Expenses

The large asset base under UTIMCO's management allows for economies of scale in management of the endowment funds. UTIMCO incurs expenses associated with strategy and analysis, portfolio management, custody and safekeeping, accounting and other investment related functions. Total expenses related to the management of PUF Investments were $28 million during 2007 versus $35 million in 2006, a decrease of 20%. The majority of the decrease is directly related to performance based external investment management fees. Despite both positive market trends and strong investment results increasing assets under management, incentive based management fees have decreased. Several of the PUF's external investment managers' performance lagged their performance goals and objectives, which in turn produced lower incentive based performance fees. PUF Investment expenses represented .25% and .35% of the average net asset value of the PUF during the years ended August 31, 2007 and 2006, respectively. The PUF also incurred expenses related to the management of the PUF Lands and an oversight fee by UT System, together representing .04% and .06% of the average net asset value of the PUF during each of the years ended August 31, 2007 and 2006, respectively. In total, PUF expenses incurred during fiscal years 2007 and 2006 were .29% and .41%, respectively.