percent per year.

Members first employed after June 30, 1989 receive only the Tier II calculation with a normal retirement age that is their retirement age for full Social Security retirement benefits, but not to exceed age 66.

Six different types of annuities are available to members upon retirement. The No Refund Life Plan (A-1) is a lifetime annuity that ceases upon the death of the retiree - no survivor annuity is payable. A retiring member may also choose to provide survivor benefits to a designated beneficiary(ies) by selecting one of the five plans which have survivorship features. Vested members may also leave their contributions in the TRA Fund upon termination of service in order to qualify for a deferred annuity at retirement age. Any member terminating service is eligible for a refund of their employee contributions plus interest.

The benefit provisions stated apply to active plan participants. Vested, terminated employees who are entitled to benefits but not yet receiving them are bound by the provisions in effect at the time they last terminated their public service.

TRA publicly issues a Comprehensive Annual Financial Report (CAFR) presenting financial statements, supplemental information on funding levels, investment performance, and further information on benefits provisions. The report may be accessed at the TRA web site www.tra.state.mn.us. Alternatively, a copy of the report may be obtained by writing TRA: Teachers Retirement Association, 60 Empire Drive, Suite 400, St. Paul, MN 55103-4000 or by calling (651) 296-6449 or (800) 657-3853.

Page 20

TECHNOLOGY AND INFORMATION EDUCATIONAL SERVICES (TIES)

NOTES TO FINANCIAL STATEMENTS June 30, 2011 and 2010

NOTE 11- EMPLOYEE RETIREMENT PLANS (continued)

Funding Policy

Minnesota Statutes Chapter 354 sets the rates for the employee and employer contributions. These statures are established and amended by the state legislature. Coordinated and Basic Plan members are required to contribute 5.5 percent and 9.0 percent, respectively, of their annual covered salary as employee contributions. The TRA employer contribution rates are 5.5 percent for Coordinated members and 9.5 percent for Basic members. Total covered payroll salaries for all TRA members statewide during fiscal year ended June 30, 2010 was approximately $3.79 billion. TRA covered payroll for all members statewide for the years ended June 30, 2009 and June 30, 2008 were $3.76 billion and $3.65 billion, respectively.

TIES contributions for the years ending June 30, 2011, 2010 and 2009 were $19,474, $18,366 and $17,649, respectively, equal to the required contributions for each year as set by state statute.

The 2010 Legislature approved employee and employer contribution rate increases to be phased-in over a four­year period beginning July 1, 2011. Employee and employer contribution rates will rise 0.5 percent each year of the four-year period. Beginning July 1, 2014, TRA Coordinated employee and employer contribution rates will each be 7. 5 percent.

(b) Public Employees' Retirement Association (PERA):

Plan Description

All full-time and certain part-time employees of TIES are covered by a defined benefit plan administered by the Public Employees' Retirement Association of Minnesota (PERA). PERA administers the General Employees Retirement Fund (GERF), which is a cost-sharing, multiple-employer retirement plan. This plan is established and administered in accordance with Minnesota Statutes, Chapters 353 and 356.

GERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by Social Security and Basic Plan members are not. All new members must participate in the Coordinated Plan.

PERA provides retirement benefits as well as disability benefits to members, and benefits to survivors upon death of eligible members. Benefits are established by state statute, and vest after three years of credited service. The defined retirement benefits are based on a member's highest average salary for any five successive years of allowable service, age, and years of credit at termination of service.

Two methods are used to compute benefits for PERA's Coordinated and Basic Plan members. The retiring member receives the higher of a step-rate benefit accrual formula (Method 1) or a level accrual formula (Method 2). Under Method 1, the annuity accrual rate for a Basic Plan member is 2.2 percent of average salary for each of the first 10 years of service and 2.7 percent for each remaining year. The annuity accrual rate for a Coordinated Plan member is 1.2 percent of average salary for each of the first 10 years and 1. 7 percent for each remaining year. Under Method 2, the annuity accrual rate is 2. 7 percent of average salary for Basic Plan members and 1. 7 percent for Coordinated Plan members for each year of service. For all GERF members whose annuity is calculated using Method 1, a full annuity is available when age plus years of service equal 90. A reduced retirement annuity is also available to eligible members seeking early retirement.

There are different types of annuities available to members upon retirement. A single-life annuity is a lifetime annuity that ceases upon the death of the retiree - no survivor annuity is payable. There are also various types of joint and survivor annuity options available which will be payable over joint lives. Members may also leave their contributions in the fund upon termination of public service in order to qualify for a deferred annuity at retirement age. Refunds of contributions are available at any time to members who leave public service, but before retirement benefits begin.

Page 21

TECHNOLOGY AND INFORMATION EDUCATIONAL SERVICES (TIES)

NOTES TO FINANCIAL STATEMENTS June 30,2011 and 2010

NOTE 11- EMPLOYEE RETIREMENT PLANS (continued)

The benefit provisions stated in the previous paragraphs of this section are current provisions and apply to active plan participants. Vested, terminated employees who are entitled to benefits but are not receiving them yet are bound by the provisions in effect at the time they last terminated their public service.

PERA issues a publicly available financial report that includes financial statements and required supplementary information for GERF. That report may be obtained on the Internet at www.mnpera.org, by writing to PERA at 60 Empire Drive #200, St. Paul, Minnesota, 55103-2088, or by calling (651) 296-7460 or (800) 652-9026.

Funding Policy

Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. These statues are established and amended by the state legislature. TIES makes annual contributions to the pension plans equal to the amount required by state statutes. GERF Basic Plan members and Coordinated Plan members were required to contribute 9.1% and 6.25%, respectively, of their annual covered salary in 2011. TIES was required to contribute 11.78% for Basic Plan GERF members and 7% for Coordinated Plan GERF members. TIES' contributions to the Public Employees Retirement Fund for the years ending June 30, 2011, 2010 and 2009 were $478,253, $427,373, and $394,556, respectively. TIES' contributions were equal to the contractually required contributions for each year as set by state statutes.

NOTE 12 - FLEXIBLE BENEFIT PLAN

TIES maintains the TIES Medical and Day Care Expense Reimbursement Plan. The plan is a "cafeteria plan" under §125 of the Internal Revenue Code. Eligible employees can elect to participate by contributing pre-tax dollars withheld from payroll checks to the plan for health care and dependent care benefits. Payments are made from the plan to participating employees upon submitting a request for reimbursement of eligible expenses actually incurred by the participant.

The plan is administered by a third party. The assets are included in the financial statements as funds held by others and accrued expenses.

All plan property and income attributable to that property is solely the property of TIES, subject to the claims of TIES' general creditors. Participants' rights under the plan are equal to those of general creditors of TIES in an amount equal to the eligible health care and dependent care expenses incurred by the participant. TIES believes that it is unlikely that it will use the assets to satisfy the claims of general creditors in the future.

NOTE 13 - COMMITMENTS

TIES has a copier lease, with monthly payments of $7,500, maturing in September 2011. Total operating lease expense for the years ending June 30, 2011 and 2010 totaled approximately $100,000 for 2011 and $90,000 for 2010. Future minimum operating lease commitments remaining under this lease is as follows: 2012- $22,500.

Amounts received or receivable from federal and state agencies are subject to agency audit and adjustment. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable fund. The amount, if any, of funds which may be disallowed by the agencies cannot be determined at this time although TIES expects such amounts, if any, to be immaterial.

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NOTE 14- RISK MANAGEMENT

TECHNOLOGY AND INFORMATION EDUCATIONAL SERVICES (TIES)

NOTES TO FINANCIAL STATEMENTS June 30, 2011 and 2010

TIES is exposed to various risks of loss related to torts; thefts, damage to, and destruction of assets; errors and omissions; and natural disasters. TIES carries commercial insurance for these and certain other risks of loss. Settled claims have not exceeded commercial insurance coverage in any of the past three years.

NOTE15-WNEOFCREDIT

TIES has available a bank line of credit of $1,800,000. The note, which is secured by business assets, matures in August 2012. The note accrues interest at 1.5% over the bank's prime rate.

A summary of line of credit activity for the year ended June 30, 2011 is as follows:

2010 Increases Decreases 2011

Line of credit $ $ 2,200,000 $ 2,200,000 ~$====

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REQUIRED SUPPLEMENTARY INFORMATION

Fiscal Actuarial Year Value End of Assets

6/30/2011 N/A 6/30/2010 N/A 6/30/2009 -

TECHNOLOGY AND INFORMATION EDUCATIONAL SERVICES (TIES)

OTHER POSTEMPLOYMENT BENEFITS PLAN SCHEDULE OF FUNDING PROGRESS

For the Year Ended June 30, 2011

Actuarial Accrued Liability (AAL)- Unfunded

Entry Age AAL Funded Normal (UAAL) Ratio

N/A N/A N/A N/A N/A N/A

$ 367,439 $ 367,439 0.00%

The next actuarial valuation will be for 7/1/11.

See independent auditors' report.

UAAL as a Percentage

of Covered Covered Payroll Payroll

N/A N/A N/A N/A

$ 6,500,000 5.65%

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SUPPLEMENTARY INFORMATION

TECHNOLOGY AND INFORMATION EDUCATIONAL SERVICES (TIES)

SCHEDULE OF FUTURE MINIMUM CONTRACTUAL OBLIGATION PAYMENTS June 30, 2011

Pal£ments Due Description of Contract Date 2011-2012 2012-2013 2013-2014

Capital leases UNISYS Leasing Corporation #20 12-12-05 $ 71,458 $ - $ -Wells Fargo Lease #2 07-24-07 205,291 Wells Fargo Lease #3 07-24-07 52,491 52,491 52,491 Wells Fargo Lease #4 06-19-09 93,016 93,016 93,016 Wells Fargo Lease #5 07-05-09 325,433 325,433 325,433 Wells Fargo Lease #6 05-21-10 174,268 174,268 174,268 Wells Fargo Lease #7 05-19-11 427,013 427,014 427,014 Bank of America 11-18-09 112,960

Total capital leases 1,461,930 1,072,222 1,072,222

Operating leases Copier lease 09-30-01 22,500

22,500

Total annual contract payments $ 1.484.430 $ 1.072.222 $ 1.072.222

Note: The above payments include principal and interest (if applicable).

2014-2015

$

26,245

26,245

$ 26.245

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OTHER REQUIRED REPORTS

GENERAL FUND

Total Revenue Total Expenditures

Fund Balance (Net Assets): Unassigned:

422 Unassigned

TECHNOLOGY AND INFORMATION EDUCATIONAL SERVICES (TIES)

Uniform Financial Accounting and Reporting Standards Compliance Table

June 30, 2011

$ 32,522,884 32,366,934

$ 2,654,378

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VIRCHOW KRAUSE, LLP

Baker Tilly Virchow Krause, LLP 225 S Sixth St, Ste 2300 Minneapolis, MN 55402-4661 tel612 876 4500 fax 612 238 8900 bakertilly.com

INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON

AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

To the Members of Technology and Information Educational Services (TIES)

Falcon Heights, Minnesota

We have audited the financial statements of Technology and Information Educational Services (TIES) as of and for the year ended June 30, 2011, which comprise Technology and Information Educational Services (TIES)'s basic financial statements and have issued our report thereon dated December 2, 2011. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.

Internal Control Over Financial Reporting

Management of Technology and Information Educational Services (TIES) is responsible for establishing and maintaining effective internal control over financial reporting. In planning and performing our audit of the financial statements of Technology and Information Educational Services (TIES) as of June 30, 2011 and for the year then ended, we considered Technology and Information Educational Services (TIES)'s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Technology and Information Educational Services (TIES)'s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of Technology and Information Educational Services (TIES)'s internal control over financial reporting.

Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies or material weaknesses. However, as discussed below, we identified certain deficiencies in internal control over financial reporting that we consider to be significant deficiencies.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above.

~ a~independentmemberof

BAKER TILLY INTERNATIONAL

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An Affirmative Action Equal Opportunity Employer

A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider the deficiencies described in the accompanying schedule of findings and responses to be significant deficiencies in internal control over financial reporting. These significant deficiencies are items 2011-1 and 2011-2.

As part of our audit, we considered the internal control over financial reporting of Technology and Information Educational Services (TIES). Such considerations were solely for the purpose of determining our audit procedures and not provide assurance concerning such internal control over financial reporting.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether Technology and Information Educational Services (TIES)'s basic financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

Minnesota Legal Compliance

We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the provisions of the Minnesota Legal Compliance Audit Guide for Local Government, promulgated by the Legal Compliance Task Force pursuant to Minnesota Statute §6.65. Accordingly, the audit included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.

The Minnesota Legal Compliance Audit Guide for Local Government covers seven categories of compliance to be tested: contracting and bidding, deposits and investments, conflicts of interest, public indebtedness, claims and disbursements, uniform accounting and reporting standards for school districts and miscellaneous provisions. Our study included all of the listed categories.

The results of our tests indicate that for the items tested, Technology and Information Educational Services {TIES) complied with the material terms and conditions of applicable legal provisions.

Technology and Information Educational Services (TIES)'s written response to the findings identified in our audit has not been subjected to any auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it.

This report is intended for the information and use of the Members, management, and the Minnesota Department of Education, and federal awarding agencies and is not intended to be, and should not be, used by anyone other than these specified parties.

~ -1JL \S~ ~.W> Minneapoli~-~~esota December 2, 2011

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TECHNOLOGY AND INFORMATION EDUCATIONAL SERVICES (TIES)

SCHEDULE OF FINDINGS AND RESPONSES June 30, 2011

Finding 2011-1: Significant Deficiency- Bank and Account Reconciliations

Condition The primary bank account and other general ledger accounts were not completely reconciled or reviewed (lack of formal documentation) in a timely manner during and for the year ended June 30, 2011.

Criteria In order to maintain effective controls over financial reporting, bank and general ledger accounts should be reconciled and reviewed in a timely manner (typically by the end of the following month).

Effect The potential exists that an error could occur in the financial records and not be detected in a timely manner.

Cause Due to constraints in staffing, it was not possible to complete the reconciliations in a timely manner.

Recommendation We recommend that the Organization review and revise its reconciliation procedures to ensure that bank and other accounts are completely reconciled in a timely manner. The procedures should include a process whereby the reconciliations would be reviewed in a timely manner by someone other than those involved in preparing the reconciliations.

Corrective Action Plan I Management's Response The Organization understands the serious nature of this finding. The Accounting Manager and Executive Director continue to explore various ways to mitigate the risks of not having the bank and other accounts completely reconciled and/or reviewed timely and will strive to revise procedures and responsibilities so this is no longer an issue for fiscal year 2012.

Finding 2011-2: Significant Deficiency- Audit Adjustments and Assistance

Condition Significant adjusting and reclassifying journal entries were discovered during the course of the audit along with revisions being required to the financial statements that were prepared internally. There were also some entries that were brought to us following the start of audit field work, but prior to us auditing those areas.

Criteria Statement on Auditing Standards (SAS) No. 115 requires us to report a finding if we identified significant journal entries and/or made substantial revisions to the financial statements.

Effect The potential exists that an error could occur in the financial statements and not be detected in a timely manner.

Cause Due to constraints in staffing, it was not possible to accurately reconcile all accounts prior to the start of the audit field work. Also, there was minimal time available for preparation of the financial statements.

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TECHNOLOGY AND INFORMATION EDUCATIONAL SERVICES (TIES)

SCHEDULE OF FINDINGS AND RESPONSES (CONTINUED) June 30, 2011

Finding 2011-2: Significant Deficiency- Audit Adjustments and Assistance (Cont.)

Recommendation We recommend that the Organization develop an action plan to ensure that all significant year-end adjustments are recorded by the Organization's staff prior to the start of audit field work and that sufficient time is available to accurately prepare the complete financial statements.

Planned Corrective Action I Management's Response The Organization will develop a plan and time-line for having staff record all significant year-end adjustments prior to the start of audit field work and accurately prepare the complete financial statements.

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APPENDIX D

TIES Organizational Chart