Update on UC's Enron Investments and Lawsuit

Exactly how much did UC lose by investing in Enron, and what impact does this have on UC's investments overall?
UC lost $144.9 million as a result of its investments in Enron, including $115.5 million in the UC Retirement Plan portfolio and $14.03 million in the 403(b) Equity portfolio -- but less than 0.3% of total funds under management. However, despite the Enron losses, UC's investment funds remain strong.

When did UC buy and sell its Enron stock?
UC acquired a total of 2.2 million Enron shares through two different procedures. The Treasurer's Office purchased most of those shares (1.75 million) through its actively managed funds. Those shares were bought at an average price of $68.50 per share between May 24, 2000 and Jan. 9, 2001.

An additional 478,000 shares were purchased as part of the University's Russell 3000 Tobacco-Free index fund, which reflects investments in the country's 3,000 largest companies. UC's shares in these 3,000 companies, including Enron, are managed by State Street Global Advisors. State Street's purchase of these Enron shares began on Nov. 2, 2000 (avg. $71.34/share) as part of the multi-company stock buys required to build up UC's new index fund.

The Treasurer's Office sold a portion of its Enron holdings on Nov. 14, 2001, following the Nov. 9th announcement of a merger between Enron and rival Dynegy. Like many investors, UC held the remainder of its shares with the expectation that the merger would bolster Enron stock. As the merger began to unravel and news of additional Enron debts were revealed, however, UC sold its remaining shares on Nov. 21, 2001. Sold for an overall average price of $5.33 per share, the University's losses from its actively managed Enron shares totaled $110.5 million.

Enron was not removed from the Russell 3000 index until Nov. 29, 2001, at which time State Street sold the fund's Enron shares (avg. of $1.52/share). These Enron losses totaled $34.4 million.

The University currently owns no Enron stock. (UC never invested in Enron bonds or any of the company's "off-balance sheet" partnerships.)

Who is responsible for managing the University's investments?
The University's investments are managed by the Treasurer's Office, which reports to the Board of Regents and the Office of the President. The Treasurer's Office has a team of portfolio managers, industry analysts and traders who constantly monitor UC's investments.

UC's equity investments are now in diversified index funds that reflect the overall performance of the market rather than the ups and downs of an individual stock. UC's Russell 3000 Tobacco-Free index — fund based on the country's top 3,000 companies — is managed by State Street Global Advisors.

While the Treasurer reports to the Board of Regents, the Regents do not make decisions about the sale or purchase of stock in individual companies. However, they do have a fiduciary responsibility to protect the security of the University's pension and endowment funds. They establish management guidelines, reporting procedures, benchmark policies and the general parameters for how the portfolio's assets are distributed into a variety of domestic and international stocks, bonds and other investment opportunities ("asset allocation"). These policies, revised and adopted by the Regents in March 2000, ensure that the portfolio is diversified and that exposure to risk is minimized.

Why is being lead plaintiff important to the University?
As lead plaintiff, UC is responsible for monitoring prosecution of the lawsuit on behalf of itself and other investors in the class. It is important that someone step up and take responsibility for overseeing the litigation to ensure the best possible result for investors. UC believes that, given its size, resources and substantial stake in the outcome, it is able to fill that role.