Texas Treasury Safekeeping Trust Co.

INCENTIVE COMPENSATION PLAN

Effective January 1, 2008

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Table of Contents

Page

1. Plan Objectives ..............................................................................................................1

2. Plan Philosophy .............................................................................................................1

3. Base Salary Administration ..........................................................................................13.1 Salary Structure.................................................................................................13.2 Salary Adjustments............................................................................................2

4. Incentive Compensation Plan .......................................................................................24.1 Purpose of the Plan and Effective Date.............................................................24.2 Performance Period ...........................................................................................24.3A Participation in the Plan for the Initial Performance Period...........................24.3B Participation in the Plan after the Initial Performance Period........................44.4 Performance Targets and Incentive Award Opportunity ................................74.5 Compliance With Investment Policy Statement and Ethics Policy..................84.6 Performance Standards and Measurements.....................................................94.7 Potential Performance Incentive Award Calculations ................................... 114.8 Earning, Vesting, and Payout of Potential Performance Incentive Awards.. 12

5. Plan Authority and Responsibility.............................................................................. 145.1 Plan Modification and Termination................................................................ 145.2 Plan Administration......................................................................................... 145.3 Record Keeping and Reporting....................................................................... 155.4 Compliance with State and Federal Law ........................................................ 15

6. Fiduciary Finding for Expenditure of Funds ............................................................. 15

7. At-Will Employment ................................................................................................... 15

8. Other Plan Provisions ................................................................................................. 158.1 Non-assignment and Non-transferability of Awards...................................... 158.2 Plan Does Not Create a Trust or Entitlement................................................. 168.3 Tax and Other Deductions .............................................................................. 168.4 Payments Not Eligible for Retirement Purposes ............................................ 168.5 Grievances........................................................................................................ 16

9. Definitions.................................................................................................................... 16

Addendums:A –List of Eligible Positions by Title, Associated Component Weightings and Maximum

Award OpportunityB –Endowment and Treasury Pools Excess Performance Levels and Associated Incentive

Award ValuesC –Endowment and Treasury Pools Performance Benchmarks

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D –Endowment Peer Relative PerformanceE – Incentive Award Calculation Examples for Investment Performance Component

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DISCLAIMER

THIS INCENTIVE COMPENSATION PLAN IS NOT A CONTRACT. NOTHING CONTAINED IN THIS PLAN, OR ANY WRITTEN OR ORAL STATEMENT CONTRADICTING, MODIFYING, INTERPRETING, EXPLAINING OR CLARIFYING ANY PROVISION OF THE PLAN, IS INTENDED TO CREATE, OR SHALL CREATE, ANY EXPRESS OR IMPLIED CONTRACTUAL OBLIGATIONS THAT ARE BINDING UPON EITHER THE TRUST COMPANY OR A PARTICIPANT. THIS DOCUMENT IS INTENDED TO PROVIDE A PARTICIPANT WITH INFORMATION ABOUT THE PLAN. AS AN AT-WILL EMPLOYEE OF THE TRUST COMPANY, YOU MAY TERMINATE YOUR EMPLOYMENT AT ANY TIME, WITH OR WITHOUT CAUSE OR NOTICE, AND THE TRUST COMPANY RETAINS THE SAME RIGHT.

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1. PLAN OBJECTIVES

The Incentive Compensation Plan (the “Plan”) of the Texas Treasury Safekeeping Trust Company (“Trust Co.”) serves a number of objectives:

To attract and retain Investment Professionals (as defined in Section 9) who have outstanding ability;

To encourage Investment Professionals to develop a strong commitment to the performance of the assets for which the Trust Co. has been delegated investment responsibility; and

To motivate Investment Professionals to focus on maximizing real, long-term returns for all funds managed by the Trust Co. while assuming appropriate levels of risk.

2. PLAN PHILOSOPHY

To remain competitive in its efforts to attract and retain high caliber Investment Professionals, the Trust Co. strives to offer a competitive compensation package. Incentive compensation is an industry standard practice in the private sector investment arena and is rapidly becoming a standard practice in the public sector. By offering both a competitive base salary and incentive compensation, the Trust Co. enhances its ability to fulfill its mission to preserve and grow the state’s financial resources by competitively managing and investing them in a prudent, ethical, and cost-effective manner while focusing on client needs.

The Plan addresses and includes:

Base salaries, targeted at competitive levels, as defined by the Chief Executive Officer of the Trust Co. (the “CEO”), with actual individual base salaries based on an Investment Professional’s experience, education, knowledge, skills, and overall job performance; and

Incentive compensation, calculated as a percentage of an Investment Professional’s base salary for performance above pre-determined standards, earned and vested contingent upon continued employment at specified times and payable over a three-year period.

3. BASE SALARY ADMINISTRATION

3.1 Salary Structure

(a) Pursuant to Section 404.115(c) of the Texas Government Code (“Code”), the CEO of the Trust Co. “shall develop a career ladder program and a system of compensation necessary to retain qualified staff.”

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(b) The CEO recommends compensation for its Investment Professionals that is aligned with the market standard and based upon an independent compensation survey.

3.2 Salary Adjustments

Investment Professionals may be considered for merit increases at such times as determined by the CEO in consultation with the Comptroller.

4. INCENTIVE COMPENSATION PLAN

4.1 Purpose of the Plan and Effective Date

(a) The purpose of the Plan is to provide the opportunity for Investment Professionals to receive performance incentive compensation based on specific criteria relative to the Trust Co.’s investment performance targets and the Investment Professional’s job performance.

(b) The effective date of the Plan shall be January 1, 2008.

4.2 Performance Period

For purposes of the Plan, a “Performance Period” is the period from October 1st through September 30th of each year beginning with October 1, 2008, except that the initial Performance Period is the period from January 1, 2008 through September 30, 2008.

4.3A Participation in the Plan for the Initial Performance Period

(a) This Section 4.3A applies only to the initial Performance Period ending September 30, 2008. Section 4.3B applies to Performance Periods beginning on or after October 1, 2008.

(b) Each Investment Professional who is in an “Eligible Position” (as defined in Section 9) on January 1, 2008, as certified by the CEO, is eligible to participate in the Plan (a “Participant”) with respect to the initial Performance Period.Notwithstanding any provision in the Plan to the contrary, each Participant’s Potential Performance Incentive Awards for the initial Performance Period (including each applicable component of such Awards) will be prorated to 75% of the Incentive Award Opportunity as defined in Subsection 4.4(c) to reflect that the initial Performance Period is only nine months long.

(c) Notwithstanding Subsection 4.3A(b) above, an Investment Professional who first begins employment in an Eligible Position (through new hire, promotion or reassignment) after the beginning of the initial Performance Period will become a Participant with respect to the initial Performance Period as follows:

(i) If the Investment Professional begins employment in an Eligible Position after January 1, 2008 but no later than April 1, 2008, the Investment

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Professional will become a Participant on April 1, 2008 and his or her Potential Performance Incentive Awards for such initial Performance Period (including each applicable component of such Awards), as already prorated in accordance with Subsection 4.3A(b), will be further prorated to 67% of the Incentive Award Opportunity as defined in Subsection 4.4(c).

(ii) If the Investment Professional begins employment in an Eligible Position after April 1, 2008 but no later than July 1, 2008, the Investment Professional will become a Participant on July 1, 2008 and his or her Potential Performance Incentive Awards for such initial Performance Period (including each applicable component of such Awards), as already prorated in accordance with Subsection 4.3A(b), will be further prorated to 33% of the Incentive Award Opportunity as defined in Subsection 4.4(c).

(iii) If the Investment Professional begins employment in an Eligible Position after July 1, 2008 but no later than October 1, 2008, the Investment Professional will not become a Participant until the beginning of the next Performance Period (assuming such Investment Professional is employed by the Trust Co. in an Eligible Position on October 1st of the next Performance Period).

(d) An Eligible Position in the initial Performance Period is not automatically an Eligible Position in any subsequent Performance Period.

(e) Within 30 days after the formal adoption of the Plan by the Trust Co., the CEO shall certify in writing for the initial Performance Period the name of each Participant (i.e., the Investment Professional in each Eligible Position as of January 1, 2008). In addition, for Investment Professionals who first become Participants, or who move to a different Eligible Position after the beginning of the Performance Period, the CEO shall certify in writing the name of each Participant within 30 days of the date such Investment Professional becomes a Participant or moves to a different Eligible Position. The CEO will also certify the:

base salary of each Participant; specific weightings within each applicable Investment Performance

Component Category for each Participant; and maximum incentive award for each Participant.

(f) After the beginning of the initial Performance Period, if a Participant moves to a different Eligible Position, the Participant’s Potential Performance Incentive Award and the measurement of the Participant’s performance for the initial Performance Period will be prorated between that appropriate for the old Eligible Position and that appropriate for the new Eligible Position as follows:

(i) If the Participant moves to the new Eligible Position after January 1, 2008 but no later than April 1, 2008, the Participant’s Potential Performance

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Incentive Award and the measurement of the Participant’s performance will be based on the old Eligible Position for the period January 1, 2008 through March 31, 2008, and on the new Eligible Position for the period April 1, 2008 through September 30, 2008.

(ii) If the Participant moves to the new Eligible Position after April 1, 2008 but no later than July 1, 2008, the Participant’s Potential Performance Incentive Award and the measurement of the Participant’s performance will be based on the old Eligible Position for the period January 1, 2008 through June 30, 2008, and on the new Eligible Position for the period July 1, 2008 through September 30, 2008.

(iii) If the Participant moves to the new Eligible Position after July 1, 2008, the Participant’s Potential Performance Incentive Award will be based on the old Eligible Position for the entire initial Performance Period.

(g) An Investment Professional will cease to be a Participant in the Plan on the earliest to occur of:

(i) The date the Investment Professional is no longer employed in an Eligible Position but is still employed by the Trust Co.;

(ii) The date of termination of the Investment Professional’s employment with the Trust Co. for any reason, including, but not limited to, voluntary termination or involuntary termination (with or without cause), other than for a reason set forth in Subsection 4.3A(g)(iii) and (iv) below. (For purposes of the Plan, the date of termination is the last day on the job and does not include any leave the Investment Professional was allowed to use to extend their employment for payroll purposes.);

(iii) The date of termination of the Investment Professional’s employment with the Trust Co. due to the Investment Professional’s death;

(iv) The date of termination of the Investment Professional’s employment with the Trust Co. due to the Investment Professional’s disability within the meaning of Section 409A of the Internal Revenue Code; or

(v) The date of termination of the Plan.

4.3B Participation in the Plan after the Initial Performance Period

(a) This Section 4.3B applies to Performance Periods beginning on or after October 1, 2008. Section 4.3A applies to the initial Performance Period ending September 30, 2008.

(b) For each Performance Period beginning on or after October 1, 2008, each Investment Professional who is in an “Eligible Position” (as defined in Section 9) on October 1st of the applicable Performance Period, as certified by the CEO, is

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eligible to participate in the Plan (a “Participant”) with respect to such Performance Period.

(c) Notwithstanding Subsection 4.3B(b) above, an Investment Professional who first begins employment in an Eligible Position (through new hire, promotion or reassignment) after the beginning of a Performance Period (other than the initial Performance Period) will become a Participant with respect to such Performance Period as follows:

(i) If the Investment Professional begins employment in an Eligible Position after October 1st but no later than January 1st, the Investment Professional will become a Participant on January 1st and his or her Potential Performance Incentive Awards for such Performance Period will be prorated to 75% of the Incentive Award Opportunity as defined in Subsection 4.4(c).

(ii) If the Investment Professional begins employment in an Eligible Position after January 1st but no later than April 1st, the Investment Professional will become a Participant on April 1st and his or her Potential Performance Incentive Awards for such Performance Period will be prorated to 50% of the Incentive Award Opportunity as defined in Subsection 4.4(c).

(iii) If the Investment Professional begins employment in an Eligible Position after April 1st but no later than July 1st, the Investment Professional will become a Participant on July 1st and his or her Potential Performance Incentive Awards for such Performance Period will be prorated to 25% of the Incentive Award Opportunity as defined in Subsection 4.4(c).

(iv) If the Investment Professional begins employment in an Eligible Position after July 1st of a Performance Period, the Investment Professional will not become a Participant until the beginning of the next Performance Period (assuming such Investment Professional is employed by the Trust Co. in an Eligible Position on October 1st of the next Performance Period).

(d) An Eligible Position in one Performance Period is not automatically an Eligible Position in any subsequent Performance Period.

(e) Within 30 days after the beginning of a Performance Period (other than the initial Performance Period), the CEO shall certify in writing for the Performance Period the name of each Participant (i.e., the Investment Professional in each Eligible Position as of October 1st). In addition, for Investment Professionals who first become Participants, or who move to a different Eligible Position after the beginning of the Performance Period, the CEO shall certify in writing the name of each Participant within 30 days of the date such Investment Professional becomes

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a Participant or moves to a different Eligible Position. The CEO will also certify the:

base salary of each Participant; specific weightings within each applicable Investment Performance

Component Category for each Participant; and maximum incentive award for each Participant.

(f) After the beginning of a Performance Period (other than the initial Performance Period), if a Participant moves to a different Eligible Position, the Participant’s Potential Performance Incentive Award and the measurement of the Participant’s performance for that Performance Period will be prorated between that appropriate for the old Eligible Position and that appropriate for the new Eligible Position as follows:

(i) If the Participant moves to the new Eligible Position after October 1st but no later than January 1st, the Participant’s Potential Performance Incentive Award and the measurement of the Participant’s performance will be based on the old Eligible Position for the period October 1st through December 31st, and on the new Eligible Position for the period January 1st through September 30th.

(ii) If the Participant moves to the new Eligible Position after January 1st but no later than April 1st, the Participant’s Potential Performance Incentive Award and the measurement of the Participant’s performance will be based on the old Eligible Position for the period October 1st through March 31st, and on the new Eligible Position for the period April 1st through September 30th.

(iii) If the Participant moves to the new Eligible Position after April 1st but no later than July 1st, the Participant’s Potential Performance Incentive Award and the measurement of the Participant’s performance will be based on the old Eligible Position for the period October 1st through June 30th, and on the new Eligible Position for the period July 1st through September 30th.

(iv) If the Participant moves to the new Eligible Position after July 1st of a Performance Period, the Participant’s Potential Performance Incentive Award will be based on the old Eligible Position for the entire Performance Period.

(g) An Investment Professional will cease to be a Participant in the Plan on the earliest to occur of:

(i) The date the Investment Professional is no longer employed in an Eligible Position but is still employed by the Trust Co. (although, as described in Subsection 4.8(d), such individual may become entitled to payment for

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Potential Performance Incentive Awards from earlier Performance Periods if he or she remains continuously employed with the Trust Co. through the applicable dates specified in Section 4.8);

(ii) The date of termination of the Investment Professional’s employment with the Trust Co. for any reason, including, but not limited to, voluntary termination or involuntary termination (with or without cause), other than for a reason set forth in Subsection 4.3B(g)(iii) and (iv) below. (For purposes of the Plan, the date of termination is the last day on the job and does not include any leave the Investment Professional was allowed to use to extend their employment for payroll purposes.);

(iii) The date of termination of the Investment Professional’s employment with the Trust Co. due to the Investment Professional’s death;

(iv) The date of termination of the Investment Professional’s employment with the Trust Co. due to the Investment Professional’s disability within the meaning of Section 409A of the Internal Revenue Code; or

(v) The date of termination of the Plan.

4.4 Performance Targets and Incentive Award Opportunity

(a) Each Participant’s Potential Performance Incentive Award will be comprised of the following two components: an Investment Performance Component weighted at 70% and a Qualitative Performance Component weighted at 30%. Within the Investment Performance Component are the following categories:

(1) Endowment Pool Performance Category, which will be determined by comparing the Endowment pool’s investment performance relative to the applicable benchmarks set forth in Addendum C;

(2) Treasury Pool Performance Category, which will be determined by comparing the Treasury pool’s investment performance relative to the applicable benchmarks set forth in Addendum C; and

(3) Endowment Peer Relative Performance Category, which will be determined by comparing the Endowment pool’s investment performance relative to the performance of a predefined universe of comparable public funds and in accordance with the criteria set forth in Addendum D.

The Qualitative Performance Component will include an Investment Professional’s performance in a variety of contributions and behaviors needed for organizational success of the Trust Co.

(b) Each Eligible Position will be assigned specific weightings for each category within the Investment Performance Component (that is, for the Endowment Pool

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Performance Category, Treasury Pool Performance Category, and Endowment Peer Relative Performance Category) that total 70% as set forth in Addendum A. Each Eligible Position will be assigned a 30% weighting for the Qualitative Performance Component as set forth in Addendum A.

(c) The Incentive Award Opportunity for a Performance Period is expressed as a percentage of the “Maximum Award Opportunity.” The Maximum Award Opportunity ranges from 30% to 100% of the Participant’s Base salary, depending on the Eligible Position. Addendum A contains a list of all Eligible Positions and their associated Maximum Award Opportunities.

The Incentive Award Opportunity includes a minimum, a maximum, and intermediate levels of potential award that correspond to specific levels of performance with respect to the Endowment Pool Performance Category and Treasury Pool Performance Category, as shown in Addendum B, the Endowment Peer Relative Performance Category, as shown in Addendum D, and the Qualitative Performance Component. The Incentive Award Opportunity in a Performance Period will range from zero to 100% of the Maximum Award Opportunity, depending on performance relative to the Award Components, including the applicable Investment Performance Component Categories.

(d) Potential Performance Incentive Awards are the amounts calculated for each Participant based on the level of performance achieved relative to the Award Components, including the applicable Investment Performance Component Categories, in each applicable Performance Period, taking into account the Participant’s weighting of each applicable Investment Performance Component Category (as shown in Addendum A), any applicable prorating adjustments, and any other relevant terms and conditions of the Plan. Potential Performance Incentive Awards are capped at the Maximum Award Opportunity, regardless of whether the performance with respect to a Participant exceeds the stated maximum performance targets. Potential Performance Incentive Awards only become earned, vested, and payable if the Participant is employed at the applicable times stated in Section 4.8.

4.5 Compliance With Investment Policy Statement and Ethics Policy

(a) Investment Professionals exercise fiduciary responsibilities to carry out the purposes of the Trust Co. as set forth in Sections 404.101-116 of the Code. Investment Professionals manage the portfolios according to applicable law, relevant statutes and regulations, and Investment Policy Statements (as defined in Section 9). In addition, all Investment Professionals are responsible for complying with the Trust Co. and Comptroller’s ethics and fraud policies and other applicable policies.

(b) If excess performance is achieved in an investment pool during a Performance Period with respect to a Participant that fails to manage the assets of the Comptroller in accordance with the Investment Policy Statements, the Trust Co.

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and Comptroller’s ethics and fraud policies and other applicable policies, then that Participant shall forfeit that portion of the Potential Performance Incentive Award that is attributable to the Performance Period in which the noncompliance occurred. The CEO will make this determination on a case-by-case basis (or, in the case of applying this provision to the CEO as a Participant, the Comptroller will make this determination on a case-by-case basis).

(c) Serious violations of the applicable Investment Policy Statements, Trust Co. and Comptroller’s ethics and fraud policies, or other applicable policies by a Participant, as determined by the CEO (or, with respect to any such violation by the CEO, as determined by the Comptroller) will result in forfeiture of the Potential Performance Incentive Award calculated for the Performance Period in which the violation(s) occurred, as well as for earlier Performance Periods that have not yet become earned and vested (in accordance with the provisions of Section 4.8 below). Additionally, during the investigation of possible serious violations of policy, the CEO (or the Comptroller) may suspend payment of the Potential Performance Incentive Award until the conclusion of the investigation.

4.6 Performance Standards and Measurements

(a) Investment performance for a Performance Period will be measured as follows:

(i) With respect to the Endowment Pool Performance Category and Treasury Pool Performance Category, on three-year rolling historical performance data, weighted at 25% for one year performance (i.e., performance during the Performance Period) and 75% for the three-year performance that includes the Performance Period and the immediately preceding two-year period, except as described in Subsection 4.6(b) below; and

(ii) With respect to the Endowment Peer Relative Performance Category, on three-year rolling historical performance data, except as described in Subsection 4.6(c) below.

(b) During the first four Performance Periods of this Plan, investment performance for the Endowment Pool Performance Category and Treasury Pool Performance Category will be measured as follows:

(i) For the initial Performance Period of the Plan, investment performance will be based on 9 months of historical performance (i.e., the performance for the initial Performance Period beginning January 1, 2008 and ending September 30, 2008).

(ii) For the second Performance Period of the Plan (i.e., the first full year Performance Period), investment performance will be based on one full year of historical performance (i.e., the performance for the second Performance Period ending September 30, 2009).

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(iii) For the third Performance Period of the Plan (i.e., the second full year Performance Period), investment performance will be measured on two years of historical performance data, weighted at 25% for one year performance (i.e., performance during the third Performance Period ending September 30, 2010) and 75% for two years of performance that includes the third Performance Period and the immediately preceding one-year period.

(iv) For the fourth Performance Period and subsequent Performance Periods of the Plan, investment performance will be based on one year and three year historical performance, weighted at 25% for one year performance (i.e., performance during the Performance Period) and 75% for three years of performance that includes the Performance Period and the immediately preceding two-year period.

(c) During the first four Performance Periods of this Plan, investment performance for the Endowment Peer Relative Performance Category will be measured as follows:

(i) For the initial Performance Period of the Plan, the Endowment Peer Relative Performance Category will be based on 9 months of historical performance data (i.e., data for the same 9-month period as the initial Performance Period beginning January 1, 2008 and ending September 30, 2008).

(ii) For the second Performance Period of the Plan (i.e., the first full year Performance Period), the Endowment Peer Relative Performance Category will be based on one full year of historical performance data (i.e., data for the same one-year period as the second Performance Period ending September 30, 2009).

(iii) For the third Performance Period of the Plan (i.e., the second full year Performance Period), the Endowment Peer Relative Performance Category will be based on two years of historical performance data (i.e., data for the two-year period ending September 30, 2010, which is the last day of such third Performance Period).

(iv) For the fourth Performance Period and subsequent Performance Periods of the Plan, the Endowment Peer Relative Performance Category will be based on three years of historical performance data, (i.e., data for the three-year period ending on the last day of the applicable Performance Period).

(d) The Qualitative Performance Component for a Performance Period will be measured annually as part of the Participant’s annual performance appraisal process and will take into account an Investment Professional’s performance in a variety of contributions and behaviors needed for organizational success of the

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Trust Co. Based on a uniform scale approved by the CEO that takes into account the Participant’s applicable annual performance appraisal rating(s) for the applicable Performance Period, a percentage score will be determined for each Participant’s Qualitative Performance Component that ranges from zero to 30% (maximum).

4.7 Potential Performance Incentive Award Calculations

(a) Following the end of each Performance Period, the CEO will review the actual performance with respect to each Participant relative to the applicable Award Components, including the applicable Investment Performance Component Categories.

(b) Potential Performance Incentive Awards will be calculated for each Participant based on the level of performance achieved relative to the Award Components, including each applicable Investment Performance Component Category, during each applicable Performance Period, taking into account the Participant’s Maximum Award Opportunity and the weighting of each Investment Performance Component Category (as shown in Addendum A), as well as any applicable prorating adjustments and any other relevant terms and conditions of the Plan. In addition, Potential Performance Incentive Awards will be calculated in accordance with the following rules and limitations:

(i) If the minimum target level of performance set forth in Addendum B for the Endowment Pool Performance Category is not achieved for the applicable Performance Period, the Endowment Peer Relative Performance Category will not be counted (that is, treated as zero) in calculating a Participant’s Potential Performance Incentive Award for that Performance Period, regardless of the Endowment pool’s performance relative to the applicable peer group.

(ii) If the minimum target level of performance set forth in Addendum B for the Endowment Pool Performance Category is achieved for the applicable Performance Period, this Endowment Pool Performance Category will be counted in calculating a Participant’s Potential Performance Incentive Award for such Performance Period, regardless of whether the minimum target level of performance described in Addendum D is achieved for the Endowment Peer Relative Performance Category.

(iii) The Qualitative Performance Component for the applicable Performance Period will be counted in calculating a Participant’s Potential Performance Incentive Award, regardless of whether the minimum target level of performance is achieved with respect to any of the Investment Performance Component Categories for such Performance Period.

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(c) For purposes of illustration only, sample calculations with respect to the Investment Performance Component of Potential Performance Incentive Awards are shown on Addendum E.

(d) Performance data and calculations applicable to determining Potential Performance Incentive Awards may be reviewed by an external independent source selected by the CEO, but final calculations shall be approved and certified by the CEO.

4.8 Earning, Vesting, and Payout of Potential Performance Incentive Awards

(a) In no event will a Participant be entitled to any payment with respect to a Potential Performance Incentive Award unless, and to the extent that, such Potential Performance Incentive Award becomes earned and vested as provided in this Section 4.8. Notwithstanding CEO approval of Potential Performance Incentive Award calculations, Potential Performance Incentive Awards for a Performance Period will only become earned, vested, and payable as stated below:

(i) If an Investment Professional is employed by the Trust Co. on November1st following the end of the applicable Performance Period for which he or she was a Participant, all of the Qualitative Performance Component of the Potential Performance Incentive Award for that Performance Period, and fifty percent (50%) of the Investment Performance Component of the Potential Performance Incentive Award for that Performance Period, will become earned and vested. Payment of this earned and vested portion of the award will be processed with that November payroll, typically issued on or about December 1st, provided however that in no event will payment be made later than December 15th.

(ii) If an Investment Professional is employed by the Trust Co. on November1st following the first anniversary of the end of the applicable Performance Period for which he or she was a Participant, twenty-fivepercent (25%) of the Investment Performance Component of the Potential Performance Incentive Award for that Performance Period will become earned and vested. Payment of this earned and vested portion of the award will be processed with that November payroll, typically issued on or about December 1st, provided however that in no event will payment be made later than December 15th.

(iii) If an Investment Professional is employed by the Trust Co. on November1st following the second anniversary of the end of the applicable Performance Period for which he or she was a Participant, twenty-fivepercent (25%) of the Investment Performance Component of the Potential Performance Incentive Award for that Performance Period will become earned and vested. Payment of this earned and vested portion of the award will be processed with that November payroll, typically issued on or about

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December 1st, provided however that in no event will payment be made later than December 15th.

(b) Notwithstanding Subsection 4.8(a) above to the contrary, if an investment pool (as shown in Addendum A) experiences a total return of zero or less for a Performance Period, the Investment Performance Component of any Potential Performance Incentive Award for that particular Performance Period (but not earlier Performance Periods) that might have otherwise become earned, vested, and payable on November 1st following the end of that Performance Period will be subject to a “One Year Delay” and not become earned, vested, and payable until November 1st of the following year, assuming the Investment Professional is employed by the Trust Co. on that November 1st and regardless of whether the investment pool has again experienced a total return of zero or less. The One Year Delay described in this Subsection 4.8(b) shall not operate to delay the earning, vesting, or payment of the portion of the Investment Performance Component of Potential Performance Incentive Awards that are scheduled to occur (if at all) on or after the first anniversary of the end of such Performance Period pursuant to Subsections 4.8(a)(ii) and 4.8(a)(iii). In addition, the One Year Delay described in this Subsection 4.8(b) shall not apply to the Qualitative Performance Component of a Potential Performance Incentive Award.

(c) No interest or earnings will accrue on either the earned and vested portions, or the unearned and non-vested portions, of a Potential Performance Incentive Award.

(d) If an Investment Professional ceases to be a Participant before the end of a Performance Period due to no longer being employed in an Eligible Position (but is still employed by the Trust Co.), such individual’s Potential Performance Incentive Award for that Performance Period will not become earned or vested, will not be paid, and will be immediately forfeited. Such individual’s Potential Performance Incentive Awards from earlier Performance Periods that have not yet become earned and vested as set forth herein, can become earned and vested and be paid according to the terms of this Section 4.8, unless such payments are prohibited by applicable law.

(e) If an Investment Professional ceases to be a Participant before the end of a Performance Period due to termination of employment with the Trust Co. for any reason other than a reduction in force, death, or disability within the meaning of Section 409A of the Internal Revenue Code, such individual’s Potential Performance Incentive Award for that Performance Period will not become earned or vested, will not be paid, and will be immediately forfeited. Such individual’s Potential Performance Incentive Awards from earlier Performance Periods that have not yet become earned and vested as set forth herein, will not become earned or vested, will not be paid, and will be immediately forfeited.

(f) If an Investment Professional ceases to be a Participant before the end of a Performance Period due to termination of employment with the Trust Co. because of a reduction in force, death, or disability within the meaning of Section 409A of

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the Internal Revenue Code, such individual’s Potential Performance Incentive Award for that Performance Period will not become earned or vested, will not be paid, and will be immediately forfeited. Notwithstanding any provision in this Section 4.8 to the contrary, such individual’s Potential Performance Incentive Award from earlier Performance Periods that have not yet become earned and vested (in accordance with the provisions of this Section 4.8) will immediately become earned, vested, and payable. Payments under this Subsection will be made, as applicable, to the terminated employee, or to the estate of the deceased employee, or to the disabled employee, or as otherwise provided by law. These payments will be made as soon as administratively practicable, but not later than two and one-half months after the end of the Performance Period during which the reduction in force, death, or disability occurred.

(g) If an Investment Professional ceases to be a Participant before the end of a Performance Period due to termination of the Plan, such individual’s Potential Performance Incentive Award for that Performance Period will not become earned or vested, will not be paid, and will be immediately forfeited. Such individual’s Potential Performance Incentive Awards from earlier Performance Periods that have not yet become earned and vested (in accordance with the provisions of this Section 4.8), shall become earned and vested and be paid according to the terms in Section 4.8 above (determined in the same manner as if the Plan had not been terminated), unless such payments are prohibited by applicable law.

5. PLAN AUTHORITY AND RESPONSIBILITY

5.1 Plan Modification and Termination

(a) The Comptroller shall have the right, in the Comptroller’s sole discretion, to modify the Plan or any portion thereof at any time. Any modifications to the Plan in a Performance Period shall be in writing and provided to each Participant. Except with respect to a modification to the Plan that is required by law or a modification that does not materially and adversely affect a Participant’s Potential Performance Incentive Award for the current Performance Period or an earlier Performance Period, a modification to the Plan shall not become effective until the beginning of the next Performance Period.

(b) Notwithstanding any provision in the Plan to the contrary, the Comptroller shall have the right, in the Comptroller’s sole discretion, to terminate the Plan entirely or any portion thereof at any time.

5.2 Plan Administration

(a) The CEO has the authority to administer the Plan. Consistent with the provisions of the Plan, the CEO has the discretion to interpret the Plan and may from time to time adopt such rules and procedures as he may deem advisable to carry out the

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Plan. All decisions made by the CEO with respect to the Plan and in construing the provisions of the Plan are final and binding on all Participants.

(b) Notwithstanding any provision of the Plan to the contrary, the CEO will be disqualified from deciding any matter relating solely to himself under the Plan and from deciding any case in which his individual right to claim any benefit or payment under the Plan is particularly involved. In any case in which the CEO is so disqualified to act, the Comptroller shall exercise all of the powers of the CEO concerning the matter that the CEO is disqualified.

5.3 Record Keeping and Reporting

All Investment Professional performance evaluation, salary, and performance incentive pay records for the Plan shall be maintained by the Manager of Human Resources at the Trust Co. All investment performance records shall be maintained by the Manager of Investment Accounting at the Trust Co.

5.4 Compliance with State and Federal Law

If the CEO determines or a court with appropriate jurisdiction makes a final non-appealable decision that a portion(s) of the Plan violates applicable state or federal law, that portion(s) shall be deemed to not be in effect at any time. The remaining portions of the Plan shall remain in full force and effect to the maximum extent possible.

6. FIDUCIARY FINDING FOR EXPENDITURE OF FUNDS

Pursuant to the laws governing the Trust Co., the CEO, in consultation with the Comptroller, has determined that the expenditure of funds for payments made under the Plan is required to retain qualified staff to perform the fiduciary duties of the Trust Co., and the amount expended for payments under the Plan will be independently paid from revenue generated by the Trust Co. and not from any other source.

7. AT-WILL EMPLOYMENT

Nothing in the adoption of this Plan or the awarding of performance incentive pay alters the at-will nature of employment that the Trust Co. has with its employees, confers on any Trust Co. employee the right to continued employment with the Trust Co., or affects in any way the right of the Trust Co. to terminate the employment of its employees at any time.

8. OTHER PLAN PROVISIONS

8.1 Non-assignment and Non-transferability of Awards

Except for the rights of the estate of Participants to receive payments as set forth in Subsection 4.8(e) or as otherwise required by a court order that meets the requirements of a “qualified domestic relations order” as set forth in Section 414(p) of the Internal Revenue Code, Potential Performance Incentive Awards under the Plan, including both

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the earned and vested portions and the unearned and non-vested portions of such awards, are non-assignable and non-transferable and are not subject to anticipation, adjustment, alienation, encumbrance, garnishment, attachment or levy of any kind.

8.2 Plan Does Not Create a Trust or Entitlement

(a) Neither the establishment of the Plan, the calculation of Potential Performance Incentive Awards, or the actual earning, vesting, or payment of awards shall be deemed to create a trust or entitlement. The Plan is an unfunded, unsecured liability of the Trust Co. to make payments in accordance with the provisions of the Plan. Any amounts budgeted by the Trust Co. for Potential Performance Incentive Awards shall be the assets of the Trust Co., and no Investment Professional or any other person shall have any security or other interest in any assets of the Trust Co. by reason of the Plan.

(b) Nothing contained in the Plan shall be deemed to give any interest or title to any specific property of the Trust Co. to any Investment Professional, or any personal representative or beneficiary.

8.3 Tax and Other Deductions

All payments under the Plan shall be subject to any deductions (1) for tax and withholding required by federal, state, or local law at the time of payment and (2) for any and all amounts owed by the Investment Professional to the Trust Co. at the time of payment. The Trust Co. is not obligated to advise an Investment Professional of the tax or the amount that the Trust Co. will be required to withhold.

8.4 Payments Not Eligible for Retirement Purposes

Payments made pursuant to the Plan shall not be eligible compensation for ERS pension plan purposes, and, as currently written, any payments made pursuant to the Plan are fringe benefits and not eligible compensation for ERS pension plan purposes.

8.5 Grievances

The Trust Co. may establish a grievance and appeals policy for the Plan, which may be set forth in a separate document. Unless and until the Trust Co. establishes a grievance and appeals policy for the Plan, all grievances related to the Plan will be addressed according to the Comptroller’s Dispute Resolution Policy.

9. DEFINITIONS

Award Components are the Investment Performance Component and the Qualitative Performance Component, which are the two components comprising a Potential Performance Incentive Award.

Base Salary for use in the Plan is the Participant’s annualized monthly salary (not including longevity or benefit replacement pay) as of the first date of the applicable

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Performance Period (i.e., as of October 1st for subsequent Performance Periods), or, in the case of an Investment Professional who begins participation effective after the first date of the applicable Performance Period, the annualized monthly salary of the new Participant as of the date he or she first becomes a Participant, as certified by the CEO.

Eligible Positions are all positions listed in Addendum A, as such Addendum may be modified from time to time, and refer to the positions themselves, not the actual Participants in the positions.

Incentive Award Opportunity is expressed as a percentage of the Maximum Award Opportunity for a Performance Period. The Incentive Award Opportunity includes a threshold, a maximum and intermediate levels of potential award that correspond to specific levels of performance with respect to the Award Components, including the applicable Investment Performance Component Categories.

Investment Performance Component is one of the two components comprising a Potential Performance Incentive Award. The assigned specific weightings for each Investment Performance Component Category vary by Eligible Position and total 70% as set forth in Addendum A.

Investment Performance Component Category is the Endowment Pool Performance Category, the Treasury Pool Performance Category, and/or the Endowment Peer Relative Performance Category, each of which is described in Subsection 4.4(a).

Investment Policy Statement means the investment guidelines for the Texas Endowment Funds.

Investment Professional means all investment division employees, Chief Financial Officer and General Counsel.

Maximum Award Opportunity is the maximum Incentive Award Opportunity available to an Eligible Position. Depending on the Eligible Position, the Maximum Award Opportunity ranges from 30% to 100% of the Participant’s base salary.

Participant is an employee in an Eligible Position on October 1st of the applicable Performance Period (or on January 1, 2008 with respect to the initial Performance Period), or who first is employed in an Eligible Position after the beginning of the Performance Period as described in Subsection 4.3A(c) or Subsection 4.3B(c) of the Plan, as certified by the CEO, and who has not ceased to be a Participant in accordance with the provisions of Subsection 4.3A(g) or Subsection 4.3B(g).

Performance Period is the period beginning on October 1st of each year and ending on September 30th of the following year, except that the initial Performance Period is the period from January 1, 2008 through September 30, 2008.

Potential Performance Incentive Awards are the amounts calculated for each Participant based on the level of performance achieved relative to the Award Components, including the applicable Investment Performance Component Categories, in

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each applicable Performance Period, taking into account the weighting assigned to each Eligible Position (as shown in Addendum A), any applicable prorating adjustments, and any other relevant terms and conditions of the Plan. Potential Performance Incentive Awards are capped at the Maximum Award Opportunity, regardless of whether an investment pool exceeds the stated maximum. Potential Performance Incentive Awards only become earned and vested if the Participant is employed at the applicable times stated in Section 4.8.

Qualitative Performance Component is one of the two components comprising a Potential Performance Incentive Award. As reflected in Addendum A, each Eligible Position is assigned a 30% weighting for the Qualified Performance Component.