Exhibit A - Audited Financial Statements for the Fiscal Year Ended 20250630.pdf

TOBACCO SETTLEMENT FINANCING CORPORATION

(A COMPONENT UNIT OF THE STATE OF RHODE ISLAND)

FINANCIAL STATEMENTS

AS OF AND FOR THE YEAR ENDED JUNE 30, 2025

CONTENTS

Independent Auditors’ Report.................................................................................................. 1-3

Management’s Discussion and Analysis ................................................................................ 4-17

Financial Statements

Statement of Net Position Statement of Activities Statement of Cash Flows Balance Sheet – Governmental Fund and Reconciliation to Statement of Net Position Statement of Revenues, Expenditures, and Changes in Fund Balance – Governmental Fund and Reconciliation to Statement of Activities

Notes to Financial Statements ............................................................................................... 23-39

Other Information

Calculations of Debt Service Coverage Ratios

Schedule of Actual MSA Receipts Compared to Base Case Projections at Time of Bond Issuances .............................................................................. 41-42

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 ..................................... 43-44

CBIZ CPAs P.C.

100 Westminster Street

Suite 500

Providence, RI 02903

P: 401.600.4500

CBIZCPAS.COM

Independent Auditors’ Report

To the Board of Directors Report on the Audit of the Financial Statements

Opinions

We have audited the financial statements of the governmental activities and the major governmental fund of the Tobacco Settlement Financing Corporation (the “Entity”), a component unit of the State of Rhode Island, as of and for the year ended June 30, 2025, and the related notes to the financial statements, which collectively comprise the Entity’s basic financial statements as listed in the table of contents.

In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and the governmental major fund of the Entity, as of June 30, 2025, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinions

We conducted our audit in accordance with auditing standards generally accepted in the United States of America (“GAAS”) and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States (“Government Auditing Standards”).

Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Entity and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Entity's ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GAAS and Government Auditing Standards, we

• Exercise professional judgment and maintain professional skepticism throughout the audit.

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity’s internal control. Accordingly, no such opinion is expressed.

• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Entity’s ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control—related matters that we identified during the audit.

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the management's discussion and analysis be presented to supplement the basic financial statements. Such information is the responsibility of management and, 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 GAAS, 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.

Other Information

Management is responsible for the other information included in the annual report. The other information comprises the multi year trend data and related information but does not include the basic financial statements and our auditors’ report thereon. Our opinions on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon.

In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated February 10, 2026 on our consideration of the Entity’s 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 solely 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 effectiveness of the Entity’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Entity’s internal control over financial reporting and compliance.

Providence, RI February 10, 2026

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE FISCAL YEAR ENDED JUNE 30, 2025

Management’s discussion and analysis (“MD&A”) provides a narrative overview and analysis of the financial activities of the Tobacco Settlement Financing Corporation (hereinafter referred to as “TSFC” or the “Corporation”) for the fiscal year ended June 30, 2024. MD&A is intended to serve as an introduction to the Corporation’s basic financial statements, which have the following components: (1) government-wide financial statements, (2) fund financial statements, and (3) notes to the financial statements. The MD&A is designed to (a) assist the reader in focusing on significant financial matters, (b) provide an overview of the Corporation’s financial activities, and

(c) highlight individual fund matters. The following presentation is by necessity highly summarized, and in order to gain a thorough understanding of the Corporation’s financial condition, the following financial statements, notes, and other information should be reviewed in their entirety.

The TSFC was created in 2002 as a public corporation, having a distinct legal existence from the State of Rhode Island (the “State”) and not constituting a department of State government. The TSFC was created to finance the acquisition from the State of the State’s right, title, and interest and in the State’s right to receive the moneys due under and pursuant to (i) the Master Settlement Agreement (the “MSA”), dated November 23, 1998, among the attorneys general of 46 states, the District of Columbia, the Commonwealth of Puerto Rico, Guam, the U.S. Virgin Islands, American Samoa, and the Territory of the Northern Marianas and Philip Morris, Incorporated, R.J. Reynolds Tobacco Company, Brown & Williamson Tobacco Corporation, and Lorillard Tobacco Company and (ii) the Consent Decree and Final Judgment of the Rhode Island Superior Court for Providence County dated December 17, 1998, as the same has been and may be corrected, amended, or modified, in the class action styled State of Rhode Island v. American Tobacco, Inc., et al. (Docket No. 97-3058), including, without limitation, the rights of the State to receive the moneys due to it thereunder.

It should also be noted that while attempts have been made to disclose pertinent risk factors, it is difficult to capture all current litigation and other proceedings relating to the MSA, and the reader should not rely upon management’s discussion contained herein when making investment decisions.

The Corporation issued $685,390,000 of Tobacco Settlement Asset-Backed Bonds, 2002 Series A in June 2002, which were fully redeemed on March 19, 2015.

In June 2007, the Corporation issued $197,005,742 of Tobacco Settlement Asset-Backed Bonds, Series 2007A, B, and C, which were structurally subordinate to the payment in full of the 2002 Series Bonds. The Trustee was entitled to receive the “Residual” tobacco settlement revenues pledged to pay the 2007 Series A, B, and C Bonds upon full payment of the 2002 Series A Bonds.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE FISCAL YEAR ENDED JUNE 30, 2025

On March 19, 2015, the Corporation issued $620,935,000 of Tobacco Settlement Asset-Backed Bonds that bear interest at annual rates ranging from 0.590% to 5.000% and mature in varying amounts through June 1, 2050. The proceeds of this issuance, along with the release of debt service reserve funds related to the bonds retired and the proceeds received for early termination of investment contracts, were used to fully redeem the 2002 Series bonds and repurchase and retire the principal amount of $76,220,155 of the 2007 Series bonds, as well as pay accreted interest of $13,600,495 on the retired 2007 Series bonds. The remaining 2007 Series A and B bonds (all Series C bonds were repurchased and retired with proceeds from the 2015 issuance) are structurally subordinate to the payment in full of the 2015 Series bonds.

All of the bonds are payable both as to principal and interest solely out of the assets of the Corporation pledged for such purpose, and neither the faith and credit nor the taxing power of the State of Rhode Island or any political subdivision thereof is pledged to the payment of the principal of or the interest on the bonds. The bonds do not constitute an indebtedness of or a general, legal, or “moral” obligation of the State or any political subdivision of the State.

Financial Highlights

Future revenues continue to be threatened by factors discussed under “Risk Factors and Future Revenue” and the “Economic Outlook” sections of this MD&A.

The following are the key highlights from the government-wide financial statements:

• The liabilities and deferred inflows of resources of TSFC exceeded its assets at June 30, 2025 by $641,986,767. This occurred primarily because no receivables for future revenues were recognized at June 30, 2025, except for one-half of the estimated Tobacco Settlement Revenues (“TSRs”) to be received in April 2026, for calendar year 2025. Please see Note 1 to the Financial Statements for a description of the Corporation’s revenue recognition policy.

• This deficiency decreased by $6,434,705 from June 30, 2024, which is primarily due to TSR revenue and investment income exceeding interest expense, including accreted interest due in the future.

• Revenues, consisting of TSRs and investment income amounted to $40,732,535 for fiscal year 2025. This compares to $41,251,144 for fiscal year 2024, a decrease of $518,609. The decrease was attributable to a decrease in TSR receipts pertaining to the domestic shipment of cigarettes during the fiscal year ended June 30, 2025 and a decrease in investment earnings.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE FISCAL YEAR ENDED JUNE 30, 2025

• Expenses amounted to $34,297,830 for fiscal year 2025. This compares to $34,346,913 for fiscal year 2024, a decrease of $49,083. The decrease was attributable to a decrease in interest and other bond charges, offset by a decrease in the annual amortization of i) bond premiums and ii) deferred gain on refunding of debt and an increase in general and administrative expenses.

• The Corporation had $24,400,000 in redemptions of outstanding bonds during the fiscal year consisting of $10,380,000 in turbo redemptions and $14,020,000 in scheduled redemptions. See Note 3 of the Notes to the Financial Statements.

Disputed Payments Account Settlement & Early Extinguishment of Debt

On March 24, 2017, the Rhode Island Attorney General (the “Attorney General”) announced that his office had reached a settlement in principle with various tobacco manufacturers over disputed payments for the years 2004 through 2014 under the Master Settlement Agreement (the “MSA”) among such tobacco manufacturers (the “Participating Manufacturers” or “PMs”) and certain participating states (each an “MSA State”) including the State of Rhode Island (“Rhode Island” or the “State”), eliminating a potential liability to the State of over $500 million. Disputed payments arose from a provision in the MSA that allows the PMs to withhold a portion of the annual distribution to the MSA States if certain conditions are met. Under the MSA, the MSA States have certain obligations to diligently enforce certain state statutes with respect to tobacco manufacturers that are not signatories to the MSA (the “Non-participating Manufacturers,” or “NPMs”). If the PMs decide to dispute an MSA State’s diligent enforcement of such statutes, the PMs may deposit a portion of their annual distribution to such MSA State (the “MSA Payment”) into a disputed payments account for such MSA State until the dispute is adjudicated. The PMs have annually disputed each MSA State’s diligent enforcement actions. The State has always and continues to maintain that it diligently enforces its applicable statutes against the NPMs. Under the terms of the multistate settlement with the PMs (the “Settlement Term Sheet”), settling MSA States received an upfront payment of 54 percent of the disputed payments deposited by the PMs in the settling MSA State’s Disputed Payments Account (“DPA”) for the years 2004-2014.1 The PMs receive the remaining 46 percent in the form of credits taken against the MSA payments due to the settling MSA States in payment years 2017 through 2021. Under the Settlement Term Sheet, the PMs also would not place into the disputed payment accounts certain amounts with respect to payment years 2017 through 2021 (reflecting certain disputed amounts relating to years 2014 through and including 2020) that would otherwise be deposited into the disputed payment accounts and not paid to the MSA States if the MSA States did not join the Settlement Term Sheet. A final comprehensive agreement (“the Settlement Agreement“) was fully executed in the fall of 2017 by

1 24 settling MSA States other than Rhode Island and Oregon settled their claims in respect to the disputed payments for the years 2003 through 2014. Rhode Island’s settlement did not include year 2003 because the PMs issued an order of “no contest” for Rhode Island during the 2003 Arbitration. This meant that the PMs decided not to pursue its diligent enforcement claims against Rhode Island for 2003.

the signatory PMs and 26 MSA States. To date, there are currently 36 State signatories to the Settlement Agreement, subject to each State’s respective joinder letters.2 Effective for the 2019 and 2020 payments, the signatory PMs and original 26 State signatories entered into an extension of the Settlement Agreement per the Settlement Agreement’s modification provisions to 1) include 2016 / 2017 as settled years, not just transition years at a 75% / 25% split between the States and PMs to resolve those years and 2) eliminate the potential of a state excise tax (“SET”) paid NPM Sales Adjustment pursuant to Section V.B of the Settlement Agreement for 2015, 2016, and 2017.

Because the State had assigned all revenues from the MSA to the TSFC, which in turn used those committed revenues to secure its bonds, the TSFC was required to seek bondholder approval before the State could enter into the Settlement Term Sheet. A consent solicitation process was conducted in March 2017 and the requisite approvals from bondholders were received as of March 17, 2017. Upon receipt of the bondholder approvals, the Attorney General signed a joinder letter joining the multistate settlement. Rhode Island’s joinder letter became effective upon written approval of the Participating Manufacturers on April 3, 2017.

As a result of the State joining the Settlement Term Sheet, in April of 2017, the Trustee for the TSFC received a payment from the PMs of $82,173,014. This payment was comprised of a $31,056,600 2017 MSA payment by the PMs and a $51,116,414 transfer from the State’s DPA.

As noted above, the Participating Manufacturers received credits through 2021. The largest credits were taken against the State’s 2017 MSA payment. As a result, the expected 2017 MSA payment of $47,922,735 was reduced by credits totaling $16,866,135, resulting in a net 2017 MSA payment of $31,056,600. The 2018 MSA payment of $50,185,710 was reduced by credits totaling $4,269,495, resulting in a net 2018 MSA payment of $45,916,215. The 2019 MSA payment of $48,958,352 was reduced by credits totaling $5,076,239, resulting in a net 2019 MSA payment of $43,882,114. The 2020 MSA payment of $48,323,852 was reduced by credits totaling $6,834,447, resulting in a net 2020 MSA payment of $41,489,405.

The 2021 MSA payment of $51,616,551 was reduced by credits totaling $4,629,337, resulting in a net 2021 MSA payment of $46,987,214. The 2022 MSA payment of $52,906,121 was reduced by credits totaling $4,636, resulting in a net 2022 MSA payment of $52,901,485. The 2023 MSA payment of $50,314,500 was reduced by credits totaling $2,642,842 and increased by $607,387 from the resolution of disputed payments, resulting in a net 2023 MSA payment of $48,279,045.

The 2024 MSA payment of $46,153,476 was reduced by credits, disputed payment amount escrows, and fees totaling $3,097,429, resulting in a net 2024 MSA payment of $43,056,047. The 2025 MSA payment of $43,627,430 was reduced by credits totaling $2,868,891 resulting in a net 2025 MSA payment of $40,758,539.

Bonds issued by the TSFC in 2007 (the “2007 TSFC Bonds”) and in 2015 (the “2015 TSFC Bonds” and collectively with the 2007 TSFC Bonds, the “TSFC Bonds”) remain outstanding. Pursuant to

2 The NPM Adjustment Arbitration regarding calendar year 2004 remains ongoing with non-settled States.

the indentures governing the TSFC Bonds, as amended during the 2015 refunding of the 2002 bonds, the State was entitled to receive 30 percent of the State’s disputed payments on deposit in the State’s DPA as of the date of issuance of the 2015 TSFC Bonds, with the remaining 70 percent to be used to redeem $212,160,000 (future value) of the Series A component of the 2007 TSFC Bonds (the “2007 Series A TSFC Bonds”). The disputed payments deposited after the date of issuance of the 2015 TSFC Bonds would be applied to pay debt service due on the 2015 TSFC Bonds in accordance with the terms of the indentures governing the TSFC Bonds. Of the $51,116,414 received from the DPA in April 2017, $38,276,966 was on deposit in the State’s DPA as of March 19, 2015, the date of issuance of the 2015 TSFC Bonds, and the balance of $12,839,448 was deposited after that date. The State received $11,483,090 or 30 percent of the $38,276,966 on deposit as of March 19, 2015. After payment of costs associated with the consent solicitation process and other transaction related costs, the net transfer to the State in May 2017 was $10,360,190.

Overview of the Financial Statements

This discussion and analysis is intended to serve as an introduction to the Corporation’s basic financial statements. The basic financial statements include three components:

1. Government-wide financial statements

2. Fund financial statements

3. Notes to the financial statements

This report also contains other information in addition to the basic financial statements.

Government-wide Financial Statements

The government-wide financial statements provide a broad view of the Corporation’s finances.

The statements provide both short-term and long-term information about the Corporation’s financial position, which assists in assessing the Corporation’s financial condition at the end of the year. These financial statements are prepared using the accrual basis of accounting, which recognizes all revenues and grants when earned, and expenses at the time the related liabilities are incurred, regardless of the timing of the related cash flows.

• The Statement of Net Position presents all of the Corporation’s assets, deferred outflows of resources, liabilities, and deferred inflows of resources, with the difference being reported as “net position (deficiency).” Over time, increases and decreases in the Corporation's net position may serve as a useful indicator of whether the financial position of the Corporation is improving or deteriorating.

• The Statement of Activities presents information showing how the Corporation's net position (deficiency) changed during the fiscal year. All changes in net position (deficiency) are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Therefore, revenues and expenses are reported in this statement for some items that will not result in cash flows until future fiscal periods.

Fund Financial Statements

A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The Corporation uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. The fund financial statements focus on the individual parts of the Corporation and report the Corporation’s operations in more detail than the government-wide financial statements.

• Governmental funds: All of the Corporation’s activities are financed through governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements.

However, unlike the government-wide financial statements, the governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on spendable resources available at the end of the fiscal year. Such information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance the Corporation’s activities.

Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements.

By doing so, readers may better understand the long-term impact of the Corporation’s near-term financial decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and the governmental activities.

Notes to Financial Statements

The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to financial statements can be found immediately following the fund financial statements.

Other information, which follows the notes to financial statements, includes the calculation of debt service coverage ratios and information about the actual MSA receipts compared to base case projections at the time the revenue bonds were issued.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE FISCAL YEAR ENDED JUNE 30, 2025

Government-wide Financial Statement Analysis

The Corporation’s net deficiency totaled $641,986,767 at the end of fiscal year 2025, as compared with a net deficiency of $648,421,472 at June 30, 2024. The decrease in the net deficiency is primarily due to TSR revenue and investment income exceeding interest expense, including accreted interest due in the future.

As discussed previously, the overall deficiency in net position is primarily attributable to long term receivables for future TSR revenues not being recognized while the full amount of bonds payable is reflected on the Statement of Net Position.

A condensed statement of activities for fiscal years ended 2025 and 2024 follows:

2025 2024 Change

Revenues $ 40,732,535 $ 41,251,144 $ (518,609)

Expenses 34,297,830 34,346,913 (49,083)

$ 6,434,705 $ 6,904,231 $ (469,526)

During fiscal year 2025, the Corporation recognized $40,732,535 of revenues from the TSRs and investment income, a decrease of $518,609 from fiscal year 2024. The decrease was attributable to a decrease in TSR receipts pertaining to the domestic shipment of cigarettes during the fiscal year ended June 30, 2025 and a decrease in investment earnings.

Total expenses amounted to $34,297,830 for fiscal year 2025, as compared to $34,346,913 in the prior fiscal year. The decrease of $49,083 was attributable to a decrease in interest and other bond charges, offset by a decrease in the annual amortization of i) bond premiums and ii) deferred gain on refunding of debt and an increase in general and administrative expenses.

Analysis of Fund Financial Statements

The governmental fund had a combined fund balance of $67,849,358 at June 30, 2025. This represents a decrease of $3,115,295 from June 30, 2024.

Long-Term Debt

In June 2007, the TSFC issued $197,005,742 of asset-backed bonds, which included $176,974,412 of Series 2007 A Bonds, $17,336,218 of Series 2007 B Bonds, and $2,695,112 of Series 2007 C Bonds.

As of August 26, 2025, Standard & Poor’s Rating Services rates the TSFC 2007 Series A debt “CCC-” and the Series B debt “CCC-.”

In March 2015, the TSFC issued $620,935,000 of asset-backed bonds, which included $332,300,000 of Series 2015 A Bonds and $288,635,000 of Series B Bonds. In connection with this issuance, all of the outstanding 2002 Series asset-backed bonds were redeemed. In addition, principal of $68,324,411 of 2007 Series A, principal of $5,200,633 of 2007 Series B, and all of 2007 Series C bonds were repurchased and retired.

At the time of the original issuance on March 19, 2015, Standard & Poor’s rated the 2015 Series A asset-backed bonds maturing from 2016 to 2025 “A,” those bonds maturing from 2026 to 2030 and in 2035 were rated “A-,” and the June 1, 2040 maturity was rated “BBB+.”

On August 20, 2015, Standard & Poor’s announced that the ratings for certain of the 2015 asset-backed bonds were being changed as follows: the rating on the 2015 Series A asset-backed bonds maturing from 2019 to 2025 was changed to “BBB+,” the rating on the bonds maturing from 2026 to 2030 and in 2035 was changed to “BBB,” and the rating on the June 1, 2040 maturity bonds was also changed to “BBB.”

On February 22, 2018, Standard & Poor’s announced that the ratings for certain of the 2015 asset-backed bonds were being changed as follows: the rating on the 2015 Series A asset-backed bonds maturing from 2019 to 2021 was changed to “A,” the rating on the bonds maturing from 2026 to 2027 was changed to “BBB+.”

On October 24, 2019, Standard & Poor’s announced that the ratings for certain of the 2015 asset-backed bonds were being changed as follows: the rating on the 2015 Series A asset-backed bonds maturing in 2022 was changed to “A,” the rating on the bonds maturing from 2025 to 2027 was changed to “BBB.”

As of August 26, 2025, Standard & Poor’s Rating Services rates the TSFC 2015 Series A asset-backed bonds maturing from 2026 to 2027 “A” and those bonds maturing from 2028 to 2040 as

“BBB.”

Fitch Ratings rated both the 2015 Series A and Series B bonds “BBB+sf” at the time of issuance.

However, effective June 16, 2016, Fitch has since withdrawn its ratings for all U.S. Tobacco asset-back securities, including those issued by the Corporation.

Ratings on all the bonds are subject to change at any time and readers should refer to information available from the rating services for the most current ratings. Currently, only Standard & Poor’s rates the TSFC bonds.

The Corporation has issued capital appreciation bonds, which were sold at a deep discount from par and accrete to full value at maturity. No periodic interest payments are made while the bonds are outstanding; however, accreted interest expense is recognized and included in the carrying amount of the capital appreciation bonds on the government-wide (full accrual) financial statements. While recognized for accounting and financial reporting purposes, the Corporation has no requirement to accumulate current resources for the accreted interest payable at maturity on the capital appreciation bonds.

The current year addition to accreted interest was $17,727,000 for a cumulative balance of $202,009,000.

During fiscal year 2025, the Corporation paid $10,380,000 in principal on long-term debt pursuant to the turbo redemption provisions of the Trust Indenture relating to its outstanding bonds. The amount of principal determined by the Trustee to be subject to the turbo redemption was based upon actual cash available in June 2025.

For additional information relating to long-term debt, see the notes to the financial statements.

Risk Factors and Future Revenue

The Corporation has little or no control over the level of revenues that are collected. Risk factors possibly impacting the level of revenues to be received by the TSFC are beyond the control of the Corporation and include, but are not limited to, decreases in cigarette consumption, financial viability and disputed payments of the Participating Manufacturers, and the liability of the tobacco industry. In the event of non-payment of the amounts due and payable under the MSA that have been assigned to the Corporation, the State of Rhode Island has pledged to pursue legal remedies to the extent possible to obtain amounts due pursuant to the MSA and payable to the Corporation.

The bonds issued by the Corporation were structured based upon assumptions in TSR collections prepared by an independent consultant at the time the bonds were issued. The repayment of the bonds is dependent upon the receipt of TSRs from the MSA, which are based on domestic cigarette sales. Any amounts received in excess of the scheduled principal and interest are applied to turbo maturities (principal and interest paid on the bonds in excess of scheduled principal and interest requirements). Any payment of turbo maturities in future years impacts, potentially significantly, the overall debt service requirements to maturity schedule. The domestic cigarette consumption estimates and projections are highly sensitive to a variety of assumptions.

Many adjustments are included in the calculation of an MSA Payment, such as a volume adjustment, cost of living adjustment, and an NPM adjustment. An NPM adjustment would permit the PM to reduce their MSA payments provided that the PMs’ market share loss exceeds 2% of the original participating manufacturers’ 1997 market share, that the MSA was a significant factor for the PMs’ market share loss, and that the states did not enact a Model Escrow Statute included in the MSA and diligently enforce it and the MSA. If the NPM adjustment is applied, the payment reduction is based on the percentage of market share lost to NPMs multiplied by three and allocated to states that did not diligently enforce the MSA and the escrow statute, up to the amount of the allocable share. The offset is not carried forward to other MSA payments.

Through the fiscal year ended June 30, 2025, states have collected less TSRs than originally expected due to a decline in cigarette volume attributable to many factors, including, but not limited to, the MSA and higher excise taxes, both state and federal. The adjustment for inflation has offset the volume adjustment, but it has not outweighed it.

Through the fiscal year ended June 30, 2021, shipments of cigarettes had decreased at a rate greater than was projected when the Corporation issued the Series 2007 and Series 2015 bonds due to significant increases in tobacco excise taxes in various jurisdictions, including Rhode Island, and at the Federal level, and the enactment of varying restrictions on public smoking, which further contributed to a decline in tobacco consumption.

For the fiscal year June 30, 2022, shipments of cigarettes increased compared to shipments for the year ended June 30, 2021. Shipments of cigarettes for the fiscal year ended June 30, 2022 are less than what was projected when the Corporation issued the Series 2007 bonds and are greater than what was projected when the Corporation issued the Series 2015 bonds.

For the fiscal year ended June 30, 2023, shipments of cigarettes decreased compared to shipments for the year ended June 30, 2022. Shipments of cigarettes for the fiscal year ended June 30, 2023 are less than what was projected when the Corporation issued the Series 2007 bonds and are greater than what was projected ended when the Corporation issued the Series 2015 bonds.

For the fiscal year ended June 30, 2024, shipments of cigarettes decreased compared to shipments for the year ended June 30, 2023. Shipments of cigarettes for the fiscal year ended June 30, 2024 are less than what was projected when the Corporation issued the Series 2007 bonds and are less than what was projected when the Corporation issued the Series 2015 bonds.

For the fiscal year ended June 30, 2025, shipments of cigarettes decreased compared to shipments for the year ended June 30, 2024. Shipments of cigarettes for the fiscal year ended June 30, 2025 are less than what was projected when the Corporation issued the Series 2007 bonds and are less than what was projected when the Corporation issued the Series 2015 bonds.

In April 2017, the PMs paid the Settling States $6,193,097,859. Rhode Island received an actual MSA payment of $82,173,013, including the DPA Settlement. A further breakdown of the payment is below:

DPA Settlement $51,116,414 TSR Revenue 47,922,734 Less: DPA Settlement Credits

16,866,135

In April 2018, the PMs paid the Settling States $6,692,190,292. Rhode Island received an actual MSA payment of $45,916,215, which included certain one-time revenue totaling $7,522,982.

Specifically, a total of $4,632,611 was received under the Settlement Agreement, which was 72% of the 2017 disputed payment and $2,890,371 was received from the settlement of the 2015 disputed payment.

In April 2019, Rhode Island received an actual MSA payment of $43,882,113, which included certain one-time revenue totaling $7,558,896. Specifically, $2,920,946 related to disputed payment amount for 2016 as a settled, not transition, year at 75% of the 2016 disputed payment amount (see Note 4 for more details) and $4,637,950 related to the disputed payment amount for 2018 at 72% of the 2018 disputed payment amount.

In April 2020, Rhode Island received an actual MSA payment of $41,489,405, which included certain one-time revenue totaling $8,311,196.3 Specifically, $1,799,091 related to disputed payment amount for 2017 as a settled, not transition, year at 75% of the 2017 disputed payment amount (see Note 4 for more details), $77,233 as a true-up payment for 2018, and approximately $6,434,873 related to the disputed payment amount for 2019 as a transition year at 73% of the 2019 disputed payment amount.

In April 2021, Rhode Island received an actual MSA payment of $46,987,214, which included certain one-time revenue items totaling $12,625,252. A total of $2,036,738 related to disputed payment amount for 2018, as a settled, not transition, year at 75% of the 2018 NPM Adjustment disputed payment amount and $10,588,514 related to the NPM Adjustment disputed payment amount for 2020 as a transition year at 100% of Rhode Island’s potential maximum 2020 NPM Adjustment. The 2020 year was settled on a 75% / 25% split between the States and PMs with 100% of the potential maximum NPM Adjustment amount paid to Rhode Island in 2021. A 25% credit of $2,647,129 for the 2020 NPM Adjustment was due to the PMs in the 2023 payment year and was settled via a reduction of the Corporation’s amount received in 2023.

3 Financial conditions in the market created by the COVID-19 pandemic resulted in the annual MSA payment being disbursed to the States in two installments on two separate days: April 16, 2020 and April 21, 2020.

In April 2022, Rhode Island received an actual MSA payment of $52,901,485, which included certain one-time revenue items totaling $2,027,179 and is reflective of the settled 2019 NPM Adjustment.

In April 2023, Rhode Island received an actual MSA payment of $48,279,045, which included certain one-time revenue items totaling $2,412,719 and is reflective of the NPM Adjustment.

In April 2024, Rhode Island received an actual MSA payment of $43,056,047, which included certain one-time revenue items totaling $2,814,382.

In April 2025, Rhode Island received an actual MSA payment of $40,758,539, which included certain one-time revenue items totaling $2,457,579.

Rhode Island will continue to vigorously enforce the MSA and related statutes. Although a Settling State that diligently enforces its Qualifying Statute is not subject to the NPM Adjustment, many procedural uncertainties, as described above, still remain regarding the NPM Adjustment. Future NPM Adjustment claims for Settling States remain possible for calendar years 2024 and all future years. 4 One of the financial benefits of the NPM Settlement Term Sheet is that the signatory States and the PMs split disputed payments for future years 50% (at a minimum) / 50% (at a maximum).5 Without this settlement, 100% of the disputed moneys would be held in the DPA. The settlement agreement allows at least 50% of future disputed payments to be given to Rhode Island immediately in the corresponding Payment Year as a credit, with the PMs keeping a maximum of 50%. When the dispute over a particular year is finally resolved, the prevailing party will receive the other party’s percentage as a credit to that year’s payment.

Should the PMs be determined with finality to be entitled to a full NPM Adjustment in a future year, thereby requiring Rhode Island to return its percentage of a disputed payment it previously received, operation of the NPM Adjustment would also have a material adverse effect on the amounts of TSRs available to the Corporation to make turbo redemptions and other payments on the bonds. Prior to the Settlement Agreement, 100% of a State’s MSA Payment in a given year was at risk until the disputed payment issue was resolved. If a State was found non-diligent, the State could lose up to 100% of its MSA Payment for a given year. The Settlement Agreement allows for a reduction in the form of a reduced reimbursement percentage for those States found

4 On September 18, 2020, and effective for the 2021 payment, the signatory PMs and 35 state signatories to the Settlement Agreement entered into an extension of the Settlement Agreement per Section IX. BB to include 2018- 2022 as settled years, not just transition years, at a 75% / 25% spilt to resolve those years (the 36th signatory state settled on slightly different terms through 2024 per its joinder letter). The States are still subject to the SET-paid adjustment for those years if not found to be within the safe harbor provision pursuant to Section V.B.8 of the Settlement Agreement.

5 The reimbursement percentages for future unsettled years are calculated by the Data Clearinghouse (BDO LLP) pursuant to Section VI.I.1 of the Settlement Agreement. The actual calculated percentage for the 2019 spilt was 73% States and 27% PMs.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE FISCAL YEAR ENDED JUNE 30, 2025

non-diligent, so the State would retain a portion of its MSA Payment even if found non-diligent for non-settled years.6 Any finding of non-diligence on behalf of the State in future arbitrations could have a material adverse effect on receipt of TSRs.7 Any failure on the part of the PMs to perform its obligations under the MSA or the Settlement Agreement could also have a material adverse effect on receipt of future TSRs.

Litigation could always threaten the ability of the tobacco companies to pay the amounts owed under the MSA, including, but not limited to, bankruptcy. A number of PMs have filed for bankruptcy in the past, and Rhode Island and the other Settling States pursued those claims in bankruptcy court. The issue of whether or not the PMs would seek bankruptcy protection in the future continues to be a possibility.

In addition, please see Note 5 of the notes to financial statements for additional information about Commitments and Contingencies.

6 As detailed in the Settlement Term Sheet and the Bond Consent Solicitation Statement (and incorporated under Section V.C.9(a) and (b), and corresponding Exhibit M, of the Settlement Agreement), Rhode Island is entitled to a TSR reimbursement (reduction of liability to PMs if found non-diligent in a given year) equaling the sum of the percentage equal to (a) the total number of NPM Cigarettes on which SET was paid in such year in the Settling States, divided by the total nationwide number of NPM Cigarettes on which federal excise tax was paid in such year, plus (b) the percentage equal to the total number of NPM Cigarettes on which an Equity Fee was paid in such year in Previously Settled States (States that settled with the PMs before the MSA was executed) that had in effect an Equity Fee Law for the entirety of the year, divided by the total nationwide number of NPM Cigarettes on which federal excise tax was paid in such year.

7 As detailed in the Settlement Term Sheet and the Bond Consent Solicitation Statement (and incorporated under Section V.B.8 of the Settlement Agreement), a State’s MSA payment may also be subject to an adjustment on all SET-paid NPM cigarettes for future unsettled years if a State does not meet a safe harbor provision. A State will not be subject to this revised adjustment if (i) escrow was deposited on 96% of all NPM cigarettes sold in the State during that year on which SET was paid, or (ii) the number of SET-paid NPM cigarettes sold in the State during that year on which escrow was not deposited did not exceed 2 million cigarettes. For Year 2018, BDO, LLP, acting as the Data Clearinghouse established pursuant to Section VI of the Settlement Agreement determined that Rhode Island met the safe-harbor provision. On or about August 3, 2020, in accordance with Section VI.E(1)-(2) of the Settlement Agreement, Rhode Island, through the Attorney General’s Office, submitted certain confidential documents to BDO and PM counsel related to NPM sales in Rhode Island during Year 2019. The documents and disclosure of such information are protected by a confidentiality and protective order issued by Rhode Island’s MSA Court in July 2019.

On August 18, 2020, BDO notified the State and PM counsel of its preliminary determination that Rhode Island has met the safe harbor provision for year 2019 and will not be subject to the SET-paid adjustment for the 2021 MSA payment. The PMs did not dispute BDO’s preliminary determination. A final determination of safe harbor was issued in 2021 and the state was found to be compliant with the safe harbor provision.

Economic Outlook

Future payments of all types on the Bonds are contingent on actual MSA Receipts. These receipts are dependent on a number of factors, including, but not limited to, the rates of consumption of tobacco products.

In structuring the financial transactions for the issuance of the bonds, the Corporation engaged the services of independent consultants to develop forecasts of these receipts.

Please see the “Schedule of Actual MSA Receipts Compared to Base Case Projections at Time of Bond Issuances” in the Other Information section of this report for more information about this decrease in MSA receipts compared to those projected when the respective bonds were issued.

Requests for Information

This financial report is designed to provide a general overview of the TSFC finances for all those with an interest in this organization. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to Chairperson, Tobacco Settlement Financing Corporation, c/o State Budget Office, One Capitol Hill, 4th Floor, Providence, Rhode Island 02908.

STATEMENT OF NET POSITION

JUNE 30, 2025

The notes to the financial statements are an integral part of this statement.

Assets:

Current assets

Cash equivalents $ 374,657 Cash equivalents, restricted 48,592,053 Interest receivable 170,007

37,084 Tobacco settlement receivables 18,688,315

Total current assets 67,862,116

Total assets 67,862,116

Liabilities:

Current liabilities:

Accrued expenses 12,758 Accrued interest 1,514,000 Bonds payable 14,810,000

Total current liabilities 16,336,758

Noncurrent liabilities:

Bonds payable, net of unamortized premium / discount 672,014,125

Total noncurrent liabilities 672,014,125

Total liabilities 688,350,883

Deferred inflows of resources:

Deferred gain on refunding of debt 21,498,000

Net position (deficiency):

Restricted for debt service 67,450,375 Unrestricted deficiency (709,437,142)

$ (641,986,767)

Prepaid expenses

STATEMENT OF ACTIVITIES

FOR THE FISCAL YEAR ENDED JUNE 30, 2025

The notes to the financial statements are an integral part of this statement.

Revenues:

Tobacco settlement revenues $ 38,418,941 Investment income 2,313,594

Total revenues 40,732,535

Expenses:

General and administrative 83,080 Amortization of bond premium, discount, and deferred gain on refunding of debt, net (2,780,000) Interest and other bond charges 36,994,750

Total expenses 34,297,830

Increase in net position 6,434,705

Net position (deficiency)

Beginning of the year (648,421,472) End of year $ (641,986,767)

STATEMENT OF CASH FLOWS

Cash flows from operating activities:

Cash received from tobacco settlement revenues $ 40,758,539 Payments to vendors (73,599)

Net cash provided by operating activities 40,684,940

Cash flows from non-capital financing activities:

Principal paid on long-term debt (24,400,000) Interest paid on long-term debt, net of related financing costs (19,364,750)

Net cash used in non-capital financing activities (43,764,750)

Cash flows from investing activities:

Investment earnings 2,364,536

Net cash provided by investing activities 2,364,536

Net change in cash and…