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 $25.0 million during 2005 versus $21.1 million in 2004, an increase of 18.5%. 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 performance fees. PUF Investment expenses represented .28% and .27% of the average net asset value of the PUF during the years ended August 31, 2005 and 2004, respectively. The PUF also incurred expenses related to the management of the PUF Lands and beginning in 2005, an oversight fee by UT System, together representing .06% of the average net asset value of the PUF during each of the years ended August 31, 2005 and 2004, respectively. In total, PUF expenses incurred during fiscal years 2005 and 2004 were .34% and .33%, respectively.