Letter from the Executive Management

Investment Strategy
UTIMCO enjoys a diversified and thoughtful investment strategy that includes exposures across a wide variety of asset classes and geographies, as well as prudent exposures in actively managed trading strategies and less-liquid private investments. As a result of investing in global capital markets and investing with the most skilled managers, UTIMCO has been able to produce excellent investment returns with responsibly managed risk.

As the world continues to evolve into a truly global marketplace with growth coming increasingly from outside the developed economies, our investment strategy is well positioned to benefit from these trends. As investment management techniques continue to evolve in sophistication and creativity, UTIMCO's staff is well qualified to identify and invest with the most talented practitioners.

Our directional and absolute return hedge fund portfolios have consistently produced high returns with low volatility. Given the diversified nature of the portfolios' assets, strategies and underlying managers, these investments should continue to play an important, positive role in the overall portfolio.

Our private market investments portfolio has also produced stellar returns and it also is well-diversified across strategy, vintage year and manager. As long-term investors, we are positioned to be rewarded for providing patient capital to venture, growth, buyout, and distressed opportunities.

Over the coming year, we are committed to pursuing opportunities in the emerging economies. We are also committed to working to put more capital to work in longer term investments in the natural resources supply chain. Finally, we are developing a long-term program to commit capital to private real estate equity funds.

The University of Texas at Austin

Risk Management
UTIMCO employs a full range of risk management techniques in order to manage its investment portfolio.

We evaluate asset class exposures on a daily basis to measure actual versus policy positions and to ensure that we are within our minimum and maximum limits.

We also calculate the overall portfolio's risk (as measured by the probability of downside occurrences) on a monthly basis and follow policies detailing target, minimum and maximum risk limits.

We calculate our liquidity position to ensure that we are within policy-dictated limits. We also measure geographic, sector and company specific exposures.

We constantly monitor the managers we have invested with, including analysis of manager communications, regular phone calls and periodic meetings. We believe that this close communication with our managers is perhaps the key technique for monitoring and managing risk.

Support and Control Functions
UTIMCO is fortunate to have extremely strong support and control functions. We believe that our operations, administration and finance area is one of the best in the business. Our technology infrastructure is robust and dynamic. We hired an internal legal counsel and are in the process of bringing on an independent Chief Compliance Officer.

UTIMCO has developed comprehensive and detailed policies and procedures which it adheres to and implements fully.

UTIMCO participates in the UT System's compliance program as well as is internally audited by UT System personnel. UTIMCO and its Funds also undergo a formal annual external audit.

Governance
UTIMCO is fortunate to have an exceptionally qualified and engaged Board of Directors.

The Board is comprised of a broad cross-section of investment expertise and corporate governance experience. Board members tirelessly devote their efforts to providing guidance, ensuring control and assisting UTIMCO staff in their mission to provide excellent risk-adjusted investment returns.

We are extremely grateful to each Board member for their efforts on behalf of UTIMCO.

Organization
Similarly, UTIMCO is fortunate to have an exceptionally qualified and motivated staff. Across the board, the UTIMCO staff is bright, hard-working, ethical and, frankly, a lot of fun to work with.

UTIMCO's investment results, risk management and control environment, and its bright prospects for the future are all because of the quality and commitment of its staff. This team, we are certain, will continue to produce stellar results and we believe the prospects for the future are bright.

Bruce Zimmerman Chief Executive Officer and Chief Investment Officer

Cathy Iberg President and Deputy Chief Investment Officer