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 $21.1 million during 2004 versus $15.1 million in 2003, an increase of 38.8%. The majority of the increase is directly related to external investment management fees which are total asset and performance based. Therefore, as both market trends and strong investment results increased assets under management, the management fees also increased. Several of the external investment managers performed extremely well, exceeding their performance goals and objectives and, therefore, earning their performance fees. PUF Investment expenses represented .27% and .23% of the average net asset value of the PUF during the years ended August 31, 2004 and 2003, respectively. The PUF also incurred expenses related to the management of the PUF Lands, representing .06% and .08% of the average net asset value of the PUF during the years ended August 31, 2004 and 2003, respectively. In total, PUF expenses incurred during fiscal years 2004 and 2003 were .33% and .31%, respectively.