(a) In this section and Sections 403.1042 and 403.1043:
(1) “Account” means the tobacco settlement permanent trust account established under the agreement.
(2) “Advisory committee” means the tobacco settlement permanent trust account investment advisory committee.
(3) “Agreement” means the Agreement Regarding Disposition of Settlement Proceeds filed on July 24, 1998, in the United States District Court, Eastern District of Texas, in the case styled The State of Texas v. The American Tobacco Co., et al., No. 5-96CV-91. The term includes the subsequent Clarification of Agreement Regarding Disposition of Settlement Proceeds filed on July 24, 1998, in that litigation.
(4) “Department” means the Texas Department of Health.
(5) “Political subdivision” means:
(A) a hospital district;
(B) another local political subdivision that owns or maintains a public hospital; or
(C) a county of this state responsible for providing indigent health care to the general public.
(b) With the advice of and in consultation with the advisory committee, the comptroller shall administer the account and shall manage the assets of the account.

(c) In managing the assets of the account, the comptroller, with the advice of and in consultation with the advisory committee, may acquire, exchange, sell, supervise, manage, or retain, through procedures and subject to restrictions the comptroller establishes and in amounts the comptroller considers appropriate, any kind of investment that a person of ordinary prudence, discretion, and intelligence, exercising the judgment and care under the circumstances prevailing at that time, would acquire or retain for the person’s own account in the management of the person’s affairs, not in regard to speculation but in regard to the permanent disposition of the person’s money, considering the probable income as well as the probable safety of the capital. Investment and management decisions concerning individual investments must be evaluated not in isolation but in the context of the investment portfolio as a whole and as part of an overall investment strategy consistent with the investment objectives of the account.
(d) The account is a trust account with the comptroller and is composed of money paid to the account in accordance with the agreement, assets purchased with that money, the earnings of the account, and any other contributions made to the account. The corpus of the account shall remain in the account and may not be distributed for any purpose. The money and other assets contained in the account are not a part of the general funds of the state. The comptroller may appoint one or more commercial banks, depository trust companies, or other entities to serve as a custodian of the account’s assets. § 404.071 does not apply to the account.
(e) The comptroller, with the advice of and in consultation with the advisory committee, may use the earnings of the account for any investment expense, including to obtain the advice of appropriate investment consultants for managing the assets in the account.
(f) On certification by the department under Subchapter J, Chapter 12, Health and Safety Code, the comptroller shall make an annual distribution of the net earnings from the account to each eligible political subdivision as provided in the agreement regarding disposition of settlement proceeds.
(g) Before December 1 of each year the comptroller shall prepare a written report regarding the account during the fiscal year ending on the preceding August 31. Not later than January 1 of each year the comptroller shall distribute the report to the advisory committee, the governor, the lieutenant governor, the attorney general, and the Legislative Budget Board. The comptroller shall furnish a copy of the report to any member of the legislature or other interested person on request. The report must include:
(1) statements of assets and a schedule of changes in book value of the investments from the account;
(2) a summary of the gains, losses, and income from investments on August 31;
(3) an itemized list of the securities held for the account on August 31; and
(4) any other information needed to clearly indicate the nature and extent of the investments made of the account and the income realized from the components of the account.
(h) The comptroller shall adopt rules necessary to implement the comptroller’s duties under this section, including rules distinguishing the net earnings of the account that may be distributed under Subsection (f) from earnings used for investment expenses under Subsection (e) and from the money and assets that are the corpus of the account. A rule adopted by the comptroller under this subsection must be submitted to the advisory committee and may not become effective before the rule is approved by the advisory committee. If the advisory committee disapproves a proposed rule, the advisory committee shall provide the comptroller the specific reasons that the rule was disapproved.