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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 18, 2000
FILE NO. 333-85415
FILE NO. 811-9555
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
PRE EFFECTIVE AMENDMENT NO. 2 /X/
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT ACT OF 1940
AMENDMENT NO. 2 /X/
COMMONFUND INSTITUTIONAL FUNDS
(Exact Name of Registrant as Specified in Charter)
THE CORPORATION TRUST COMPANY
1209 ORANGE STREET
WILMINGTON, DELAWARE 19801, COUNTY OF NEW CASTLE
(Name and Address of Agent for Service)
Copies to:
ARTHUR GARDINER, ESQUIRE JOHN H. GRADY, Jr., ESQUIRE
8 Sargent Street Morgan, Lewis & Bockius LLP
Hanover, NH 03755 1701 Market Street
Philadelphia, PA 19103
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commonfund
Commonfund
Institutional Funds
PROSPECTUS
JANUARY 20, 2000
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Commonfund Short Duration Fund
Investment Manager
Commonfund Asset Management Company, Inc.
Investment Sub-Advisers
Wellington Management Company, LLP
Western Asset Management Company
Distributor
Commonfund Securities, Inc.
The Securities and Exchange Commission has not approved or disapproved the
Fund's shares or determined whether this prospectus is accurate or complete.
It is a crime for anyone to tell you otherwise.
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COMMONFUND INSTITUTIONAL FUNDS
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Commonfund Institutional Funds (the "Company") is a no-load, open-end management
investment company that seeks to improve the net investment returns of its
shareholders by making available to them a series of investment funds, each with
its own investment objectives and policies. The investment funds are sold
primarily to institutional investors, including colleges, universities, private
secondary schools, hospitals, foundations, pension funds, museums, libraries,
performing arts groups and centers, public secondary school districts,
charitable service organizations and others. The investment funds are not
available to individuals, except current and former directors, officers and
employees of Commonfund Asset Management Company, Inc. (the "Investment
Manager") and its affiliates ("Eligible Individuals").
HOW TO READ THIS PROSPECTUS
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The Commonfund Short Duration Fund (the "Fund") has individual investment goals
and strategies. This prospectus gives you important information about the Fund
that you should know before investing. This prospectus has been arranged into
different sections so that you can easily review this important information.
Please read this prospectus and keep it for future reference.
The Fund's Investments........................................................ 3
Fees and Portfolio Management................................................. 4
Purchasing and Redeeming Shares............................................... 7
Dividends, Distributions and Taxes............................................ 8
To obtain more information about Commonfund Institutional Funds please refer to
the Back Cover of the Prospectus.
2
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COMMONFUND SHORT DURATION FUND
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INVESTMENT GOAL
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Current interest income with some price appreciation, each as consistent with
liquidity and safety of principal.
INVESTMENT FOCUS
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A portfolio of U.S. Government securities and other high quality debt
securities.
PRINCIPAL INVESTMENT STRATEGY
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The Commonfund Short Duration Fund invests in a diversified portfolio of
securities issued or guaranteed by the U.S. Government and its agencies and
instrumentalities, obligations of U.S. and foreign commercial banks, corporate
debt securities, including commercial paper, and fully-collateralized repurchase
agreements with highly rated counterparties. The fixed income securities
acquired by the Fund may include mortgage-backed and asset-backed securities.
The Fund's investment strategies are designed to produce a total rate of return
that exceeds the total return on 90 day U.S. Treasury bills.
The Fund seeks to minimize fluctuations in net asset value by maintaining high
credit quality standards and employing a relatively short effective duration.
Duration is a measure of a security's price volatility or risk associated with
changes in interest rates. The Fund's effective duration generally will not
exceed one (1) year, and the maximum remaining maturity of any individual
security will be five and one-half (5 1/2) years, except for certain
mortgage-related and asset-backed securities. The Fund will invest only in fixed
income securities rated at the time of investment in one of the three highest
rating categories by a major rating agency, or determined by the Investment
Manager or a Sub-Adviser to be of equivalent quality.
The Investment Manager allocates the Fund's assets among selected Sub-Advisers,
who in turn manage the Fund's assets on a day-to-day basis. Subject to oversight
by the Investment Manager, each of the Fund's Sub-Advisers, Wellington
Management Company, LLP ("Wellington Management") and Western Asset Management
Company ("Western Asset") select investments for its portion of the Fund's
assets based on its own investment style and strategy. Wellington Management's
investment philosophy is to maximize total return while limiting the level of
risk appropriate for the Fund by combining a top-down strategy which directs
portfolio structure including duration and sector weights, and a bottom-up
securities selection process. Western Asset applies a team approach to portfolio
management that revolves around their investment outlook, focusing on duration
weighting, term structure position, sector and issue selection. While duration
and yield curve structure decisions underlie Western Asset's investment process,
the company concentrates primarily on sector and issue selection for adding
value. The Sub-Advisers seek to achieve the Fund's objectives on a total return
basis and without regard to tax consequences. The Fund's portfolio turnover rate
may be higher as a result. Higher portfolio turnover will result in higher
transaction costs and may result in taxable gains being passed through to
taxable shareholders.
OTHER INVESTMENTS
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The Fund also may invest in other securities, use other strategies and engage in
other investment practices, which are not principal investments and strategies.
These investments and strategies, as well as those described in this prospectus,
are described in greater detail in the Fund's Statement of Additional
Information (SAI). During unusual economic or market conditions, or for
temporary defensive or liquidity purposes, the Fund may invest up to 100% of its
assets in cash, repurchase agreements and short-term obligations. When so
invested, the Fund may not achieve its investment objective.
PRINCIPAL RISKS
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The value of an investment in the Fund is based on the market value of the
securities the Fund holds. These prices change daily due to economic and other
events that affect particular companies and other issuers. These price
movements, sometimes called volatility, may be larger or smaller depending on
the types of securities the Fund owns and the markets in which they trade.
Generally, the Fund's fixed income securities will decrease in value if interest
rates rise and vice versa. The price of fixed income securities also may
fluctuate in response to changes in credit risk. Also, prices of longer-term
securities are generally more volatile, so the average maturity of the Fund's
portfolio affects risk.
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The Investment Manager's allocation of Fund assets to the Sub-Advisers and the
Sub-Advisers' judgments about the markets, the economy and/or companies may not
anticipate actual market movements, economic conditions or company performance,
and these judgments may affect the Fund's return. In fact, you can lose money on
your investment in the Fund, just as you could with other investments. A Fund
share is not a bank deposit, and it is not insured or guaranteed by the FDIC or
any government agency.
RISKS OF HOLDING CERTAIN SECURITIES
U.S. Government Securities. U.S. Government securities are considered to be
those with the least credit risk, but U.S. Government securities are subject to
price movements due to changing interest rates. Obligations issued by some U.S.
Government agencies are backed by the U.S. Treasury, while others are backed
solely by the ability of the agency to borrow from the U.S. Treasury or by the
agency's own resources, and are subject to slightly greater credit risks.
Asset-Backed Securities. Asset-backed securities are fixed income securities
representing an interest in a pool of loans or receivables of an entity, such as
a bank or credit card company. Therefore, repayment depends largely on the cash
flows generated by the assets backing the securities. It is possible that
prepayments on the underlying assets will alter the cash flow on asset-backed
securities, making it difficult to predict with certainty the actual maturity
date or average life of an asset-backed security and, therefore, to assess the
volatility risk of the Fund.
Mortgage-Backed Securities. Mortgage-backed securities are fixed income
securities representing an interest in a pool of underlying mortgage loans.
Mortgage-backed securities are sensitive to changes in interest rates, but may
respond to these changes differently from other fixed income securities due to
the possibility of prepayment of the underlying mortgage loans. Declining
interest rates tend to encourage the prepayment of mortgage-backed securities.
As a result, the Fund may have to reinvest prepaid amounts in securities paying
lower interest rates. It may not be possible to determine in advance the actual
maturity date or average life of a mortgage-backed security and, therefore, to
assess the volatility risk of the Fund.
YEAR 2000 TRANSITION
The Fund and its service providers do not appear to have been adversely affected
by computer problems related to the transition to the year 2000. However, there
remains a risk that such problems could arise or be discovered in the future.
Year 2000 related problems also may negatively affect issuers whose securities
the Fund purchases, which could have an impact on the value of your investment.
PRIOR PERFORMANCE INFORMATION
As of the date of this prospectus, the Fund had not yet commenced operations,
and did not have a performance history.
FUND FEES AND EXPENSES
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This table describes the Fund's fees and expenses that you will pay if you buy
and hold shares of the Fund.
ANNUAL FUND OPERATING EXPENSES (expenses deducted from Fund assets)
<TABLE>
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Investment Advisory Fees.......... 0.19%
Distribution (12b-1) Fees......... None
Other Expenses*................... 0.30%
TOTAL ANNUAL FUND OPERATING
EXPENSES........................ 0.49%
Fee waivers and expense
reimbursements.................. 0.24%
NET ANNUAL FUND OPERATING
EXPENSES........................ 0.25%**
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</TABLE>
* OTHER EXPENSES ARE ESTIMATED ASSUMING THE AVERAGE DAILY NET ASSETS OF THE
FUND WILL BE $100 MILLION.
** THE INVESTMENT MANAGER HAS CONTRACTUALLY AGREED TO WAIVE FEES AND TO
REIMBURSE EXPENSES, SO LONG AS IT SERVES AS INVESTMENT ADVISER TO THE FUND,
IN ORDER TO KEEP TOTAL OPERATING EXPENSES FROM EXCEEDING 0.25% OF NET ASSETS
PER YEAR. THIS FEE WAIVER MAY BE AMENDED OR TERMINATED ONLY WITH THE CONSENT
OF THE BOARD OF DIRECTORS.
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EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated. The Example also
assumes that each year your investment has a 5% return and Fund expenses remain
the same. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<S> <C>
1 Year $26*
3 Years $80*
</TABLE>
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* EXPENSES ARE CALCULATED BASED ON ANNUAL FUND OPERATING EXPENSES NET OF THE
INVESTMENT MANAGER'S FEE WAIVERS AND EXPENSE REIMBURSEMENTS (0.25%).
INVESTMENT MANAGER
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COMMONFUND ASSET MANAGEMENT COMPANY, INC. is an indirect, wholly-owned
subsidiary of The Commonfund for Non-Profit Organizations ("Commonfund").
Employees of the Investment Manager also are responsible for Commonfund's
investment program, which is comprised of more than 20 funds with more than $20
billion in assets and is conducted in a "manager of managers" format. The Fund
will pay the Investment Manager an annual fee of 0.19% of average net assets for
its services.
The Investment Manager acts as a "manager of managers" for the Fund, and
supervises adherence by the Sub-Advisers with the Fund's investment policies and
guidelines. The Investment Manager also recommends the appointment of additional
or replacement Sub-Advisers to the Fund's Board of Directors. The Fund and the
Investment Manager have requested exemptive relief from the Securities and
Exchange Commission (the "Commission") to permit the Investment Manager and the
Fund to add or terminate Sub-Advisers without shareholder approval.
INVESTMENT SUB-ADVISERS
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WELLINGTON MANAGEMENT COMPANY, LLP traces its origins to 1928. As of June 30,
1999, the firm had investment management authority with respect to approximately
$223 billion in assets, with approximately $91 billion in fixed income
securities, for domestic and foreign clients. Wellington Management is
headquartered in Boston, Massachusetts, with affiliates in London, Singapore,
Sydney and Tokyo.
WESTERN ASSET MANAGEMENT COMPANY manages over $50 billion in assets. The firm
has managed short-duration portfolios since 1974. It is wholly-owned by Legg
Mason Inc., a financial services company headquartered in Baltimore, Maryland.
PORTFOLIO MANAGERS
Commonfund Asset Management Company, Inc. The Investment Manager employs a team
to supervise the Sub-Advisers, which includes the following members:
Todd E. Petzel is President and Chief Investment Officer of Commonfund
Asset Management Company, a position he assumed in August, 1999. From January
1996 until August 1999, he served as Executive Vice President and Chief
Investment Officer for Commonfund after having been Executive Vice President,
Business Development, of the Chicago Mercantile Exchange, where he worked in
positions of increasing responsibility for eight years. Mr. Petzel received his
A.B., A.M., and Ph.D. degrees from the University of Chicago.
MaryEllen Beaudreault, a Senior Vice President of Commonfund Asset
Management Company, joined Commonfund in 1993. She is responsible for the
oversight of all fixed income funds. Those funds implement cash management,
domestic, global and international fixed income and strategies. Ms. Beaudreault
has 15 years of professional experience. Ms. Beaudreault is a graduate of
Central Connecticut State University.
Wellington Management Company, LLP.
Responsibility for investment decisions will rest with two persons:
John C. Keogh, a Partner and Senior Vice President of Wellington
Management, will serve as the Fund's Portfolio Manager. Mr. Keogh has 20 years
of professional experience, 16 of which have been with Wellington Management.
Mr. Keogh received a B.A. from Tufts University in 1979.
Timothy E. Smith, a Vice President of Wellington Management, will also
serve as Portfolio Manager of the Fund. Mr. Smith has 14 years of professional
experience, seven of which have been with Wellington Management. Mr. Smith
received his MBA from Babson College in 1992.
5
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Western Asset Management Western Asset's Investment Strategy Group is
responsible for investment decisions. The group consists of senior portfolio
managers who specialize in all major sectors of the fixed income market, such as
U.S. Government securities, money market instruments, mortgage-related
securities, and asset-backed securities. Each sector specialist is responsible
for selecting individual securities to implement an overall strategy set by the
Investment Strategy Group. The following individuals are members of Western
Asset's Investment Strategy Group:
Stephen A. Walsh, a Managing Director with Western Asset since 1991, has 18
years of professional experience. Mr. Walsh received his B.S. from the
University of Colorado at Boulder.
Carl E. Eichstaedt, a Portfolio Manager who has 13 years of professional
experience, has been with Western Asset since 1994. Mr. Eichstaedt received his
B.S. from University of Illinois and his M.B.A. from the Kellogg Graduate School
of Management at Northwestern University.
PRIOR PERFORMANCE OF SUB-ADVISERS
The following tables present a composite of each Sub-Adviser's past performance
when managing other accounts that have investment objectives, policies and
strategies that are substantially similar to the Fund's in all material
respects. This information has been provided by the Sub-Advisers and calculated
in accordance with AIMR Performance Presentation Standards. This table does not
indicate how the Fund may perform in the future. The extent to which the
performance of a particular Sub-Adviser affects Fund performance will be limited
to the portion of the Fund's assets allocated to that Sub-Adviser by the
Investment Manager.
Wellington Management Company, LLP
Historical Performance of Account for Periods Ended September 30, 1999*
Average Annual Total Return
<TABLE>
<S> <C> <C>
Wellington 3 Month-T-Bill
Management
Past three years 5.43% 5.15%
Past one year 4.84% 4.69%
Since inception 9/96 5.43% 5.15%
</TABLE>
* Performance results reflect the deduction of fees equal to the Fund's total
operating expenses net of the Investment Manager's fee waivers, (0.25%).
Performance results reflect composite returns for all discretionary accounts
managed in accordance with Wellington Management's short duration strategy
with investment guidelines that are substantially similar to those of the
Fund, none of which are registered investment companies.
Western Asset Management Company
Historical Performance for Periods Ended June 30, 1999*
Average Annual Total Return
<TABLE>
<S> <C> <C>
Western Asset 3 Month-T-Bill
Past ten years 5.37% 5.36%
Past five years 5.40% 5.37%
Past three years 5.34% 5.15%
Past one year 4.91% 4.69%
</TABLE>
* Performance results reflect deduction of fees equal to the Fund's total
operating expenses net of the Investment Manager's fee waivers (0.25%).
Performance results reflect composite returns for all discretionary accounts
managed in accordance with Western Asset's short duration strategy with
investment guidelines that are substantially similar to those of the Fund,
none of which are registered investment companies.
The accounts are not subject to certain investment limitations, diversification
requirements and other restrictions imposed by the Investment Company Act of
1940 and the Internal Revenue Code which, if applicable, may have adversely
affected performance results.
6
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INVESTING IN THE COMMONFUND INSTITUTIONAL FUNDS -- A SUMMARY:
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In order to open a new account, you must complete and mail the New Account
Application that you receive with this prospectus to:
Commonfund Institutional Funds
P.O. Box 9130, Mail Code OPS22
Boston, MA 02117-9130
The Fund's minimum initial investment is $100,000 for institutions and $5,000
for Eligible Individuals. The minimum subsequent investment is $1,000, except
that no minimum applies to reinvestments from dividends and distributions.
- ---------------------------------------------------------
Once you are a shareholder of the Commonfund Institutional Funds you can do the
following:
- ---------------------------------------------------------
* Purchase or redeem Fund shares by phone.
Call 1-877-426-6600 to place a trade.
- ---------------------------------------------------------
* Purchase Fund shares by wiring funds to:
Investors Bank & Trust Company
ABA #011001438
Account # 020103345
Further Credit: Commonfund Short Duration Fund, shareholder name and
Commonfund Institutional Funds account number.
PURCHASING AND REDEEMING COMMONFUND INSTITUTIONAL FUNDS SHARES
- ------------------------------------------------------
This section tells you how to purchase and redeem shares of the Fund.
PURCHASING SHARES
WHEN CAN YOU PURCHASE SHARES?
You may purchase shares of the Fund on any day that the New York Stock Exchange
and the Federal Reserve System are both open for business (a "Business Day").
To open an account:
Please send your completed New Account Application to Commonfund
Institutional Funds, P.O. Box 9130, Mail Code OPS22, Boston, MA 02117-9130.
All investments by institutions must be made by wire.
Please call us to let us know that you intend to make an investment. You
will need to instruct your bank to wire money to: Investors Bank & Trust
Company, ABA #011001438; for Account Number 020103345; Further Credit:
Commonfund Short Duration Fund. The shareholder name and shareholder
account number must be specified in the wire.
HOW ARE FUND SHARE PRICES CALCULATED?
The price per share (the offering price) will be the net asset value (NAV) per
share next determined after the Fund receives your purchase order. The Fund's
NAV is calculated once each Business Day at the regularly-scheduled close of
normal trading on the New York Stock Exchange (NYSE) (normally, 4:00 p.m.
Eastern time).
NET ASSET VALUE
NAV for one Fund share is the value of that share's portion of all of the net
assets in the Fund. In calculating NAV, the Fund generally values its portfolio
at market price. If market prices are unavailable or we think that they are
unreliable, fair value prices may be determined in good faith using methods
approved by the Board of Directors.
ACCEPTANCE OF SUBSCRIPTIONS
We may reject any purchase order if we determine that accepting the order would
not be in the best interests of the Fund or its shareholders. In order for your
purchase to be processed on the trade date, the Fund must receive funds by 4:00
p.m. Eastern time. Orders for which funds are received after 4:00 p.m. Eastern
time will be processed on the following Business Day.
PURCHASING ADDITIONAL SHARES
Current shareholders are eligible to purchase shares by phone by calling
1-877-426-6600 if they have requested that privilege by checking the appropriate
box on the New Account Application.
PURCHASES BY ELIGIBLE INDIVIDUALS
Eligible Individuals may purchase shares by mail at the address of Commonfund
Institutional Funds. The purchase price may be tendered by personal check. We do
not accept third party checks or cash.
TELEPHONE TRANSACTIONS
Purchasing or redeeming Fund shares over the telephone is extremely convenient,
but not without
7
<PAGE> 9
risk. Although we have certain safeguards and procedures to confirm the identity
of callers and the authenticity of instructions, we are not responsible for any
losses or costs incurred by following telephone instructions we reasonably
believe to be genuine. If you or your financial institution transact with us
over the telephone, you will generally bear the risk of any loss.
REDEEMING SHARES
You may redeem your shares on any Business Day by contacting us directly by mail
or telephone. The redemption price of each share will be the NAV next determined
after we receive your request.
In the case of institutions and Eligible Individuals, payments in redemption
will be made by wire transfer to the account designated in your New Account
Application or another account that has properly been designated with a
signature guarantee.
SIGNATURE GUARANTEES
A signature guarantee is a widely accepted way to protect shareholders by
verifying signatures. The signature(s) must be guaranteed by an acceptable
financial institution such as a national or state bank, a trust company, a
federal savings and loan association, a credit union or a broker-dealer that is
a member of a national securities exchange. Notarization is not acceptable.
Financial institutions which participate in one of the medallion signature
programs must use the specific "Medallion Guaranteed" stamp.
METHODS FOR REDEEMING SHARES
* By Mail -- If you wish to redeem shares of the Fund by mail, you should send
us a letter with your name, Fund and account number and the amount of your
request. All letters must be signed by the owner(s) of the account. In
certain circumstances, additional documentation may be required. You may
obtain additional details by phoning 1-877-426-6600.
* By Phone -- When filling out your New Account Application, you are given the
opportunity to establish telephone redemption privileges.
* Systematic Withdrawal Plan -- Under the plan you may arrange monthly,
quarterly, semi-annual or annual automatic withdrawals.
REDEMPTIONS IN KIND -- The Fund generally pays redemption proceeds in cash.
However, under unusual conditions that make the payment of cash unwise (and for
the protection of the Fund's remaining shareholders), the Fund might pay all or
part of your redemption proceeds in liquid securities with a market value equal
to the redemption price (redemption in kind). In the highly unlikely event that
your shares are redeemed in kind, you will have to pay brokerage costs to sell
the securities distributed to you.
SUSPENSION OF YOUR RIGHT TO REDEEM SHARES -- The Fund may suspend your right to
redeem your shares if the NYSE restricts trading, the SEC declares an emergency
or for such other periods as the SEC may by order permit.
INVOLUNTARY SALES OF YOUR SHARES -- If your account balance drops below the
required minimum of $100,000 for institutions or $5,000 for Eligible Individuals
as a result of shareholder redemptions, the Fund may redeem your shares. You
will always be given at least 60 days' written notice to give you time to add to
your account and avoid redemption of your shares.
RECEIVING YOUR MONEY
Normally, we will send your sale proceeds the next Business Day after we receive
your request. In unusual circumstances, it may take up to seven days. Proceeds
will be wired to your properly designated account at a financial institution.
DISTRIBUTION OF FUND SHARES
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Commonfund Securities, Inc. is the distributor of the Fund and receives no
compensation from the Fund for that service.
DIVIDENDS, DISTRIBUTIONS AND TAXES
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DIVIDENDS AND DISTRIBUTIONS
The Fund accrues dividends of net investment income on a daily basis, and
declares and pays dividends monthly. The Fund makes distributions of capital
gains, if any, at least annually.
Shareholders will receive dividends and distributions in the form of additional
shares. Dividends generally are not paid in cash.
8
<PAGE> 10
TAXES
The Fund is managed without regard to tax consequences. Shareholders seeking to
finance tax obligations may need to redeem shares.
The Fund will distribute substantially all of its investment income and capital
gains, if any. The dividends and distributions you receive may be subject to
federal, state and local taxation, depending upon your tax situation. Capital
gains distributions may be taxable at different rates depending on the length of
time the Fund holds its portfolio securities. EACH SALE OR EXCHANGE OF FUND
SHARES IS A TAXABLE EVENT.
This summary is based on current tax laws, which may change.
MORE INFORMATION ABOUT TAXES IS IN THE SAI.
9
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COMMONFUND
INSTITUTIONAL FUNDS
INVESTMENT MANAGER
Commonfund Asset Management Company, Inc.
INVESTMENT SUB-ADVISERS
Wellington Management Company, LLP
Western Asset Management Company
DISTRIBUTOR
Commonfund Securities, Inc.
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
More information about Commonfund Institutional Funds is available without
charge through the following:
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
- ------------------------------------------------------
The SAI dated January 20, 2000, includes more detailed information about
Commonfund Institutional Funds. The SAI is on file with the SEC and is
incorporated by reference into this prospectus. This means that the SAI, for
legal purposes, is a part of this prospectus.
TO OBTAIN MORE INFORMATION ABOUT THE FUND:
BY TELEPHONE: Call 1-877-426-6600
BY MAIL: Write to
Commonfund Institutional Funds
15 Old Danbury Road
P.O. Box 812
Wilton, CT 06897-0812
BY INTERNET: http://www.commonfund.org
FROM THE SEC: You can also obtain the SAI or the Annual or Semi-Annual Reports,
as well as other information about Commonfund Institutional Funds, from the
EDGAR Database on the SEC's website ("http://www.sec.gov"). You may review and
copy documents at the SEC Public Reference Room in Washington, DC (for
information on the operation of the Public Reference Room, call 1-202-942-8090).
You may request documents by mail from the SEC, upon payment of a duplicating
fee, by writing to: Securities and Exchange Commission, Public Reference
Section, Washington, DC 20549-0102. You may also obtain this information, upon
payment of a duplicating fee, by e-mailing the SEC at the following address:
[email protected].
The Fund's Investment Company Act registration number is 811-9555.
<PAGE> 12
COMMONFUND INSTITUTIONAL FUNDS
COMMONFUND SHORT DURATION FUND
INVESTMENT MANAGER
COMMONFUND ASSET MANAGEMENT COMPANY, INC.
INVESTMENT SUB-ADVISERS
WELLINGTON MANAGEMENT COMPANY, LLP
WESTERN ASSET MANAGEMENT COMPANY
DISTRIBUTOR
COMMONFUND SECURITIES, INC.
This Statement of Additional Information is not a prospectus and relates only to
the Commonfund Short Duration Fund (the "Fund"). It is intended to provide
additional information regarding the activities and operations of the Commonfund
Institutional Funds (the "Company") and should be read in conjunction with the
Fund's Prospectus dated January 20, 2000. The Prospectus may be obtained without
charge by calling 1-877-426-6600.
TABLE OF CONTENTS
<TABLE>
<S> <C>
THE COMPANY................................................. S-2
INVESTMENT OBJECTIVE........................................ S-2
INVESTMENT POLICIES......................................... S-2
DESCRIPTION OF PERMITTED INVESTMENTS AND RISK FACTORS....... S-3
INVESTMENT LIMITATIONS...................................... S-9
THE INVESTMENT MANAGER AND SUB-ADVISERS..................... S-11
FUND ADMINISTRATION......................................... S-12
CUSTODIAN................................................... S-12
EXPERTS..................................................... S-12
LEGAL COUNSEL............................................... S-12
DISTRIBUTION AND SHAREHOLDER SERVICES....................... S-12
DIRECTORS AND OFFICERS OF THE COMPANY....................... S-13
COMPUTATION OF YIELD AND TOTAL RETURN....................... S-15
PURCHASE AND REDEMPTION OF SHARES........................... S-16
DETERMINATION OF NET ASSET VALUE............................ S-16
TAXES....................................................... S-17
PORTFOLIO TRANSACTIONS...................................... S-18
VOTING...................................................... S-18
DESCRIPTION OF SHARES....................................... S-19
5% SHAREHOLDERS............................................. S-19
FUND BALANCE SHEET.......................................... S-19
APPENDIX.................................................... A-1
</TABLE>
January 20, 2000
<PAGE> 13
THE COMPANY
This Statement of Additional Information relates only to the Commonfund Short
Duration Fund (the "Fund"). The Fund is a separate series of Commonfund
Institutional Funds (the "Company"), an open-end management investment company
established as a Delaware business trust under an Agreement and Declaration of
Trust dated August 7, 1999. The Agreement and Declaration of Trust permits the
Company to offer separate series of units of beneficial interest ("shares"), and
separate classes of shares within the Fund. Each share of the Fund represents an
equal proportionate interest in the Fund.
INVESTMENT OBJECTIVE
The Fund seeks current income from interest and price appreciation consistent
with liquidity and safety of principal. There can be no assurance that the Fund
will achieve its investment objective. The net asset value of the Fund is
expected to fluctuate modestly in response to changes in interest rates.
INVESTMENT POLICIES
The Fund invests in a diversified portfolio of securities issued or guaranteed
by the U.S. Government and its agencies and instrumentalities, obligations of
U.S. and foreign commercial banks, corporate debt securities, including
commercial paper, and fully-collateralized repurchase agreements with
highly-rated counterparties. The Fund will invest in obligations of national and
state commercial banks and bank holding companies and their foreign branches, as
well as foreign banks, provided that the obligations shall be payable in U.S.
dollars or fully hedged. The securities acquired by the Fund may include
mortgage-backed and asset-backed securities. The Fund's investment strategies
are designed to produce a total rate of return that exceeds the total return on
90 day U.S. Treasury bills. The Fund seeks to minimize fluctuation in net asset
value by maintaining high credit quality standards and employing a relatively
short effective duration.
Duration is a measure of a security's expected price volatility or risk
associated with changes in the interest rate. Duration is not static, and
responds inversely to changes in interest rates, so that duration shortens when
rates rise and lengthens when rates fall. These changes may be magnified in a
low yield environment. For example, a 30 year, 10% coupon non-callable bond has
a 7.2 year duration in a 15% yield environment, a 9.9 year duration in a 10%
yield environment, and a 14 year duration in a 5% yield environment. Effective
duration is a measure of risk and sensitivity to interest rate changes of bonds
with implied call options, such as callable or putable bonds and mortgage-backed
securities. The calculation of the effective duration of a security takes into
consideration the possibility of early redemption or extension of these options.
The Fund's effective duration generally will not exceed one (1) year, and the
maximum remaining maturity of any individual security will be five and one-half
(5 1/2) years, except for certain mortgage-related and asset-backed securities.
The Fund will purchase the following types of securities if, at the time of
purchase, such securities either have been rated in one of the three highest
rating categories by a nationally recognized statistical rating organization
("NRSRO"), except as noted below, or are determined by Commonfund Asset
Management Company Inc. (the "Investment Manager") or a Sub-Adviser to be of
comparable quality, and are otherwise eligible for investment: (i) obligations
issued or guaranteed as to principal and interest by the U.S. Government or its
agencies or instrumentalities; (ii) corporate bonds and debentures of U.S. or
foreign issuers and denominated in U.S. dollars; (iii) private mortgage-backed
securities; (iv) asset-backed securities; (v) commercial paper rated in one of
the two highest rating categories; (vi) obligations of U.S. and foreign
commercial banks rated in one of the two highest rating sub-categories; and
(vii) fully collateralized repurchase agreements. If a security is downgraded to
below the minimum quality level specified above, the Investment Manager and the
Sub-Adviser(s) involved will review the situation and take appropriate action.
The Fund may purchase fixed income securities with variable and floating rates.
The Fund may invest in illiquid securities in an amount not to exceed 15% of its
net assets. The Fund may purchase securities that are eligible for resale under
Rule 144A and other restricted securities, provided that said securities will be
deemed to be illiquid unless they are deemed liquid under guidelines adopted by
the Company.
The Fund may purchase securities on a when-issued basis or delayed delivery
basis.
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The Fund may enter into futures and options transactions to the extent permitted
for registered investment companies under positions adopted by the Securities
and Exchange Commission (the "SEC") and the staff thereof.
DESCRIPTION OF PERMITTED INVESTMENTS AND RISK FACTORS
ASSET-BACKED SECURITIES
Asset-backed securities are secured by non-mortgage assets such as company
receivables, truck and auto loans, leases and credit card receivables. Such
securities are generally issued as pass-through certificates, which represent
undivided fractional ownership interests in the underlying pools of assets.
Asset-backed securities also may be issued as debt instruments, which are also
known as collateralized obligations and are generally issued as the debt of a
special purpose entity, such as a trust, organized solely for the purpose of
owning such assets and issuing such debt.
Asset-backed securities are not issued or guaranteed by the U.S. Government, its
agencies or instrumentalities; however, the payment of principal and interest on
such obligations may be guaranteed up to certain amounts and for a certain
period by a letter of credit issued by a financial institution (such as a bank
or insurance company) unaffiliated with the issuers of such securities. The
purchase of asset-backed securities presents risk considerations specific to the
financing of the instruments underlying such securities. For example, there is a
risk that another party could acquire an interest in the obligations superior to
that of the holders of the asset-backed securities. There also is the
possibility that recoveries on repossessed collateral may not, in some cases, be
available to support payments on those securities. Asset-backed securities also
entail prepayment risk, which may vary depending on the type of asset, but is
generally less than the prepayment risk associated with mortgage-backed
securities. In addition, credit card receivables are unsecured obligations of
card holders.
BANKERS' ACCEPTANCES AND BANK OBLIGATIONS
The Fund may invest in bankers' acceptances or notes, which are fixed income
instruments evidencing a bank's obligation to pay a draft drawn on it by a
customer. These instruments represent the obligation of the bank and of the
drawer to pay the full amount of the instrument upon maturity. The Fund will
only purchase obligations of banks that are rated in the top two categories by a
major rating agency.
BORROWING
Borrowing may exaggerate changes in the net asset value of the Fund's shares and
in the return on the Fund's portfolio. Although the principal of any borrowing
will be fixed, the Fund's assets may change in value during the time the
borrowing is outstanding. The Fund may be required to liquidate portfolio
securities at a time when it would be disadvantageous to do so in order to make
payments with respect to any borrowing. The Fund may be required to segregate
liquid assets in an amount sufficient to meet its obligations in connection with
such borrowings.
CERTIFICATES OF DEPOSIT
The Fund may invest in certificates of deposit or time deposits, which are
obligations issued against funds deposited in a banking institution for a
specified period of time at a specified interest rate.
DERIVATIVES
Derivatives are instruments that derive their value from other securities,
baskets of securities, financial instruments or indices (for each derivative
instrument, this is sometimes referred to as the "underlying"). The following
are considered derivative securities: financial futures, options (e.g., puts and
calls) on financial futures, options on securities, swap agreements, certain
mortgage-backed securities (e.g., CMOs), when-issued securities, floating and
variable rate securities and "stripped" U.S. Treasury securities (e.g., STRIPs).
See elsewhere in the "Description of Permitted Investments" for discussions of
these various instruments.
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FIXED INCOME SECURITIES
The market values of fixed income investments change in response to interest
rate changes and other factors. During periods of falling interest rates, the
values of outstanding fixed income securities generally rise. Conversely, during
periods of rising interest rates, the values of such securities generally
decline. Moreover, while securities with longer maturities tend to produce
higher yields, the prices of longer maturity securities are also subject to
greater market fluctuations as a result of changes in interest rates. Changes by
recognized agencies in the rating of any fixed income security and in the
ability of an issuer to make payments of interest and principal also affect the
value of these investments. Changes in the value of these securities will not
necessarily affect cash income derived from these securities, but will affect
the Fund's net asset value.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
Futures contracts provide for the future sale or purchase by a party of a
specified amount of a specific underlying at a specified future time and at a
specified price. An option on a futures contract gives the purchaser the right,
in exchange for a premium, to assume a position in a futures contract at a
specified exercise price during the term of the option. The Fund may use futures
contracts and related options for bona fide hedging purposes, to offset changes
in the value of securities held or expected to be acquired or be disposed of, to
minimize fluctuations in foreign currencies, or to gain exposure to a particular
market or instrument. The Fund will seek to minimize the risk that it will be
unable to close out a futures contract by only entering into futures contracts
which are traded on recognized futures exchanges.
No price is paid upon entering into futures contracts. Instead, the Fund is
required to deposit an amount of cash or U.S. Treasury securities known as
"initial margin." Subsequent payments, called "variation margin," to and from
the broker, would be made on a daily basis as the value of the futures position
varies (a process known as "marking to market"). The margin is in the nature of
a performance bond or good-faith deposit on a futures contract.
There are risks associated with these activities, including the following: (1)
the success of a hedging strategy may depend on an ability to predict movements
in the prices of the individual underlying securities, fluctuations in markets
and movements in interest rates; (2) there may be an imperfect or no correlation
between the changes in market value of the underlying securities held by the
Fund and the prices of futures and options on futures; (3) there may not be a
liquid secondary market for a futures contract or option; (4) trading
restrictions or limitations may be imposed by an exchange; and (5) government
regulations may restrict trading in futures contracts and options on futures.
The Fund may enter into futures contracts and options on futures contracts
traded on an exchange regulated by the Commodities Futures Trading Commission
("CFTC"), as long as, to the extent that such transactions are not for "bona
fide" hedging purposes or risk management, the aggregate initial margin and
premiums on such positions (excluding the amount by which such options are in
the money) do not exceed 5% of the Fund's net assets. The Fund may buy and sell
futures contracts and related options to manage its exposure to changing
interest rates and securities prices. Some strategies reduce the Fund's exposure
to price fluctuations, while others tend to increase its market exposure.
Futures and options on futures can be volatile instruments and involve certain
risks that could negatively impact the Fund's return.
ILLIQUID SECURITIES
Illiquid securities are securities that cannot be disposed of within seven
business days at approximately the price at which they are being carried on the
Fund's books. Illiquid securities include demand instruments with demand notice
periods exceeding seven days, securities for which there is no active secondary
market, and repurchase agreements with durations or maturities over seven days
in length.
MORTGAGE-RELATED SECURITIES
A mortgage-related security is an interest in a pool of mortgage loans. Most
mortgage-related securities are pass-through securities, which means that
investors receive payments consisting of a pro rata share of both principal
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and interest (less servicing and other fees), as well as unscheduled
prepayments, as mortgages in the underlying mortgage pool are paid off by
borrowers.
Agency-Mortgage-Related Securities: The dominant issuers or guarantors of
mortgage-related securities today are the Government National Mortgage
Association ("GNMA"), Fannie Mae and the Federal Home Loan Mortgage Corporation
("FHLMC"). GNMA creates pass-through securities from pools of U.S. government
guaranteed or insured (such as by the Federal Housing Authority or Veterans
Administration) mortgages originated by mortgage bankers, commercial banks and
savings associations. Fannie Mae and FHLMC issue pass-through securities from
pools of conventional and federally insured and/or guaranteed residential
mortgages obtained from various entities, including savings associations,
savings banks, commercial banks, credit unions and mortgage bankers.
Fannie Mae Securities: Fannie Mae is a federally chartered and privately owned
corporation established under the Federal National Mortgage Association Charter
Act. Fannie Mae provides funds to the mortgage market primarily by purchasing
home mortgage loans from local lenders, thereby providing them with funds for
additional lending. Fannie Mae uses its funds to purchase loans from investors
that may not ordinarily invest in mortgage loans directly, thereby expanding the
total amount of funds available for housing.
Each Fannie Mae pass-through security represents a proportionate interest in one
or more pools of loans, including conventional mortgage loans (that is, mortgage
loans that are not insured or guaranteed by any U.S. Government agency). The
pools consist of one or more of the following types of loans: (1) fixed-rate
level payment mortgage loans; (2) fixed-rate growing equity mortgage loans; (3)
fixed-rate graduated payment mortgage loans; (4) variable rate mortgage loans;
(5) other adjustable rate mortgage loans; and (6) fixed-rate mortgage loans
secured by multifamily projects.
Federal Home Loan Mortgage Corporation Securities: The operations of FHLMC
currently consist primarily of the purchase of first lien, conventional,
residential mortgage loans and participation interests in mortgage loans and the
resale of the mortgage loans in the form of mortgage-backed securities.
The mortgage loans underlying FHLMC securities typically consist of fixed-rate
or adjustable rate mortgage loans with original terms to maturity of between 10
to 30 years, substantially all of which are secured by first liens on
one-to-four-family residential properties or multifamily projects. Each mortgage
loan must be whole loans, participation interests in whole loans and undivided
interests in whole loans or participation in another FHLMC security.
Government National Mortgage Association Securities: GNMA is a wholly-owned
corporate instrumentality of the U.S. Government within the Department of
Housing and Urban Development. In order to meet its obligations under a
guarantee, GNMA is authorized to borrow from the U.S. Treasury with no
limitations as to amount.
GNMA pass-through securities may represent a proportionate interest in one or
more pools of the following types of mortgage loans: (1) fixed-rate level
payment mortgage loans; (2) fixed-rate graduated payment mortgage loans; (3)
fixed-rate growing equity mortgage loans; (4) fixed-rate mortgage loans secured
by manufactured (mobile) homes; (5) mortgage loans on multifamily residential
properties under construction; (6) mortgage loans on completed multifamily
projects; (7) fixed-rate mortgage loans as to which escrowed funds are used to
reduce the borrower's monthly payments during the early years of the mortgage
loans ("buydown" mortgage loans); (8) mortgage loans that provide for
adjustments on payments based on periodic changes in interest rates or in other
payment terms of the mortgage loans; and (9) mortgage-backed serial notes.
The principal and interest on GNMA pass-through securities are guaranteed by
GNMA and backed by the full faith and credit of the U.S. Government. Fannie Mae
guarantees full and timely payment of all interest and principal, while FHLMC
guarantees timely payment of interest and ultimate collection of principal, of
its pass-through securities. Fannie Mae and FHLMC securities are not backed by
the full faith and credit of the United States; however, they are generally
considered to present minimal credit risks. The yields provided by these
mortgage-related securities historically have exceeded the yields on other types
of U.S. government securities with comparable maturities in large measure due to
the risks associated with prepayment.
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Adjustable rate mortgage securities ("ARMs") are a form of pass-through security
representing interests in pools of mortgage loans, the interest rates of which
are adjusted from time to time. The adjustments usually are determined in
accordance with a predetermined interest rate index and may be subject to
certain limits. The adjustment feature of ARMs tends to make their values less
sensitive to interest rate changes. As the interest rates on the mortgages
underlying ARMs are reset periodically, yields of such portfolio securities will
gradually align themselves to reflect changes in market rates. Unlike fixed-rate
mortgages, which generally decline in value during periods of rising interest
rates, ARMs allow the Fund to participate in increases in interest rates through
periodic adjustments in the coupons of the underlying mortgages, resulting in
both higher current yields and low price fluctuations. Furthermore, if
prepayments of principal are made on the underlying mortgages during periods of
rising interest rates, the Funds may be able to reinvest such amounts in
securities with a higher current rate of return. During periods of declining
interest rates, of course, the coupon rates may readjust downward, resulting in
lower yields to the Funds. Further, because of this feature, the values of ARMs
are unlikely to rise during periods of declining interest rates to the same
extent as fixed rate instruments.
Collateralized mortgage obligations ("CMOs") are mortgage-related securities
that separate the cash flows of mortgage pools into different components called
classes or "tranches." Each class of a CMO is issued at a specific fixed or
floating coupon rate and has a stated maturity or final distribution date.
Principal prepayments on the collateral pool may cause the various classes of a
CMO to be retired substantially earlier than their stated maturities or final
distribution dates. The principal of, and interest on, the collateral pool may
be allocated among the several classes of a CMO in a number of different ways.
Generally, the purpose of the allocation of the cash flow of a CMO to the
various classes is to obtain a more predictable cash flow to some of the
individual tranches than exists with the underlying collateral of the CMO. As a
general rule, the more predictable the cash flow is on a CMO tranche, the lower
the anticipated yield will be on that tranche at the time of issuance relative
to prevailing market yields on mortgage-related securities. Certain classes of
CMOs may have priority over others with respect to the receipt of prepayments on
the mortgages.
The Fund considers GNMA-, Fannie Mae-, and FHLMC-issued pass-through
certificates, CMOs, and other mortgage-related securities to be U.S. Government
securities for purposes of each Fund's investment policies.
Privately Issued Mortgage-Related Securities: Mortgage-related securities
offered by private issuers include pass-through securities for pools of
conventional residential mortgage loans; mortgage pay-through obligations and
mortgage-backed bonds, which are considered to be obligations of the institution
issuing the bonds and are collateralized by mortgage loans; and bonds and CMOs
which are collateralized by mortgage-related securities issued by GNMA, Fannie
Mae, FHLMC or by pools of conventional mortgages. The Fund limits its
investments in privately issued mortgage-related securities to "mortgage related
securities" within the meaning of the Secondary Mortgage Market Enhancement Act
of 1984, as amended.
The Fund may invest in, among other things, "parallel pay" CMOs, Planned
Amortization Class CMOs ("PAC Bonds") and REMICs. A REMIC is a CMO that
qualifies for special tax treatment under the Internal Revenue Code of 1986 (the
"Code") and invests in certain mortgages principally secured by interests in
real property. Investors may purchase beneficial interests in REMICS, which are
known as "regular" interests, or "residual" interests. The Portfolios will not
invest in residual REMICs. Guaranteed REMIC pass-through certificates (REMIC
Certificates) issued by Fannie Mae, FHLMC or GNMA represent beneficial ownership
interests in a REMIC trust consisting principally of mortgage loans or Fannie
Mae, FHLMC or GNMA-guaranteed mortgage pass-through certificates. For FHLMC
REMIC Certificates, FHLMC guarantees the timely payment of interest, and also
guarantees the payment of principal as payments are required to be made on the
underlying mortgage participation certificates. Fannie Mae REMIC Certificates
are issued and guaranteed as to timely distribution of principal and interest by
Fannie Mae. GNMA REMIC certificates are supported by the full faith and credit
of the U.S. Treasury.
Parallel pay CMOs, as well as REMICs, are structured to provide payments of
principal on each payment date to more than one class. These simultaneous
payments are taken into account in calculating the stated maturity date or final
distribution date of each class, which like the other CMO structures, must be
retired by its stated maturity date or final distribution date but may be
retired earlier. PAC Bonds are parallel pay CMOs that generally require
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payments of a specified amount of principal on each payment date; the required
principal payment on PAC Bonds have the highest priority after interest has been
paid to all classes.
Mortgage-related securities created by private issuers generally offer a higher
rate of interest (and greater credit and interest rate risk) than U.S.
Government and U.S. Government mortgage-related securities because they offer no
direct or indirect government guarantees of payments. However, many issuers or
servicers of mortgage-related securities guarantee, or provide insurance for,
timely payment of interest and principal on such securities.
Additional Risk Factors: Due to the possibility of prepayments of the underlying
mortgage instruments, mortgage-backed securities generally do not have a known
maturity. In the absence of a known maturity, market participants generally
refer to an estimated average life. An average life estimate is a function of an
assumption regarding anticipated prepayment patterns, based upon current
interest rates, current conditions in the relevant housing markets and other
factors. The assumption is necessarily subjective, and thus different market
participants can produce different average life estimates with regard to the
same security. There can be no assurance that estimated average life will be a
security's actual average life.
OPTIONS
Options give the holder of the option the right to buy or sell an underlying at
an agreed price, while obligating the writer of the option to buy or sell at the
agreed price if exercised by the buyer. A put option gives the purchaser of the
option the right to sell, and the writer of the option the obligation to buy,
the underlying security at any time during the option period. A call option
gives the purchaser of the option the right to buy, and the writer of the option
the obligation to sell, the underlying security at any time during the option
period. The premium paid to the writer is the consideration for undertaking the
obligations under the option contract. The initial purchase (sale) of an option
contract is an "opening transaction." The writer of an option may close out an
option position that it has written, by entering into a "closing transaction,"
which is simply the purchase of an option contract on the same security with the
same exercise price and expiration date as the option contract originally
opened. If the writer is unable to effect a closing transaction, it will be
obligated to honor the option until the option expires or it delivers the
underlying upon exercise. When the Fund writes an option, it will "cover" its
obligation by holding the underlying (in the case of a call option) or
segregating or earmarking cash (in the case of a put option) needed to satisfy
its obligation until it enters into a closing transaction, the option expires,
or the Fund delivers the underlying security upon exercise by the option holder.
The Fund may purchase put and call options to protect against declines in the
market values of the securities in its portfolio, or in anticipation of
movements in the market values of securities subject to the option. When the
Fund purchases put and call options it pays a premium. If price movements in the
underlying securities are such that exercise of the option would not be
profitable, the Fund's loss will equal the amount of the premium. In the case of
a put option, where the Fund already holds the underlying security, the loss of
the premium may be offset by an increase in the value of the Fund's security. In
the case of a call option, where the Fund acquires the underlying security in a
separate transaction, the loss of the premium may be offset by a decrease in the
cost of acquisition of the security.
The Fund may write covered call and put options as a means of increasing the
yield on its portfolio. When the Fund writes an option, if the underlying
securities do not increase or decrease to a price that would make the exercise
of the option by the option holder profitable, the holder generally will allow
the option to expire without being exercised. In such a situation, the Fund will
have realized as profit the premium received for writing the option. When a call
option written by the Fund is exercised, the Fund will be required to sell the
underlying securities to the option holder at the strike price. This price
generally will be lower than the price the Fund could have received if it sold
the underlying at the market price. When a put option written by the Fund is
exercised, the Fund will be required to purchase the underlying securities from
the option holder at the strike price. This price generally will be higher than
the price the Fund would have paid if it bought the underlying at the market
price.
The Fund may purchase and write options on an exchange or over the counter. Over
the counter options ("OTC options") differ from exchange-traded options in
several respects. They are transacted directly with dealers and not with a
clearing corporation, and therefore entail the risk of non-performance by the
counterparty. OTC options are available for a greater variety of securities and
for a wider range of expiration dates and exercise
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prices than are available for exchange-traded options. Because OTC options are
not traded on an exchange, pricing normally is determined by reference to
information provided by a market maker. OTC options generally are considered to
be illiquid.
Risk Factors: Risks associated with options transactions include: (1) the
success of a hedging strategy may depend on an ability to predict movements in
the prices of individual securities, fluctuations in markets and movements in
interest rates; (2) there may be an imperfect correlation between the movement
in prices of options and the securities underlying them; and (3) there may not
be a liquid secondary market for options.
PORTFOLIO TURNOVER
An annual portfolio turnover rate in excess of 100% may result from the
Investment Manager's use of a multimanager approach. Higher portfolio turnover
may result in higher transaction costs and taxable gains being passed through to
taxable shareholders.
REPURCHASE AGREEMENTS
Repurchase agreements are agreements by which the Fund obtains a security in
exchange for cash and simultaneously commits to return the security to the
seller (typically, a member bank of the Federal Reserve System or primary
securities dealer as recognized by the Federal Reserve Bank of New York) at an
agreed upon price (including principal and interest) on an agreed upon date
within a number of days (usually not more than seven) from the date of purchase.
The resale price reflects the purchase price plus an agreed upon market rate of
interest, which is unrelated to the coupon rate or maturity of the underlying
security. A repurchase agreement involves the obligation of the seller to pay
the agreed upon price, which obligation is, in effect, secured by the value of
the underlying security.
Repurchase agreements are considered to be loans by the Fund for purposes of its
investment limitations. The repurchase agreements entered into by the Fund will
provide that the underlying security at all times shall have a value at least
equal to the resale price stated in the agreement. Under all repurchase
agreements entered into by the Fund, the Company's Custodian or its agent must
take possession of the underlying collateral. However, if the seller defaults,
the Fund could realize a loss on the sale of the underlying security to the
extent that the proceeds of sale, including accrued interest, are less than the
resale price provided in the agreement including interest. In addition, even
though the Bankruptcy Code provides protection for most repurchase agreements,
if the seller should be involved in bankruptcy or insolvency proceedings, the
Fund may experience delays and incur costs in selling the underlying security,
or may suffer a loss of principal and interest if the Fund is treated as an
unsecured creditor and is required to return the underlying security to the
seller's estate.
RULE 144A SECURITIES
Rule 144A securities are securities exempt from registration on resale pursuant
to Rule 144A under the Securities Act of 1933, as amended (the "1933 Act"). Rule
144A securities are traded in the institutional market pursuant to this
registration exemption, and, as a result, may not be as liquid as
exchange-traded securities since they may only be resold to certain qualified
institutional investors. Due to the relatively limited size of this
institutional market, these securities may affect the Fund's liquidity to the
extent that qualified institutional buyers become, for a time, uninterested in
purchasing such securities. Nevertheless, Rule 144A securities may be treated as
liquid securities pursuant to guidelines adopted by the Company's Board of
Directors.
SECURITIES LENDING
In order to generate additional income, the Fund may lend its securities
pursuant to agreements requiring that the loan be continuously secured by
collateral consisting of cash or securities of the U.S. Government or its
agencies equal to at least 100% of the market value of the loaned securities.
The Fund continues to receive interest on the loaned securities while
simultaneously earning interest on the investment of cash collateral. Collateral
is marked to market daily. There may be risks of delay in recovery of the
securities or even loss of rights in the collateral should the borrower of the
securities fail financially or become insolvent.
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U.S. GOVERNMENT SECURITIES
U.S. Government Securities: U.S. Government securities are bills, notes and
bonds issued by the U.S. Government and backed by the full faith and credit of
the United States.
U.S. Treasury Obligations: U.S. Treasury Obligations are bills, notes and bonds
issued by the U.S. Treasury, and separately traded interest and principal
component parts of such obligations that are transferable through the Federal
book-entry system known as Separately Traded Registered Interest and Principal
Securities ("STRIPS").
U.S. Government Agency Obligations: Certain Federal agencies, such as the GNMA,
have been established as instrumentalities of the U.S. Government to supervise
and finance certain types of activities. Issues of these agencies, while not
direct obligations of the U.S. Government, are either backed by the full faith
and credit of the United States (e.g., GNMA securities) or supported by the
issuing agencies' right to borrow from the Treasury. The issues of other
agencies are supported by the credit of the instrumentality (e.g., Fannie Mae
securities).
VARIABLE AND FLOATING RATE INSTRUMENTS
Certain obligations may carry variable or floating rates of interest, and may
involve a conditional or unconditional demand feature. Such instruments bear
interest at rates which are not fixed, but which vary with changes in specified
market rates or indices. The interest rates on these securities may be reset
daily, weekly, quarterly or some other reset period, and may have a floor or
ceiling on interest rate changes. There is a risk that the current interest rate
on such obligations may not accurately reflect existing market interest rates. A
demand instrument with a demand notice exceeding seven days may be considered
illiquid if there is no secondary market for such security.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
When-issued or delayed delivery securities are subject to market fluctuations
due to changes in market interest rates and it is possible that the market value
at the time of settlement could be higher or lower than the purchase price if
the general level of interest rates has changed. When the Fund agrees to
purchase when-issued or delayed delivery securities, it will earmark or
segregate cash or liquid securities in an amount equal to the Fund's commitment
to purchase these securities. Although the Fund may purchase securities on a
when-issued (or forward commitment) basis with the intention of actually
acquiring securities for its investment portfolio, it may dispose of a
when-issued security or forward commitment prior to settlement if it deems
appropriate.
YANKEE DOLLARS
The Fund may invest in certain fixed income securities known as Yankee dollars,
which are dollar-denominated obligations issued by foreign banks in the U.S.
markets.
YEAR 2000
The Fund and its service providers do not appear to have been adversely affected
by computer problems related to the transition to the year 2000. However, there
remains a risk that such problems could arise or be discovered in the future.
Year 2000 related problems also may negatively affect issuers whose securities
the Fund purchases, which could have an impact on the value of your investment.
INVESTMENT LIMITATIONS
FUNDAMENTAL POLICIES
The following investment limitations are fundamental policies of the Fund which
cannot be changed with respect to the Fund without the consent of the holders of
a majority of the Fund's outstanding shares. The term "majority of the
outstanding shares" means the vote of (i) 67% or more of the Fund's shares
present at a meeting, if more than 50% of the outstanding shares of the Fund are
present or represented by proxy, or (ii) more than 50% of the Fund's outstanding
shares, whichever is less.
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The Fund may not:
1. Purchase securities of any issuer (except securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities and repurchase
agreements involving such securities) if, as a result, (i) more than 5% of
the total assets of the Fund would be invested in the securities of such
issuer; or (ii) acquire more than 10% of the outstanding voting securities of
any one issuer. This restriction applies to 75% of the Fund's total assets.
2. Purchase any securities which would cause 25% or more of the total assets of
the Fund to be invested in the securities of one or more issuers conducting
their principal business activities in the same industry, provided that this
limitation does not apply to investments in obligations issued or guaranteed
by the U.S. Government or its agencies and instrumentalities and repurchase
agreements involving such securities.
3. Borrow money in an amount exceeding 33 1/3% of the value of its total assets,
provided that, for purposes of this limitation, investment strategies which
either obligate the Fund to purchase securities or require the Fund to
segregate assets are not considered to be borrowings.
4. Make loans if, as a result, more than 33 1/3% of its total assets would be
lent to other parties, except that the Fund may (i) purchase or hold debt
instruments in accordance with its investment objective and policies; (ii)
enter into repurchase agreements; and (iii) lend its securities.
5. Purchase or sell real estate, physical commodities, or commodities contracts,
except that the Fund may purchase (i) marketable securities issued by
companies which own or invest in real estate (including real estate
investment trusts), commodities, or commodities contracts; and (ii)
commodities contracts relating to financial instruments, such as financial
futures contracts and options on such contracts.
6. Issue senior securities (as defined in the Investment Company Act of 1940
(the "1940 Act")) except as permitted by rule, regulation or order of the
SEC.
7. Act as an underwriter of securities of other issuers, except as it may be
deemed an underwriter in selling a portfolio security.
8. Invest in interests in oil, gas, or other mineral exploration or development
programs and oil, gas or mineral leases.
The foregoing percentages (except with respect to the limitation on borrowing)
will apply at the time of the purchase of a security and shall not be considered
violated unless an excess or deficiency occurs immediately after or as a result
of a purchase of such security. For the purposes of fundamental restriction
number 2, finance companies are not considered a single industry, but are
grouped instead according to their services.
NON-FUNDAMENTAL POLICIES
The following investment limitations are non-fundamental policies of the Fund
and may be changed with respect to the Fund by the Board of Directors.
The Fund may not:
1. Pledge, mortgage or hypothecate assets, except to secure borrowings permitted
by the Fund's fundamental limitation on borrowing. A transfer of assets under
a repurchase agreement is not considered a pledge or hypothecation subject to
this restriction.
2. Invest in companies for the purpose of exercising control.
3. Purchase securities on margin or effect short sales, except that the Fund may
(i) obtain short-term credits as necessary for the clearance of security
transactions; (ii) provide initial and variation margin payments in
connection with transactions involving futures contracts and options on such
contracts; and (iii) make short sales "against the box" or in compliance with
the SEC's position regarding the asset segregation requirements imposed by
Section 18 of the 1940 Act.
4. Invest its assets in securities of any investment company.
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5. Purchase or hold illiquid securities (i.e., securities that cannot be
disposed of for their approximate carrying value in seven days or less) if,
in the aggregate, more than 15% of its net assets would be invested in
illiquid securities. Unregistered securities sold in reliance on the
exemption from registration in Section 4(2) of the 1933 Act and securities
exempt from registration on re-sale pursuant to Rule 144A of the 1933 Act may
be treated as liquid securities under procedures adopted by the Board of
Directors.
6. Borrow money, except for temporary or emergency circumstances in amounts not
to exceed 5% of the Fund's net assets. For example, the Fund may borrow for
temporary defensive purposes or to meet shareholder redemptions when it would
not be in the best interests of the Fund to liquidate portfolio holdings. The
Fund will not make additional purchases of securities when the Fund's
borrowings exceed 5% of total assets.
THE INVESTMENT MANAGER
Commonfund Asset Management Company, Inc. is an indirect, wholly owned
subsidiary of The Commonfund for Nonprofit Organizations ("Commonfund").
Employees of the Investment Manager are responsible for Commonfund's investment
programs which are conducted in a "manager of managers" format. The Fund will
pay the Investment Manager an annual fee of 0.19% of average net assets for its
services.
The Investment Manager serves as the investment adviser for the Fund under an
investment advisory agreement (the "Advisory Agreement"). Under the Advisory
Agreement, and subject to the supervision of, and policies established by, the
Fund's Board of Directors, the Investment Manager acts as a "manager of
managers" for the Fund, and supervises adherence by the Sub-Adviser(s) with the
Fund's investment policies and guidelines. The Investment Manager also
recommends the appointment of additional or replacement Sub-Advisers to the
Fund's Board of Directors. The Investment Manager makes recommendations to the
Board of Directors with respect to the appropriate allocation of assets to each
of the Sub-Advisers. The Fund and the Investment Manager have requested
exemptive relief from the SEC necessary to permit the Investment Manager and the
Fund to add or terminate Sub-Advisers without shareholder approval. The Advisory
Agreement provides that the Investment Manager shall not be protected against
any liability to the Company or its shareholders by reason of willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or from reckless disregard of its obligations or duties thereunder.
The continuance of the Advisory Agreement after the first two years must be
specifically approved at least annually (i) by the vote of the Board of
Directors or by a vote of the shareholders of the Fund, and (ii) by the vote of
a majority of the Board of Directors who are not parties to the Advisory
Agreement or "interested persons" of any party thereto (the "Independent
Directors"), cast in person at a meeting called for the purpose of voting on
such approval. The Advisory Agreement will terminate automatically in the event
of its assignment, and is terminable at any time without penalty by the Board of
Directors of the Company or, with respect to the Fund, by a majority of the
outstanding shares of the Fund, on not less than 30 days' nor more than 60 days'
written notice to the Investment Manager, or by the Investment Manager on 90
days' written notice to the Company.
THE SUB-ADVISERS
The Fund currently has two sub-advisers: Wellington Management Company, LLP and
Western Asset Management Company (each a "Sub-Adviser" and, collectively, the
"Sub-Advisers"). Each Sub-Adviser will manage a portion of the Fund's assets
allocated to it, which allocation is determined by the Directors upon the
recommendation of the Investment Manager. Each Sub-Adviser makes the investment
decisions for the assets of the Fund subject to the supervision of, and policies
established by, the Board of Directors. Currently, each Sub-Adviser has been
allocated approximately 50% of the Fund's total assets.
WELLINGTON MANAGEMENT COMPANY, LLP ("Wellington Management") traces its origins
to 1928. As of June 30, 1999, the firm had investment management authority with
respect to approximately $223 billion of assets, with approximately $91 billion
in fixed income securities, for domestic and foreign clients. Wellington
Management is headquartered in Boston, Massachusetts, with affiliates in London,
Singapore, Sydney and Tokyo. Wellington Management's investment philosophy is to
maximize total return while limiting the level of risk appropriate for the
strategy by combining a top-down strategy which directs portfolio structure,
including duration and sector weights, and a bottom-up securities selection
process. For its services, Wellington
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Management is entitled to receive a fee from the Fund, which is calculated daily
and paid quarterly, equal to the following percentage of the average daily net
assets of the Fund allocated to it: 0.10% of the first $100 million, 0.075% of
the next $100 million, and 0.055% thereafter.
WESTERN ASSET MANAGEMENT COMPANY ("Western Asset") manages over $50 billion in
assets. The firm has managed short-duration portfolios since 1974. It is
wholly-owned by Legg Mason Inc., a financial services company headquartered in
Baltimore, Maryland. Western Asset applies a team approach to portfolio
management that revolves around their investment outlook, focusing on duration
weighting, term structure position, sector and issue selection. While duration
and yield curve structure decisions underlie Western Asset's investment process,
the company concentrates primarily on sector and issue selection for adding
value. For its services, Western Asset is entitled to receive a fee from the
Fund, which is calculated daily and paid quarterly, at an annual rate of 0.055%
of the average daily net assets of the Fund allocated to it.
FUND ADMINISTRATION
The Company and Investors Bank & Trust Company ("IBT Co.") have entered into an
administration agreement (the "Administration Agreement"), pursuant to which IBT
Co. will provide general fund administration services to the Fund. For the
services rendered by IBT Co., the Company will pay IBT a fee, which is
calculated daily and paid monthly, equal to the following percentages of the
average daily net assets of the Fund allocated to it: 0.05% for $10 billion or
less and 0.0025% for over $10 billion.
The Administration Agreement provides that IBT Co. shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Company in
connection with the matters to which the Administration Agreement relates,
except a loss resulting from willful misfeasance, bad faith or gross negligence
on the part of the Administrator in the performance of its duties or from
reckless disregard by it of its duties and obligations thereunder.
The Administration Agreement has an initial term of three years and is
automatically renewed for an additional three year term unless terminated by
either party on 90 days prior notice. Either party may terminate the
Administration Agreement in the event of a material breach of the Administration
Agreement that is not cured within 90 days of notice thereof, and the Company
may terminate this Administrative Agreement in the event that IBT Co. fails to
cure identified deficiencies within 30 days after a written notice thereof.
IBT Co. also acts as the Fund's Transfer Agent and Fund Accounting Agent
pursuant to separate transfer agency and fund accounting agreements between the
Company and IBT Co.
CUSTODIAN
IBT Co., 200 Clarendon Street, Boston, MA, 02116, acts as the custodian of the
Company. The Custodian holds cash, securities and other assets of the Company as
required by the 1940 Act.
EXPERTS
The Independent Accountants for the Company are PricewaterhouseCoopers LLP
located at 1177 Avenue of the Americas, New York, NY 10036.
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP, 1701 Market Street, Philadelphia, Pennsylvania
19103, serves as counsel to the Company.
DISTRIBUTION
Commonfund Securities, Inc. (the "Distributor"), an indirect, wholly-owned
subsidiary of Commonfund, serves as the distributor of interests in the Company
under a Distribution Agreement. The Distribution Agreement shall remain in
effect for a period of two years after the effective date of the agreement and
is renewable annually thereafter with the approval of a majority of the Board of
Directors and a majority of the Independent Directors.
S-12
<PAGE> 24
The Distribution Agreement may be terminated by the Distributor, by a majority
vote of the Directors who are not interested persons and have no financial
interest in the Distribution Agreement or by a majority vote of the outstanding
securities of the Company upon not more than 60 days' written notice by either
party or upon assignment by the Distributor. The Distributor receives no
compensation from the Fund. The Investment Manager pays the Distributor, from
its own assets, an annual fee equal to the costs it incurs in distributing
shares of the Fund, plus 5% of such costs.
DIRECTORS AND OFFICERS OF THE COMPANY
The management and affairs of the Company are supervised by the Directors under
the laws of the State of Delaware. The Directors have approved contracts under
which, as described above, certain companies provide essential management
services to the Company. The Directors and executive officers of the Company and
their principal occupations for the last five years are set forth below. Each
may have held other positions with the named companies during that period.
Unless otherwise noted, the business address of each Director and each Executive
Officer is c/o Commonfund Institutional Fund, 15 Old Danbury Road, P.O. Box 812,
Wilton, CT 06897-0812.
DIRECTORS
Robert L. Bovinette - 59
Mr. Bovinette has served as President and Chief Executive Officer of The
Common Fund for Nonprofit Organizations since January, 1996. Prior to that time,
he served as President and Chief Executive Officer of Albuquerque Academy in
Albuquerque, New Mexico, a private day school with a substantial endowment.
John B. Carroll - 62
Since August 1997, Mr. Carroll has been Vice President of Investment
Management for GTE Corporation (GTE) and serves as a Senior Advisor to GTE and
its wholly owned subsidiary, GTE Investment Management Corporation (GTE IMC)
consulting on all investment related matters. From 1984 to August 1997 he was
President and Chief Executive of GTE IMC responsible for developing investment
policies and strategies for GTE's $25 billion in employee benefit funds and
other related financial investment worldwide.
Prior to 1984, Mr. Carroll was Executive Vice President and Director of
Consulting and Publishing for Evaluation Associates, Inc. (EAI), a pension fund
consulting firm. Prior to EAI, Mr. Carroll was Vice President and Head of
Pension Consulting Activities and National Expansion for the Trust and
Investment Division of Chemical Bank of New York (now The Chase Manhattan Bank).
Mr. Carroll is also a Director of World Equity Benchmark Shares (WEBS) and the
J.P. Morgan Private Equity Fund. He serves on the Advisory Boards/ Committees of
Ibbotson Associates, Triumph Capital Partners, and the Pension Committee of the
New York Stock Exchange. He is a former Trustee and Member of the Executive
Committee of Commonfund, a past Vice Chairman of CIEBA and a past Chairman of
the Noyes Foundation. Mr. Carroll resides in Ridgefield, CT and Kerry, Ireland.
Louis W. Moelchert - 57
Mr. Moelchert is a registered investment adviser and has been President &
Owner of Private Advisor, LLC since 1996. Since 1975 he has been employed by the
University of Richmond, first as Vice President for Business and Finance from
1975 through 1997, and since 1997 as Vice President for Investments.
Mr. Moelchert has served on the Investment Advisory Committee of the Virginia
State Retirement System since 1996, first as Vice Chairman from 1996 through
1997, and since 1998 as Chairman. He serves on the investment advisory and/or
valuation committees of approximately ten private capital investment funds, on
the Boards of Directors of Venture Lending and Leasing II and the Mentor Family
of Funds, and on the Pension Committee of Albermarle Corporation. He is
President of the Endowment Fund of the River Road Baptist Church.
S-13
<PAGE> 25
From 1986 to 1998, Mr. Moelchert was a member of the Board of Trustees of the
Commonfund, serving as Vice Chairman from 1991 through 1993 and as Chairman from
1994 through 1998. Mr. Moelchert resides in Richmond, Virginia.
Jerald L. Stevens - 59
Since 1985, Mr. Stevens has been a consultant in the areas of investment
and financial management to a range of clients including American Express,
Rockefeller & Company, James Wolfenson & Co., Indiana University and Xerox
Financial Services where he served as Executive Vice President and Chief of
Staff from 1988 through 1990. From 1983 through 1985 he was President and Chief
Operating Officer of Vanguard Group, and from 1978 through 1983 he served as
Vice President, Finance and Administration, and Treasurer of Yale University
where he had overall responsibility for all investment activities where major
initiatives were launched in real estate, venture capital, index investing and
international markets.
Mr. Stevens was Secretary of Human Services and Commissioner of Public Welfare
for the Commonwealth of Massachusetts from 1975 through 1978, Senior Vice
President of the Boston Company, from 1973 through 1975, and Senior Vice
President and Director of Wellington Management Company from 1967 through 1973.
Mr. Stevens has served as Trustee of Bryn Mawr College 1984-1994 and has been a
Board Member of the Long Wharf Theatre 1991-1993, University City Science Center
1983-1988, Thomas Jefferson University 1983-1988 and Yale New Haven Hospital
1978-1983. He was a trustee of the Hospital Fund, Inc. from 1991 through 1999,
serving as Chairman from 1995 through 1999. Mr. Stevens resides in Hamden, CT.
William T. Spitz - 48
Mr. Spitz has been Treasurer of Vanderbilt University since November 1985.
As a General Officer he has specific responsibility for management of the
University's $1.8 billion endowment, banking relationships and cash management,
external financing, life income trusts valued at $60.0 million, and management
of working capital of approximately $500.0 million. As a member of the
Chancellor's Management Group he also participates in the day-to-day
administration of the University. He is a Chartered Financial Analyst.
From January 1985 to November 1985, Mr. Spitz was President and Chief Investment
Officer of NSR Asset Management Corporation with responsibility for managing
$500.0 million in pension, profit sharing and foundation investment assets. He
was Vice President, Director of Research, and Portfolio Manager at Wertheim
Asset Management Corporation from 1979 to January 1985 with responsibility for
$200.0 million in pension fund assets. From 1978 to October 1979 he served as
Vice President and Portfolio Manager at MD Sass Investors Services managing
$100.0 million in individual and retirement fund assets. Mr. Spitz was a Senior
Research Officer at Citibank NA from February 1975 to January 1978.
Mr. Spitz has been a Trustee of Commonfund since 1990, currently serving as
Chairman since 1998. He is also a Trustee of Commonfund Capital, Inc. and
Endowment Realty Investors I and II. He serves as a Director of Bradford Funds,
including Bradford Money Market Fund, advised by J.C. Bradford & Company, a
Director of Diversified Trust Company, a Tennessee chartered Trust Company with
five comingled investment funds, managed by independent investment advisers,
offered principally to individuals and small pension funds. Diversified will
accept assets from educational endowments, but that is not a target market, and
Diversified retains several managers also retained to advise funds maintained by
Commonfund.
Mr. Spitz is an Adjunct Professor of Management at the Owen Graduate School of
Management, Vanderbilt University, serves as Co-Director of the Commonfund
Endowment Institute, and is the author of a number of articles and several books
dealing with investment management issues. Mr. Spitz resides in Nashville, TN.
OFFICERS
President - Robert L. Bovinette - see above.
Secretary - John W. Auchincloss - 41
Mr. Auchincloss is Associate General Counsel and Secretary of The Common
Fund for Nonprofit Organizations. He joined that organization as Assistant
General Counsel in July 1996. Prior to that time he was of
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<PAGE> 26
Counsel to the Westport, Connecticut law firm of Levett, Rockwood & Sanders,
P.C. which he joined after serving as an Assistant United States Attorney in the
Office of the United States Attorney for the Southern District of New York in
the Spring of 1994.
Assistant Secretary - Susan C. Mosher - 44
Ms. Mosher is a Director of Mutual Fund Administration at Investors Bank &
Trust Company. She has been employed by the organization in such capacity since
1995. Prior to joining Investors Bank & Trust Company, Ms. Mosher served as
Associate Counsel to 440 Financial Group, Inc., a subsidiary of Allamerica
Financial, from 1992 to 1995.
Treasurer - Marita K. Wein - 37
Ms. Wein is Senior Vice President and Treasurer of The Common Fund for
Nonprofit Organizations. She has been employed by that organization for 12 years
in the fund accounting area and, since her appointment to her present position
in June 1997, she has been responsible for general investor accounting and
reporting functions of the company.
Assistant Treasurer - Timothy F. Osborne - 32
Mr. Osborne serves as a Director of Mutual Fund Administration at Investors
Bank & Trust Company, a position he assumed in 1998. Mr. Osborne joined
Investors Bank & Trust Company in 1995 as a Manager. Prior to that time, Mr.
Osbourne was an Account Supervisor at Chase Global Fund Services from 1992 to
1995.
COMPENSATION OF DIRECTORS AND OFFICERS
The Officers of the Company serve without compensation as such. The Company pays
Mr. Carroll, Mr. Moelchert, Mr. Stevens and Mr. Spitz each an annual fee of
$8,000, plus reasonable out-of-pocket expenses.
The Directors and Officers of the Company own less than 1% of the outstanding
shares of the Fund.
COMPENSATION TABLE*
<TABLE>
<CAPTION>
DIRECTOR AGGREGATE ESTIMATED ANNUAL TOTAL COMPENSATION
COMPENSATION PENSION OR BENEFITS UPON FROM FUND AND
FROM FUND RETIREMENT BENEFITS RETIREMENT FUND COMPLEX
ACCRUED AS PART OF PAID
FUND EXPENSES TO DIRECTORS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert L. Bovinette, None None None None
Director
John B. Carroll, $8,000 None None $8,000
Director
Louis W. Moelchert, $8,000 None None $8,000
Director
Jerald L. Stevens, $8,000 None None $8,000
Director
William T. Spitz, $8,000 None None $8,000
Director
</TABLE>
- ---------------
* The compensation figures are based on estimates of future payments for the
current fiscal year.
COMPUTATION OF YIELD AND TOTAL RETURN
From time to time the Company may advertise yield and total return of the Fund.
These figures will be based on historical earnings and are not intended to
indicate future performance. No representation can be made concerning actual
future yields or returns. The yield of the Fund refers to the annualized income
generated by an investment in the Fund over a specified 30-day period. The yield
is calculated by assuming that the income
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generated by the investment during that 30-day period is generated in each
period over one year and is shown as a percentage of the investment. In
particular, yield will be calculated according to the following formula:
Yield = 2[((a-b)/cd + 1)(6) - 1] where a = dividends and interest earned during
the period; b = expenses accrued for the period (net of any reimbursement); c =
the current daily number of shares outstanding during the period that were
entitled to receive dividends; and d = the maximum offering price per share on
the last day of the period.
The total return of the Fund refers to the average compounded rate of return to
a hypothetical investment for designated time periods (including but not limited
to, the period from which the Fund commenced operations through the specified
date), assuming that the entire investment is redeemed at the end of each
period. In particular, total return will be calculated according to the
following formula: P (1 + T)(n) = ERV, where P = a hypothetical initial payment
of $1,000; T = average annual total return; n = number of years; and ERV =
ending redeemable value, as of the end of the designated time period, of a
hypothetical $1,000 payment made at the beginning of the designated time period.
PURCHASE AND REDEMPTION OF SHARES
Purchases and redemptions may be made through Investors Bank & Trust Company
(the "Transfer Agent") on days when the Federal Reserve System and the New York
Stock Exchange are both open for business. Currently, the weekdays on which the
Fund is closed for business are: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veterans Day, Thanksgiving Day and Christmas Day. Shares of the
Fund are offered on a continuous basis.
It is currently the Company's policy to pay all redemptions in cash. The Company
retains the right, however, to alter this policy to provide for redemptions in
whole or in part by a distribution in-kind of securities held by the Fund in
lieu of cash. The Company has elected to be governed by Rule 18f-1 under the
1940 Act, under which the Trust is obligated to redeem shares for any one
shareholder of record in cash only up to the lesser of $250,000 or 1% of the
Fund's net asset value during any 90-day period. Shareholders may incur
brokerage charges on the sale of any such securities so received in payment of
redemptions.
The Company reserves the right to suspend the right of redemption and/or to
postpone the date of payment upon redemption for any period on which trading on
the New York Stock Exchange is restricted, or during the existence of an
emergency (as determined by the SEC by rule or regulation) as a result of which
disposal or valuation of the Fund's securities is not reasonably practicable, or
for such other periods as the SEC has by order permitted. The Company also
reserves the right to suspend sales of shares of the Fund for any period during
which the New York Stock Exchange, the Investment Manager, the Administrator,
the Transfer Agent and/or the Custodian are not open for business.
DETERMINATION OF NET ASSET VALUE
The securities of the Fund are valued by the Investors Bank & Trust Company (the
"Custodian"), with assistance of the Sub-Advisers, under the general supervision
of a Valuation Committee appointed by the Board of Directors. The Custodian may
use an independent pricing service to obtain valuations of securities. The
pricing service relies primarily on prices of actual market transactions as well
as on trade quotations obtained from third parties. However, the pricing service
may use a matrix system to determine valuations of fixed income securities. This
system considers such factors as security prices, yields, maturities, call
features, ratings and developments relating to specific securities in arriving
at valuations. The procedures used by the pricing service and its valuation are
reviewed by the officers of the Company under the general supervision of the
Board of Directors. If there is no readily ascertainable market value for a
security, the Investment Manager may make a good faith determination as to the
"fair value" of the security in accordance with procedures adopted by the Board
of Directors and a Valuation Committee.
Securities with remaining maturities of 60 days or less will be valued by the
amortized cost method, unless it is determined not to represent fair value in
accordance with procedures adopted by the Board of Directors. The amortized cost
method involves valuing a security at its cost on the date of purchase and
thereafter (unless amortized cost is determined in accordance with procedures
approved by the Board of Directors not to represent
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<PAGE> 28
fair value) assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuations in general market rates of
interest on the value of the instrument. While this method provides certainty in
valuation, it may result in periods during which value, as determined by this
method, is higher or lower than the price the Fund would receive if it sold the
instrument.
TAXES
The following is only a summary of certain tax considerations generally
affecting the Fund and its shareholders, and is not intended as a substitute for
careful tax planning. Shareholders are urged to consult their tax advisors with
specific reference to their own tax situations, including their state and local
tax liabilities.
FEDERAL INCOME TAX
The following is only a summary of certain additional federal tax considerations
generally affecting the Fund that are not discussed in the Fund's Prospectus. No
attempt is made to present a detailed explanation of the federal, state or local
tax treatment of the Fund or its shareholders and the discussion here and in the
Fund's prospectus is not intended as a substitute for careful tax planning.
The discussion of federal income tax consequences is based on the Code and the
regulations issued thereunder as in effect on the date of this Statement of
Additional Information. New legislation, as well as administrative changes or
court decisions, may significantly change the conclusions expressed herein, and
may have a retroactive effect with respect to the transactions contemplated
herein.
The Fund intends to qualify as a "regulated investment company" ("RIC") as
defined under Subchapter M of the Code. By following such a policy, the Fund
expects to eliminate or reduce to a nominal amount the federal taxes to which it
may be subject.
In order to qualify for treatment as a RIC under the Code, the Fund must
distribute annually to its shareholders at least the sum of 90% of its net
interest income excludable from gross income plus 90% of its investment company
taxable income (generally, net investment income plus net short-term capital
gain) ("Distribution Requirement") and also must meet several additional
requirements. Among these requirements are the following: (i) at least 90% of
the Fund's gross income each taxable year must be derived from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stock or securities, or certain other income (including
gains from options, futures or forward contracts); (ii) at the close of each
quarter of the Fund's taxable year, at least 50% of the value of its total
assets must be represented by cash and cash items, U.S. Government securities,
securities of other RICs and other securities, with such other securities
limited, in respect to any one issuer, to an amount that does not exceed 5% of
the value of the Fund's assets and that does not represent more than 10% of the
outstanding voting securities of such issuer; and (iii) at the close of each
quarter of the Fund's taxable year, not more than 25% of the value of its assets
may be invested in securities (other than U.S. Government securities or the
securities of other RICs) of any one issuer, or of two or more issuers which are
engaged in the same, similar or related trades or business if the Fund owns at
least 20% of the voting power of such issuer.
Notwithstanding the Distribution Requirement described above, which requires
only that the Fund distribute at least 90% of its annual investment company
taxable income and does not require any minimum distribution of net capital gain
(the excess of net long-term capital gain over net short-term capital loss), the
Fund will be subject to a nondeductible 4% federal excise tax to the extent it
fails to distribute by the end of any calendar year 98% of its ordinary income
for that year and 98% of its capital gain net income (the excess of short- and
long-term capital gains over short-and long-term capital losses) for the
one-year period ending on October 31 of that year, plus certain other amounts.
The Fund intends to make sufficient distributions to avoid liability for the
federal excise tax. The Fund may in certain circumstances be required to
liquidate Fund investments in order to make sufficient distributions to avoid
federal excise tax liability at a time when the Investment Manager or
Sub-Adviser might not otherwise have chosen to do so, and liquidation of
investments in such circumstances may affect the ability of the Fund to satisfy
the requirements for qualification as a RIC.
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<PAGE> 29
Any gain or loss recognized on a sale, exchange or redemption of shares of the
Fund by a taxable shareholder who is not a dealer in securities will generally,
for individual shareholders, be treated as a long-term capital gain or loss if
the shares have been held for more than twelve months, and otherwise will be
treated as short-term capital gain or loss. However, if shares on which a
taxable shareholder has received a net capital gain distribution are
subsequently sold, exchanged or redeemed and such shares have been held for six
months or less, any loss recognized will be treated as a long-term capital loss
to the extent of the net capital gain distribution. Long-term capital gains are
currently taxed at a maximum rate of 20% and short-term capital gains are
currently taxed at ordinary income tax rates.
In certain cases, the Fund will be required to withhold, and remit to the U.S.
Treasury, 31% of any distributions paid to a shareholder who (1) has failed to
provide a correct taxpayer identification number, (2) is subject to backup
withholding by the Internal Revenue Service, or (3) has not certified to the
Fund that such shareholder is not subject to backup withholding.
If the Fund fails to qualify as a RIC for any taxable year, it will be taxable
at regular corporate rates. In such an event, all distributions (including
capital gains distributions) will be taxable as ordinary dividends to the extent
of the Fund's current and accumulated earnings and profits, and such
distributions may generally be eligible for the corporate dividends-received
deduction.
STATE TAXES
The Fund is not liable for any income or franchise tax in Delaware if it
qualifies as a RIC for federal income tax purposes. Distributions by the Fund to
shareholders and the ownership of shares may be subject to state and local
taxes.
PORTFOLIO TRANSACTIONS
The Sub-Advisers are authorized to select brokers and dealers to effect
securities transactions for the Fund. The Sub-Advisers will seek to obtain the
most favorable net results by taking into account various factors, including
price, commission, if any, size of the transactions and difficulty of
executions, the firm's general execution and operational facilities and the
firm's risk in positioning the securities involved. While the Sub-Advisers
generally seek reasonably competitive spreads or commissions, the Fund will not
necessarily be paying the lowest spread or commission available. The
Sub-Advisers seek to select brokers or dealers that offer the Fund best price
and execution and other services which are of benefit to the Fund.
The Sub-Advisers may, consistent with the interests of the Fund, consider
research services that a broker or a dealer provides in selecting brokers and
dealers for the Fund. Such services may include analyses of the business or
prospects of a company, industry or economic sector, or statistical and pricing
services. Information so received by the Sub-Advisers will be in addition to and
not in lieu of the services required to be performed by them under their
Sub-Advisory Agreements. If, in the judgment of a Sub-Adviser, the Fund or other
accounts managed by the Sub-Adviser will be benefitted by supplemental research
services, the Sub-Adviser is authorized to pay brokerage commissions to a broker
furnishing such services which are in excess of commissions which another broker
may have charged for effecting the same transaction. These research services
include advice, either directly or through publications or writings, as to the
value of securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities or purchasers or sellers of
securities; furnishing of analyses and reports concerning issuers, securities or
industries; providing information on economic factors and trends; assisting in
determining portfolio strategy; providing computer software used in security
analyses; and providing portfolio performance evaluation and technical market
analyses. The expenses of the Sub-Adviser will not necessarily be reduced as a
result of the receipt of such supplemental information, such services may not be
used exclusively with respect to the Fund or account generating the brokerage,
and there can be no guarantee that the Sub-Adviser will find all of such
services of value in advising the Fund.
VOTING
Each share held entitles the shareholder of record to one vote. Shares issued by
the Fund have no preemptive, conversion, or subscription rights. Each whole
share shall be entitled to one vote and each fractional share shall
S-18
<PAGE> 30
be entitled to a proportionate fractional vote. The Fund, as a separate series
of the Company, votes separately on matters affecting only the Fund. Voting
rights are not cumulative. To the extent the Fund may offer different classes of
shares in the future, shareholders of each Class of the Fund will vote
separately on matters pertaining solely to that Class. As a Delaware business
trust, the Company is not required to hold annual meetings of shareholders, but
approval will be sought for certain changes in the operation of the Company and
for the election of Directors under certain circumstances.
DESCRIPTION OF SHARES
The Declaration of Trust authorizes the issuance of an unlimited number of funds
and shares thereof. Each share of the Fund represents an equal proportionate
interest in the Fund with each other share. Shares are entitled upon liquidation
to a pro rata share in the net assets of the Fund. Shareholders have no
preemptive rights. The Declaration of Trust provides that the Directors of the
Company may create additional series of shares or separate classes of funds. All
consideration received by the Company for shares of any fund or separate class
and all assets in which such consideration is invested would belong to that fund
or separate class and would be subject to the liabilities related thereto. Share
certificates representing shares will not be issued.
5% SHAREHOLDERS
As of the date of this Statement of Additional Information, the following
shareholders owned more than 5% of the Fund's outstanding shares:
Commonfund Asset Management Company, Attn: Todd E. Petzel, 15 Old Danbury Road,
P.O. Box 812, Wilton, CT 06897-0812 owned 100% of the Fund's outstanding shares.
FUND BALANCE SHEET
COMMONFUND INSTITUTIONAL FUNDS
COMMONFUND SHORT DURATION FUND
STATEMENT OF ASSETS & LIABILITIES
OCTOBER 20, 1999
<TABLE>
<S> <C>
ASSETS:
Cash $100,000
--------
Total Assets $100,000
--------
LIABILITIES:
Total Liabilities $ 0
--------
NET ASSETS $100,000
========
Shares outstanding (unlimited shares authorized, $.001 par
value) 10,000
========
Net Asset Value, offering and redemption price per share $ 10.00
========
</TABLE>
See Notes to Financial Statement
S-19
<PAGE> 31
COMMONFUND INSTITUTIONAL FUNDS
COMMONFUND SHORT DURATION FUND
NOTES TO FINANCIAL STATEMENT
OCTOBER 20, 1999
NOTE 1 -- GENERAL
Commonfund Institutional Funds (the "Company") was established as a Delaware
business trust under an Agreement and Declaration of Trust dated August 7, 1999
and is registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), as an open-end, diversified management investment company. The
Company currently consists of one series, Commonfund Short Duration Fund (the
"Fund").
The Fund seeks current income from interest and price appreciation consistent
with liquidity and capital preservation by investing in short duration fixed
income securities.
Commonfund Asset Management Company ("COMANCO") serves as investment adviser to
the Company. Investors Bank & Trust Company ("IBT") serves as the custodian,
fund accounting agent, administrator, transfer agent and dividend disbursing
agent to the Fund. Commonfund Securities, Inc. ("Commonfund Securities") serves
as distributor to the Fund.
The Company has had no operations through October 20, 1999, other than those
relating to organizational matters and the sale of 10,000 shares of common stock
to COMANCO. Organization expenses incurred in connection with the organization
and initial registration of the Company will be paid by COMANCO.
NOTE 2 -- AGREEMENTS
The Company has retained the services of COMANCO as investment adviser. COMANCO
exercises overall responsibility for supervision of the investment management
program for the Fund but has contracted out the day-to-day management of the
investment operations of the Fund to sub-advisers. As compensation for the
services rendered by COMANCO under the investment advisory agreement with the
Company, COMANCO receives a fee from the Fund, which is computed daily and paid
monthly, equal to an annual fee of 0.19% of the Fund's average daily net assets.
COMANCO has retained the services of Wellington Management Company, LLP and
Western Asset Management Company as investment sub-advisers to the Fund. As
compensation for their services, each sub-adviser receives a fee paid from
COMANCO that is based on the average daily net assets of the Fund.
The Company has retained the services of IBT as the transfer agent, dividend
disbursing agent, custodian and fund accounting agent for the Fund. For these
services, IBT will receive a fee from the Fund, which is computed daily and paid
monthly, at an annual rate of 0.0235% of the average daily net assets of the
Fund up to $10 billion and 0.0185% of such net assets in excess of $10 billion.
In addition, the Company has retained IBT as administrator of the Fund. For its
services as administrator, IBT will receive a fee from the Fund, which is
computed daily and paid monthly, at an annual rate of 0.005% of the average
daily net assets of the Fund up to $10 billion and 0.0025% of such net assets in
excess of $10 billion.
The Company has entered into a distribution agreement with Commonfund
Securities, an affiliate of COMANCO, to serve as principal distributor for
shares of the Fund. COMANCO has agreed to pay Commonfund Securities for services
rendered to the Company.
COMANCO has voluntarily agreed that it will waive its fee or reimburse the Fund
for expenses to the extent necessary to maintain the Fund's total operating
expenses at not more than 0.25% of the average daily net assets of the Fund.
Such waiver and/or reimbursement is determined on an annual basis. COMANCO has
undertaken to pay all organizational expenses of the Company.
The Fund will pay each director, other than Robert L. Bovinette, who is Chair of
the Board of Directors of the investment adviser, an annual fee of $8,000 plus
reimbursement of out-of-pocket expenses.
S-20
<PAGE> 32
COMMONFUND INSTITUTIONAL FUNDS
COMMONFUND SHORT DURATION FUND
NOTES TO FINANCIAL STATEMENT (CONTINUED)
OCTOBER 20, 1999
NOTE 3 -- INCOME TAXES
The Company intends to comply with the requirements of the Internal Revenue Code
necessary to qualify as a regulated investment company and make the requisite
distributions of taxable income to its shareholders which will be sufficient to
relieve it from all or substantially all federal income and excise taxes.
S-21
<PAGE> 33
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Trustees of
Commonfund Institutional Funds --
Commonfund Short Duration Fund
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of Commonfund
Institutional Funds -- Commonfund Short Duration Fund (the "Fund") at October
20, 1999, in conformity with generally accepted accounting principles. This
financial statement is the responsibility of the Fund's management; our
responsibility is to express an opinion on this financial statement based on our
audit. We conducted our audit of this financial statement in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statement is
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
January 18, 2000
<PAGE> 34
APPENDIX
The following descriptions are summaries of published ratings.
DESCRIPTION OF CORPORATE BOND RATINGS
Bonds rated AAA have the highest rating S&P assigns to a debt obligation. Such a
rating indicates an extremely strong capacity to pay principal and interest.
Bonds rated AA by S&P also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and differs from AAA issues only in
small degree. Debt rated A by S&P has a strong capacity to pay interest and
repay principal although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in higher rated
categories.
Bonds rated Aaa by Moody's are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large, or an exceptionally stable,
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues. Bonds rated Aa by Moody's are
judged by Moody's to be of high quality by all standards. Together with bonds
rated Aaa, they comprise what are generally known as high-grade bonds. They are
rated lower than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risk appear somewhat larger than in Aaa securities. Bonds rated A by
Moody's possess many favorable investment attributes and are to be considered as
upper-medium grade obligations. Factors giving security to principal and
interest are considered adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future.
Fitch uses plus and minus signs with a rating symbol to indicate the relative
position of a credit within the rating category. Plus and minus signs, however,
are not used in the AAA category. Bonds rated AAA by Fitch are considered to be
investment grade and of the highest credit quality. The obligor has an
exceptionally strong ability to pay interest and repay principal, which is
unlikely to be affected by reasonably foreseeable events. Bonds rated AA by
Fitch are considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F-1+. Bonds rated A by Fitch
are considered to be investment grade and of high credit quality. The obligor's
ability to pay interest and repay principal is considered to be strong, but may
be more vulnerable to adverse changes in economic conditions and circumstances
than bonds with higher ratings.
Bonds rated AAA by Duff are judged by Duff to be of the highest credit quality,
with negligible risk factors being only slightly more than for risk-free U.S.
Treasury debt. Bonds rated AA by Duff are judged by Duff to be of high credit
quality with strong protection factors and risk that is modest but that may vary
slightly from time to time because of economic conditions. Bonds rated A by Duff
are judged by Duff to have average but adequate protection factors. However,
risk factors are more variable and greater in periods of economic stress.
Obligations rated AAA by IBCA have the lowest expectation of investment risk.
Capacity for timely repayment of principal and interest is substantial, such
that adverse changes in business, economic or financial conditions are unlikely
to increase investment risk significantly. Obligations for which there is a very
low expectation of investment risk are rated AA by IBCA. Capacity for timely
repayment of principal and interest is substantial. Adverse changes in business,
economic or financial conditions may increase investment risk albeit not very
significantly. Obligations for which there is a low expectation on investment
risk are rated A by IBCA. Capacity for timely repayment of principal and
interest is strong, although adverse changes in business, economic or financial
conditions may lead to increased investment risk.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Commercial paper rated A by Standard & Poor's Corporation ("S&P") is regarded by
S&P as having the greatest capacity for timely payment. Issues rated A are
further refined by use of the numbers 1, 1+, and 2 to indicate the
A-1
<PAGE> 35
relative degree of safety. Issues rated A-1+ are those with an "overwhelming
degree" of credit protection. Those rated A-1, the highest rating category,
reflect a "very strong" degree of safety regarding timely payment. Those rated
A-2, the second highest rating category, reflect a satisfactory degree of safety
regarding timely payment but not as high as A-1.
Commercial paper issues rated Prime-1 or Prime-2 by Moody's Investors Service,
Inc. ("Moody's") are judged by Moody's to be of "superior" quality and "strong"
quality respectively on the basis of relative repayment capacity.
F-1+ (Exceptionally Strong) is the highest commercial paper rating Fitch
assigns; paper rated F-1+ is regarded as having the strongest degree of
assurance for timely payment. Paper rated F-1 (Very Strong) reflects an
assurance of timely payment only slightly less in degree than paper rated F-1+.
The rating F-2 (Good) reflects a satisfactory degree of assurance for timely
payment, but the margin of safety is not as great as for issues rated F-1+ or
F-1.
The rating Duff-1 is the highest commercial paper rating assigned by Duff. Paper
rated Duff-1 is regarded as having very high certainty of timely payment with
excellent liquidity factors which are supported by good fundamental protection
factors. Risk factors are minor. Duff has incorporated gradations of 1+ and 1-
to assist investors in recognizing quality differences within this highest tier.
Paper rated Duff-1+ has the highest certainty of timely payment, with
outstanding short-term liquidity and safety just below risk-free U.S. Treasury
short-term obligations. Paper rated Duff-1- has high certainty of timely payment
with strong liquidity factors which are supported by good fundamental protection
factors. Risk factors are very small. Paper rated Duff-2 is regarded as having
good certainty of timely payment, good access to capital markets (although
ongoing funding may enlarge total financing requirements) and sound liquidity
factors and company fundamentals. Risk factors are small.
The designation A1, the highest rating by IBCA, indicates that the obligation is
supported by a strong capacity for timely repayment. Those obligations rated A1+
are supported by the highest capacity for timely repayment. Obligations rated
A2, the second highest rating, are supported by a satisfactory capacity for
timely repayment, although such capacity may be susceptible to adverse changes
in business, economic or financial conditions.
A-2
<PAGE> 36
PART C: OTHER INFORMATION
Item 23. Exhibits:
(a)(1) Certificate of Trust dated August 12, 1999, is incorporated by
reference to Exhibit (a)(1) of the Registrant's Initial
Registration Statement as filed via EDGAR (Accession No.
0000893220-99-000977) on August 17, 1999.
(a)(2) Declaration of Trust of Commonfund Institutional Funds, dated
August 7, 1999, is incorporated by reference to Exhibit (a)(2)
of the Registrant's Initial Registration Statement as filed
via EDGAR (Accession No. 0000893220-99-000977) on August 17,
1999.
(b) By-Laws are incorporated by reference to Exhibit (b) of the
Registrant's Initial Registration Statement as filed via EDGAR
(Accession No. 0000893220-99-000977) on August 17, 1999.
(c) Instruments defining rights of Security Holders incorporated
by reference to the Declaration of Trust of Commonfund
Institutional Funds, filed via EDGAR (Accession No.
0000893220-99-000977) as Exhibit (a)(2) to the Registrant's
Initial Registration Statement on August 17, 1999, and the
By-Laws, filed via EDGAR (Accession No. 0000893220-99-000977)
as Exhibit (b) to the Registrant's Initial Registration
Statement on August 17, 1999.
(d)(1) Investment Advisory Agreement between the Registrant and
Commonfund Asset Management Company, Inc., dated October
12, 1999, is filed herewith.
(d)(2) Form of Investment Sub-Advisory Agreement between the
Registrant and Wellington Management Company, LLP is filed
herewith.
(d)(3) Form of Investment Sub-Advisory Agreement between the
Registrant and Western Asset Management Company is filed
herewith.
(e) Form of Distribution Agreement between the Registrant and
Commonfund Securities, Inc. is filed herewith.
(f) Not applicable
(g) Custodian Agreement between the Registrant and Investors Bank
& Trust Company, dated October 12, 1999, is filed herewith.
ii
<PAGE> 37
(h)(1) Administration Agreement between the Registrant and Investors
Bank & Trust Company, dated October 12, 1999 is filed
herewith.
(h)(2) Transfer Agency Agreement between the Registrant and Investors
Bank & Trust Company, dated October 12, 1999 is filed
herewith.
(i) Opinion and Consent of Counsel is filed herewith.
(j) Accountant's Consent is filed herewith.
(k) Subscription Agreement between the Registrant and Commonfund
Asset Management Company is filed herewith.
(l) Not applicable.
(m) Not applicable.
(n) Not applicable.
(o) Not applicable.
(p) To be completed by Amendment.
(q) Powers of Attorney for Robert L. Bovinette, John B. Carroll,
Louis W. Moelchert, Jr., William T. Spitz and Jerald L.
Stevens are filed herewith.
Item 24. Persons Controlled by or under Common Control with the Fund
Not applicable.
Item 25. Indemnification
Article III, Section 8. of the Declaration of Trust filed as Exhibit (a)(2) to
this Registration Statement is incorporated herein by reference.
Section 8. Indemnification of Shareholders. If any Shareholder or
former Shareholder shall be exposed to liability by reason of a claim or demand
relating to his or her being or having been a Shareholder, and not because of
his or her acts or omissions, the Shareholder or former Shareholder (or his or
her heirs, executors, administrators, or other legal representatives or in the
case of a corporation or other entity, its corporate or other general successor)
shall be entitled to be held harmless from and indemnified out of the assets of
the Trust against all loss and expense arising from such claim or demand, but
only
iii
<PAGE> 38
out of the assets held with respect to the particular Series or Class of which
such Person is or was a Shareholder and from or in relation to which such
liability arose.
Article XI of the By-Laws filed as Exhibit (b) to this Registration Statement is
incorporated herein by reference.
Section 1. Agents, Proceedings, Expenses. For the purpose of this
Article, "agent" means any Person who is or was a Director, officer, employee or
other agent of the Trust or is or was serving at the request of the Trust as a
director, officer, employee or agent of another organization in which the Trust
has any interest as a shareholder, creditor or otherwise; "proceeding" means any
threatened, pending or completed claim, action, suit or proceeding, whether
civil, criminal, administrative or investigative (including appeals);and
"expenses" includes, without limitation, attorneys' fees, costs, judgments,
amounts paid in settlement, fines, penalties and all other liabilities
whatsoever.
Section 2. Indemnification. Subject to the exceptions and limitations
contained in Section 3 below, every agent shall be indemnified by the Trust to
the fullest extent permitted by law against all liabilities and against all
expenses reasonably incurred or paid by him or her in connection with any
proceeding in which he or she becomes involved as a party or otherwise by virtue
of his or her being or having been an agent.
Section 3. Limitations, Settlements. No indemnification shall be
provided hereunder to an agent:
(a) who shall have been adjudicated by the court or other body before
which the proceeding was brought to be liable to the Trust or its Shareholders
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her office
(collectively, "disabling conduct"); or
(b) with respect to any proceeding disposed of (whether by settlement,
pursuant to a consent decree or otherwise) without an adjudication by the court
or other body before which the proceeding was brought that such agent was liable
to the Trust or its Shareholders by reason of disabling conduct, unless there
has been a determination that such agent did not engage in disabling conduct:
(i) by the court or other body before which the proceeding was brought;
(ii) by at least a majority of those Directors who are neither
Interested Persons of the Trust nor are parties to the proceeding based upon a
review of readily available facts (as opposed to a full trial-type inquiry); or
iv
<PAGE> 39
(iii) by written opinion of independent legal counsel based upon a
review of readily available facts (as opposed to a full trial-type inquiry);
provided, however, that indemnification shall be provided hereunder to an agent
with respect to any proceeding in the event of (1) a final decision on the
merits by the court or other body before which the proceeding was brought that
the agent was not liable by reason of disabling conduct, or (2) the dismissal of
the proceeding by the court or other body before which it was brought for
insufficiency of evidence of any disabling conduct with which such agent has
been charged.
Section 4. Insurance, Rights Not Exclusive. The rights of
indemnification herein provided may be insured against by policies maintained by
the Trust on behalf of any agent, shall be severable, shall not be exclusive of
or affect any other rights to which any agent may now or hereafter be entitled
and shall inure to the benefit of the heirs, executors and administrators of any
agent.
Section 5. Advance of Expenses. Expenses incurred by an agent in
connection with the preparation and presentation of a defense to any proceeding
shall be paid by the Trust from time to time prior to final disposition thereof
upon receipt of an undertaking by or on behalf of such agent that such amount
will be paid over by him or her to the Trust if it is ultimately determined that
he or she is not entitled to indemnification under this Article XI; provided,
however, that (a) such agent shall have provided appropriate security for such
undertaking, (b) the Trust is insured against losses arising out of any such
advance payments or (c) either a majority of the Directors who are neither
Interested Persons of the Trust nor parties to the proceedings, or independent
legal counsel in a written opinion, shall have determined, based upon a review
of readily available facts (as opposed to a trial-type inquiry or full
investigation), that there is reason to believe that such agent will be found
entitled to indemnification under this Article XI.
Section 6. Fiduciaries of Employee Benefit Plan. The Article does not
apply to any proceeding against any director, investment manager or other
fiduciary of an employee benefit plan in that person's capacity as such, even
though that person may also be an agent of this Trust as defined in Section 1 of
this Article. Nothing contained in this Article shall limit any right to
indemnification to which such director, investment manager, or other fiduciary
may be entitled by contract or otherwise which shall be enforceable to the
extent permitted by applicable law other than this Article.
Item 26. Business and other Connections of the Investment Adviser and
Sub-Advisers:
Other business, profession, vocation, or employment of a substantial nature in
which each director or principal officer of the Adviser is or has been, at any
time during the last two fiscal years, engaged for his own or in the capacity of
director, officer, employee, partner or trustee are as follows:
v
<PAGE> 40
COMMONFUND ASSET MANAGEMENT COMPANY
Commonfund Asset Management Company is the Investment Adviser for the
Registrant. Their principal business address is 15 Old Danbury Rd., P.O. Box
812, Wilton, CT, 06897-0812. Commonfund Asset Management Company is an
investment adviser registered under the Investment Advisers Act of 1940.
<TABLE>
<CAPTION>
NAME AND POSITION WITH POSITION WITH OTHER
INVESTMENT ADVISER OTHER COMPANY COMPANY
<S> <C> <C>
John W. Auchincloss
Secretary
MaryEllen Beaudreault
Senior Vice President-Fixed
Income
Robert L. Bovinette
Director and Chair
Howard Coonley, II
Director
James P. Feeney
Director of Compliance
Jeff Landle
Managing Director, Alternative
Investments
William Miller Chicago Mercantile Exchange Director
Independent Risk Oversight
Officer
Association for Financial
Professionals Director
End-Users of Derivatives
Association Chairman & Director
Todd Petzel
President and Chief Investment
Officer
Eben M. Riordan II
Senior Vice President, CFO
Elizabeth E. Schaefer
Senior Vice President-Fixed
Income
Curt R. Tobey
Senior Vice
President-International
</TABLE>
vi
<PAGE> 41
WESTERN ASSET MANAGEMENT COMPANY
Western Asset Management is a Sub-Adviser for Registrant's Short Duration Fund.
Their principal business address is 117 E. Colorado Blvd., Pasadena, CA 91105.
Western Asset Management is an investment adviser registered under the Advisers
Act.
<TABLE>
<CAPTION>
NAME AND POSITION WITH CONNECTION WITH OTHER
INVESTMENT ADVISER OTHER COMPANY COMPANY
<S> <C> <C>
Carl L. Eichstaedt
Portfolio Manager
Keith J. Gardner
Portfolio Manager
Scott F. Grannis
Director & Economist
Ilene Schiowitz Harker
Director of Compliance and
Controls
James W. Hirschmann III
Chief Executive Officer
Randolph L. Kohn
Director of Client Services
Stephen K. Leech
Director & CIO
William C. Livingston
Director & CEO
</TABLE>
vii
<PAGE> 42
<TABLE>
<S> <C> <C>
Legg Mason, Inc. Chairman, President & CEO
Raymond A. Mason Legg Mason Wood Walker, Inc. Chairman, President & CEO
Non-Employee Director
Ronald D. Mass
Director of Analytics/Risk
Management
Edward A. Moody
Director & Sr. Portfolio Manager
James V. Nelson
Director of Research
Elisabeth Nurick Spector Legg Mason, Inc. Senior Vice President
Non-Employee Director
Legg Mason Wood Walker, Inc. Senior Vice President
Edward A. Taber III Legg Mason, Inc. Sr. Exec VP & Investment
Non-Employee Director Management
Legg Mason Wood Walker, Inc. Director & Sr. Executive Vice
President
Jeffrey D. Van Schaick
Director of Research
Stephen A. Walsh
Director of Portfolio Management
</TABLE>
WELLINGTON MANAGEMENT COMPANY
Wellington Management Company, LLP ("Wellington") is a Sub-Adviser for
the Registrant's Short Duration Fund. Their principal business address is 75
State Street, Boston, Massachusetts 02109. Wellington is an investment adviser
registered under the Advisers Act.
viii
<PAGE> 43
<TABLE>
<CAPTION>
NAME AND POSITION WITH CONNECTION WITH OTHER
INVESTMENT ADVISER NAME OF OTHER COMPANY COMPANY
<S> <C> <C>
Kenneth Lee Abrams
General Partner
Nicholas Charles Adams
General Partner
Rand Lawrence Alexander
General Partner
Deborah Louise Allison
General Partner
James Halsey Averill
General Partner
Karl E. Bandtel
General Partner
Marie-Claude Petit Bernal
General Partner
William Nicholas Booth
General Partner
Paul Braverman Wellington International Director
General Partner Management Company Pte Ltd.
Wellington Management Partner and Chief Financial Officer
International
Wellington Trust Company, NA Treasurer/Cashier
Robert A. Bruno
General Partner
Maryann E. Carroll
General Partner
Pamela Dippel
General Partner
</TABLE>
ix
<PAGE> 44
<TABLE>
<S> <C> <C>
Charles Townsend Freeman
General Partner
Laurie Allen Gabriel
General Partner
Frank Joseph Gilday, III
General Partner
John Herrick Gooch Wellington Management Partner
General Partner International
Wellington Trust Compnay, NA Director & Vice President
Nicholas Peter Greville Wellington International Director
General Partner Management Company Pte Ltd.
Partner
Wellington Management
International
Paul J. Hammel
General Partner
Lucius T. Hill III
General Partner
Paul David Kaplan
General Partner
John Charles Keogh
General Partner
George Cabot Lodge, Jr.
General Partner
Nancy T. Lukitsh Wellington Trust Company, NA Director & Vice President
General Partner
Mark T. Lynch
General Partner
Christine Smith Manfredi
General Partner
Patrick John McCloskey
General Partner
</TABLE>
x
<PAGE> 45
<TABLE>
<S> <C> <C>
Earl Edward McEvoy
General Partner
Duncan Mathieu McFarland Wellington International Director
General Partner Management Company Pte Ltd.
Wellington Management Partner
International
Wellington Trust Company, NA Director, Chairman of the Board
and the Executive Committee
Paul Mulford Mecray, III
General Partner
Matthew Edward Megargel
General Partner
James Nelson Mordy
General Partner
Diane Carol Nordin
General Partner
Stephen T. O'Brien
General Partner
Edward Paul Owens
General Partner
Saul Joseph Pannell
General Partner
Thomas Louis Pappas
General Partner
Jonathan Martin Payson Wellington Trust Company, NA Director & President
General Partner
Stephen Michael Pazuk Wellington International Director
General Partner Management Company Pte Ltd.
Wellington Management Retired as Partner on August 1,
International 1999.
Robert Douglas Rands
General Partner
Eugene Edward Record, Jr.
General Partner
</TABLE>
xi
<PAGE> 46
<TABLE>
<S> <C> <C>
James Albert Rullo
General Partner
John Robert Ryan
General Partner
Joseph Harold Schwartz
General Partner
Theodore Shasta
General Partner
Binkley Calhoun Shorts
General Partner
Trond Skramstad
General Partner
Catherine Anne Smith
General Partner
Stephen Albert Soderberg
General Partner
Brendan James Swords
General Partner
Harriett Tee Taggart
General Partner
Perry Marques Traquina
General Partner
Gene Roger Tremblay
General Partner
Michael A. Tyler
General Partner
Mary Ann Tynan Wellington Management Partner
General Partner International
Wellington Trust Company, NA Trust Officer, Vice President
Clare Villari
General Partner
Ernst Hans von Metzsch
General Partner
James Leland Walters Wellington International Director
General Partner Management Company Pte Ltd.
Wellington Trust Company, NA Director, Senior Trust Officer &
Trust Counsel
Kim Williams
General Partner
Francis Vincent Wisneski, Jr.
General Partner
</TABLE>
xii
<PAGE> 47
Item 27. Principal Underwriters
Not applicable.
Item 28. Location of Accounts and Records
Books or other documents required to be maintained by Section 31(a) of
the Investment Company Act of 1940, and the rules promulgated thereunder, are
maintained as follows:
(a) With respect to Rules 31a-1(a); 31a-1(b)(1); (2)(a) and (b); (3);
(6); (8); (12); and 31a-1(d), the required books and records will be maintained
at the offices of Registrant's Adviser, Sub-Advisers and Custodian:
Adviser:
Commonfund Asset Management Company
15 Old Danbury Rd..
P.O. Box 812
Wilton, CT, 06897-0812
Sub-Advisers:
Wellington Management Company, LLP
75 State Street
Boston, MA, 02109
Western Asset Management Company
117 E. Colorado Blvd.
Pasadena, CA, 91105
Custodian:
Investors Bank & Trust Company
200 Clarendon Street
Boston, Massachusetts, 02116
xiii
<PAGE> 48
Item 29. Management Services
Not applicable
Item 30. Undertakings
Not applicable
xiv
<PAGE> 49
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Pre-Effective Amendment (File No. 333-85415) to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Wilton, State of
Connecticut on this 18th day of January, 2000.
Commonfund Institutional Funds
By: /s/ Robert L. Bovinette
-------------------------
Robert L. Bovinette
President and Director
Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment has been signed below by the following persons in the
capacity on the dates indicated.
<TABLE>
<S> <C> <C>
By: /s/ Robert L. Bovinette President and Director January 18, 2000
------------------------------
Robert L. Bovinette
By: * Director January 18, 2000
-------------------------------
John B. Carroll
By: * Director January 18, 2000
---------------------------------
Louis M. Moelchert, Jr.
By: * Director January 18, 2000
-------------------------------
William T. Spitz
By: * Director January 18, 2000
-----------------------------
Jerald L. Stevens
By: /s/ Marita K. Wein Chief Financial Officer January 18, 2000
-------------------
Marita K. Wein
*By: /s/ Robert L. Bovinette
Robert L. Bovinette, Attorney-in-Fact
pursuant to Powers of Attorney
</TABLE>
xv
<PAGE> 50
EXHIBIT INDEX
<TABLE>
<CAPTION>
Name Exhibit Page
- ---- ------------
<S> <C>
Certificate of Trust of the Registrant, dated August 12, 1999 B(a)(1)
(incorporated herein by reference to Exhibit a(1) of the Initial Registration
Statement filed August 17, 1999).
Declaration of Trust of Commonfund Institutional Funds dated B(a)(2)
August 7, 1999 (incorporated herein by reference to Exhibit a(2) of the Initial
Registration Statement filed August 17, 1999).
By-Laws of the Registrant (incorporated herein by reference to B(b)
Exhibit (b) of the Initial Registration Statement filed August 17, 1999).
</TABLE>
xvii
<PAGE> 51
<TABLE>
<S> <C>
Investment Advisory Agreement between Commonfund Institutional Funds and EX-99.B(d)(1)
Commonfund Asset Management Company, dated October 12, 1999, filed herewith.
Form of Sub-Advisory Agreement between the Registrant and Wellington Management EX-99.B(d)(2)
Company, LLP is filed herewith.
Form of Sub-Advisory Agreement between the Registrant and Western EX-99.B(d)(3)
Asset Management Company is filed herewith.
Form of Distribution Agreement between the Registrant and EX-99.B(e)
Commonfund Securities, Inc. is filed herewith.
Custodian Agreement between the Registrant and Investors Bank & Trust Company, EX-99.B(g)
dated October 12, 1999, is filed herewith.
Administration Agreement between the Registrant and Investors Bank & Trust EX-99.B(h)(1)
Company, dated October 12, 1999, is filed herewith.
Transfer Agency Agreement between the Registrant and Investors Bank & Trust EX-99.B(h)(2)
Company, dated October 12, 1999, is filed herewith.
Opinion and Consent of Counsel is filed herewith. EX-99.B(i)
Accountant's consent is filed herewith. EX-99.B(j)
Subscription Agreement between the Registrant and CommonFund Asset EX-99.B(k)
Management Company is filed herewith.
</TABLE>
xvii
<PAGE> 52
<TABLE>
<S> <C>
Powers of Attorney for Robert L. Bovinette, John B. Carroll, EX-99.B(q)
Jerald L. Stevens, William T. Spitz and Louis M. Moelchert, Jr.
are filed herewith.
</TABLE>
xix
<PAGE> 1
Exhibit (d)(1)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 12th day of October, 1999, by and between
Commonfund Institutional Funds, a Delaware business trust (the "Company"), and
Commonfund Asset Management Company (the "Investment Manager").
WHEREAS, the Company is an open-end, diversified management investment
company registered under the Investment Company Act of 1940, as amended, which
may consist of several series, each having its own investment objective and
policies (each, a "Fund"); and
WHEREAS, the Company desires to retain the Investment Manager to render
investment management services with respect to each Fund as the Company and the
Investment Manager may agree upon and as are set forth in the attached schedule,
and the Investment Manager is willing to render such services.
NOW, THEREFORE, in consideration of mutual covenants herein contained,
the parties hereto agree as follows:
1. DUTIES OF INVESTMENT MANAGER. The Company employs the Investment
Manager to manage the investment and reinvestment of the assets of each
Fund, and, to that end, to retain (subject to the approval of the
Company's Board of Trustees and, except as otherwise permitted under
rule or regulation or the terms of any exemptive relief obtained in the
future from the Securities and Exchange Commission, a majority of the
outstanding voting securities of the Fund) one or more sub-advisers for
each Fund, to supervise the investment activities of such sub-advisers,
to allocate assets among such sub-advisers, to monitor the performance
of such sub-advisers and of each Fund, to determine in its discretion,
when appropriate, securities to be purchased and sold for each Fund,
and to render regular reports to the Company's officers and Directors
concerning its discharge of the foregoing responsibilities.
The Investment Manager shall discharge the foregoing responsibilities
subject to the control of the Board of Directors of the Company and in
compliance with (i) such standing instructions and other policies as
the Directors may from time to time establish, (ii) the objectives,
policies, and limitations for each such Fund set forth in the
prospectus and statement of additional information pertaining to such
Fund as amended from time to time, and (iii) applicable laws and
regulations.
The Investment Manager accepts such employment and agrees, at its own
expense, to render the services and to provide the office space,
furnishings and equipment and the personnel required by it to perform
the services on the terms and for the compensation provided herein. The
Investment Manager will not, however, pay for the cost of securities,
commodities, and other investments (including brokerage
1
<PAGE> 2
commissions and other transaction charges, if any) purchased or sold
for the Company.
2. FUND TRANSACTIONS. The Investment Manager, and each sub-adviser
retained by the Investment Manager, is authorized to select the brokers
or dealers that will execute the purchases and sales of portfolio
securities for each Fund and is directed to use its best efforts to
obtain the best net results as described from time to time in the
Company's Prospectuses and Statement of Additional Information. The
Investment Manager will promptly communicate, or cause sub-advisers
retained by it to promptly communicate, to the officers and the Board
of Directors of the Company such information relating to portfolio
transactions as they may reasonably request.
It is understood that neither the Investment Manager nor any
sub-adviser retained by the Investment Manager, will be deemed to have
acted unlawfully, or to have breached a fiduciary duty to the Company
or be in breach of any obligation owing to the Company under this
Agreement, or otherwise, by reason of its having directed a securities
transaction on behalf of the Company to a broker-dealer in compliance
with the provisions of Section 28(e) of the Securities Exchange Act of
1934 or as described from time to time by the Company's Prospectuses
and Statement of Additional Information.
3. COMPENSATION OF THE INVESTMENT MANAGER. For the services to be rendered
by the Investment Manager as provided in Sections 1 and 2 of this
Agreement, the Company shall pay to the Investment Manager compensation
at the rate specified in the Schedule A which is attached hereto and
made a part of this Agreement. Such compensation shall be paid to the
Investment Manager at the end of each month, and shall be accrued daily
(using a 365 day year) at the annual percentage rate as specified in
the attached Schedule A. The fee shall be based on the average daily
net assets (less any assets held in non-interest bearing special
deposits with a Federal Reserve Bank). The Investment Manager may, in
its discretion and from time to time, waive a portion of its fee.
All rights of compensation under this Agreement for services performed
as of the termination date shall survive the termination of this
Agreement.
4. OTHER EXPENSES. The Company shall pay all expenses relating to mailing
to existing shareholders prospectuses, statements of additional
information, proxy solicitation material and shareholder reports.
5. EXCESS EXPENSES.
(a) If the expenses for any Fund for any fiscal year
(including fees and other amounts payable to the
Investment Manager, but excluding interest,
2
<PAGE> 3
taxes, brokerage costs, litigation, and other
extraordinary costs) as calculated every business day
would exceed the expense limitations imposed on
investment companies by any applicable statute or
regulatory authority of any jurisdiction in which
shares of a Fund are qualified for offer and sale,
the Investment Manager shall bear such excess cost.
However, the Investment Manager will not bear
expenses of any Fund if that would result in the
Fund's inability to qualify as a regulated investment
company under provisions of the Internal Revenue
Code.
(b) The Investment Manager agrees to waive its fees and
to reimburse expenses of the Fund as necessary to
prevent the total operating expenses of the Fund from
exceeding 0.25% of net assets per annum in the period
that ends on October 31, 2001.
6. REPORTS. The Company and the Investment Manager agree to furnish to
each other, to the extent such documents are otherwise prepared,
current prospectuses, proxy statements, reports to shareholders,
certified copies of their financial statements, and such other
information with regard to their affairs as each may reasonably
request.
7. STATUS OF INVESTMENT MANAGER. The services of the Investment Manager to
the Company are not to be deemed exclusive, and the Investment Manager
shall be free to render similar services to others so long as its
services to the Company are not impaired thereby. The Investment
Manager shall be deemed to be an independent contractor and, unless
otherwise expressly provided or authorized, shall have no authority to
act for or represent the Company in any way or otherwise be deemed an
agent of the Company.
8. CERTAIN RECORDS. Any records required to be maintained and preserved
pursuant to the provisions of Rule 31a-1 and Rule 31a-2 promulgated
under the Investment Company Act of 1940 which are prepared or
maintained by the Investment Manager on behalf of the Company are the
property of the Company and will be surrendered promptly to the Company
on request.
9. LIMITATION OF LIABILITY OF INVESTMENT MANAGER. The duties of the
Investment Manager shall be confined to those expressly set forth
herein, and no implied duties are assumed by or may be asserted against
the Investment Manager hereunder. The Investment Manager shall not be
liable for any error of judgment or mistake of law or for any loss
arising out of any investment or for any act or omission in carrying
out its duties hereunder, except a loss resulting from willful
misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of reckless disregard of its obligations and
duties hereunder, except as may otherwise be provided under provisions
of applicable state law or Federal securities law which cannot be
waived or modified hereby. (As used in this Paragraph 9, the term
3
<PAGE> 4
"Investment Manager" shall include directors, officers, employees and
other corporate agents of the Investment Manager, including any
sub-adviser retained by the Investment Manager to provide services to
the Company and its directors, officers, employees and agents, as well
as that entity itself).
10. PERMISSIBLE INTERESTS. Directors, partners, officers, agents, and
shareholders of the Company are or may be interested in the Investment
Manager (or any successor thereof) as directors, partners, officers, or
shareholders, or otherwise; directors, partners, officers, agents, and
shareholders of the Investment Manager are or may be interested in the
Company as Directors, officers, shareholders or otherwise; and the
Investment Manager (or any successor) is or may be interested in the
Company as a shareholder or otherwise. In addition, brokerage
transactions for the Company may be effected through affiliates of the
Investment Manager if approved by the Board of Directors, subject to
the rules and regulations of the Securities and Exchange Commission.
11. LICENSE OF INVESTMENT MANAGER'S NAME AND GOODWILL. Commonfund has
granted to the Investment Manager a license to use the trade names
"Commonfund" and "Common Fund" (together, the "Trade Name") together
with the business reputation and goodwill associated with the Trade
Name for a period ending on August 1, 2009. The Investment Manager
hereby grants a license to the Company to use the Trade Name and the
name of the Investment Manager in the name of the Company, in the names
of the Funds, and in advertising and other promotional literature
relating to the Funds, for the term of this Agreement, as it may be
renewed, up to August 1, 2009. The Company acknowledges that, in the
absence of such license, it has no right to use or promote its products
using the Trade Name or the name of the Investment Manager. The license
granted herein may be revoked at any time and for any reason upon 90
days notice from the Investment Manager to the Company. In the event of
such revocation, the Company shall immediately cease using the Trade
Name and the name of the Investment Manager and the business reputation
and goodwill associated with the Trade Name in connection with the
business of the Company and acknowledges that failure to comply with
this requirement would be a breach of contract for which there is no
adequate remedy at law.
12. DURATION AND TERMINATION. This Agreement, unless sooner terminated as
provided herein, shall remain in effect until two years from date of
execution, and thereafter, for periods of one year so long as such
continuance thereafter is specifically approved at least annually (a)
by the vote of a majority of those Directors of the Company who are not
parties to this Agreement or interested persons of any such party, cast
in person at a meeting called for the purpose of voting on such
approval, and (b) by the Directors of the Company, or by vote of a
majority of the outstanding voting securities of each Fund; provided,
however, that if the shareholders of any Fund fail to approve
the Agreement as provided herein, the Investment Manager may
continue
4
<PAGE> 5
to serve hereunder in the manner and to the extent permitted
by the Investment Company Act of 1940 and rules and
regulations thereunder. The foregoing requirement that
continuance of this Agreement be "specifically approved at
least annually" shall be construed in a manner consistent with
the Investment Company Act of 1940 and the rules and
regulations thereunder.
This Agreement may be terminated as to any Fund at any time,
without the payment of any penalty by vote of a majority of
the Directors of the Company or by vote of a majority of the
outstanding voting securities of such Fund on not less than 30
days nor more than 60 days written notice to the Investment
Manager, or by the Investment Manager at any time without the
payment of any penalty, on 90 days written notice to the
Company. This Agreement will automatically and immediately
terminate in the event of its assignment. Any notice under
this Agreement shall be given in writing, addressed and
delivered, or mailed postpaid, to the other party at any
office of such party.
As used in this Section 12, the terms "assignment",
"interested persons," and a "vote of a majority of the
outstanding voting securities" shall have the respective
meanings set forth in the Investment Company Act of 1940 and
the rules and regulations thereunder; subject to such
exemptions as may be granted by the Securities and Exchange
Commission under said Act.
13. NOTICE. Any notice required or permitted to be given by either
party to the other shall be deemed sufficient if sent by
registered or certified mail, postage prepaid, addressed by
the party giving notice to the other party at the last address
furnished by the other party to the party giving notice. At
the commencement of this Agreement, addresses for notice shall
be as follows: if to the Company, at Commonfund Institutional
Funds, 450 Post Road East, Westport, CT, 06881, and if to the
Investment Manager at Commonfund Asset Management Company, 450
Post Road East, Westport, CT 06881.
14. SEVERABILITY. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be
affected thereby.
15. GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of New York and the applicable
provisions of the 1940 Act. To the extent that the applicable
laws of the State of New York, or any of the provisions
herein, conflict with the applicable provisions of the 1940
Act, the latter shall control.
16. NO INDIVIDUAL LIABILITY. A copy of the Declaration of Trust of
the Company is on file with the Secretary of State of the
State of Delaware and notice is hereby given
5
<PAGE> 6
that the obligations of this instrument are not binding on any
of the Directors, officers or shareholders of the Company or
any Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the day and year first written above.
COMMONFUND INSTITUTIONAL FUNDS
By: /s/ Marita K. Wein
---------------------------
Attest: /s/ John W. Auchincloss
-----------------------
COMMONFUND ASSET MANAGEMENT COMPANY
By: /s/ Todd E. Petzel
---------------------------
Attest: /s/ John W. Auchincloss
-----------------------
6
<PAGE> 7
SCHEDULE A
TO THE
INVESTMENT ADVISORY AGREEMENT
DATED OCTOBER 12, 1999
BETWEEN
COMMONFUND INSTITUTIONAL FUNDS
AND
COMMONFUND ASSET MANAGEMENT COMPANY
Pursuant to Article 3, the Company shall pay the Investment Manager compensation
at an annual rate as follows commencing on the date as specified:
<TABLE>
<CAPTION>
Fund Annual Fee Date
---- ---------- ----
<S> <C> <C>
Commonfund
Short Duration Fund 0.19% Commencement of
distribution of Fund
shares
</TABLE>
7
<PAGE> 8
COMMONFUND INSTITUTIONAL FUNDS
COMMONFUND SHORT DURATION FUND
STANDING INSTRUCTIONS FROM BOARD OF DIRECTORS
TO
COMMONFUND ASSET MANAGEMENT COMPANY
Commonfund Asset Management Company (the "Investment Manager"), acting
as Investment Manager under its agreement with Commonfund Institutional Funds
(the "Company") for management of the Commonfund Short Duration Fund (the
"Fund"), shall perform services under the agreement in accordance with the
following standing instructions:
The Investment Manager shall:
(a) Recommend criteria that the Company should adopt for
identification and selection of sub-advisers for the
Fund;
(b) Identify, screen and interview sub-advisers for the
Fund, analyze the capabilities of such sub-advisers,
and, subject to the final approval of the Board,
retain one or more sub-advisers to invest assets of
one or more Funds taking into consideration the
comparative capabilities of available advisers and
expectations as to the way in which the investment
programs and styles of each will contribute, in
tandem, to the overall performance of the Fund;
(c) On behalf of the Company, negotiate and, subject to
the final approval of the Board of Directors of the
Company, enter into discretionary investment
management agreements with sub-advisers on suitable
terms with particular attention to performance
benchmarks and fees (it being understood that the
agreements will vest with the sub-advisers, and not
with the Investment Manager, the discretion to select
particular investments within the investment program,
performance criteria, investment policies, and
restrictions set forth in such agreements), and
consult with the Company, which has final
responsibility for the investment and operating
policies reflected in such agreements, as to terms
thereof that involve questions of interpretation of
such investment and operating policies;
(d) Review fee and other terms of agreements with
sub-advisers as it may
8
<PAGE> 9
from time to time consider appropriate and negotiate
and agree to adjustments in such fees and terms in
its discretion;
(e) Review periodically the performance of each
sub-adviser against the sub-adviser's performance
benchmark and the sub-adviser's overall contribution
to the Fund's performance, and make such
recommendations to the Company as the Investment
Manager deems appropriate with respect to the
continuation, modification, or termination of the
agreement with each sub-adviser;
(f) Consult with the Company on policies with respect to
allocation of assets among sub-advisers and, within
parameters established by the Company as a result of
such consultations, allocate and reallocate assets to
and among sub-advisers in light of changing market
conditions, sub-adviser performance, and other
factors that the Investment Manager deems relevant
with the objective of maximizing investment
performance of each fund;
(g) Review the investment objectives, policies and
restrictions applicable to each fund in light of the
Fund's performance and make such recommendations as
the Investment Manager deems appropriate with respect
to any changes in such objectives, policies and
restrictions.
(h) If requested by the Company, manage on a
discretionary basis assets allocated to it for that
purpose, and in such cases determine in its
discretion the securities to be purchased or sold,
(i) Provide the Company with records concerning the
Investment Manager's activities which the Company is
required to maintain, and to render regular reports
to the Company's officers and Trustees concerning the
Investment Manager's discharge of the foregoing
responsibilities
9
<PAGE> 1
Exhibit (d)(2)
FORM OF
INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT made this ___ day of ____ , 1999, by and between Commonfund
Institutional Funds, a Delaware business trust (the "Company"), Commonfund Asset
Management Company , a Delaware Corporation (the "Investment Manager"), and
Wellington Management Company, LLP (the "Sub-Adviser").
WHEREAS, the Company is an open-end, management investment company
registered under the Investment Company Act of 1940, as amended, which may
consist of several series, each having its own investment policies; and
WHEREAS, one of those series is the Commonfund Short Duration Fund (the
"Fund"); and
WHEREAS, the Company has entered into an investment advisory agreement
with the Investment Manager pursuant to which the Investment Manager will act as
investment manager to the Fund; and
WHEREAS, the Investment Manager, acting with the approval of the
Company, wishes to retain the Sub-Adviser to render discretionary investment
advisory services with respect to that portion of the Fund that may be allocated
by the Investment Manager for management by the Sub-Adviser from time to time
(together with all income earned on those assets and all realized and unrealized
capital appreciation related to those assets (the "Managed Assets"), and the
Sub-Adviser is willing to render such services.
NOW, THEREFORE, in consideration of mutual covenants herein contained,
the parties hereto agree as follows:
1. DUTIES OF SUB-ADVISER. The Sub-Adviser shall manage the
investment and reinvestment of the Managed Assets and determine
in its discretion, the securities and other property to be
purchased or sold and the portion of the Managed Assets to retain
in cash. The Sub-Adviser shall review all proxy solicitation
materials and shall exercise any voting rights associated with
securities comprising the Managed Assets in the best interests of
the Fund and its shareholders. The Sub-Adviser shall provide the
Investment Manager and the Company with records concerning the
Sub-Adviser's activities that the Company is required to
maintain, and to render regular reports to the Investment Manager
and to the Company concerning the Sub-Adviser's discharge of the
foregoing responsibilities.
The Sub-Adviser shall discharge the foregoing responsibilities
subject to the written instructions and directions of the Company
and its Board of Directors
1
<PAGE> 2
and their agents, including the officers of the Company and the
Investment Manager, and in compliance with (i) such policies as
the Company may from time to time establish and communicate to
the Sub-Adviser, (ii) the objectives, policies, and limitations
for the Fund set forth in the Prospectus and Statement of
Additional Information as those documents may from time to time
be amended or supplemented from and delivered to the Sub-Adviser
(the "Prospectus and Statement of Additional Information"), (iii)
the Declaration of Trust of the Company, and (iv) applicable laws
and regulations including the Investment Company Act of 1940 (the
"1940 Act") and the Internal Revenue Code of 1986. If a conflict
in policies or guidelines referenced herein occurs, the
Prospectus and Statement of Additional Information shall control.
The Sub-Adviser agrees to perform such duties at its own expense
and to provide the office space, furnishings and equipment and
the personnel required by it to perform the services on the terms
and for the compensation provided herein. The Sub-Adviser will
not, however, pay for the cost of securities, commodities, and
other investments (including brokerage commissions and other
transaction charges, if any) purchased or sold for the Fund, nor
will the Sub-Adviser bear any expenses that would result in the
Company's inability to qualify as a regulated investment company
under provisions of the Internal Revenue Code.
2. DUTIES OF INVESTMENT MANAGER The Investment Manager shall
continue to have responsibility for all services to be provided
to the Fund pursuant to the Advisory Agreement between it and the
Company and shall oversee and review the Sub-Adviser's
performance under this Agreement.
The Investment Manager shall furnish to the Sub-Adviser current
and complete copies of the Declaration of Trust and By-laws of
the Company, and the current Prospectus and Statement of
Additional Information as those documents may be amended from
time to time.
3. CUSTODY, DELIVERY AND RECEIPT OF SECURITIES. The Company shall
designate one or more custodians to hold the Managed Assets. The
custodians, as so designated, will be responsible for the
custody, receipt and delivery of securities and other assets of
the Fund including the Managed Assets, and the Sub-Adviser shall
have no authority, responsibility or obligation with respect to
the custody, receipt or delivery of securities or other assets of
the Fund including the Managed Assets. In the event that any cash
or securities of the Fund are delivered to the Sub-Adviser, it
will promptly deliver the same over to the custodian for the
benefit of and in the name of the Fund.
2
<PAGE> 3
Unless otherwise required by local custom, all securities
transactions for the Managed Assets will be consummated by
payment to or delivery by the Fund of cash or securities due to
or from the Managed Assets.
Repurchase agreements including tri-party repurchase agreements
and other trading agreements may be entered into by the Fund
acting through designated officers or agents; custodians under
tri-party repurchase agreements will act as sub-custodians of the
Fund.
4. PORTFOLIO TRANSACTIONS.
(a) Selection of Brokers. The Sub-Adviser is authorized to select
the brokers or dealers that will execute the purchases and sales
of portfolio securities and other property for the Fund in a
manner that implements the policy with respect to brokerage set
forth in the Prospectus and Statement of Additional Information
for the Fund or as the Board of Directors or the Investment
Manager may direct from time to time and in conformity with
federal securities laws.
In executing Fund transactions and selecting brokers or dealers,
the Sub-Adviser will use its best efforts to seek on behalf of
the Fund the best overall terms available. In assessing the best
overall terms available for any transaction, the Sub-Adviser
shall consider all factors that it deems relevant, including the
breadth of the market in the security, the price of the security,
the financial condition and execution capability of the broker or
dealer, and the reasonableness of the commission, if any, both
for the specific transaction and on a continuing basis. In
evaluating the best overall terms available, and in selecting the
broker-dealer to execute a particular transaction, the
Sub-Adviser may also consider the brokerage and research services
provided (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934). Consistent with any guidelines
established by the Board of Directors and communicated to the
Sub-Adviser, the Sub-Adviser is authorized to pay to a broker or
dealer who provides such brokerage and research services a
commission for executing a portfolio transaction for the Fund
that is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if, but
only if, the Sub-Adviser determines in good faith that such
commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer
viewed in terms of that particular transaction or terms of the
overall responsibilities of the Sub-Adviser to the Fund. In
addition, the Sub-Adviser is authorized to allocate purchase and
sale orders for securities to brokers or dealers (including
brokers and dealers
3
<PAGE> 4
that are affiliated with the Investment Manager, Sub-Adviser or
the Company's principal underwriter) to take into account the
sale of shares of the Company if the Sub-Adviser believes that
the quality of the transaction and the commission are comparable
to what they would be with other qualified firms. In no instance,
however, will Fund assets be purchased from or sold to the
Investment Manager, Sub-Adviser, the Company's principal
underwriter, or any affiliated person of either the Company, the
Investment Manager or the principal underwriter, acting as
principal in the transaction, except to the extent permitted by
the Securities and Exchange Commission ("SEC") and the 1940 Act.
b) Aggregating Orders. The that Sub-Adviser may aggregate orders
for purchase or sale of Managed Assets with similar orders being
made concurrently for other accounts managed by Sub-Adviser, if,
in Sub-Adviser's reasonable judgment, such aggregation shall
result in an overall economic benefit to the Fund, taking into
consideration the transaction price, brokerage commission and
other expenses. The Fund acknowledges that the determination of
such economic benefit to the Fund by Sub-Adviser may represent
Sub-Adviser's evaluation that the Fund is benefited by relatively
better purchase or sales prices, lower commission expenses and
beneficial timing of transactions or a combination of these and
other factors. In any single transaction in which purchases and
or sales of securities of any issuer for the account of the Fund
are aggregated with other accounts managed by Sub-Adviser, the
actual prices applicable to the transaction will be averaged
among the accounts for which the transaction is effected,
including the account of Fund.
5. COMPENSATION OF THE SUB-ADVISER. For the services to be rendered
by the Sub-Adviser under this Agreement, the Investment Manager
shall pay to the Sub-Adviser compensation at the rate specified
in Schedule 1 as it may be amended from time to time. Such
compensation shall be paid at the times and on the terms set
forth in Schedule 1. All rights of compensation under this
Agreement for services performed as of the termination date shall
survive the termination of this Agreement. Except as may
otherwise be prohibited by law or regulation (including any then
current SEC staff interpretations), the Sub-Adviser may, in its
discretion and from time to time, waive a portion of its fee.
6. OTHER EXPENSES. The Company shall pay all expenses relating to
mailing prospectuses, statements of additional information, proxy
solicitation material and shareholder reports to shareholders.
4
<PAGE> 5
7. REPORTS.
(i) The Company and the Sub-Adviser agree to furnish to each
other, current prospectuses, proxy statements, reports to
shareholders, certified copies of financial statements, and
such other information with regard to their affairs as each may
reasonably request. The Investment Manager will furnish to the
Sub-Adviser advertising and sales literature or other material
prepared for distribution to Fund shareholders or the public,
which refer to the Sub-Adviser or its clients in any way, prior
to the use thereof, and the Investment Manager shall not use
any such materials if the Sub-Adviser reasonably objects in
writing within ten (10) business days (or such other time as
may be mutually agreed) after receipt thereof.
(ii) The Sub-Adviser shall provide to the Fund's custodian, on
each business day, information relating to all transactions in
the Managed Assets and shall provide such information to the
Investment Manager upon request. The Sub-Adviser will make all
reasonable efforts to notify the Custodian of all orders to
brokers for the Managed Assets by 9:00 am EST on the day
following the trade date and will affirm the trade to the
Custodian before the close of business one business day after
the trade date (T + 1).
(iii) The Sub-Adviser will promptly communicate to the
Investment Manager and to the Company such information relating
to portfolio transactions as they may reasonably request.
(iv) The Sub-Adviser shall promptly notify the Company and the
Investment Manager of any financial condition likely to impair
the ability of the Sub-Adviser to fulfill its commitments under
this Agreement.
8. STATUS OF SUB-ADVISER. The Sub-Adviser is and will continue to be
registered as such under the federal Investment Advisers Act of
1940. The services of the Sub-Adviser to the Company for the Fund
are not to be deemed exclusive, and the Sub-Adviser shall be free
to render similar services to others so long as its services to
the Fund are not impaired thereby. The Sub-Adviser shall be
deemed to be an independent contractor and shall, unless
otherwise expressly provided or authorized, have no authority to
act for or represent the Company in any way or otherwise be
deemed an agent of the Company.
9. CERTAIN RECORDS. The Sub-Adviser shall maintain all books and
records with respect to transactions involving the Managed Assets
required by
5
<PAGE> 6
subparagraphs (b)(5), (6), (7), (9), (10) and (11) and paragraph
(f) of Rule 31a-1 under the 1940 Act. The Sub-Adviser shall
provide to the Investment Manager or the Board of Directors such
periodic and special reports, balance sheets or financial
information, and such other information with regard to its
affairs as the Investment Manager or the Board of Directors may
reasonably request.
The Sub-Adviser shall keep the books and records relating to the
Managed Assets required to be maintained by the Sub-Adviser under
this Agreement and shall timely furnish to the Investment Manager
all information relating to the Sub-Adviser's services under this
Agreement needed by the Investment Manager to keep the other
books and records of the Company required by Rule 31a-1 under the
1940 Act. The Sub-Adviser shall also furnish to the Investment
Manager any other information relating to the Managed Assets that
is required to be filed by the Investment Manager or the Company
with the SEC or sent to shareholders under the 1940 Act
(including the rules adopted thereunder) or any exemptive or
other relief that the Investment Manager or the Company obtains
from the SEC. The Sub-Adviser agrees that all records that it
maintains on behalf of the Company are property of the Company
and the Sub-Adviser will surrender promptly to the Company any of
such records upon the Company's request; provided, however, that
the Sub-Adviser may retain a copy of such records. In addition,
for the duration of this Agreement, the Sub-Adviser shall
preserve for the periods prescribed by Rule 31a-2 under the 1940
Act any such records as are required to be maintained by it
pursuant to this Agreement, and shall transfer said records to
any successor sub-adviser upon the termination of this Agreement
(or, if there is no successor sub-adviser, to the Investment
Manager).
10. LIMITATION OF LIABILITY OF SUB-ADVISER. The duties of the
Sub-Adviser shall be confined to those expressly set forth
herein, and no implied duties are assumed by or may be asserted
against the Sub-Adviser hereunder. The Sub-Adviser shall not be
liable for any error of judgment or mistake of law or for any
loss arising out of any investment or for any act or omission in
carrying out its duties hereunder, except a loss resulting from
willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of reckless disregard of
its obligations and duties hereunder, except as may otherwise be
provided under provisions of applicable state law or Federal
securities law which cannot be waived or modified hereby. (As
used in this Paragraph 10, the term "Sub-Adviser" shall include
directors, officers, employees and other corporate agents of the
Sub-Adviser as well as that entity itself).
11. PERMISSIBLE INTERESTS. Agents and shareholders of the Company may
be interested in the Sub-Adviser (or any successor thereof) as
directors, partners, officers, or shareholders, or otherwise;
directors, partners, officers, agents, and shareholders of the
Sub-Adviser are or may be interested in the
6
<PAGE> 7
Company as shareholders or otherwise; and the Sub-Adviser (or any
successor) is or may be interested in the Company as a
shareholder or otherwise. In addition, brokerage transactions for
the Company may be effected through affiliates of the Sub-Adviser
if approved by the Board of Directors of the Company subject to
the rules and regulations of the Securities and Exchange
Commission.
12. DURATION AND TERMINATION. This Agreement shall become effective
upon its approval by the Board of Directors of the Company and by
a vote of the majority of the outstanding voting securities of
the Fund; provided, however, that at any time the Adviser shall
have obtained exemptive relief from the Securities and Exchange
Commission permitting it to engage a Sub-Adviser without first
obtaining approval of the Agreement from a majority of the
outstanding voting securities of the Fund(s) involved, the
Agreement shall become effective upon its approval by the
Company's Board of Directors. This Agreement shall remain in
effect until two years from date of execution, and thereafter,
for periods of one year so long as such continuance thereafter is
specifically approved at least annually by the vote of a (a)
majority of those Directors of the Company who are not parties to
this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such
approval, and (b) by the Directors of the Company, or by the vote
of a majority of the outstanding voting securities of the Fund;
provided, however, that if the shareholders of the Fund fail to
approve the Agreement as provided herein, the Sub-Adviser may
continue to serve hereunder in the manner and to the extent
permitted by the Investment Company Act of 1940 and rules and
regulations thereunder. The foregoing requirement that
continuance of this Agreement be "specifically approved at least
annually" shall be construed in a manner consistent with the
Investment Company Act of 1940 and the rules and regulations
thereunder.
This Agreement may be terminated at any time, without the payment
of any penalty, by vote of a majority of the Directors of the
Company or by vote of a majority of the outstanding voting
securities of the Fund on not less than 30 days nor more than 60
days written notice to the Sub-Adviser, by the Investment Manager
at any time without the payment of a penalty upon 90 days written
notice to the Sub-Adviser, or by the Sub-Adviser at any time
without the payment of any penalty on 90 days written notice to
the Investment Manager. This Agreement will automatically and
immediately terminate in the event of its assignment or in the
event of the termination of the Investment Manager's advisory
agreement with the Company. Any termination of this Agreement in
accordance with the terms hereof will not affect the obligations
or liabilities accrued prior to termination. Any notice
7
<PAGE> 8
under this Agreement shall be given in writing, addressed and
delivered, or mailed postpaid, to the other party at any office
of such party.
As used in this Section 12, the terms "assignment", "interested
persons," and a "vote of a majority of the outstanding voting
securities" shall have the respective meanings set forth in the
1940 Act and the rules and regulations thereunder; subject to
such exceptions as may be granted by the SEC under said Act.
13. NOTICE. Any notice required or permitted to be given by either
party to the other shall be deemed sufficient if sent by
registered or certified mail, postage prepaid, addressed by the
party giving notice to the other party at the last address
furnished by the other party to the party giving notice. At the
outset, such notices shall be delivered to the following
addresses:
(i) if to the Company:
c/o Commonfund Asset Management Company
Attention: President
450 Post Road East
Westport, CT. 06881;
(ii) if to the Investment Manager, at the foregoing address;
and
(iii) if to the Sub-Adviser:
Wellington Management Company, LLP
Attention: Regulatory Affairs
75 State Street, Boston, MA 02109.
14. SEVERABILITY. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
15. GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of New York and the applicable
provisions of the 1940 Act. To the extent that the applicable
laws of the State of New York, or any of the provisions herein,
conflict with the applicable provisions of the 1940 Act, the
latter shall control.
16. MISCELLANEOUS. This instrument constitutes the sole and only
agreement of the parties to it relating to its object; any prior
agreements, promises or representations not expressly set forth
in this Agreement are of no force and effect. No waiver or
modification of this Agreement shall be effective unless reduced
to writing and signed by the party to be charged. No failure to
exercise and no delay in exercising on the part of any party
hereto of any right, remedy, power or privilege hereunder shall
operate as a waiver thereof.
8
<PAGE> 9
Except as set forth in Section 12, this Agreement binds and
inures to the benefit of parties, their successors and assigns.
This Agreement may be executed in more than one counterpart each
of which shall be deemed an original and both of which, taken
together, shall be deemed to constitute one and the same
instrument. A copy of the Certificate of Trust of the Company is
on file with the Secretary of State of the State of Delaware and
notice is hereby given that the obligations under this instrument
are not binding on any of the Directors, officers or shareholders
of the Company. Where the effect of a requirement of the 1940 Act
reflected in any provision of this Agreement is altered by rule,
regulation or order of the SEC, whether of special or general
application, such provision shall be deemed to incorporate the
effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the day and year first written above.
COMMONFUND INSTITUTIONAL FUNDS
By:
--------------------------
Attest:
----------------------
COMMONFUND ASSET MANAGEMENT COMPANY
By:
--------------------------
Attest:
----------------------
WELLINGTON MANAGEMENT COMPANY, LLP
By:
--------------------------
Attest:
----------------------
9
<PAGE> 10
SCHEDULE 1
TO THE
INVESTMENT SUB-ADVISORY AGREEMENT
DATED ___________, 1999
AMONG
COMMONFUND INSTITUTIONAL FUNDS
COMMONFUND ASSET MANAGEMENT COMPANY
AND
WELLINGTON MANAGEMENT COMPANY
FEES
Daily Accrual
- -------------
Fees shall be accrued each day by applying to the Net Asset Value of the
Managed Assets at the end of that day, the daily rate, using a 365 day year,
equivalent to the following:
Rate
Managed Assets($) (% Per Annum)
----------------- -------------
First $ 100 million 0.10%
Next $ 100 million 0.075%
Over $ 200 million 0.055%
Quarterly Payment
- -----------------
Fees shall be paid within 30 days following the end of each calendar quarter.
COMMONFUND ASSET MANAGEMENT COMPANY WELLINGTON MANAGEMENT COMPANY, LLP
By: By:
--------------------------- ---------------------------
Name: Name:
Title: Title:
Date of this Schedule 1:
------
10
<PAGE> 1
EXHIBIT (d)(3)
FORM OF
INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT made this __st day of _______________, 1999, by and between
Commonfund Institutional Funds, a Delaware business trust (the "Company"),
Commonfund Asset Management Company , a Delaware Corporation (the "Investment
Manager"), and Western Asset Management Company (the "Sub-Adviser").
WHEREAS, the Company is an open-end, management investment company
registered under the Investment Company Act of 1940, as amended, which may
consist of several series, each having its own investment policies; and
WHEREAS, one of those series is the Commonfund Short Duration Fund (the
"Fund"); and
WHEREAS, the Company has entered into an investment advisory agreement
with the Investment Manager pursuant to which the Investment Manager will act as
investment manager to the Fund; and
WHEREAS, the Investment Manager, acting with the approval of the
Company, wishes to retain the Sub-Adviser to render discretionary investment
advisory services with respect to that portion of the Fund that may be allocated
by the Investment Manager for management by the Sub-Adviser from time to time
(together with all income earned on those assets and all realized and unrealized
capital appreciation related to those assets (the "Managed Assets"), and the
Sub-Adviser is willing to render such services.
NOW, THEREFORE, in consideration of mutual covenants herein contained,
the parties hereto agree as follows:
1. DUTIES OF SUB-ADVISER. The Sub-Adviser shall manage the
investment and reinvestment of the Managed Assets and
determine in its discretion, the securities and other property
to be purchased or sold and the portion of the Managed Assets
to retain in cash. The Sub-Adviser shall review all proxy
solicitation materials and shall exercise any voting rights
associated with securities comprising the Managed Assets in
the best interests of the Fund and its shareholders. The
Sub-Adviser shall provide the Investment Manager and the
Company with records concerning the Sub-Adviser's activities
that the Company is required to maintain, and to render
regular reports to the Investment Manager and to the Company
concerning the Sub-Adviser's discharge of the foregoing
responsibilities.
The Sub-Adviser shall discharge the foregoing responsibilities
subject to the written instructions and directions of the
Company and its Board of Directors
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<PAGE> 2
and their agents, including the officers of the Company and
the Investment Manager, and in compliance with (i) such
policies as the Company may from time to time establish and
communicate to the Sub-Adviser, (ii) the objectives, policies,
and limitations for the Short Duration Fund set forth in the
Prospectus and Statement of Additional Information as those
documents may from time to time be amended or supplemented and
delivered to the Sub-Adviser (the "Prospectus and Statement of
Additional Information"), (iii) the Declaration of Trust of
the Company, and (iv) applicable laws and regulations
including the Investment Company Act of 1940 (the "1940 Act")
and the Internal Revenue Code of 1986. If a conflict in
policies or guidelines referenced herein occurs, the
Prospectus and Statement of Additional Information shall
control.
The Sub-Adviser agrees to perform such duties at its own
expense and to provide the office space, furnishings and
equipment and the personnel required by it to perform the
services on the terms and for the compensation provided
herein. The Sub-Adviser will not, however, pay for the cost of
securities, commodities, and other investments (including
brokerage commissions and other transaction charges, if any)
purchased or sold for the Fund nor will the Sub-Adviser bear
any expenses that would result in the Company's inability to
qualify as a regulated investment company under provisions of
the Internal Revenue Code.
2. DUTIES OF INVESTMENT MANAGER The Investment Manager shall
continue to have responsibility for all services to be
provided to the Fund pursuant to the Advisory Agreement
between it and the Company and shall oversee and review the
Sub-Adviser's performance under this Agreement.
The Investment Manager shall furnish to the Sub-Adviser
current and complete copies of the Declaration of Trust and
By-laws of the Company, and the current Prospectus and
Statement of Additional Information as those documents may be
amended from time to time.
3. CUSTODY, DELIVERY AND RECEIPT OF SECURITIES. The Company shall
designate one or more custodians to hold the Managed Assets.
The custodians, as so designated, will be responsible for the
custody, receipt and delivery of securities and other assets
of the Fund including the Managed Assets, and the Sub-Adviser
shall have no authority, responsibility or obligation with
respect to the custody, receipt or delivery of securities or
other assets of the Fund including the Managed Assets. In the
event that any cash or securities of the Fund are delivered to
the Sub-Adviser, it will promptly deliver the same over to the
custodian for the benefit of and in the name of the Fund.
2
<PAGE> 3
Unless otherwise required by local custom, all securities
transactions for the Managed Assets will be consummated by
payment to or delivery by the Fund of cash or securities due
to or from the Managed Assets.
Repurchase agreements including tri-party repurchase
agreements and other trading agreements may be entered into by
the Fund acting through designated officers or agents;
custodians under tri-party repurchase agreements will act as
sub-custodians of the Fund.
4. PORTFOLIO TRANSACTIONS.
(a) Selection of Brokers. The Sub-Adviser is authorized to
select the brokers or dealers that will execute the purchases
and sales of portfolio securities and other property for the
Fund in a manner that implements the policy with respect to
brokerage set forth in the Prospectus and Statement of
Additional Information for the Fund or as the Board of
Directors or the Investment Manager may direct from time to
time and in conformity with federal securities laws.
In executing Fund transactions and selecting brokers or
dealers, the Sub-Adviser will use its best efforts to seek on
behalf of the Fund the best overall terms available. In
assessing the best overall terms available for any
transaction, the Sub-Adviser shall consider all factors that
it deems relevant, including the breadth of the market in the
security, the price of the security, the financial condition
and execution capability of the broker or dealer, and the
reasonableness of the commission, if any, both for the
specific transaction and on a continuing basis. In evaluating
the best overall terms available, and in selecting the
broker-dealer to execute a particular transaction, the
Sub-Adviser may also consider the brokerage and research
services provided (as those terms are defined in Section 28(e)
of the Securities Exchange Act of 1934). Consistent with any
guidelines established by the Board of Directors and
communicated to the Sub-Adviser, the Sub-Adviser is authorized
to pay to a broker or dealer who provides such brokerage and
research services a commission for executing a portfolio
transaction for the Fund that is in excess of the amount of
commission another broker or dealer would have charged for
effecting that transaction if, but only if, the Sub-Adviser
determines in good faith that such commission was reasonable
in relation to the value of the brokerage and research
services provided by such broker or dealer viewed in terms of
that particular transaction or terms of the overall
responsibilities of the Sub-Adviser to the Fund. In addition,
the Sub-Adviser is authorized to allocate purchase and sale
orders for securities to brokers or dealers (including brokers
and dealers
3
<PAGE> 4
that are affiliated with the Investment Manager, Sub-Adviser
or the Company's principal underwriter) to take into account
the sale of shares of the Company if the Sub-Adviser believes
that the quality of the transaction and the commission are
comparable to what they would be with other qualified firms.
In no instance, however, will Fund assets be purchased from or
sold to the Investment Manager, Sub-Adviser, the Company's
principal underwriter, or any affiliated person of either the
Company, the Investment Manager or the principal underwriter,
acting as principal in the transaction, except to the extent
permitted by the Securities and Exchange Commission ("SEC")
and the 1940 Act.
b) Aggregating Orders. The Sub-Adviser may aggregate orders
for purchase or sale of Managed Assets with similar orders
being made concurrently for other accounts managed by
Sub-Adviser, if, in Sub-Adviser's reasonable judgment, such
aggregation shall result in an overall economic benefit to the
Fund, taking into consideration the transaction price,
brokerage commission and other expenses. The Fund acknowledges
that the determination of such economic benefit to the Fund by
Sub-Adviser may represent Sub-Adviser's evaluation that the
Fund is benefited by relatively better purchase or sales
prices, lower commission expenses and beneficial timing of
transactions or a combination of these and other factors. In
any single transaction in which purchases and or sales of
securities of any issuer for the account of the Fund are
aggregated with other accounts managed by Sub-Adviser, the
actual prices applicable to the transaction will be averaged
among the accounts for which the transaction is effected,
including the account of Fund.
5. COMPENSATION OF THE SUB-ADVISER. For the services to be
rendered by the Sub-Adviser under this Agreement, the
Investment Manager shall pay to the Sub-Adviser compensation
at the rate specified in Schedule 1 as it may be amended from
time to time. Such compensation shall be paid at the times and
on the terms set forth in Schedule 1. All rights of
compensation under this Agreement for services performed as of
the termination date shall survive the termination of this
Agreement. Except as may otherwise be prohibited by law or
regulation (including any then current SEC staff
interpretations), the Sub-Adviser may, in its discretion and
from time to time, waive a portion of its fee.
6. OTHER EXPENSES. The Company shall pay all expenses relating to
mailing prospectuses, statements of additional information,
proxy solicitation material and shareholder reports to
shareholders.
4
<PAGE> 5
7. REPORTS.
(i) The Company and the Sub-Adviser agree to furnish
to each other, current prospectuses, proxy
statements, reports to shareholders, certified copies
of financial statements, and such other information
with regard to their affairs as each may reasonably
request. The Investment Manager will furnish to the
Sub-Adviser advertising and sales literature or other
material prepared for distribution to Fund
shareholders or the public, which refer to the
Sub-Adviser or its clients in any way, prior to the
use thereof, and the Investment Manager shall not use
any such materials if the Sub-Adviser reasonably
objects in writing within ten (10) business days (or
such other time as may be mutually agreed) after
receipt thereof.
(ii) The Sub-Adviser shall provide to the Fund's
custodian, on each business day, information relating
to all transactions in the Managed Assets and shall
provide such information to the Investment Manager
upon request. The Sub-Adviser will make all
reasonable efforts to notify the Custodian of all
orders to brokers for the Managed Assets by 9:00 am
EST on the day following the trade date and will
affirm the trade to the Custodian before the close of
business one business day after the trade date (T +
1).
(iii) The Sub-Adviser will promptly communicate to
the Investment Manager and to the Company such
information relating to portfolio transactions as
they may reasonably request.
(iv) The Sub-Adviser shall promptly notify the
Company and the Investment Manager of any financial
condition likely to impair the ability of the
Sub-Adviser to fulfill its commitments under this
Agreement.
8. STATUS OF SUB-ADVISER. The Sub-Adviser is and will continue to
be registered as such under the federal Investment Advisers
Act of 1940. The services of the Sub-Adviser to the Company
for the Fund are not to be deemed exclusive, and the
Sub-Adviser shall be free to render similar services to others
so long as its services to the Fund are not impaired thereby.
The Sub-Adviser shall be deemed to be an independent
contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the
Company in any way or otherwise be deemed an agent of the
Company.
9. CERTAIN RECORDS. The Sub-Adviser shall maintain all books and
records with respect to transactions involving the Managed
Assets required by
5
<PAGE> 6
subparagraphs (b)(5), (6), (7), (9), (10) and (11) and
paragraph (f) of Rule 31a-1 under the 1940 Act. The
Sub-Adviser shall provide to the Investment Manager or the
Board of Directors such periodic and special reports, balance
sheets or financial information, and such other information
with regard to its affairs as the Investment Manager or the
Board of Directors may reasonably request.
The Sub-Adviser shall keep the books and records relating to
the Managed Assets required to be maintained by the
Sub-Adviser under this Agreement and shall timely furnish to
the Investment Manager all information relating to the
Sub-Adviser's services under this Agreement needed by the
Investment Manager to keep the other books and records of the
Company required by Rule 31a-1 under the 1940 Act. The
Sub-Adviser shall also furnish to the Investment Manager any
other information relating to the Managed Assets that is
required to be filed by the Investment Manager or the Company
with the SEC or sent to shareholders under the 1940 Act
(including the rules adopted thereunder) or any exemptive or
other relief that the Investment Manager or the Company
obtains from the SEC. The Sub-Adviser agrees that all records
that it maintains on behalf of the Company are property of the
Company and the Sub-Adviser will surrender promptly to the
Company any of such records upon the Company's request;
provided, however, that the Sub-Adviser may retain a copy of
such records. In addition, for the duration of this Agreement,
the Sub-Adviser shall preserve for the periods prescribed by
Rule 31a-2 under the 1940 Act any such records as are required
to be maintained by it pursuant to this Agreement, and shall
transfer said records to any successor sub-adviser upon the
termination of this Agreement (or, if there is no successor
sub-adviser, to the Investment Manager).
10. LIMITATION OF LIABILITY OF SUB-ADVISER. The duties of the
Sub-Adviser shall be confined to those expressly set forth
herein, and no implied duties are assumed by or may be
asserted against the Sub-Adviser hereunder. The Sub-Adviser
shall not be liable for any error of judgment or mistake of
law or for any loss arising out of any investment or for any
act or omission in carrying out its duties hereunder, except a
loss resulting from willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of
reckless disregard of its obligations and duties hereunder,
except as may otherwise be provided under provisions of
applicable state law or Federal securities law which cannot be
waived or modified hereby. (As used in this Paragraph 10, the
term "Sub-Adviser" shall include directors, officers,
employees and other corporate agents of the Sub-Adviser as
well as that entity itself).
11. PERMISSIBLE INTERESTS. Agents and shareholders of the Company
may be interested in the Sub-Adviser (or any successor
thereof) as directors, partners, officers, or shareholders, or
otherwise; directors, partners, officers, agents, and
shareholders of the Sub-Adviser are or may be interested in
the
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<PAGE> 7
Company as shareholders or otherwise; and the Sub-Adviser (or
any successor) is or may be interested in the Company as a
shareholder or otherwise. In addition, brokerage transactions
for the Company may be effected through affiliates of the
Sub-Adviser if approved by the Board of Directors of the
Company subject to the rules and regulations of the Securities
and Exchange Commission.
12. DURATION AND TERMINATION. This Agreement shall become
effective upon its approval by the Board of Directors of the
Company and by a vote of the majority of the outstanding
voting securities of the Fund; provided, however, that at any
time the Adviser shall have obtained exemptive relief from the
Securities and Exchange Commission permitting it to engage a
Sub-Adviser without first obtaining approval of the Agreement
from a majority of the outstanding voting securities of the
Fund(s) involved, the Agreement shall become effective upon
its approval by the Company's Board of Directors. This
Agreement shall remain in effect until two years from date of
execution, and thereafter, for periods of one year so long as
such continuance thereafter is specifically approved at least
annually by the vote of a (a) majority of those Directors of
the Company who are not parties to this Agreement or
interested persons of any such party, cast in person at a
meeting called for the purpose of voting on such approval, and
(b) by the Directors of the Company, or by the vote of a
majority of the outstanding voting securities of the Fund;
provided, however, that if the shareholders of the Fund fail
to approve the Agreement as provided herein, the Sub-Adviser
may continue to serve hereunder in the manner and to the
extent permitted by the Investment Company Act of 1940 and
rules and regulations thereunder. The foregoing requirement
that continuance of this Agreement be "specifically approved
at least annually" shall be construed in a manner consistent
with the Investment Company Act of 1940 and the rules and
regulations thereunder.
This Agreement may be terminated at any time, without the
payment of any penalty, by vote of a majority of the Directors
of the Company or by vote of a majority of the outstanding
voting securities of the Fund on not less than 30 days nor
more than 60 days written notice to the Sub-Adviser, by the
Investment Manager at any time without the payment of a
penalty upon 90 days written notice to the Sub-Adviser, or by
the Sub-Adviser at any time without the payment of any penalty
on 90 days written notice to the Investment Manager. This
Agreement will automatically and immediately terminate in the
event of its assignment or in the event of the termination of
the Investment Manager's advisory agreement with the Company.
Any termination of this Agreement in accordance with the terms
hereof will not affect the obligations or liabilities accrued
prior to termination. Any notice
7
<PAGE> 8
under this Agreement shall be given in writing, addressed and
delivered, or mailed postpaid, to the other party at any
office of such party.
As used in this Section 12, the terms "assignment",
"interested persons," and a "vote of a majority of the
outstanding voting securities" shall have the respective
meanings set forth in the 1940 Act and the rules and
regulations thereunder; subject to such exceptions as may be
granted by the SEC under said Act.
13. NOTICE. Any notice required or permitted to be given by either
party to the other shall be deemed sufficient if sent by
registered or certified mail, postage prepaid, addressed by
the party giving notice to the other party at the last address
furnished by the other party to the party giving notice. At
the outset, such notices shall be delivered to the following
addresses:
(i) if to the Company:
c/o Commonfund Asset Management Company
Attention: President
450 Post Road East
Westport, CT. 06881;
(ii) if to the Investment Manager: at the
foregoing address;
(iii) if to the Sub-Adviser:
Western Asset Management Company
Attention: Ilene Harker
117 East Colorado Boulevard, 6th Floor,
Pasadena, California 91105.
14. SEVERABILITY. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be
affected thereby.
15. GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of New York and the applicable
provisions of the 1940 Act. To the extent that the applicable
laws of the State of New York, or any of the provisions herein,
conflict with the applicable provisions of the 1940 Act, the
latter shall control.
16. MISCELLANEOUS. This instrument constitutes the sole and only
agreement of the parties to it relating to its object; any
prior agreements, promises or representations not expressly
set forth in this Agreement are of no force and effect. No
waiver or modification of this Agreement shall be effective
unless reduced to writing and signed by the party to be
charged. No failure to exercise and no delay in exercising on
the part of any party hereto of any right, remedy, power or
privilege hereunder shall operate as a waiver thereof.
8
<PAGE> 9
Except as set forth in Section 12, this Agreement binds and
inures to the benefit of parties, their successors and
assigns. This Agreement may be executed in more than one
counterpart each of which shall be deemed an original and both
of which, taken together, shall be deemed to constitute one
and the same instrument. A copy of the Certificate of Trust of
the Company is on file with the Secretary of State of the
State of Delaware and notice is hereby given that the
obligations under this instrument are not binding on any of
the Directors, officers or shareholders of the Company. Where
the effect of a requirement of the 1940 Act reflected in any
provision of this Agreement is altered by rule, regulation or
order of the SEC, whether of special or general application,
such provision shall be deemed to incorporate the effect of
such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the day and year first written above.
COMMONFUND INSTITUTIONAL FUNDS
By:
------------------------------------------
Attest:
--------------------------------------
COMMONFUND ASSET MANAGEMENT COMPANY
By:
------------------------------------------
Attest:
--------------------------------------
WESTERN ASSET MANAGEMENT COMPANY
By:
------------------------------------------
Attest:
--------------------------------------
9
<PAGE> 10
SCHEDULE 1
TO THE
INVESTMENT SUB-ADVISORY AGREEMENT
DATED , 1999
AMONG
COMMONFUND INSTITUTIONAL FUNDS
COMMONFUND ASSET MANAGEMENT COMPANY
AND
WESTERN ASSET MANAGEMENT COMPANY
FEES
Daily Accrual
Fees shall be accrued each day by applying to the Net Asset Value of the
Managed Assets at the end of that day, the daily rate, using a 365 day year,
equivalent to the following:
<TABLE>
<CAPTION>
Rate
Managed Assets($) (% Per Annum)
----------------- -------------
<S> <C>
Current Amount 0.055%
</TABLE>
Quarterly Payment
Fees shall be paid within 30 days following the end of each calendar quarter.
COMMONFUND ASSET WESTERN ASSET MANAGEMENT
MANAGEMENT COMPANY COMPANY LLP
By: By:
-------------------------------- --------------------------------
Name: Name:
Title: Title:
Date of this Schedule 1:
-------
10
<PAGE> 1
EXHIBIT (e)
DISTRIBUTION AGREEMENT
AGREEMENT made as of this 12 day of October, 1999, by and
between COMMONFUND INSTITUTIONAL FUNDS, a Delaware business trust (the
"Company"), and COMMONFUND SECURITIES, INC., a Delaware corporation (the
"Distributor").
W I T N E S S E T H :
WHEREAS, the Company is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as a diversified open-end
management investment company and it is in the interest of the Company to offer
its shares of beneficial interest in one or more series ("Shares") for sale
continuously and to appoint a principal underwriter for the purpose of
facilitating such offers and sales;
WHEREAS, the Company and the Distributor have entered into an
arrangement with respect to the solicitation of indications of interest in the
Shares in the period before effectiveness (the "Pre-effective Period") of its
initial registration statement filed pursuant to the Securities Act of 1933, as
amended, (the "1933 Act") and the 1940 Act;
WHEREAS, the Company and the Distributor wish to enter into an
agreement and with respect to the continuous offering and sale of Shares, after
the effectiveness of such registration statement.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor.
The Company hereby appoints the Distributor its underwriter in connection with
the offering and sale of the Shares on the terms set forth in this Agreement and
the Distributor hereby accepts such appointment and agrees to act hereunder
Section 2. Services and Duties of the Distributor.
(a) The Distributor hereby confirms its agreement to solicit
indications of interest in the Shares as agent for the Company during the
Pre-effective Period and agrees to offer and sell shares as agent for the
Company after the Pre-effective Period and during the remaining term of this
Agreement. Offers and sales will be upon the terms described in the Prospectus.
As used hereafter in this Agreement, the term "Prospectus" shall mean the
prospectus included as part of the Company's Registration Statement, as such
prospectus may be amended or supplemented from time to time, and the term
<PAGE> 2
"Registration Statement" shall mean the Registration Statement most recently
filed from time to time by the Company with the Securities and Exchange
Commission and effective under the 1933 Act and the 1940 Act, as such
Registration Statement is amended by any amendments thereto at the time in
effect.
(b) The Distributor will hold itself available to receive
orders, satisfactory to the Distributor, for the purchase of Shares and will
accept such orders on behalf of the Company and will transmit any orders to
purchase Shares received by it to the Company's transfer and shareholder
servicing agent as promptly as practicable after receipt. The Distributor will
not accept funds tendered to purchase Shares and shall promptly forward to the
Company"s Custodian any checks or other orders for payment in favor of the
Company in respect of purchases of Shares in accordance with the instructions of
the Company"s Administrator. Purchase orders shall be deemed effective at the
time and in the manner set forth in the Prospectus.
(c) The offering price of the Shares shall be the net asset
value (determined as set forth in the Prospectus) per Share next determined
following receipt of an order.
(d) The Distributor shall not be obligated to sell any certain
number of Shares and nothing herein contained shall prevent the Distributor from
entering into like distribution arrangements with other investment companies. At
the present time, Distributor privately places shares for certain private
investment companies.
Section 3. Duties of the Company.
(a) The Company agrees to sell its Shares so long as it has
Shares available for sale and to cause the Company"s transfer and shareholder
servicing agent to record on its books the ownership of (or deliver
certificates, if any, for) such Shares registered in such names and amounts as
the Distributor has requested in writing or other means of data transmission, as
promptly as practicable after receipt by the Company of the net asset value
thereof and written request of the Distributor therefor.
(b) The Company shall keep the Distributor fully informed with
regard to its affairs and shall furnish to the Distributor copies of all
information, financial statements and other papers which the Distributor may
reasonably request for use in connection with the distribution of Shares of the
Company, and this shall include one certified copy, upon request by the
Distributor, of all financial statements prepared for the Company by independent
accountants and such reasonable number of copies of its most current Prospectus
and annual and interim reports as the Distributor may request and shall
cooperate fully in the efforts of the Distributor to sell and arrange for the
sale of the Shares and in the performance of the Distributor under this
Agreement.
(c) The Company shall take, from time to time, such steps,
including payment of the related filing fees, as may be necessary to register
its Shares under the 1933 Act to the end that there will be available for sale
such number of Shares as the
<PAGE> 3
Distributor may be expected to sell. The Company agrees to file from time to
time such amendments, reports and other documents as may be necessary in order
that there may be no untrue statement of a material fact in a Registration
Statement or Prospectus, or necessary in order that there may be no omission to
state a material fact in the Registration Statement or Prospectus which omission
would make the statements therein misleading.
(d) The Company shall use its best efforts to qualify and
maintain the qualification of an appropriate number of its Shares for sale under
the securities laws of such states as the Distributor and the Company may
approve provided that the Company shall not be required to amend its Agreement
and Declaration of Trust or By-Laws to comply with the laws of any state, to
maintain an office in any state, to change the terms of the offering of the
Shares in any state from the terms set forth in its Registration Statement and
Prospectus, to qualify as a foreign corporation in any state or to consent to
service of process in any state other than with respect to claims arising out of
the offering of the Shares. The Distributor shall furnish such information and
other material relating to its affairs and activities as may be required by the
Company in connection with such qualifications.
Section 4. Expenses.
(a) The Company shall bear all costs and expenses of the
continuous offering of the Shares in connection with (i) fees and disbursements
of its counsel and independent accountants, (ii) the preparation, filing and
printing of any registration statements and/or prospectuses required to be filed
by and under the federal and state securities laws, (iii) the preparation and
mailing of annual and interim reports, prospectuses and proxy materials to
shareholders and (iv) the qualifications of Shares for sale under the securities
laws of such states or other jurisdictions as shall be selected by the Company
and the Distributor pursuant to Section 3(d) hereof and the cost and expenses
payable to each such state for continuing qualification therein.
(b) The Distributor shall bear (i) the costs and expenses of
preparing, printing and distributing any materials not prepared by the Company
and other materials used by the Distributor in connection with its offering of
the Shares for sale to the public, including the additional cost of printing
copies, at printer's over-run cost, of the Prospectus and of annual and interim
reports to shareholders other than copies thereof required for distribution to
shareholders or for filing with any federal and state securities authorities,
(ii) any expenses of advertising incurred by the Distributor in connection with
such offering and (iii) the expenses of registration or qualification of the
Distributor as a dealer or broker under federal or state laws and the expenses
of continuing such registration or qualification.
Section 5. Compensation. No compensation shall be payable by the
Company to the Distributor for the services to be rendered and the expenses
assumed by the Distributor with respect to this Agreement.
<PAGE> 4
Section 6. Indemnification. The Company agrees to indemnify, defend and
hold the Distributor, its officers and directors and any person who controls the
Distributor within the meaning of Section 15 of the 1933 Act, free and harmless
from and against any and all claims, demands, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which the
Distributor, its officers, directors or any such controlling person may incur
under the 1933 Act, or under common law or otherwise, arising out of or based
upon any untrue statement of a material fact contained in the Registration
Statement or Prospectus or arising out of or based upon any alleged omission to
state a material fact required to be stated in either thereof or necessary to
make the statements in either thereof not misleading, except insofar as such
claims, demands, liabilities or expenses arise out of or are based upon any such
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with information furnished in writing by the
Distributor to the Company for use in the Registration Statement or Prospectus;
provided, however, that this indemnity agreement, to the extent that it might
require indemnity of any person who is also an officer or Director of the
Company or who controls the Company within the meaning of Section 15 of the 1933
Act, shall not inure to the benefit of such officer, Director or controlling
person unless a court of competent jurisdiction shall determine, or it shall
have been determined by controlling precedent, that such result would not be
against public policy as expressed in the 1933 Act; and further provided, that
in no event shall anything contained herein be so construed as to protect the
Distributor against any liability to the Company or to its security holders to
which the Distributor would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of its duties, or
by reason of its reckless disregard of its obligations under this Agreement. The
Company's agreement to indemnify the Distributor, its officers and directors and
any such controlling person as aforesaid is expressly conditioned upon the
Company's being promptly notified of any action brought against the Distributor,
its officers or directors, or any such controlling person, such notification to
be given to the Company at its principal business office. The Company agrees
promptly to notify the Distributor of the commencement of any litigation or
proceedings against it or any of its officers or Directors in connection with
the issue and sale of any Shares.
The Distributor agrees to indemnify, defend and hold the
Company, its Directors and officers and any person who controls the Company, if
any, within the meaning of Section 15 of the 1933 Act, free and harmless from
and against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending against such claims, demands or liabilities
and any counsel fees incurred in connection therewith) which the Company, its
Directors or officers or any such controlling person may incur under the 1933
Act or under common law or otherwise, but only to the extent that such liability
or expense incurred by the Company, its Directors or officers or such
controlling person resulting from such claims or demands shall arise out of or
be based upon any alleged untrue statement of a material fact contained in
information furnished in writing by the Distributor to the Company for use in
the preparation of the Registration
<PAGE> 5
Statement or Prospectus or shall arise out of or be based upon any alleged
omission to state a material fact in such information or a fact necessary to
make such information not misleading, it being understood that the Company will
rely upon the information provided by the Distributor for use in the preparation
of the Registration Statement and Prospectus. The Distributor's agreement to
indemnify the Company, its Directors and officers, and any such controlling
person as aforesaid is expressly conditioned upon the Distributor's being
promptly notified of any action brought against the Company, its Directors or
officers or any such controlling person, such notification to be given to the
Distributor at its principal business office.
Section 7. Compliance with Securities Laws. The Company
represents that it is registered as an open-end management investment company
under the 1940 Act, and agrees that it will comply with the provisions of the
1940 Act and of the rules and regulations thereunder. The Company and the
Distributor each agree to comply with the applicable terms and provisions of the
1940 Act, the 1933 Act and, subject to the provisions of Section 3(d),
applicable state "Blue Sky" laws. The Distributor agrees to comply with the
applicable terms and provisions of the Securities Exchange Act of 1934.
Section 8. Term of Agreement; Termination. This Agreement
shall commence on the date first set forth above. This Agreement shall continue
in effect for a period more than two years from the date hereof only so long as
such continuance is specifically approved at least annually in conformity with
the requirements of the 1940 Act.
This Agreement shall terminate automatically in the event of
its assignment (as defined by the 1940 Act). In addition, this Agreement may be
terminated by either party at any time, without penalty, on not more than sixty
days' nor less than thirty days' written notice to the other party.
Section 9. Notices. Any notice required to be given pursuant
to this Agreement shall be deemed duly given if delivered or mailed by
registered mail, postage prepaid, (1) to the Distributor at 450 Post Road East,
Westport, Connecticut 06881, Attention: President, or (2) to the Company at 450
Post Road East, Westport, Connecticut 06881, Attention: President. The foregoing
addresses may be changed by the party entitled to notice by providing notice as
contemplated in this Section.
Section 10. Notice. The Directors of the Company have
authorized the execution of this Agreement in their capacity as Directors and
not individually and the Distributor agrees that neither the shareholders nor
the Directors nor any officer, employee, representative or agent of the Company
shall be personally liable upon, nor shall resort be had to their private
property for the satisfaction of, obligations given, executed or delivered on
behalf of or by the Company, that the shareholders, Directors, officers,
employees, representatives and agents of the Company shall not be personally
liable hereunder, and that the Distributor shall look solely to the property of
the Company for the satisfaction of any claim hereunder.
<PAGE> 6
Section 11. Governing Law. This Agreement shall be governed
and construed in accordance with the laws of the State of New York.
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
COMMONFUND SECURITIES, INC.
By: __________________________
COMMONFUND INSTITUTIONAL FUNDS
By: __________________________
<PAGE> 1
Exhibit (g)
CUSTODIAN AGREEMENT
AGREEMENT made as of this 12th day of October, 1999, between Commonfund
Institutional Funds, a business trust organized under the laws of the state of
Delaware (the "Company"), and INVESTORS BANK & TRUST COMPANY, a Massachusetts
trust company (the "Bank").
The Company, an open-end management investment company, on behalf of
the portfolios/series listed on Appendix A hereto (as such Appendix A may be
amended from time to time) (each a "Fund" and collectively, the "Funds"),
desires to place and maintain all of its portfolio securities and cash in the
custody of the Bank. The Bank has at least the minimum qualifications required
by Section 17(f)(1) of the Investment Company Act of 1940 (the "1940 Act") to
act as custodian of the portfolio securities and cash of the Company, and has
indicated its willingness to so act, subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto agree as follows:
1. Bank Appointed Custodian. The Company hereby appoints the Bank as
custodian of its portfolio securities and cash delivered to the Bank as
hereinafter described and the Bank agrees to act as such upon the terms and
conditions hereinafter set forth. For the services rendered pursuant to this
Agreement the Company agrees to pay to the Bank the fees set forth on Appendix B
hereto.
2. Definitions. Whenever used herein, the terms listed below will have
the following meaning:
2.1 Authorized Person. Authorized Person will mean any of the
persons duly authorized to give Proper Instructions or otherwise act on behalf
of the Company by appropriate resolution of its Board, and set forth in a
certificate as required by Section 4 hereof.
2.2 Board. Board will mean the Board of Directors of the Company.
2.3 Security. The term security as used herein will have the same
meaning assigned to such term in the Securities Act of 1933, as amended,
including, without limitation, any note, stock, treasury stock, bond, debenture,
evidence of indebtedness, certificate of interest or participation in any profit
sharing agreement, collateral-trust certificate, preorganization certificate or
subscription, transferable share, investment contract, voting-trust certificate,
certificate of deposit for a security, fractional undivided interest in oil,
gas, or other mineral rights, any put, call, straddle, option, or privilege on
any security, certificate of deposit, or group or index of securities (including
any interest therein or based on the value thereof), or any put, call, straddle,
option, or privilege entered into on a national securities exchange relating to
a foreign currency, or, in general, any interest or instrument commonly known as
a "security", or any certificate of interest or participation in, temporary or
interim certificate for, receipt for, guarantee of, or warrant or right to
subscribe to, or option contract to purchase or sell any of the foregoing, and
futures, forward contracts and options thereon.
2.4 Portfolio Security. Portfolio Security will mean any security
owned by the Company.
<PAGE> 2
2.5 Officers' Certificate. Officers' Certificate will mean, unless
otherwise indicated, any request, direction, instruction, or certification in
writing signed by any two Authorized Persons of the Company.
2.6 Book-Entry System. Book-Entry System shall mean the Federal
Reserve-Treasury Department Book Entry System for United States government,
instrumentality and agency securities operated by the Federal Reserve Bank, its
successor or successors and its nominee or nominees.
2.7 Depository. Depository shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of 1934 ("Exchange
Act"), its successor or successors and its nominee or nominees. The term
"Depository" shall further mean and include any other person authorized to act
as a depository under the 1940 Act, its successor or successors and its nominee
or nominees, specifically identified in a certified copy of a resolution of the
Board.
2.8 Proper Instructions. Proper Instructions shall mean (i)
instructions regarding the purchase or sale of Portfolio Securities, and
payments and deliveries in connection therewith, given by an Authorized Person,
such instructions to be given in such form and manner as the Bank and the
Company shall agree upon from time to time, and (ii) instructions (which may be
continuing instructions) regarding other matters signed or initialed by an
Authorized Person. Oral instructions will be considered Proper Instructions if
the Bank reasonably believes them to have been given by an Authorized Person.
The Company shall cause all oral instructions to be promptly confirmed in
writing. The Bank shall act upon and comply with any subsequent Proper
Instruction which modifies a prior instruction and the sole obligation of the
Bank with respect to any follow-up or confirmatory instruction shall be to make
reasonable efforts to detect any discrepancy between the original instruction
and such confirmation and to report such discrepancy to the Company. The Company
shall be responsible, at the Company's expense, for taking any action, including
any reprocessing, necessary to correct any such discrepancy or error, and to the
extent such action requires the Bank to act, the Company shall give the Bank
specific Proper Instructions as to the action required. Upon receipt by the Bank
of an Officers' Certificate as to the authorization by the Board accompanied by
a detailed description of procedures approved by the Company, Proper
Instructions may include communication effected directly between
electro-mechanical or electronic devices provided that the Board and the Bank
agree in writing that such procedures afford adequate safeguards for the
Company's assets.
3. Separate Accounts. If the Company has more than one Fund, the Bank
will segregate the assets of each Fund to which this Agreement relates into a
separate account for each such Fund containing the assets of such Fund (and all
investment earnings thereon). Unless the context otherwise requires, any
reference in this Agreement to any actions to be taken by the Company shall be
deemed to refer to the Company acting on behalf of one or more of its series,
any reference in this Agreement to any assets of the Company, including, without
limitation, any Portfolio Securities and cash and earnings thereon, shall be
deemed to refer only to assets of the applicable series, any duty or obligation
of the Bank hereunder to the Company shall be deemed to refer to duties and
obligations with respect to such individual series and any obligation or
liability of the Company hereunder shall be binding only with respect to such
individual series, and shall be discharged only out of the assets of such
series.
4. Certification as to Authorized Persons. The Secretary or Assistant
Secretary of the Company will at all times maintain on file with the Bank his or
her certification to the Bank, in such form as may be acceptable to the Bank, of
(i) the names and signatures of the Authorized
<PAGE> 3
Persons and (ii) the names of the members of the Board, it being understood that
upon the occurrence of any change in the information set forth in the most
recent certification on file (including without limitation any person named in
the most recent certification who is no longer an Authorized Person as
designated therein), the Secretary or Assistant Secretary of the Company will
sign a new or amended certification setting forth the change and the new,
additional or omitted names or signatures. The Bank will be entitled to rely and
act upon any Officers' Certificate given to it by the Company which has been
signed by Authorized Persons named in the most recent certification received by
the Bank.
5. Custody of Cash. As custodian for the Company, the Bank will open
and maintain a separate account or accounts in the name of the Company or in the
name of the Bank, as Custodian of the Company, and will deposit to the account
of the Company all of the cash of the Company, except for cash held by a
subcustodian appointed pursuant to Sections 14.2 or 14.3 hereof, including
borrowed funds, delivered to the Bank, subject only to draft or order by the
Bank acting pursuant to the terms of this Agreement. Pursuant to the Bank's
internal policies regarding the management of cash accounts, the Bank may
segregate that portion of the cash of the Company that the Company wishes to
place under interest bearing deposit arrangements with the Bank into a separate
savings deposit account upon which the Bank reserves the right to require seven
(7) days notice prior to withdrawal of cash from the account. Upon receipt by
the Bank of Proper Instructions (which may be continuing instructions) (or in
the case of payments for redemptions and repurchases of outstanding shares of
common stock of the Company, notification from the Company's transfer agent as
provided in Section 7, requesting such payment), designating the payee or the
account or accounts to which the Bank will release funds for deposit, and
stating that it is for a purpose permitted under the terms of this Section 5,
specifying the applicable subsection, the Bank will make payments of cash held
for the accounts of the Company, insofar as funds are available for that
purpose, only as permitted in subsections 5.1-5.9 below.
5.1 Purchase of Securities. Upon the purchase of securities for the
Company, against contemporaneous receipt of such securities by the Bank or
against delivery of such securities to the Bank in accordance with generally
accepted settlement practices and customs in the jurisdiction or market in which
the transaction occurs registered in the name of the Company or in the name of,
or properly endorsed and in form for transfer to, the Bank, or a nominee of the
Bank, or receipt for the account of the Bank pursuant to the provisions of
Section 6 below, each such payment to be made at the purchase price shown on a
broker's confirmation (or transaction report in the case of Book Entry Paper (as
that term is defined in Section 6.6 hereof)) of purchase of the securities
received by the Bank before such payment is made, as confirmed in the Proper
Instructions received by the Bank before such payment is made.
5.2 Redemptions. In such amount as may be necessary for the
repurchase or redemption of common shares of the Company offered for repurchase
or redemption in accordance with Section 7 of this Agreement.
5.3 Distributions and Expenses of Company. For the payment on the
account of the Company of dividends or other distributions to shareholders as
may from time to time be declared by the Board, interest, taxes, management or
supervisory fees, distribution fees, fees of the Bank for its services hereunder
and reimbursement of the expenses and liabilities of the Bank as provided
hereunder, fees of any transfer agent, fees for legal, accounting, and auditing
services, or other operating expenses of the Company.
<PAGE> 4
5.4 Payment in Respect of Securities. For payments in connection
with the conversion, exchange or surrender of Portfolio Securities or securities
subscribed to by the Company held by or to be delivered to the Bank.
5.5 Repayment of Loans. To repay loans of money made to the Company,
but, in the case of final payment, only upon redelivery to the Bank of any
Portfolio Securities pledged or hypothecated therefor and upon surrender of
documents evidencing the loan;
5.6 Repayment of Cash. To repay the cash delivered to the Company
for the purpose of collateralizing the obligation to return to the Company
certificates borrowed from the Company representing Portfolio Securities, but
only upon redelivery to the Bank of such borrowed certificates.
5.7 Foreign Exchange Transactions.
(a) For payments in connection with foreign exchange contracts
or options to purchase and sell foreign currencies for spot and future delivery
(collectively, "Foreign Exchange Agreements") which may be entered into by the
Bank on behalf of the Company upon the receipt of Proper Instructions, such
Proper Instructions to specify the currency broker or banking institution (which
may be the Bank, or any other subcustodian or agent hereunder, acting as
principal) with which the contract or option is made, and the Bank shall have no
duty with respect to the selection of such currency brokers or banking
institutions with which the Company deals or for their failure to comply with
the terms of any contract or option.
(b) In order to secure any payments in connection with Foreign
Exchange Agreements which may be entered into by the Bank pursuant to Proper
Instructions, the Company agrees that the Bank shall have a continuing lien and
security interest, to the extent of any payment due under any Foreign Exchange
Agreement, in and to any property at any time held by the Bank for the Company's
benefit or in which the Company has an interest and which is then in the Bank's
possession or control (or in the possession or control of any third party acting
on the Bank's behalf). The Company authorizes the Bank, in the Bank's sole
discretion, at any time to charge any such payment due under any Foreign
Exchange Agreement against any balance of account standing to the credit of the
Company on the Bank's books.
5.8 Other Authorized Payments. For other authorized transactions of
the Company, or other obligations of the Company incurred for proper Company
purposes; provided that before making any such payment the Bank will also
receive a certified copy of a resolution of the Board signed by an Authorized
Person (other than the Person certifying such resolution) and certified by its
Secretary or Assistant Secretary, naming the person or persons to whom such
payment is to be made, and either describing the transaction for which payment
is to be made and declaring it to be an authorized transaction of the Company,
or specifying the amount of the obligation for which payment is to be made,
setting forth the purpose for which such obligation was incurred and declaring
such purpose to be a proper corporate purpose.
5.9 Termination: Upon the termination of this Agreement as
hereinafter set forth pursuant to Section 8 and Section 16 of this Agreement.
6. Securities.
6.1 Segregation and Registration. Except as otherwise provided
herein, and except for securities to be delivered to any subcustodian appointed
pursuant to Sections 14.2 or 14.3 hereof,
<PAGE> 5
the Bank as custodian will receive and hold pursuant to the provisions hereof,
in a separate account or accounts and physically segregated at all times from
those of other persons, any and all Portfolio Securities which may now or
hereafter be delivered to it by or for the account of the Company. All such
Portfolio Securities will be held or disposed of by the Bank for, and subject at
all times to, the instructions of the Company pursuant to the terms of this
Agreement. Subject to the specific provisions herein relating to Portfolio
Securities that are not physically held by the Bank, the Bank will register all
Portfolio Securities (unless otherwise directed by Proper Instructions or an
Officers' Certificate), in the name of a registered nominee of the Bank as
defined in the Internal Revenue Code and any Regulations of the Treasury
Department issued thereunder, and will execute and deliver all such certificates
in connection therewith as may be required by such laws or regulations or under
the laws of any state.
The Company will from time to time furnish to the Bank
appropriate instruments to enable it to hold or deliver in proper form for
transfer, or to register in the name of its registered nominee, any Portfolio
Securities which may from time to time be registered in the name of the Company.
6.2 Voting and Proxies. Neither the Bank nor any nominee of the Bank
will vote any of the Portfolio Securities held hereunder, except in accordance
with Proper Instructions or an Officers' Certificate. The Bank will execute and
deliver, or cause to be executed and delivered, to the Company all notices,
proxies and proxy soliciting materials delivered to the Bank with respect to
such Securities, such proxies to be executed by the registered holder of such
Securities (if registered otherwise than in the name of the Company), but
without indicating the manner in which such proxies are to be voted.
6.3 Corporate Action. If at any time the Bank is notified that an
issuer of any Portfolio Security has taken or intends to take a corporate action
(a "Corporate Action") that affects the rights, privileges, powers, preferences,
qualifications or ownership of a Portfolio Security, including without
limitation, liquidation, consolidation, merger, recapitalization,
reorganization, reclassification, subdivision, combination, stock split or stock
dividend, which Corporate Action requires an affirmative response or action on
the part of the holder of such Portfolio Security (a "Response"), the Bank shall
notify the Company promptly of the Corporate Action, the Response required in
connection with the Corporate Action and the Bank's deadline for receipt from
the Company of Proper Instructions regarding the Response (the "Response
Deadline"). The Bank shall forward to the Company via telecopier and/or
overnight courier all notices, information statements or other materials
relating to the Corporate Action promptly after receipt of such materials by the
Bank.
(a) The Bank shall act upon a required Response only after
receipt by the Bank of Proper Instructions from the Company no later than 5:00
p.m. on the date specified as the Response Deadline and only if the Bank (or its
agent or subcustodian hereunder) has actual possession of all necessary
Securities, consents and other materials no later than 5:00 p.m. on the date
specified as the Response Deadline.
(b) The Bank shall have no duty to act upon a required
Response if Proper Instructions relating to such Response and all necessary
Securities, consents and other materials are not received by and in the
possession of the Bank no later than 5:00 p.m. on the date specified as the
Response Deadline. Notwithstanding, the Bank may, in its sole discretion, use
its best efforts to act upon a Response for which Proper Instructions and/or
necessary Securities, consents or other materials are received by the Bank after
5:00 p.m. on the date specified as the Response Deadline, it being acknowledged
and agreed by the parties that any undertaking by the Bank to
<PAGE> 6
use its best efforts in such circumstances shall in no way create any duty upon
the Bank to complete such Response prior to its expiration.
(c) In the event that the Company notifies the Bank of a
Corporate Action requiring a Response and the Bank has received no other notice
of such Corporate Action, the Response Deadline shall be 48 hours prior to the
Response expiration time set by the depository processing such Corporate Action.
(d) Section 14.3(e) of this Agreement shall govern any
Corporate Action involving Foreign Portfolio Securities held by a Selected
Foreign Sub-Custodian.
6.4 Book-Entry System. Provided (i) the Bank has received a
certified copy of a resolution of the Board specifically approving deposits of
Company assets in the Book-Entry System, and (ii) for any subsequent changes to
such arrangements following such approval, the Board has reviewed and approved
the arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval:
(a) The Bank may keep Portfolio Securities in the Book-Entry
System provided that such Portfolio Securities are represented in an account
("Account") of the Bank (or its agent) in such System which shall not include
any assets of the Bank (or such agent) other than assets held as a fiduciary,
custodian, or otherwise for customers;
(b) The records of the Bank (and any such agent) with respect
to the Company's participation in the Book-Entry System through the Bank (or any
such agent) will identify by book entry the Portfolio Securities which are
included with other securities deposited in the Account and shall at all times
during the regular business hours of the Bank (or such agent) be open for
inspection by duly authorized officers, employees or agents of the Company.
Where securities are transferred to the Company's account, the Bank shall also,
by book entry or otherwise, identify as belonging to the Company a quantity of
securities in a fungible bulk of securities (i) registered in the name of the
Bank or its nominee, or (ii) shown on the Bank's account on the books of the
Federal Reserve Bank;
(c) The Bank (or its agent) shall pay for securities purchased
for the account of the Company or shall pay cash collateral against the return
of Portfolio Securities loaned by the Company upon (i) receipt of advice from
the Book-Entry System that such Securities have been transferred to the Account,
and (ii) the making of an entry on the records of the Bank (or its agent) to
reflect such payment and transfer for the account of the Company. The Bank (or
its agent) shall transfer securities sold or loaned for the account of the
Company upon
(i) receipt of advice from the Book-Entry System that
payment for securities sold or payment of the initial cash collateral against
the delivery of securities loaned by the Company has been transferred to the
Account; and
(ii) the making of an entry on the records of the
Bank (or its agent) to reflect such transfer and payment for the account of the
Company. Copies of all advices from the Book-Entry System of transfers of
securities for the account of the Company shall identify the Company, be
maintained for the Company by the Bank and shall be provided to the Company at
its request. The Bank shall send the Company a confirmation, as defined by Rule
17f-4 of the 1940 Act, of any transfers to or from the account of the Company;
<PAGE> 7
(d) The Bank will promptly provide the Company with any report
obtained by the Bank or its agent on the Book-Entry System's accounting system,
internal accounting control and procedures for safeguarding securities deposited
in the Book-Entry System;
6.5 Use of a Depository. Provided (i) the Bank has received a
certified copy of a resolution of the Board specifically approving deposits in
DTC or other such Depository and (ii) for any subsequent changes to such
arrangements following such approval, the Board has reviewed and approved the
arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval:
(a) The Bank may use a Depository to hold, receive, exchange,
release, lend, deliver and otherwise deal with Portfolio Securities including
stock dividends, rights and other items of like nature, and to receive and remit
to the Bank on behalf of the Company all income and other payments thereon and
to take all steps necessary and proper in connection with the collection
thereof;
(b) Registration of Portfolio Securities may be made in the
name of any nominee or nominees used by such Depository;
(c) Payment for securities purchased and sold may be made
through the clearing medium employed by such Depository for transactions of
participants acting through it. Upon any purchase of Portfolio Securities,
payment will be made only upon delivery of the securities to or for the account
of the Company and the Company shall pay cash collateral against the return of
Portfolio Securities loaned by the Company only upon delivery of the Securities
to or for the account of the Company; and upon any sale of Portfolio Securities,
delivery of the Securities will be made only against payment therefor or, in the
event Portfolio Securities are loaned, delivery of Securities will be made only
against receipt of the initial cash collateral to or for the account of the
Company; and
(d) The Bank shall use its best efforts to provide that:
(i) The Depository obtains replacement of any certificated
Portfolio Security deposited with it in the event such Security is lost,
destroyed, wrongfully taken or otherwise not available to be returned to the
Bank upon its request;
(ii) Proxy materials received by a Depository with respect
to Portfolio Securities deposited with such Depository are forwarded immediately
to the Bank for prompt transmittal to the Company;
(iii) Such Depository promptly forwards to the Bank
confirmation of any purchase or sale of Portfolio Securities and of the
appropriate book entry made by such Depository to the Company's account;
(iv) Such Depository prepares and delivers to the Bank
such records with respect to the performance of the Bank's obligations and
duties hereunder as may be necessary for the Company to comply with the
recordkeeping requirements of Section 31(a) of the 1940 Act and Rule 31(a)
thereunder; and
(v) Such Depository delivers to the Bank all internal
accounting control reports, whether or not audited by an independent public
accountant, as well as such other reports as the Company may reasonably request
in order to verify the Portfolio Securities held by such Depository.
<PAGE> 8
6.6 Use of Book-Entry System for Commercial Paper. Provided (i) the
Bank has received a certified copy of a resolution of the Board specifically
approving participation in a system maintained by the Bank for the holding of
commercial paper in book-entry form ("Book-Entry Paper") and (ii) for each year
following such approval the Board has reviewed and approved the arrangements,
upon receipt of Proper Instructions and upon receipt of confirmation from an
Issuer (as defined below) that the Company has purchased such Issuer's
Book-Entry Paper, the Bank shall issue, and hold in book-entry form on behalf of
the Company, commercial paper issued by issuers with whom the Bank has entered
into a book-entry agreement (the "Issuers"). In maintaining procedures for
Book-Entry Paper, the Bank agrees that:
(a) The Bank will maintain all Book-Entry Paper held by the
Company in an account of the Bank that includes only assets held by it for
customers;
(b) The records of the Bank with respect to the Company's
purchase of Book-Entry Paper through the Bank will identify, by book-entry,
commercial paper belonging to the Company which is included in the Book-Entry
System and shall at all times during the regular business hours of the Bank be
open for inspection by duly authorized officers, employees or agents of the
Company;
(c) The Bank shall pay for Book-Entry Paper purchased for the
account of the Company upon contemporaneous (i) receipt of advice from the
Issuer that such sale of Book-Entry Paper has been effected, and (ii) the making
of an entry on the records of the Bank to reflect such payment and transfer for
the account of the Company;
(d) The Bank shall cancel such Book-Entry Paper obligation
upon the maturity thereof upon contemporaneous (i) receipt of advice that
payment for such Book-Entry Paper has been transferred to the Company, and (ii)
the making of an entry on the records of the Bank to reflect such payment for
the account of the Company; and
(e) The Bank will send to the Company such reports on its
system of internal accounting control with respect to the Book-Entry Paper as
the Company may reasonably request from time to time.
6.7 Use of Immobilization Programs. Provided (i) the Bank has
received a certified copy of a resolution of the Board specifically approving
the maintenance of Portfolio Securities in an immobilization program operated by
a bank which meets the requirements of Section 26(a)(1) of the 1940 Act, and
(ii) for each year following such approval the Board has reviewed and approved
the arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval, the Bank shall enter into
such immobilization program with such bank acting as a subcustodian hereunder.
6.8 Eurodollar CDs. Any Portfolio Securities which are Eurodollar
CDs may be physically held by the European branch of the U.S. banking
institution that is the issuer of such Eurodollar CD (a "European Branch"),
provided that such Portfolio Securities are identified on the books of the Bank
as belonging to the Company and that the books of the Bank identify the European
Branch holding such Portfolio Securities. Notwithstanding any other provision of
this Agreement to the contrary, except as stated in the first sentence of this
subsection 6.8, the Bank shall be under no other duty with respect to such
Eurodollar CDs belonging to the Company.
6.9 Options and Futures Transactions.
<PAGE> 9
(a) Puts and Calls Traded on Securities Exchanges, NASDAQ
or Over-the-Counter.
(i) The Bank shall take action as to put options
("puts") and call options ("calls") purchased or sold (written) by the Company
regarding escrow or other arrangements (i) in accordance with the provisions of
any agreement entered into upon receipt of Proper Instructions among the Bank,
any broker-dealer registered with the National Association of Securities
Dealers, Inc. (the "NASD"), and, if necessary, the Company, relating to the
compliance with the rules of the Options Clearing Corporation and of any
registered national securities exchange, or of any similar organization or
organizations.
(ii) Unless another agreement requires it to do so,
the Bank shall be under no duty or obligation to see that the Company has
deposited or is maintaining adequate margin, if required, with any broker in
connection with any option, nor shall the Bank be under duty or obligation to
present such option to the broker for exercise unless it receives Proper
Instructions from the Company. The Bank shall have no responsibility for the
legality of any put or call purchased or sold on behalf of the Company, the
propriety of any such purchase or sale, or the adequacy of any collateral
delivered to a broker in connection with an option or deposited to or withdrawn
from a Segregated Account (as defined in subsection 6.10 below). The Bank
specifically, but not by way of limitation, shall not be under any duty or
obligation to: (i) periodically check or notify the Company that the amount of
such collateral held by a broker or held in a Segregated Account is sufficient
to protect such broker or the Company against any loss; (ii) effect the return
of any collateral delivered to a broker; or (iii) advise the Company that any
option it holds, has or is about to expire. Such duties or obligations shall be
the sole responsibility of the Company.
(b) Puts, Calls and Futures Traded on Commodities Exchanges
(i) The Bank shall take action as to puts, calls and
futures contracts ("Futures") purchased or sold by the Company in accordance
with the provisions of any agreement entered into upon the receipt of Proper
Instructions among the Company, the Bank and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any Contract Market, or
any similar organization or organizations, regarding account deposits in
connection with transactions by the Company.
(ii) The responsibilities of the Bank as to futures,
puts and calls traded on commodities exchanges, any Futures Commission Merchant
account and the Segregated Account shall be limited as set forth in subparagraph
(a)(ii) of this Section 6.9 as if such subparagraph referred to Futures
Commission Merchants rather than brokers, and Futures and puts and calls thereon
instead of options.
6.10 Segregated Account. The Bank shall upon receipt of Proper
Instructions establish and maintain a Segregated Account or Accounts for and on
behalf of the Company.
(a) Cash and/or Portfolio Securities may be transferred
into a Segregated Account upon receipt of Proper Instructions in the following
circumstances:
(i) in accordance with the provisions of any
agreement among the Company, the Bank and a broker-dealer registered under the
Exchange Act and a member of the
<PAGE> 10
NASD or any Futures Commission Merchant registered under the Commodity Exchange
Act, relating to compliance with the rules of the Options Clearing Corporation
and of any registered national securities exchange or the Commodity Futures
Trading Commission or any registered Contract Market, or of any similar
organizations regarding escrow or other arrangements in connection with
transactions by the Company;
(ii) for the purpose of segregating cash or securities in
connection with options purchased or written by the Company or commodity futures
purchased or written by the Company;
(iii) for the deposit of liquid assets, such as cash, U.S.
Government securities or other high grade debt obligations, having a market
value (marked to market on a daily basis) at all times equal to not less than
the aggregate purchase price due on the settlement dates of all the Company's
then outstanding forward commitment or "when-issued" agreements relating to the
purchase of Portfolio Securities and all the Company's then outstanding
commitments under reverse repurchase agreements entered into with broker-dealer
firms;
(iv) for the purposes of compliance by the Company with the
procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange Commission
relating to the maintenance of Segregated Accounts by registered investment
companies;
(v) for other proper corporate purposes, but only, in the case
of this clause (v), upon receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Board, or of the executive committee of
the Board signed by an officer of the Company and certified by the Secretary or
an Assistant Secretary, setting forth the purpose or purposes of such Segregated
Account and declaring such purposes to be proper corporate purposes.
(b) Cash and/or Portfolio Securities may be withdrawn from a
Segregated Account pursuant to Proper Instructions in the following
circumstances:
(i) with respect to assets deposited in accordance with the
provisions of any agreements referenced in (a)(i) or (a)(ii) above, in
accordance with the provisions of such agreements;
(ii) with respect to assets deposited pursuant to (a)(iii) or
(a)(iv) above, for sale or delivery to meet the Company's obligations under
outstanding forward commitment or when-issued agreements for the purchase of
Portfolio Securities and under reverse repurchase agreements;
(iii) for exchange for other liquid assets of equal or greater
value deposited in the Segregated Account;
(iv) to the extent that the Company's outstanding forward
commitment or when-issued agreements for the purchase of Portfolio Securities or
reverse repurchase agreements are sold to other parties or the Company's
obligations thereunder are met from assets of the Company other than those in
the Segregated Account;
(v) for delivery upon settlement of a forward commitment or
when-issued agreement for the sale of Portfolio Securities; or
<PAGE> 11
(vi) with respect to assets deposited pursuant to (a)(v)
above, in accordance with the purposes of such account as set forth in Proper
Instructions.
6.11 Interest Bearing Call or Time Deposits. The Bank shall, upon
receipt of Proper Instructions relating to the purchase by the Company of
interest-bearing fixed-term and call deposits, transfer cash, by wire or
otherwise, in such amounts and to such bank or banks as shall be indicated in
such Proper Instructions. The Bank shall include in its records with respect to
the assets of the Company appropriate notation as to the amount of each such
deposit, the banking institution with which such deposit is made (the "Deposit
Bank"), and shall retain such forms of advice or receipt evidencing the deposit,
if any, as may be forwarded to the Bank by the Deposit Bank. Such deposits shall
be deemed Portfolio Securities of the Company and the responsibility of the Bank
therefore shall be the same as and no greater than the Bank's responsibility in
respect of other Portfolio Securities of the Company.
6.12 Transfer of Securities. The Bank will transfer, exchange, deliver
or release Portfolio Securities held by it hereunder, insofar as such Securities
are available for such purpose, provided that the Bank will make a transfer,
exchange, delivery or release under this Section only upon receipt of Proper
Instructions. The Proper Instructions shall state that such transfer, exchange
or delivery is for a purpose permitted under the terms of this Section 6.12, and
shall specify the applicable subsection, or describe the purpose of the
transaction with sufficient particularity to permit the Bank to ascertain the
applicable subsection. After receipt of such Proper Instructions, the Bank will
transfer, exchange, deliver or release Portfolio Securities only in the
following circumstances:
(a) Upon sales of Portfolio Securities for the account of the
Company, against contemporaneous receipt by the Bank of payment therefor in
full, or against payment to the Bank in accordance with generally accepted
settlement practices and customs in the jurisdiction or market in which the
transaction occurs, each such payment to be in the amount of the sale price
shown in a broker's confirmation of sale received by the Bank before such
payment is made, as confirmed in the Proper Instructions received by the Bank
before such payment is made;
(b) In exchange for or upon conversion into other securities alone
or other securities and cash pursuant to any plan of merger, consolidation,
reorganization, share split-up, change in par value, recapitalization or
readjustment or otherwise, upon exercise of subscription, purchase or sale or
other similar rights represented by such Portfolio Securities, or for the
purpose of tendering shares in the event of a tender offer therefor, provided,
however, that in the event of an offer of exchange, tender offer, or other
exercise of rights requiring the physical tender or delivery of Portfolio
Securities, the Bank shall have no liability for failure to so tender in a
timely manner unless such Proper Instructions are received by the Bank at least
two business days prior to the date required for tender, and unless the Bank (or
its agent or subcustodian hereunder) has actual possession of such Security at
least two business days prior to the date of tender;
(c) Upon conversion of Portfolio Securities pursuant to their terms
into other securities;
(d) For the purpose of redeeming in-kind shares of the Company upon
authorization from the Company;
(e) In the case of option contracts owned by the Company, for
presentation to the endorsing broker;
<PAGE> 12
(f) When such Portfolio Securities are called, redeemed or retired
or otherwise become payable;
(g) For the purpose of effectuating the pledge of Portfolio
Securities held by the Bank in order to collateralize loans made to the Company
by any bank, including the Bank; provided, however, that such Portfolio
Securities will be released only upon payment to the Bank for the account of the
Company of the moneys borrowed, provided further, however, that in cases where
additional collateral is required to secure a borrowing already made, and such
fact is made to appear in the Proper Instructions, Portfolio Securities may be
released for that purpose without any such payment. In the event that any
pledged Portfolio Securities are held by the Bank, they will be so held for the
account of the lender, and after notice to the Company from the lender in
accordance with the normal procedures of the lender and any loan agreement
between the Company and the lender that an event of deficiency or default on the
loan has occurred, the Bank may deliver such pledged Portfolio Securities to or
for the account of the lender;
(h) for the purpose of releasing certificates representing Portfolio
Securities, against contemporaneous receipt by the Bank of the fair market value
of such securities, as set forth in the Proper Instructions received by the Bank
before such payment is made;
(i) for the purpose of delivering securities lent by the Company to a
bank or broker dealer, but only against receipt in accordance with street
delivery custom except as otherwise provided herein, of adequate collateral as
agreed upon from time to time by the Company and the Bank, and upon receipt of
payment in connection with any repurchase agreement relating to such securities
entered into by the Company;
(j) for other authorized transactions of the Company or for other
proper corporate purposes; provided that before making such transfer, the Bank
will also receive a certified copy of resolutions of the Board, signed by an
authorized officer of the Company (other than the officer certifying such
resolution) and certified by its Secretary or Assistant Secretary, specifying
the Portfolio Securities to be delivered, setting forth the transaction in or
purpose for which such delivery is to be made, declaring such transaction to be
an authorized transaction of the Company or such purpose to be a proper
corporate purpose, and naming the person or persons to whom delivery of such
securities shall be made; and
(k) upon termination of this Agreement as hereinafter set forth
pursuant to Section 8 and Section 16 of this Agreement.
As to any deliveries made by the Bank pursuant to this Section 6.12,
securities or cash receivable in exchange therefor shall be delivered to the
Bank.
7. Redemptions. In the case of payment of assets of the Company held by
the Bank in connection with redemptions and repurchases by the Company of
outstanding common shares, the Bank will rely on notification by the Company's
transfer agent of receipt of a request for redemption and certificates, if
issued, in proper form for redemption before such payment is made. Payment shall
be made in accordance with the Declaration of Trust and By-laws of the Company
(the "Articles"), from assets available for said purpose.
8. Merger, Dissolution, etc. of Company. In the case of the following
transactions, not in the ordinary course of business, namely, the merger of the
Company into or the consolidation of the Company with another investment
company, the sale by the Company of all, or substantially
<PAGE> 13
all, of its assets to another investment company, or the liquidation or
dissolution of the Company and distribution of its assets, the Bank will deliver
the Portfolio Securities held by it under this Agreement and disburse cash only
upon the order of the Company set forth in an Officers' Certificate, accompanied
by a certified copy of a resolution of the Board authorizing any of the
foregoing transactions. Upon completion of such delivery and disbursement and
the payment of the fees through the end of the then current term of this
Agreement, and disbursements and expenses of the Bank, this Agreement will
terminate and the Bank shall be released from any and all obligations hereunder.
9. Actions of Bank Without Prior Authorization. Notwithstanding
anything herein to the contrary, unless and until the Bank receives an Officers'
Certificate to the contrary, the Bank will take the following actions without
prior authorization or instruction of the Company or the transfer agent:
9.1 Endorse for collection and collect on behalf of and in the name
of the Company all checks, drafts, or other negotiable or transferable
instruments or other orders for the payment of money received by it for the
account of the Company and hold for the account of the Company all income,
dividends, interest and other payments or distributions of cash with respect to
the Portfolio Securities held thereunder;
9.2 Present for payment all coupons and other income items held by
it for the account of the Company which call for payment upon presentation and
hold the cash received by it upon such payment for the account of the Company;
9.3 Receive and hold for the account of the Company all securities
received as a distribution on Portfolio Securities as a result of a stock
dividend, share split-up, reorganization, recapitalization, merger,
consolidation, readjustment, distribution of rights and similar securities
issued with respect to any Portfolio Securities held by it hereunder.
9.4 Execute as agent on behalf of the Company all necessary
ownership and other certificates and affidavits required by the Internal Revenue
Code or the regulations of the Treasury Department issued thereunder, or by the
laws of any state, now or hereafter in effect, inserting the Company's name on
such certificates as the owner of the securities covered thereby, to the extent
it may lawfully do so and as may be required to obtain payment in respect
thereof. The Bank will execute and deliver such certificates in connection with
Portfolio Securities delivered to it or by it under this Agreement as may be
required under the provisions of the Internal Revenue Code and any Regulations
of the Treasury Department issued thereunder, or under the laws of any State;
9.5 Present for payment all Portfolio Securities which are called,
redeemed, retired or otherwise become payable, and hold cash received by it upon
payment for the account of the Company; and
9.6 Exchange interim receipts or temporary securities for definitive
securities.
10. Collections and Defaults. The Bank will use reasonable efforts to
collect any funds which may to its knowledge become collectible arising from
Portfolio Securities, including dividends, interest and other income, and to
transmit to the Company notice actually received by it of any call for
redemption, offer of exchange, right of subscription, reorganization or other
proceedings affecting such Securities. If Portfolio Securities upon which such
income is payable are in default or payment is refused after due demand or
presentation, the Bank will notify the
<PAGE> 14
Company in writing of any default or refusal to pay within two business days
from the day on which it receives knowledge of such default or refusal.
11. Maintenance of Records and Accounting Services. The Bank will
maintain records with respect to transactions for which the Bank is responsible
pursuant to the terms and conditions of this Agreement, and in compliance with
the applicable rules and regulations of the 1940 Act. The books and records of
the Bank pertaining to its actions under this Agreement and reports by the Bank
or its independent accountants concerning its accounting system, procedures for
safeguarding securities and internal accounting controls will be open to
inspection and audit at reasonable times by officers of or auditors employed by
the Company and will be preserved by the Bank in the manner and in accordance
with the applicable rules and regulations under the 1940 Act.
The Bank shall perform fund accounting and shall keep the books of account
and render statements or copies from time to time as reasonably requested by the
Treasurer or any executive officer of the Company.
The Bank shall assist generally in the preparation of reports to
shareholders and others, audits of accounts, and other ministerial matters of
like nature.
12. Valuation and Yield Calculation
12.1 Fund Valuation. The Bank shall compute and, unless otherwise
directed by the Board, determine as of the close of regular trading on the New
York Stock Exchange on each day on which said Exchange is open for unrestricted
trading and as of such other days, or hours, if any, as may be authorized by the
Board, the net asset value and the public offering price of a share of capital
stock of each Fund, such determination to be made in accordance with the
provisions of the Articles of the Company and the Prospectus and Statement of
Additional Information relating to the Fund, as they may from time to time be
amended, and any applicable resolutions of the Board at the time in force and
applicable; and promptly to notify the Company, the proper exchange and the NASD
or such other persons as the Company may request of the results of such
computation and determination. In computing the net asset value hereunder, the
Bank may rely in good faith upon information furnished to it by any Authorized
Person in respect of (i) the manner of accrual of the liabilities of the Fund
and in respect of liabilities of the Fund not appearing on its books of account
kept by the Bank, (ii) reserves, if any, authorized by the Board or that no such
reserves have been authorized, (iii) the source of the quotations to be used in
computing the net asset value, (iv) the value to be assigned to any security for
which no price quotations are available, and (v) the method of computation of
the public offering price on the basis of the net asset value of the shares, and
the Bank shall not be responsible for any loss occasioned by such reliance or
for any good faith reliance on any quotations received from a source pursuant to
(iii) above.
12.2. Yield Calculation. The Bank will compute the performance results
of each Fund (the "Yield Calculation") in accordance with the provisions of
Release No. 33-6753 and Release No. IC-16245 (February 2, 1988) (the "Releases")
promulgated by the Securities and Exchange Commission, and any subsequent
amendments to, published interpretations of or general conventions accepted by
the staff of the Securities and Exchange Commission with respect to such
releases or the subject matter thereof ("Subsequent Staff Positions"), subject
to the terms set forth below:
<PAGE> 15
(a) The Bank shall compute the Yield Calculation for each Fund for
the stated periods of time as shall be mutually agreed upon, and communicate in
a timely manner the result of such computation to the Fund.
(b) In performing the Yield Calculation, the Bank will derive the
items of data necessary for the computation from the records it generates and
maintains for the Company pursuant Section 11 hereof. The Bank shall have no
responsibility to review, confirm, or otherwise assume any duty or liability
with respect to the accuracy or correctness of any such data supplied to it by
the Company, any of the Company's designated agents or any of the Company's
designated third party providers.
(c) At the request of the Bank, the Company shall provide, and the
Bank shall be entitled to rely on, written standards and guidelines to be
followed by the Bank in interpreting and applying the computation methods set
forth in the Releases or any Subsequent Staff Positions as they specifically
apply to the Company. In the event that the computation methods in the Releases
or the Subsequent Staff Positions or the application to the Company of a
standard or guideline is not free from doubt or in the event there is any
question of interpretation as to the characterization of a particular security
or any aspect of a security or a payment with respect thereto (e.g., original
issue discount, participating debt security, income or return of capital, etc.)
or otherwise or as to any other element of the computation which is pertinent to
any Fund, the Fund or its designated agent shall have the full responsibility
for making the determination of how the security or payment is to be treated for
purposes of the computation and how the computation is to be made and shall
inform the Bank thereof on a timely basis. The Bank shall have no responsibility
to make independent determinations with respect to any item that is covered by
this Section, and shall not be responsible for its computations made in
accordance with such determinations so long as such computations are
mathematically correct.
(d) The Fund shall keep the Bank informed of all publicly available
information and of any non-public advice, or information obtained by the Fund
from its independent auditors or by its personnel or the personnel of its
investment adviser, or Subsequent Staff Positions related to the computations to
be undertaken by the Bank pursuant to this Agreement and the Bank shall not be
deemed to have knowledge of such information (except as contained in the
Releases) unless it has been furnished to the Bank in writing.
13. Additional Services. The Bank shall perform the additional services
for the Fund as are set forth on Appendix C hereto. Appendix C may be amended
from time to time upon agreement of the parties to include further additional
services to be provided by the Bank to the Fund, at which time the fees set
forth in Appendix B shall be appropriately increased.
14. Duties of the Bank.
14.1 Performance of Duties and Standard of Care. In performing its
duties hereunder and any other duties listed on any Schedule hereto, if any, the
Bank will be entitled to receive and act upon the advice of independent counsel
of its own selection, which may be counsel for the Fund, and will be without
liability for any action reasonably taken or thing done or omitted to be done in
accordance with this Agreement in good faith in conformity with such advice.
The Bank will be under no duty or obligation to inquire into and will not
be liable for:
(a) the validity of the issue of any Portfolio Securities purchased
by or for a Fund, the legality of the purchases thereof or the propriety of the
price incurred therefor;
<PAGE> 16
(b) the legality of any sale of any Portfolio Securities by or for a
Fund or the propriety of the amount for which the same are sold;
(c) the legality of an issue or sale of any common shares of a Fund
or the sufficiency of the amount to be received therefor;
(d) the legality of the repurchase of any common shares of a Fund or
the propriety of the amount to be paid therefor;
(e) the legality of the declaration of any dividend by a Fund or the
legality of the distribution of any Portfolio Securities as payment in kind of
such dividend; and
(f) any property or moneys of a Fund unless and until received by
it, and any such property or moneys delivered or paid by it pursuant to the
terms hereof.
Moreover, the Bank will not be under any duty or obligation to
ascertain whether any Portfolio Securities at any time delivered to or held by
it for the account of a Fund are such as may properly be held by the Fund under
the provisions of its Articles, any federal or state statutes or any rule or
regulation of any governmental agency.
14.2 Agents and Subcustodians with Respect to Property of the Company
Held in the United States. The Bank may employ agents of its own selection in
the performance of its duties hereunder and shall be responsible for the acts
and omissions of such agents as if performed by the Bank hereunder. Without
limiting the foregoing, certain duties of the Bank hereunder may be performed by
one or more affiliates of the Bank.
Upon receipt of Proper Instructions, the Bank may employ subcustodians
selected by or at the direction of the Company, provided that any such
subcustodian meets at least the minimum qualifications required by Section
17(f)(1) of the 1940 Act to act as a custodian of the Company's assets with
respect to property of the Company held in the United States. The Bank shall
have no liability to the Company or any other person by reason of any act or
omission of any such subcustodian and the Company shall indemnify the Bank and
hold it harmless from and against any and all actions, suits and claims, arising
directly or indirectly out of the performance of any subcustodian. Upon request
of the Bank, the Company shall assume the entire defense of any action, suit, or
claim subject to the foregoing indemnity. The Company shall pay all fees and
expenses of any subcustodian.
14.3 Duties of the Bank with Respect to Property of the Company Held
Outside of the United States.
(a) Appointment of Foreign Custody Manager.
(i) If the Company has appointed the Bank Foreign Custody
Manager (as that term is defined in Rule 17f-5 under the 1940 Act), the Bank's
duties and obligations with respect to the Company's Portfolio Securities and
other assets maintained outside the United States shall be, to the extent not
set forth herein, as set forth in the Delegation Agreement between the Company
and the Bank (the "Delegation Agreement").
(ii) If the Company has appointed any other person or entity
Foreign Custody Manager, the Bank shall act only upon Proper Instructions from
the Company with
<PAGE> 17
regard to any of the Company's Portfolio Securities or other assets held or to
be held outside of the United States, and the Bank shall be without liability
for any Claim (as that term is defined in Section 15 hereof) arising out of
maintenance of the Company's Portfolio Securities or other assets outside of the
United States. The Company also agrees that it shall enter into a written
agreement with such Foreign Custody Manager that shall obligate such Foreign
Custody Manager to provide to the Bank in a timely manner all information
required by the Bank in order to complete its obligations hereunder. The Bank
shall not be liable for any Claim arising out of the failure of such Foreign
Custody Manager to provide such information to the Bank.
(b) Segregation of Securities. The Bank shall identify on its
books as belonging to the Company the Foreign Portfolio Securities held by each
foreign sub-custodian (each an "Eligible Foreign Custodian") selected by the
Foreign Custody Manager, subject to receipt by the Bank of the necessary
information from such Eligible Foreign Custodian if the Foreign Custody Manager
is not the Bank.
(c) Access of Independent Accountants of the Company. If the
Bank is the Company's Foreign Custody Manager, upon request of the Company, the
Bank will use its best efforts to arrange for the independent accountants of the
Company to be afforded access to the books and records of any foreign banking
institution employed as an Eligible Foreign Custodian insofar as such books and
records relate to the performance of such foreign banking institution with
regard to the Company's Portfolio Securities and other assets.
(d) Reports by Bank. If the Bank is the Company's Foreign
Custody Manager, the Bank will supply to the Company the reports required under
the Delegation Agreement.
(e) Transactions in Foreign Custody Account. Transactions with
respect to the assets of the Company held by an Eligible Foreign Custodian shall
be effected pursuant to Proper Instructions from the Company to the Bank and
shall be effected in accordance with the applicable agreement between the
Foreign Custody Manager and such Eligible Foreign Custodian. If at any time any
Foreign Portfolio Securities shall be registered in the name of the nominee of
the Eligible Foreign Custodian, the Company agrees to hold any such nominee
harmless from any liability by reason of the registration of such securities in
the name of such nominee.
Notwithstanding any provision of this Agreement to the
contrary, settlement and payment for Foreign Portfolio Securities received for
the account of the Company and delivery of Foreign Portfolio Securities
maintained for the account of the Company may be effected in accordance with the
customary established securities trading or securities processing practices and
procedures in the jurisdiction or market in which the transaction occurs,
including, without limitation, delivering securities to the purchaser thereof or
to a dealer therefor (or an agent for such purchaser or dealer) against a
receipt with the expectation of receiving later payment for such securities from
such purchaser or dealer.
In connection with any action to be taken with respect to the
Foreign Portfolio Securities held hereunder, including, without limitation, the
exercise of any voting rights, subscription rights, redemption rights, exchange
rights, conversion rights or tender rights, or any other action in connection
with any other right, interest or privilege with respect to such Securities
(collectively, the "Rights"), the Bank shall promptly transmit to the Company
such information in connection therewith as is made available to the Bank by the
Eligible Foreign Custodian, and shall promptly forward to the applicable
Eligible Foreign Custodian any
<PAGE> 18
instructions, forms or certifications with respect to such Rights, and any
instructions relating to the actions to be taken in connection therewith, as the
Bank shall receive from the Company pursuant to Proper Instructions.
Notwithstanding the foregoing, the Bank shall have no further duty or obligation
with respect to such Rights, including, without limitation, the determination of
whether the Company is entitled to participate in such Rights under applicable
U.S. and foreign laws, or the determination of whether any action proposed to be
taken with respect to such Rights by the Company or by the applicable Eligible
Foreign Custodian will comply with all applicable terms and conditions of any
such Rights or any applicable laws or regulations, or market practices within
the market in which such action is to be taken or omitted.
(f) Tax Law. The Bank shall have no responsibility or liability for
any obligations now or hereafter imposed on the Company or the Bank as custodian
of the Company by the tax laws of any jurisdiction, and it shall be the
responsibility of the Company to notify the Bank of the obligations imposed on
the Company or the Bank as the custodian of the Company by the tax law of any
non-U.S. jurisdiction, including responsibility for withholding and other taxes,
assessments or other governmental charges, certifications and governmental
reporting. The sole responsibility of the Eligible Foreign Custodian with regard
to such tax law shall be to use reasonable efforts to assist the Company with
respect to any claim for exemption or refund under the tax law of jurisdictions
for which the Company has provided such information.
14.4 Insurance. The Bank shall use the same care with respect to the
safekeeping of Portfolio Securities and cash of the Company held by it as it
uses in respect of its own similar property but it need not maintain any special
insurance for the benefit of the Company.
14.5. Fees and Expenses of the Bank. The Company will pay or reimburse
the Bank from time to time for any transfer taxes payable upon transfer of
Portfolio Securities made hereunder, and for all necessary proper disbursements,
expenses and charges made or incurred by the Bank in the performance of this
Agreement (including any duties listed on any Schedule hereto, if any) including
any indemnities for any loss, liabilities or expense to the Bank as provided
above. For the services rendered by the Bank hereunder, the Company will pay to
the Bank such compensation or fees at such rate and at such times as shall be
agreed upon in writing by the parties from time to time. The Bank will also be
entitled to reimbursement by the Company for all reasonable expenses incurred in
conjunction with termination of this Agreement.
14.6 Advances by the Bank. The Bank may, in its sole discretion,
advance funds on behalf of a Fund to make any payment permitted by this
Agreement upon receipt of any proper authorization required by this Agreement
for such payments by the Company. Should such a payment or payments, with
advanced funds, result in an overdraft (due to insufficiencies of the Fund's
account with the Bank, or for any other reason) this Agreement deems any such
overdraft or related indebtedness a loan made by the Bank to the Fund payable on
demand. Such overdraft shall bear interest at the current rate charged by the
Bank for such loans unless the Fund shall provide the Bank with agreed upon
compensating balances. The Company agrees that the Bank shall have a continuing
lien and security interest to the extent of any overdraft or indebtedness and to
the extent required by law, in and to any property at any time held by it for
the Fund's benefit or in which the Fund has an interest and which is then in the
Bank's possession or control (or in the possession or control of any third party
acting on the Bank's behalf). The Company authorizes the Bank, in the Bank's
sole discretion, at any time to charge any overdraft or indebtedness, together
with interest due thereon, against any balance of account standing to the credit
of the Company on the Bank's books.
15. Limitation of Liability.
<PAGE> 19
15.1 Notwithstanding anything in this Agreement to the contrary, in
no event shall the Bank or any of its officers, directors, employees or agents
(collectively, the "Bank Indemnified Parties") be liable to the Company, and the
Company shall indemnify and hold the Bank and the Bank Indemnified Parties
harmless from and against any and all loss, damage, liability, actions, suits,
claims, costs and expenses, including legal fees, (a "Claim") arising as a
result of any act or omission of the Bank or any Bank Indemnified Party under
this Agreement, except for any Claim resulting from the negligence, willful
misfeasance or bad faith of the Bank or any Bank Indemnified Party. Without
limiting the foregoing, neither the Bank nor the Bank Indemnified Parties shall
be liable for, and the Bank and the Bank Indemnified Parties shall be
indemnified against, any Claim arising as a result of:
(a) Any act or omission by the Bank or any Bank Indemnified
Party in good faith reliance upon any Officer's Certificate, Proper
Instructions, resolution of the Board, telegram, telecopier, notice, request,
certificate or other instrument reasonably believed by the Bank to genuine;
(b) Any act or omission of any subcustodian selected by the
Company;
(c) Any act or omission of any Foreign Custody Manager other
than the Bank or any act or omission of any Eligible Foreign Custodian if the
Bank is not the Foreign Custody Manager;
(d) Any Corporate Action, distribution or other event related
to Portfolio Securities which, at the direction of the Company, have not been
registered in the name of the Bank or its nominee;
(e) Any Corporate Action requiring a Response for which the
Bank has not received Proper Instructions or obtained actual possession of all
necessary Securities, consents or other materials by 5:00 p.m. on the date
specified as the Response Deadline;
(f) Any act or omission of any European Branch of a U.S.
banking institution that is the issuer of Eurodollar CDs in connection with any
Eurodollar CDs held by such European Branch; or
(g) Information relied on in good faith by the Bank and
supplied by any Authorized Person in connection with the calculation of (i) the
net asset value and public offering price of the shares of capital stock of the
Company or (ii) the Yield Calculation.
15.2 Notwithstanding anything in this Agreement to the contrary, in
no event shall the Company or any of its officers, directors, employees or
agents (collectively, the "Company Indemnified Parties") be liable to the Bank,
and the Bank shall indemnify and hold the Company and the Company Indemnified
Parties harmless from and against any and all claims arising as a result of any
act or omission of the Bank or any Bank Indemnified Party under this Agreement
that constitutes negligence, willful misfeasance or bad faith of the Bank or
such Bank Indemnified Party.
15.3 Neither party shall be liable to the other for any loss,
damage, liability, action, suit, claim, cost or expense arising from any acts of
God, earthquakes, fires, floods, storms or other
<PAGE> 20
disturbances of nature, epidemics, strikes, riots, nationalization,
expropriation, currency restrictions, acts of war, civil war or terrorism,
insurrection, nuclear fusion, fission or radiation other similar happenings or
events that can not be controlled or contained by such party. Neither party
shall be liable to the other for any loss, damage, liability, action, suit,
claim, cost or expense arising from the interruption, loss or malfunction of
utilities or transportation or the unavailability of energy sources except to
the extent such interruption, loss or malfunction is reasonably forseeable and
subject to correction in a commercially reasonable business continuity program.
15.4 The Bank certifies that the occurrence in or use by the Bank's
own proprietary internal systems (the "Systems") of dates before or after
January 1, 2000 (the "Millennial Dates") will not adversely affect the
performance of the Systems with respect to date dependent data, computations,
output or other functions (including, without limitation, calculating, computing
and sequencing) and that the Systems will create, store and generate output data
related to or including Millennial Dates without errors or omissions ("Year 2000
Compliance").
The parties acknowledge that the Bank relies on automated data communications
with vendors, clients and other third parties, as well as certain third party
hardware and software providers such as Electronic Data Systems. The Bank also
relies on other third party relationships in the conduct of its business. For
example, the Bank relies on the services of the landlords of its facilities,
telecommunication companies, utilities and commercial airlines, among others.
The parties acknowledge that the Bank can make no certification as to the Year
2000 Compliance of third-parties utilized by the Bank in its day to day
operations or with which the Systems interact or communicate, from which the
Systems receive data or to which the Systems send data. The parties further
acknowledge that while the Bank has contacted such third-parties regarding Year
2000 Compliance and will use reasonable efforts to monitor the status of such
third-parties' Year 2000 Compliance, failure by such third-parties to achieve
timely Year 2000 Compliance could adversely affect the Bank's performance.
15.5 Notwithstanding anything to the contrary in this Agreement, in
no event shall the Bank be liable for special, incidental or consequential
damages, even if advised of the possibility of such damages.
16. Termination.
16.1 The term of this Agreement shall be three years commencing upon
the date hereof (the "Initial Term"), unless earlier terminated as provided
herein. After the expiration of the Initial Term, the term of this Agreement
shall automatically renew for successive three-year terms (each a "Renewal
Term") unless notice of non-renewal is delivered by the non-renewing party to
the other party no later than ninety days prior to the expiration of the Initial
Term or any Renewal Term, as the case may be.
Either party hereto may terminate this Agreement prior to the
expiration of the Initial Term or any Renewal Term:
(a) in the event the other party violates any material provision
of this Agreement, provided that the non-violating party gives
written notice of such violation to the violating party and
the violating party does not cure such violation within 90
days of receipt of such notice
(b) If a majority of the Board reasonably determines that the
performance of the
<PAGE> 21
Bank under this Agreement has been unsatisfactory, written
notice (the "Notice") of such determination setting forth the
reasons for such determination shall be provided to the Bank.
In the event the Bank shall not, within thirty (30) days
thereafter, cure identified deficiencies to the satisfaction
of the Board, the Company, with the authorization of the
Board, may terminate this Agreement.
16.2 In the event of the termination of this Agreement, the Bank
will upon receipt or transmittal, as the case may be, of notice of termination,
continue nonetheless to discharge all of its obligations hereunder until
designation by the Company of a successor custodian and, upon appointment of a
successor custodian shall commence and prosecute diligently to completion the
transfer of all cash and the delivery of all Portfolio Securities duly endorsed
and all records maintained under Section 11 to such successor. If the Company
does not select a successor custodian within ninety (90) days from the date of
delivery of notice of termination the Bank may, subject to the provisions of
subsection 16.3, deliver the Portfolio Securities and cash of the Company held
by the Bank to a bank or trust company of the Bank's own selection which meets
the requirements of Section 17(f)(1) of the 1940 Act and has a reported capital,
surplus and undivided profits aggregating not less than $2,000,000, to be held
as the property of the Company under terms similar to those on which they were
held by the Bank, whereupon such bank or trust company so selected by the Bank
will become the successor custodian of such assets of the Company with the same
effect as though selected by the Board. Thereafter, the Bank shall be released
from any and all obligations under this Agreement.
16.3 Prior to the expiration of one hundred and twenty (120) days
after notice of termination has been given, the Company may furnish the Bank
with an order of the Company advising that a successor custodian cannot be found
willing and able to act upon reasonable and customary terms and that there has
been submitted to the shareholders of the Company the question of whether the
Company will be liquidated or will function without a custodian for the assets
of the Company held by the Bank. In that event the Bank will deliver the
Portfolio Securities and cash of the Company held by it, subject as aforesaid,
in accordance with one of such alternatives which may be approved by the
requisite vote of shareholders, upon receipt by the Bank of a copy of the
minutes of the meeting of shareholders at which action was taken, certified by
the Company's Secretary and an opinion of counsel to the Company in form and
content satisfactory to the Bank. Thereafter, the Bank shall be released from
any and all obligations under this Agreement.
16.4 The Company shall reimburse the Bank for any reasonable
expenses incurred by the Bank in connection with the termination of this
Agreement.
16.5 At any time after the termination of this Agreement, the
Company may, upon written request, have reasonable access to the records of the
Bank relating to its performance of its duties as custodian.
17. Confidentiality. Both parties hereto agree than any non-public
information obtained hereunder concerning the other party is confidential and
may not be disclosed without the consent of the other party, except as may be
required by applicable law or at the request of a governmental agency. The
parties further agree that a breach of this provision would irreparably damage
the other party and accordingly agree that each of them is entitled, in addition
to all other remedies at law or in equity to an injunction or injunctions
without bond or other security to prevent breaches of this provision.
<PAGE> 22
18. Notices. Any notice or other instrument in writing authorized or
required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and delivered via (i) United
States Postal Service registered mail, (ii) telecopier with written
confirmation, or (iii) hand delivery with signature to such party at its office
at the address set forth below, namely:
(a) In the case of notices sent to the Company to:
Commonfund Institutional Funds
Attn: Treasurer
c/o Commonfund
450 Post Road East
Westport, CT 06881-0909
(b) In the case of notices sent to the Bank to:
Investors Bank & Trust Company
200 Clarendon Street, P.O. Box 9130
Boston, Massachusetts 02117-9130
Attention: Carol Lowd, Senior Director - Client Management
With a copy to: John E. Henry, General Counsel
or at such other place as such party may from time to time designate
in writing.
19. Amendments. This Agreement may not be altered or amended, except by
an instrument in writing, executed by both parties.
20. Parties. This Agreement will be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that this Agreement will not be assignable by the Company
without the written consent of the Bank or by the Bank without the written
consent of the Company, authorized and approved by its Board; and provided
further that termination proceedings pursuant to Section 16 hereof will not be
deemed to be an assignment within the meaning of this provision.
21. Governing Law. This Agreement and all performance hereunder will be
governed by the laws of the Commonwealth of Massachusetts, without regard to
conflict of laws provisions.
22. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
23. Entire Agreement. This Agreement, together with its Appendices,
constitutes the sole and entire agreement between the parties relating to the
subject matter herein and does not operate as an acceptance of any conflicting
terms or provisions of any other instrument and terminates and supersedes any
and all prior agreements and undertakings between the parties relating to the
subject matter herein.
24. Limitation of Liability. The Bank agrees that the obligations
assumed by the Company hereunder shall be limited in all cases to the assets of
the Company and that the Bank shall not seek satisfaction of any such obligation
from the officers, agents, employees, trustees, or shareholders of the Company.
<PAGE> 23
25. Several Obligations of the Funds. This Agreement is an agreement
entered into between the Bank and the Company with respect to each Fund. With
respect to any obligation of the Company on behalf of any Fund arising out of
this Agreement, the Bank shall look for payment or satisfaction of such
obligation solely to the assets of the Fund to which such obligation relates as
though the Bank had separately contracted with the Company by separate written
instrument with respect to each Fund.
[Remainder of Page Intentionally Left Blank]
<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first written above.
COMMONFUND INSTITUTIONAL FUNDS
By: /s/ Marita K. Wein
-------------------------------
Name: Marita K. Wein
Title: Vice President and Treasurer
INVESTORS BANK & TRUST COMPANY
By: /s/ Robert D. Mancuso
-------------------------------
Name: Robert D. Mancuso
Title: Senior Vice President
<PAGE> 25
Appendices
Appendix A................................. Funds
Appendix B................................. Fee Schedule
Appendix C................................. Additional Services
<PAGE> 26
Appendix A
Funds
Commonfund Short Duration Fund
<PAGE> 27
Appendix B
Fees
The Company shall pay the Custodian a fee for services rendered to the
Short Duration Fund accrued daily and paid monthly at the following annual rates
using a 365 day year:
NET ASSETS OF THE FUND ANNUAL RATE
$10 billion or less 0.0235%
Over $10 billion 0.0185%
In addition, for each investment Sub-Advisor retained by the Fund in
excess of four, the Company shall pay the Custodian an annual fee, accrued daily
and paid monthly, of $25,000.
Legal expenses, printing, delivery, postage, travel and Edgar filings, and
apportioned costs of third party review (SAS 70) will be for the account of the
Company.
Incremental basis point and transaction fees will be payable for all
foreign assets based upon the attached global custody fee schedule. Local
duties, scrip fees, proxy handling, postage, delivery and legal fees are for the
account of the Company. Fees for services in markets not included on the
attached global custody fee schedule will be negotiated on a case by case basis.
Fees will be invoiced by Custodian and, after approval of the
Treasurer, charged against the Custodial Account. Payment is due within five (5)
days.
<PAGE> 28
Appendix C
Additional Services
None
<PAGE> 1
Exhibit (h)(1)
ADMINISTRATION AGREEMENT
AGREEMENT made as of October 12, 1999 by and between Commonfund
Institutional Funds, a Delaware business trust (the "Company"), and INVESTORS
BANK & TRUST COMPANY, a Massachusetts trust company (the "Bank").
WHEREAS, the Company, a registered investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), consisting of the
separate portfolios listed on Appendix A hereto; and
WHEREAS, the Company desires to retain the Bank to render certain
administrative services to the Company and the Bank is willing to render such
services.
NOW, THEREFORE, in consideration of the mutual covenants herein set
forth, it is agreed between the parties hereto as follows:
1. Appointment. The Company hereby appoints the Bank to act as
Administrator of the Company on the terms set forth in this Agreement. The Bank
accepts such appointment and agrees to render the services herein set forth for
the compensation herein provided.
2. Delivery of Documents. The Company has furnished the Bank with
copies properly certified or authenticated of each of the following:
(a) Resolutions of the Company's Board of Directors
authorizing the appointment of the Bank to provide certain administrative
services to the Company and approving this Agreement;
(b) The Company's Declaration of Trust and all amendments
thereto (the "Declaration");
(c) The Company's by-laws and all amendments thereto (the
"By-Laws");
(d) The Company's agreements with all service providers which
include any investment advisory agreements, sub-investment advisory agreements,
custody agreements, distribution agreements and transfer agency agreements
(collectively, the "Agreements");
(e) The Company's most recent Registration Statement on Form
N-1A (the "Registration Statement") under the Securities Act of 1933 and under
the 1940 Act and all amendments thereto; and
(f) The Company's most recent prospectus and statement of
additional information (the "Prospectus"); and
(g) Such other certificates, documents or opinions as may
mutually be deemed necessary or appropriate for the Bank in the proper
performance of its duties hereunder.
The Company will immediately furnish the Bank with copies of all
amendments of or supplements to the foregoing. Furthermore, the Company will
notify the Bank as soon as possible of any matter which may materially affect
the performance by the Bank of its services under this Agreement.
3. Duties of Administrator. Subject to the supervision and
direction of the Board of Directors of the Company, the Bank, as Administrator,
will assist in conducting various aspects of the Company's administrative
operations and undertakes to perform the services described in Appendix B
hereto. The Bank may, from time to time, perform additional duties and functions
which shall be set forth in an amendment to such Appendix B executed by both
parties. At such time, the fee schedule included in Appendix C hereto shall be
appropriately amended.
<PAGE> 2
In performing all services under this Agreement, the Bank shall act
in conformity with the Company's Declaration and By-Laws and the 1940 Act, as
the same may be amended from time to time, and the investment objectives,
investment policies and other practices and policies set forth in the Company's
Registration Statement, as the same may be amended from time to time.
Notwithstanding any item discussed herein, the Bank has no discretion over the
Company's assets or choice of investments and cannot be held liable for any
problem relating to such investments.
4. Duties of the Company.
(a) The Company is solely responsible (through its transfer agent or
otherwise) for (i) providing timely and accurate reports ("Daily Sales Reports")
which will enable the Bank as Administrator to monitor the total number of
shares sold in each state on a daily basis and (ii) identifying any exempt
transactions ("Exempt Transactions") which are to be excluded from the Daily
Sales Reports.
(b) The Company agrees to make its legal counsel available to the
Bank for instruction with respect to any matter of law arising in connection
with the Bank's duties hereunder, and the Company further agrees that the Bank
shall be entitled to rely on such instruction without further investigation on
the part of the Bank.
5. Fees and Expenses.
(a) For the services to be rendered and the facilities to be
furnished by the Bank, as provided for in this Agreement, the Company will
compensate the Bank in accordance with the fee schedule attached as Appendix C
hereto. Such fees do not include out-of-pocket disbursements (as delineated on
the fee schedule or other expenses with the prior approval of the Company's
management) of the Bank for which the Bank shall be entitled to bill the Company
separately and for which the Company shall reimburse the Bank.
(b) The Bank shall not be required to pay any expenses incurred by
the Company.
6. Limitation of Liability.
(a) Notwithstanding anything in this Agreement to the contrary, in
no event shall the Bank or any of its officers, directors,
employees or agents (collectively, the "Bank Indemnified
Parties") be liable to the Company, and the Company shall
indemnify and hold the Bank and the Bank Indemnified Parties
harmless from and against any and all loss, damage, liability,
actions, suits, claims, costs and expenses, including legal
fees, (a "Claim") arising as a result of any act or omission of
the Bank or any Bank Indemnified Party under this Agreement,
except for any Claim resulting from the negligence, willful
misfeasance or bad faith of the Bank or any Bank Indemnified
Party. Without limiting the foregoing, neither the Bank nor the
Bank Indemnified Parties shall be liable for, and the Bank and
the Bank Indemnified Parties shall be indemnified against, any
Claim arising as a result of : i) actions or omissions of the
Fund, including, but not limited to, inaccurate Daily Sales
Reports and misidentification of Exempt Transactions or; (ii)
the offer or sale of any securities of the Fund in violation of
(x) any requirement under the federal securities laws or
regulations, (y) any requirement under the securities laws or
regulations of any state, or (z) any stop order or other
determination or ruling by any federal or state agency with
respect to the offer or sale of such securities.
<PAGE> 3
(b) Notwithstanding anything in this Agreement to the contrary, in
no event shall the Company or any of its officers, directors, employees or
agents (collectively, the "Company Indemnified Parties") be liable to the Bank,
and the Bank shall indemnify and hold the Company and the Company Indemnified
Parties harmless from and against any and all claims arising as a result of any
act or omission of the Bank or any Bank Indemnified Party under this Agreement
that constitutes negligence, willful misfeasance or bad faith of the Bank or
such Bank Indemnified Party.
(c) Neither party shall be liable to the other for any loss, damage,
liability, action, suit, claim, cost or expense arising from any acts of God,
earthquakes, fires, floods, storms or other disturbances of nature, epidemics,
strikes, riots, nationalization, expropriation, currency restrictions, acts of
war, civil war or terrorism, insurrection, nuclear fusion, fission or radiation
other similar happenings or events that can not be controlled or contained by
such party. Neither party shall be liable to the other for any loss, damage,
liability, action, suit, claim, cost or expense arising from the interruption,
loss or malfunction of utilities or transportation or the unavailability of
energy sources except to the extent such interruption, loss or malfunction is
reasonably forseeable and subject to correction in a commercially reasonable
business continuity program.
(d) The Bank certifies that the occurrence in or use by the Bank's
own proprietary internal systems (the "Systems") of dates before or after
January 1, 2000 (the "Millennial Dates") will not adversely affect the
performance of the Systems with respect to date dependent data, computations,
output or other functions (including, without limitation, calculating, computing
and sequencing) and that the Systems will create, store and generate output data
related to or including Millennial Dates without errors or omissions ("Year 2000
Compliance").
The parties acknowledge that the Bank relies on automated data
communications with vendors, clients and other third parties, as well as certain
third party hardware and software providers such as Electronic Data Systems. The
Bank also relies on other third party relationships in the conduct of its
business. For example, the Bank relies on the services of the landlords of its
facilities, telecommunication companies, utilities and commercial airlines,
among others. The parties acknowledge that the Bank can make no certification as
to the Year 2000 Compliance of third-parties utilized by the Bank in its day to
day operations or with which the Systems interact or communicate, from which the
Systems receive data or to which the Systems send data. The parties further
acknowledge that while the Bank has contacted such third-parties regarding Year
2000 Compliance and will use reasonable efforts to monitor the status of such
third-parties' Year 2000 Compliance, failure by such third-parties to achieve
timely Year 2000 Compliance could adversely affect the Bank's performance.
(e) The Bank may apply to the Company at any time for instructions
and may consult counsel for the Company, or its own counsel, and with
accountants and other experts with respect to any matter arising in connection
with its duties hereunder, and the Bank shall not be liable or accountable for
any action taken or omitted by it in good faith in accordance with such
instruction, or with the opinion of such counsel, accountants, or other experts
so long as such action does not result from willful misfeasance, bad faith or
gross negligence by the Bank. The Bank shall not be liable for any act or
omission taken or not taken in reliance upon any document, certificate or
instrument which it reasonably believes to be genuine and to be signed or
presented by the proper person or persons. The Bank shall not be held to have
notice of any change of authority of any officers, employees, or agents of the
Company absent actual notice or until receipt of written notice thereof has been
received by the Bank from the Company.
(f) Notwithstanding anything to the contrary in this Agreement, in
no event shall the Bank be liable for special, incidental or consequential
damages, even if advised of the possibility of such damages.
<PAGE> 4
7. Termination of Agreement.
(a) The term of this Agreement shall be three years commencing upon
the date hereof (the "Initial Term"), unless earlier terminated as provided
herein. After the expiration of the Initial Term, the term of this Agreement
shall automatically renew for successive three-year terms (each a "Renewal
Term") unless notice of non-renewal is delivered by the non-renewing party to
the other party no later than ninety days prior to the expiration of the Initial
Term or any Renewal Term, as the case may be.
Either party hereto may terminate this Agreement prior to the
expiration of the Initial Term or any Renewal Term:
(i) in the event the other party violates any material provision
of this Agreement provided that the non-violating party gives
written notice of such violation to the violating party and
the violating party does not cure such violation within 90
days of receipt of such notice; and
(ii) if a majority of the Board of the Company reasonably
determines that the performance of the Bank under this
Agreement has been unsatisfactory, written notice (the
"Notice") of such determination setting forth the reasons for
such determination shall be provided to the Bank. In the event
the Bank shall not, within thirty (30) days thereafter, cure
identified deficiencies to the satisfaction of the Board, the
Company, with the authorization of the Board, may terminate
this Agreement.
(b) In the event of the termination of this Agreement, the Bank will
upon receipt or transmittal, as the case may be, of notice of termination,
continue nonetheless to discharge all of its obligations hereunder until
designation by the Company of a successor administrator and, upon appointment of
a successor administrator, shall commence and prosecute diligently to completion
the transfer of all functions performed by the Bank hereunder to successor or to
the Company or any other designee of the Company as the Company may direct. If
the Company does not select a successor administrator within ninety (90) days
from the date of delivery of notice of termination, the Bank may give the
Company a notice to quit. Sixty days thereafter the Bank shall be released from
any and all obligations under this Agreement.
(c) At any time after the termination of this Agreement, the Company
may, upon written request, have reasonable access to the records of the Bank
relating to its performance of its duties as Administrator.
8. Miscellaneous.
(a) Any notice or other instrument authorized or required by this
Agreement to be given in writing to the Company or the Bank shall be
sufficiently given if addressed to that party and received by it at its office
set forth below or at such other place as it may from time to time designate in
writing.
<PAGE> 5
To the Company:
Commonfund Institutional Funds
Attn: Treasurer
c/o Commonfund
450 Post Road East
Westport, CT 06881-0906
To the Bank:
Investors Bank & Trust Company
200 Clarendon Street, P.O. Box 9130
Boston, MA 02117-9130
Attention: Carol Lowd, Senior Director, Client Management
With a copy to: John E. Henry, General Counsel
(b) This Agreement shall extend to and shall be binding upon the
parties hereto and their respective successors and assigns; provided, however,
that this Agreement shall not be assignable without the written consent of the
other party.
(c) This Agreement shall be construed in accordance with the laws of
the Commonwealth of Massachusetts, without regard to its conflict of laws
provisions.
(d) This Agreement may be executed in any number of counterparts
each of which shall be deemed to be an original and which collectively shall be
deemed to constitute only one instrument.
(e) The captions of this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
9. Confidentiality. All books, records, information and data pertaining
to the business of the other party which are exchanged or received pursuant to
the negotiation or the carrying out of this Agreement shall remain confidential,
and shall not be voluntarily disclosed to any other person, except as may be
required in the performance of duties hereunder or as otherwise required by law.
10. Use of Name. The Company shall not use the name of the Bank or any
of its affiliates in any prospectus, sales literature or other material relating
to the Company in a manner not approved by the Bank prior thereto in writing;
provided however, that the approval of the Bank shall not be required for any
use of its name which merely refers in accurate and factual terms to its
appointment hereunder or which is required by the Securities and Exchange
Commission or any state securities authority or any other appropriate
regulatory, governmental or judicial authority; provided further, that in no
event shall such approval be unreasonably withheld or delayed.
11. Several Obligations of the Funds. This Agreement is an agreement
entered into between the Bank and the Company with respect to each Fund. With
respect to any obligation of the Company on behalf of any Fund arising out of
this Agreement, the Bank shall look for payment or satisfaction of such
obligation solely to the assets of the Fund to which such obligation relates as
though the Bank had separately contracted with the Company by separate written
instrument with respect to each Fund.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed and delivered by their duly authorized officers as of the date
first written above.
<PAGE> 6
COMMONFUND INSTITUTIONAL FUNDS
By: /s/ Marita K. Wein
--------------------------
Name: Marita K. Wein
Title: Vice President and Treasurer
INVESTORS BANK & TRUST COMPANY
By: /s/ Robert D. Mancuso
--------------------------
Name: Robert D. Mancuso
Title: Senior Vice President
<PAGE> 7
Appendices
Appendix A...................................... Funds
Appendix B...................................... Services
Appendix C...................................... Fee Schedule
<PAGE> 8
Appendix A
Funds
Commonfund Short Duration Fund
<PAGE> 9
Appendix B
Services
<PAGE> 10
Appendix C
Fee Schedule
The Company shall pay the Bank a fee for services rendered to the Short Duration
Fund accrued daily and paid monthly at the following annual rates using a 365
day year:
<TABLE>
<S> <C>
NET ASSETS IN FUNDS OF THE COMPANY ANNUAL RATE
$10 billion or less 0.05%
Over $10 billion 0.0025%
</TABLE>
Legal expenses, printing, delivery, postage and travel associated with the
performance of services under this agreement will be for the account of the
Company.
Amounts payable hereunder will be invoiced by Custodian and, after
approval of the Treasurer, charged against the Custodian Account. Payment is due
within five (5) days.
<PAGE> 1
Exhibit (h)(2)
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 12th day of October, 1999 by and between
Commonfund Institutional Funds, a Delaware business trust (the "Company"), and
INVESTORS BANK & TRUST COMPANY, a Massachusetts trust company (the "Bank").
WHEREAS, the Company desires to appoint the Bank as its transfer agent,
dividend disbursing agent and agent in connection with certain other activities,
and the Bank desires to accept such appointment;
WHEREAS, the Bank is duly registered as a transfer agent as provided in
Section 17A(c) of the Securities Exchange Act of 1934, as amended (the "1934
Act");
WHEREAS, the Company is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets;
WHEREAS, the Company intends to initially offer shares in the series
listed on Appendix A hereto (such series, together with all other series
subsequently established by the Company and made subject to this Agreement in
accordance with Section 17, being herein referred to as the "Fund(s)");
NOW, THEREFORE, in consideration of the mutual covenants herein set
forth, the Company and the Bank agree as follows:
1. Terms of Appointment; Duties of the Bank.
1.1 Subject to the terms and conditions set forth in this Agreement,
the Company on behalf of the Funds hereby employs and appoints the Bank to act,
and the Bank agrees to act, as transfer agent for each of the Fund(s)'
authorized and issued shares of beneficial interest ("Shares"), dividend
disbursing agent and agent in connection with any accumulation, open-account or
similar plans provided to the shareholders of the Company ("Shareholders") and
set out in the currently effective prospectus and statement of additional
information, as each may be amended from time to time(the "Prospectus"), of the
Company, including without limitation any periodic investment plan or periodic
withdrawal program.
1.2 The Bank agrees that it will perform the following services:
(a) In connection with procedures established from time to
time by agreement between the Company and the Bank, the Bank shall:
(i) Receive for acceptance orders for the purchase of
Shares and promptly deliver payment and appropriate documentation therefor to
the custodian of the Company appointed by the Board of Directors of the Company
(the "Custodian");
(ii) Pursuant to purchase orders, issue the
appropriate number of Shares and hold such Shares in the appropriate Shareholder
account;
(iii) Receive for acceptance redemption requests and
redemption directions and deliver the appropriate documentation therefor to the
Custodian;
<PAGE> 2
(iv) At the appropriate time as and when it receives
monies paid to it by the Custodian with respect to any redemption, pay over or
cause to be paid over in the appropriate manner such monies as instructed by the
redeeming Shareholders;
(v) Effect transfers of Shares by the registered
owners thereof upon receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and
distributions declared by the Company on behalf of a Fund;
(vii) Create and maintain all necessary records
including those specified in Article 10 hereof, in accordance with all
applicable laws, rules and regulations, including but not limited to records
required by Section 31(a) of the Investment Company Act of 1940, as amended (the
"1940 Act"), and those records pertaining to the various functions performed by
it hereunder. All records shall be available for inspection and use by the
Company. Where applicable, such records shall be maintained by the Bank for the
periods and in the places required by Rule 31a-2 under the 1940 Act;
(viii) Make available during regular business hours
all records and other data created and maintained pursuant to this Agreement for
reasonable audit and inspection by the Company, or any person retained by the
Company. Upon reasonable notice by the Company, the Bank shall make available
during regular business hours its facilities and premises employed in connection
with its performance of this Agreement for reasonable visitation by the Company,
or any person retained by the Company;
(ix) At the expense of and at the request of the
Company, maintain an adequate supply of blank share certificates for each Fund
providing for the issuance of certificates to meet the Bank's requirements
therefor. Such share certificates, if any, shall be properly signed by
facsimile. It is understood that certificates evidencing ownership of Shares in
the Company are not required and, while authorized, there is no present
intention to issue such certificates. The Company agrees that, notwithstanding
the death, resignation, or removal of any officer of the Company whose signature
appears on such certificates, the Bank may continue to countersign certificates
which bear such signatures until otherwise directed by the Company. Share
certificates may be issued and accounted for entirely by the Bank and do not
require any third party registrar or other endorsing party;
(x) Issue replacement share certificates in lieu of
certificates which have been lost, stolen, mutilated or destroyed, without any
further action by the Board of Directors or any officer of the Company, upon
receipt by the Bank of properly executed affidavits and lost certificate bonds,
in form satisfactory to the Bank with the Company and the Bank as obligees under
the bond. At the discretion of the Bank, and at its sole risk, the Bank may
issue replacement certificates without requiring the affidavits and lost
certificate bonds described above; and
(xi) Record the issuance of Shares of the Company and
maintain, pursuant to Rule 17Ad-10(e) under the 1934 Act, a record of the total
number of Shares of the Company which are authorized, based upon data provided
to it by the Company, and issued and outstanding. The Bank shall also provide
the Company on a regular basis with the total number of Shares which are
authorized and issued and outstanding and shall have no obligation, when
recording the issuance of Shares, to monitor the issuance of such Shares or to
take cognizance of
<PAGE> 3
any laws relating to the issue or sale of such Shares, which functions shall be
the sole responsibility of the Company.
(b) In addition to and not in lieu of the services set forth
in the above paragraph (a) or in any Schedule hereto, the Bank shall: (i)
perform all of the customary services of a transfer agent, dividend disbursing
agent and, as relevant, agent in connection with accumulation, open-account or
similar plans (including without limitation any periodic investment plan or
periodic withdrawal program); including but not limited to maintaining all
Shareholder accounts, preparing Shareholder meeting lists, mailing proxies,
receiving and tabulating proxies, mailing Shareholder reports and prospectuses
to current Shareholders, withholding taxes on all accounts, including
nonresident alien accounts, preparing and filing U.S. Treasury Department Forms
1099 and other appropriate forms required with respect to dividends and
distributions by federal authorities for all Shareholders, preparing and mailing
confirmation forms and statements of account to Shareholders for all purchases
and redemptions of Shares and other confirmable transactions in Shareholder
accounts, responding to Shareholder telephone calls and Shareholder
correspondence, preparing and mailing activity statements for Shareholders, and
providing Shareholder account information; and (ii) provide a system which will
enable the Company to monitor the total number of shares sold in each State. The
Company shall (i) identify to the Bank in writing those transactions and assets
to be treated as exempt from blue sky reporting for each State and (ii) verify
the establishment of transactions for each State on the system prior to
activation and thereafter monitor the daily activity for each State. The
responsibility of the Bank for a Fund's blue sky state registration status is
solely limited to the initial establishment of transactions subject to blue sky
compliance by such Fund(s) and the reporting of such transactions to the Fund(s)
as provided above.
(c) Additionally, the Bank shall utilize a system to identify
all share transactions which involve purchase and redemption orders that are
processed at a time other than the time of the computation of net asset value
per share next computed after receipt of such orders, and shall compute the net
effect upon the Fund(s) of such transactions so identified on a daily and
cumulative basis.
2. Sale of Company Shares.
2.1 Whenever the Company shall sell or cause to be sold any Shares of a
Fund, the Company shall deliver or cause to be delivered to the Bank a document
duly specifying: (i) the name of the Fund whose Shares were sold; (ii) the
number of Shares sold, trade date, and price; (iii) the amount of money to be
delivered to the Custodian for the sale of such Shares and specifically
allocated to such Fund; and (iv) in the case of a new account, a new account
application or sufficient information to establish an account.
2.2 The Bank will, upon receipt by it of a check or other payment
identified by it as an investment in Shares of one of the Funds and drawn or
endorsed to the Bank as agent for, or identified as being for the account of,
one of the Funds, promptly deposit such check or other payment to the
appropriate account postings necessary to reflect the investment. The Bank will
notify the Company, or its designee, and the Custodian of all purchases and
related account adjustments.
2.3 Under procedures as established by mutual agreement between the
Company and the Bank, the Bank shall issue to the purchaser or its authorized
agent such Shares, computed to the nearest three decimal points, as he is
entitled to receive, based on the appropriate net asset value of the Funds'
Shares, determined in accordance with the prospectus and any applicable
<PAGE> 4
federal law or regulation. In issuing Shares to a purchaser or its authorized
agent, the Bank shall be entitled to rely upon the latest directions, if any,
previously received by the Bank from the purchaser or its authorized agent
concerning the delivery of such Shares. It is understood that the Company has no
present plan to issue certificates evidencing ownership of its Shares.
2.4 The Bank shall not be required to issue any Shares of the Company
where it has received a written instruction from the Company or written
notification from any appropriate federal or state authority that the sale of
the Shares of the Fund(s) in question has been suspended or discontinued, and
the Bank shall be entitled to rely upon such written instructions or written
notification.
2.5 Upon the issuance of any Shares of any Fund(s) in accordance with
foregoing provisions of this Section, the Bank shall not be responsible for the
payment of any original issue or other taxes, if any, required to be paid by the
Company in connection with such issuance.
2.6 The Bank may establish such additional rules and regulations
governing the transfer or registration of Shares as it may deem advisable and
consistent with such rules and regulations generally adopted by transfer agents,
or with the written consent of the Company, any other rules and regulations.
3. Returned Checks. In the event that any check or other order for the transfer
of money is returned unpaid for any reason, the Bank will take such steps as the
Bank may, in its discretion, deem appropriate to protect the Company from
financial loss or as the Company or its designee may instruct. Provided that the
standard procedures, as agreed upon from time to time, between the Company and
the Bank, regarding purchases and redemptions of Shares, are adhered to by the
Bank, the Bank shall not be liable for any loss suffered by a Fund as a result
of returned or unpaid purchase or redemption transactions. Legal or other
expenses incurred to collect amounts owed to a Fund as a consequence of returned
or unpaid purchase or redemption transactions shall be an expense of that Fund.
4. Redemptions. Shares of any Fund may be redeemed in accordance with the
procedures set forth in the Prospectus of the Company and the Bank will duly
process all redemption requests.
5. Transfers and Exchanges. The Bank is authorized to review and process
transfers of Shares of each Fund, exchanges between Funds on the records of the
Funds maintained by the Bank, and exchanges between the Company and any other
entity as may be permitted by the Prospectus of the Company. If Shares to be
transferred are represented by outstanding certificates, the Bank will, upon
surrender to it of the certificates in proper form for transfer, and upon
cancellation thereof, countersign and issue new certificates for a like number
of Shares and deliver the same. If the Shares to be transferred are not
represented by outstanding certificates, the Bank will, upon an order therefor
by or on behalf of the registered holder thereof in proper form, credit the same
to the transferee on its books. If Shares are to be exchanged for Shares of
another Fund, the Bank will process such exchange in the same manner as a
redemption and sale of Shares, except that it may in its discretion waive
requirements for information and documentation.
6. Right to Seek Assurances. The Bank reserves the right to refuse to transfer
or redeem Shares until it is satisfied that the requested transfer or redemption
is legally authorized, and it shall incur no liability for the refusal, in good
faith, to make transfers or redemptions which the Bank, in its judgment, deems
improper or unauthorized, or until it is satisfied that there is no basis
<PAGE> 5
for any claims adverse to such transfer or redemption. The Bank may, in
effecting transfers, rely upon the provisions of the Uniform Act for the
Simplification of Fiduciary Security Transfers or the Uniform Commercial Code,
as the same may be amended from time to time, which in the opinion of legal
counsel for the Company or the Bank's own legal counsel, do not require certain
documents in connection with the transfer or redemption of Shares of any Fund,
and the Company shall indemnify the Bank for any act done or omitted by it in
reliance upon such laws or opinions of counsel of the Company or of the Bank.
7. Distributions.
7.1 The Company will promptly notify the Bank of the declaration of any
dividend or distribution. The Company shall furnish to the Bank a resolution of
the Board of Directors of the Company certified by the Secretary (a
"Certificate"): (i) authorizing the declaration of dividends on a specified
periodic basis and authorizing the Bank to rely on oral instructions or a
Certificate specifying the date of the declaration of such dividend or
distribution, the date of payment thereof, the record date as of which
Shareholders entitled to payment shall be determined and the amount payable per
share to Shareholders of record as of such record date and the total amount
payable to the Bank on the payment date; or (ii) setting forth the date of the
declaration of any dividend or distribution by a Fund, the date of payment
thereof, the record date as of which Shareholders entitled to payment shall be
determined, and the amount payable per share to the Shareholders of record as of
that date and the total amount payable to the Bank on the payment date.
7.2 The Bank, on behalf of the Company, shall instruct the Custodian to
place in a dividend disbursing account funds equal to the cash amount of any
dividend or distribution to be paid out. The Bank will calculate, prepare and
mail checks to (at the address as it appears on the records of the Bank), or
(where appropriate) credit such dividend or distribution to the account of, Fund
Shareholders, and maintain and safeguard all underlying records.
7.3 The Bank will replace lost checks at its discretion and in
conformity with regular business practices.
7.4 The Bank will maintain all records necessary to reflect the
crediting of dividends that are reinvested in Shares of the Company, including
without limitation daily dividends.
7.5 The Bank shall not be liable for any improper payments made in
accordance with a resolution of the Board of Directors of the Company.
7.6 If the Bank shall not receive from the Custodian sufficient cash to
make payment to all Shareholders of the Company as of the record date, the Bank
shall, upon notifying the Company, withhold payment to all Shareholders of
record as of the record date until such sufficient cash is provided to the Bank
and shall not be liable for any claim arising out of such withholding.
8. Other Duties. In addition to the duties expressly provided for herein, the
Bank shall perform such other duties and functions and shall be paid such
amounts therefor as may from time to time be agreed to in writing.
9. Taxes. It is understood that the Bank shall file such appropriate information
returns concerning the payment of dividends and capital gain distributions and
tax withholding with the
<PAGE> 6
proper Federal, State and local authorities as are required by law to be filed
by the Company and shall withhold such sums as are required to be withheld by
applicable law.
10. Books and Records.
10.1 The Bank shall maintain confidential records showing for each
Shareholder's account the following: (i) names, addresses and tax identification
numbers; (ii) numbers of Shares held; (iii) historical information (as available
from prior transfer agents) regarding the account of each Shareholder, including
dividends paid and date and price of all transactions on a Shareholder's
account; (iv) any stop or restraining order placed against a Shareholder's
account; (v) information with respect to withholdings; (vi) any capital gain or
dividend reinvestment order, plan application, dividend address and
correspondence relating to the current maintenance of a Shareholder's account;
(vii) certificate numbers and denominations for any Shareholders holding
certificates; (viii) any information required in order for the Bank to perform
the calculations contemplated or required by this Agreement; and (ix) such other
information and data as may be required by applicable law.
10.2 Any records required to be maintained by Rule 31a-1 under the 1940
Act will be preserved for the periods prescribed in Rule 31a-2 under the 1940
Act. Such records may be inspected by the Company during regular business hours
upon reasonable notice. The Bank may, at its option at any time, and shall
forthwith upon the Company's demand, turn over to the Company and cease to
retain in the Bank's files, records and documents created and maintained by the
Bank in performance of its service or for its protection. At the end of the
six-year retention period, such documents will either be turned over to the
Company, or destroyed in accordance with the Company's authorization.
10.3 Procedures applicable to the services to be performed hereunder
may be established from time to time by agreement between the Fund(s) and the
Bank. The Bank shall have the right to utilize any shareholder accounting and
recordkeeping systems which, in its opinion, qualifies to perform any services
to be performed hereunder. The Bank shall keep records relating to the services
performed hereunder, in the form and manner as it may deem advisable.
11. Fees and Expenses.
11.1 For performance by the Bank pursuant to this Agreement, the
Fund(s) agree to pay the Bank an annual maintenance fee for each Shareholder
account as set out in the initial fee schedule attached as Appendix B hereto.
Such fees and out-of-pocket expenses and advances identified under Section 11.2
below may be changed from time to time subject to mutual written agreement
between the Fund(s) and the Bank.
11.2 In addition to the fee paid under Section 11.1 above, the Fund(s)
agree to reimburse the Bank for out-of-pocket expenses or advances incurred by
the Bank for the items set out in the fee schedule attached hereto. In addition,
any other expenses incurred by the Bank at the request or with the consent of
the Fund(s) including, without limitation, any equipment or supplies which the
Company specifically orders or requires the Bank to purchase, will be reimbursed
by the Fund(s).
11.3 Postage for mailing of dividends, proxies, Fund reports and other
mailings to all shareholder accounts shall be advanced to the Bank by the
Fund(s) at least seven (7) days prior to the mailing date of such materials. Any
waiver or extension by the Bank of the thirty and seven
<PAGE> 7
day time periods enumerated in this section 11.3 shall not constitute a
dismissal of any monies due under this Agreement nor shall such waiver or
extension apply to any future monies due to the Bank hereunder.
12. Representations and Warranties of the Bank.
The Bank represents and warrants to the Company that:
12.1 It is a trust company duly organized and existing and in good
standing under the laws of the Commonwealth of Massachusetts.
12.2 It is empowered under applicable laws and by its charter and
by-laws to enter into and perform this Agreement.
12.3 All requisite corporate proceedings have been taken to authorize
it to enter into and perform this Agreement.
12.4 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
13. Representations and Warranties of the Company.
The Company represents and warrants to the Bank that:
13.1 It is a business trust duly organized and existing and in good
standing under the laws of the State of Delaware.
13.2 It is empowered under applicable laws and by its charter documents
and by-laws to enter into and perform this Agreement.
13.3 All proceedings required by said charter documents and by-laws
have been taken to authorize it to enter into and perform this Agreement.
13.4 It is a open-end investment company registered under the 1940 Act.
13.5 A registration statement on Form N-1A (including a prospectus and
statement of additional information) under the Securities Act of 1933 and the
1940 Act is currently effective and will remain effective, and appropriate state
securities law filings have been made and will continue to be made, with respect
to all Shares of the Company being offered for sale.
13.6 When Shares are hereafter issued in accordance with the terms of
the Prospectus, such Shares shall be validly issued, fully paid and
nonassessable by the Fund(s).
14. Indemnification.
14.1 Notwithstanding anything in this Agreement to the contrary, in no
event shall the Bank or any of its officers, directors, employees or agents
(collectively, the "Bank Indemnified Parties") be liable to the Company, and the
Company shall indemnify and hold the Bank and the Bank Indemnified Parties
harmless from and against any and all loss, damage, liability, actions, suits,
claims, costs and expenses, including legal fees, (a "Claim") arising as a
result of any act or omission of the Bank or any Bank Indemnified Party under
this Agreement, except for any Claim
<PAGE> 8
resulting from the negligence, willful misfeasance or bad faith of the Bank or
any Bank Indemnified Party. Without limiting the foregoing, neither the Bank nor
the Bank Indemnified Parties shall be liable for, and the Bank and the Bank
Indemnified Parties shall be indemnified against, any Claim arising as a result
of:
(a) Any actions taken or omitted to be taken by the Bank or
its agents or subcontractors in good faith in reliance on, or use by the Bank or
its agents or subcontractors of, information, records and documents which (i)
are received by the Bank or its agents or subcontractors and furnished to such
party by or on behalf of the Fund(s), or (ii) have been prepared and/or
maintained by the Fund(s) or any other person or firm on behalf of the Fund(s).
(b) The Fund(s)' refusal or failure to comply with the terms
of this Agreement, or which arise out of the Funds' lack of good faith,
negligence or willful misconduct or which arise out of the material breach of
any representation or warranty of the Fund(s) hereunder.
(c) The reliance on, or the carrying out by the Bank or its
agents or subcontractors of any instructions or requests, whether written or
oral, of the Fund(s).
(d) The offer or sale of Shares by the Company in violation of
(i) any requirement under the federal securities laws or regulations; (ii) any
requirement under the securities laws or regulations of any state; or (iii) any
stop order or other determination or ruling by any federal or state agency with
respect to the offer or sale of such Shares, but only so long as any such
violation is not caused by the Bank or any Covered Party.
14.2 Notwithstanding anything in this Agreement to the contrary, in no
event shall the Company or any of its officers, directors, employees or agents
(collectively, the "Company Indemnified Parties") be liable to the Bank, and the
Bank shall indemnify and hold the Company and the Company Indemnified Parties
harmless from and against any and all claims arising as a result of any act or
omission of the Bank or any Bank Indemnified Party under this Agreement that
constitutes negligence, willful misfeasance or bad faith of the Bank or such
Bank Indemnified Party.
14.3 Neither party shall be liable to the other for any loss, damage,
liability, action, suit, claim, cost or expense arising from any acts of God,
earthquakes, fires, floods, storms or other disturbances of nature, epidemics,
strikes, riots, nationalization, expropriation, currency restrictions, acts of
war, civil war or terrorism, insurrection, nuclear fusion, fission or radiation
other similar happenings or events that can not be controlled or contained by
such party. Neither party shall be liable to the other for any loss, damage,
liability, action, suit, claim, cost or expense arising from the interruption,
loss or malfunction of utilities or transportation or the unavailability of
energy sources except to the extent such interruption, loss or malfunction is
reasonably forseeable and subject to correction in a commercially reasonable
business continuity program.
The Bank certifies that the occurrence in or use by the Bank's own
proprietary internal systems (the "Systems") of dates before or after January 1,
2000 (the "Millennial Dates") will not adversely affect the performance of the
Systems with respect to date dependent data, computations, output or other
functions (including, without limitation, calculating, computing and sequencing)
and that the Systems will create, store and generate output data related to or
including Millennial Dates without errors or omissions ("Year 2000 Compliance").
<PAGE> 9
The parties acknowledge that the Bank relies on automated data
communications with vendors, clients and other third parties, as well as certain
third party hardware and software providers such as Electronic Data Systems. The
Bank also relies on other third party relationships in the conduct of its
business. For example, the Bank relies on the services of the landlords of its
facilities, telecommunication companies, utilities and commercial airlines,
among others. The parties acknowledge that the Bank can make no certification as
to the Year 2000 Compliance of third-parties utilized by the Bank in its day to
day operations or with which the Systems interact or communicate, from which the
Systems receive data or to which the Systems send data. The parties further
acknowledge that while the Bank has contacted such third-parties regarding Year
2000 Compliance and will use reasonable efforts to monitor the status of such
third-parties' Year 2000 Compliance, failure by such third-parties to achieve
timely Year 2000 Compliance could adversely affect the Bank's performance.
14.4 At any time the Bank may apply to any officer of the Company for
instructions, and may consult with legal counsel of the Bank or the Company with
respect to any matter arising in connection with the services to be performed by
the Bank under this Agreement, and the Bank and its agents or subcontractors
shall not be liable and shall be indemnified by the Company for any action
reasonably taken or omitted by it in reasonable reliance upon such instructions
or upon the opinion of such counsel except for gross negligence, willful
misfeasance or bad faith or a knowing violation of law. The Bank, its agents and
subcontractors shall be protected and indemnified in acting upon any paper or
document furnished by or on behalf of the Fund(s), reasonably believed to be
genuine and to have been signed by the proper person or persons, or upon any
instruction, information, data, records or documents provided to the Bank or its
agents or subcontractors by machine readable input, telex, CRT data entry or
other similar means authorized by the Fund(s), and the Bank, its agents and
subcontractors shall not be held to have notice of any change of authority of
any person, in the absence of actual notice, until receipt of written notice
thereof from the Fund(s). The Bank, its agents and subcontractors shall also be
protected and indemnified in recognizing stock certificates which are reasonably
believed to bear the proper manual or facsimile signatures of an officer of the
Company, and one proper countersignature of any former transfer agent or
registrar, or of a co-transfer agent or co-registrar.
14.5 Neither party to this Agreement shall be liable to the other party
for special, incidental or consequential damages, even if the other party has
been advised of the possibility of such damages, under any provision of this
Agreement or for any act or failure to act hereunder as contemplated by this
Agreement.
14.6 In order that the indemnification provisions contained in this
Article 14 shall apply, upon the assertion of a claim for which either party may
be required to indemnify the other, the party seeking the indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
seeking indemnification shall give the indemnifying party full and complete
authority, information and assistance to defend such claim or proceeding, and
the indemnifying party shall have, at its option, sole control of the defense of
such claim or proceeding and all negotiations for its compromise or settlement.
The party seeking indemnification shall in no case confess any claim or make any
compromise in any case in which the other party may be required to indemnify it
except with the other party's prior written consent, which consent shall not be
unreasonably withheld.
<PAGE> 10
15. Covenants of the Company and the Bank.
15.1 The Company shall promptly furnish to the Bank the following:
(a) A certified copy of the resolution of the Directors of the
Company authorizing the appointment of the Bank and the execution and delivery
of this Agreement.
(b) A copy of the charter documents and by-laws of the Company
and all amendments thereto.
(c) Copies of each vote of the Directors designating
authorized persons to give instructions to the Bank, and a Certificate providing
specimen signatures for such authorized persons.
(d) Certificates as to any change in any officer or Director
of the Company.
(e) If applicable a specimen of the certificate of Shares in
each Fund of the Company in the form approved by the Directors, with a
Certificate as to such approval.
(f) Specimens of all new certificates for Shares, accompanied
by the Directors' resolutions approving such forms.
(g) All account application forms and other documents relating
to shareholder accounts or relating to any plan, program or service offered by
the Company.
(h) A list of all Shareholders of the Fund(s) with the name,
address and tax identification number of each Shareholder, and the number of
Shares of the Fund(s) held by each, certificate numbers and denominations (if
any certificates have been issued), lists of any account against which stops
have been placed, together with the reasons for said stops, and the number of
Shares redeemed by the Fund(s).
(i) An opinion of counsel for the Company with respect to the
validity of the Shares and the status of such Shares under the Securities Act of
1933.
(j) Copies of the Fund(s) registration statement on Form N-1A
(if applicable)as amended and declared effective by the Securities and Exchange
Commission and all post-effective amendments thereto.
(k) Such other certificates, documents or opinions as the Bank
may deem necessary or appropriate for the Bank in the proper performance of its
duties hereunder.
15.2 The Bank hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Company for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.
15.3 The Bank shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable. To the
extent required by Section 31 of the 1940 Act and the Rules thereunder, the Bank
agrees that all such records prepared or maintained by the Bank relating to the
services to be performed by the Bank hereunder are the confidential
<PAGE> 11
property of the Company and will be preserved, maintained and made available in
accordance with such Section and Rules, and will be surrendered to the Company
on and in accordance with its request.
15.4 The Bank and the Company agree that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential, and shall not be voluntarily disclosed to
any other person, except as may be required by law.
15.5 In case of any requests or demands for the inspection of the
Shareholder records of the Company, the Bank will endeavor to notify the Company
and to secure instructions from an authorized officer of the Company as to such
request or demand. The Bank reserves the right, however, to exhibit the
Shareholder records to any person whenever it is advised by its counsel that it
may be subject to enforcement or other action by any court or regulatory body
for the failure to exhibit the Shareholder records to such person.
16. Term of Agreement.
16.1 Termination of Agreement. The term of this Agreement shall be
three years commencing upon the date hereof (the "Initial Term"), unless earlier
terminated as provided herein. After the expiration of the Initial Term, the
term of this Agreement shall automatically renew for successive three-year terms
(each a "Renewal Term") unless notice of non-renewal is delivered by the
non-renewing party to the other party no later than ninety days prior to the
expiration of the Initial Term or any Renewal Term, as the case may be.
Either party hereto may terminate this Agreement prior to the
expiration of the Initial Term or any Renewal Term:
(a) in the event the other party violates any material
provision of this Agreement provided that the
non-violating party gives written notice of such
violation to the violating party and the violating
party does not cure such violation within 90 days of
receipt of such notice; and
(b) if a majority of the Board of the Company reasonably
determines that the performance of the Bank under
this Agreement has been unsatisfactory, written
notice (the "Notice") of such determination setting
forth the reasons for such determination shall be
provided to the Bank. In the event the Bank shall
not, within thirty (30) days thereafter, cure
identified deficiencies to the satisfaction of the
Board, the Company, with the authorization of the
Board, may terminate this Agreement.
16.2 In the event of the termination of this Agreement, the Bank will
upon receipt or transmittal, as the case may be, of notice of termination,
continue nonetheless to discharge all of its obligations hereunder until
designation by the Company of a successor transfer agent and, upon appointment
of a successor transfer agent, shall commence and prosecute diligently to
completion the transfer of all functions performed by the Bank hereunder to
successor or to the Company or any other designee of the Company as the Company
may direct. If the Company does not select a successor transfer agent within
ninety (120) days from the date of delivery of notice of termination, the Bank
may give the Company a notice to quit. Sixty (60) days thereafter the Bank shall
be released from any and all obligations under this Agreement.
<PAGE> 12
16.3 Should the Company exercise its right to terminate, all reasonable
out-of-pocket expenses associated with the movement of records and material will
be borne by the Company. Additionally, the Bank reserves the right to recover
from the Company any other reasonable expenses associated with such termination.
17. Additional Funds. In the event that the Company establishes one or more
series of Shares in addition to the series listed on Appendix A hereto with
respect to which it desires to have the Bank render services as transfer agent
under the terms hereof, it shall so notify the Bank in writing, and if the Bank
agrees in writing to provide such services, such series of Shares shall become a
Fund hereunder and Appendix A shall be appropriately amended.
18. Assignment.
18.1 Except as provided in Section 18.3 below, neither this Agreement
nor any rights or obligations hereunder may be assigned by either party without
the written consent of the other party.
18.2 This Agreement shall inure to the benefit of and be binding upon
the parties and their respective permitted successors and assigns.
18.3 The Bank, may without further consent on the part of the Company,
subcontract for the performance of any of the services to be provided hereunder
to third parties, including any affiliate of the Bank, provided that the Bank
shall remain liable hereunder for any acts or omissions of any subcontractor as
if performed by the Bank.
19. Amendment. This Agreement may be amended or modified only by a written
agreement executed by both parties.
20. Governing Law. This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts, without regard to its conflict of laws provisions.
21. Merger of Agreement and Severability.
21.1 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
hereof whether oral or written.
21.2 In the event any provision of this Agreement shall be held
unenforceable or invalid for any reason, the remainder of the Agreement shall
remain in full force and effect.
21.3 This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original; but such counterparts shall
together, constitute only one instrument.
22. Notices. Any notice or other instrument in writing authorized or required by
this Agreement to be given to either party hereto will be sufficiently given if
addressed to such party and mailed or delivered to it at its office at the
address set forth below:
<PAGE> 13
For the Fund(s):
Commonfund Institutional Funds
Attn: Treasurer
c/o Commonfund
450 Post Road East
Westport, CT 06881-0909
For the Bank:
Investors Bank & Trust Company
200 Clarendon Street, P.O. Box 9130
Boston, Massachusetts 02117-9130
Attention: Carol Lowd,Senior Director, Client
Management
With a copy to: John E. Henry, General Counsel
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in their names and on their behalf under their seals by and through their duly
authorized officers, as of the day and the year first above written.
COMMONFUND INSTITUTIONAL FUNDS
By: /s/ Marita K. Wein
-------------------------------------
Name: Marita K. Wein
Title: Vice President and Treasurer
Investors Bank & Trust Company
By: /s/ Robert D. Mancuso
-------------------------------------
Name: Robert D. Mancuso
Title: Senior Vice President
<PAGE> 14
Appendices
<TABLE>
<CAPTION>
<S> <C>
Appendix A................................... Funds
Appendix B................................... Fee Schedule
</TABLE>
<PAGE> 15
Appendix A
Funds
Commonfund Short Duration Fund
<PAGE> 16
Appendix B
Fee Schedule
Payments by the Company to the Bank under the Custodian Agreement between
the Company and the Bank entered into concurrently herewith shall
constitute payment of all fees due from Company to the Bank rendered under
this Agreement.
Legal expenses, printing, delivery, postage and travel associated with
the performance of services under this agreement will be for the account of the
Company.
Amounts payable hereunder will be invoiced by Custodian and, after
approval of the Treasurer, charged against the Custodian Account. Payment is due
within five (5) days.
<PAGE> 1
Exhibit I
[letterhead of Morgan, Lewis & Bockius LLP]
January 18, 2000
Commonfund Institutional Funds
15 Old Danbury Road
P.O. Box 812
Wilton, CT 06897-0812
Re: Opinion of Counsel regarding Pre-Effective Amendment No. 2 to the
Registration Statement filed on Form N-1A under the Securities Act of
1933 (File No. 333-85415).
---------------------------------------------------------------------
Ladies and Gentlemen:
We are furnishing this opinion with respect to the proposed offer and sale from
time to time of an indefinite number of units of beneficial interest, without
par value (the "Shares"), of Commonfund Institutional Funds (the "Company"), a
Delaware business trust, in registration under the Securities Act of 1933 by a
Registration Statement on Form N-1A (File No. 333-85415) as amended from time to
time (the "Registration Statement").
We have acted as counsel to the Company since its inception, and we are familiar
with the actions taken by its Directors to authorize the issuance of the Shares.
We have reviewed the Declaration of Trust, the By-laws, and the minute books of
the Company, and such other certificates, documents and opinions of counsel as
we deem necessary for the purpose of this opinion.
We have reviewed the Company's Notification of Registration on Form N-8A under
the Investment Company Act of 1940 (File No. 811-9555). We have assisted in the
preparation of the Company's Registration Statement, including all pre-effective
amendments thereto, filed or to be filed with the Securities and Exchange
Commission.
In our review we have assumed the genuineness of all signatures, the
authenticity and completeness of all documents purporting to be originals
(whether reviewed by us in original or in copy form), and the conformity to the
originals of all documents purporting to be copies.
<PAGE> 2
Commonfund Institutional Funds
January 18, 2000
Page 2
We have assumed the appropriate action will be taken to register or qualify the
sale of the Shares under any applicable state and federal laws regulating sales
and offerings of securities.
Based upon the foregoing, we are of the opinion that:
1. The Company is a business trust validly existing under the laws of the
State of Delaware. The Company is authorized under its Declaration of
Trust to issue an unlimited number of Shares in series representing
interests in Shares of the Commonfund Short Duration Fund and in such
other series or classes as the Directors may hereafter duly authorize.
2. Upon the issuance of any Shares of any of the series or classes of the
Company for payment therefor as described in, and in accordance with
the Registration Statement and the Declaration of Trust and By-laws of
the Company, the Shares so issued will be validly issued, fully paid
and non-assessable.
This opinion is intended only for your use in connection with the offering of
Shares and may not be relied upon by any other person.
We hereby consent to the inclusion of this opinion as Exhibit (i) to
the Company's Pre-Effective Amendment No. 2 to be filed with the Securities and
Exchange Commission and to the reference to our firm under the caption "Legal
Counsel" in the Statement of Additional Information filed as part of such
Amendment.
Very truly yours,
/s/ Morgan, Lewis & Bockius LLP
<PAGE> 1
Exhibit J
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this pre-effective amendment No. 2 to the registration
statement on Form N-1a (the "Registration Statement") of our report dated
January 18, 2000, relating to the statement of assets and liabilities of
Commonfund Institutional Funds - Commonfund Short Duration Fund, which appears
in such Statement of Additional Information, and to the incorporation by
reference of our report into the Prospectus which constitutes part of this
Registration Statement. We also consent to the reference to us under the heading
"Experts" in such Statement of Additional Information.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
January 18, 2000
<PAGE> 1
Exhibit (k)
October 15, 1999
Commonfund Asset Management Company
450 Post Road East
Westport CT 06881-0909
Attention: Todd Petzel, President and Chief Investment Officer
Re: Purchase of Shares in the Commonfund Short Duration Fund,
a Series of Commonfund Institutional Funds
The purpose of this letter is to evident the agreement between
Commonfund Asset Management Company ("Comanco") and the Commonfund Short
Duration Fund ("Fund"), a series in Commonfund Institutional Funds, with respect
to the purchase by Comanco of 10,000 shares of the Fund in exchange
for a payment in cash of $100,000.
1. The Fund hereby acknowledges receipt from Comanco on the date of
this letter of $100,000 in cash in exchange for which the Fund has
issued to Comanco 10,000 shares of the Fund (the "Shares").
2. Comanco hereby acknowledges that the Shares have not been
registered for sale under the Securities Act of 1933, nor under
any state Blue Sky law in reliance on the exemption from
registration available for issuance of securities not involving
any public offering.
3. Comanco hereby affirms that it is acquiring the shares for
investment and without any intent to resell them. It hereby
acknowledges that, as a condition of the purchase, it has agreed
not to resell the shares, which it has not present intent to do,
without prior written consent of the Fund. The Fund does not
intend to grant its consent to resale in the absence of an
effective registration statement for the Shares or the
availability of an exemption that would permit sale of the shares
without registration.
<PAGE> 2
4. This letter agreement and all matters arising thereunder will be
governed by the law of the State of New York without reference to
choice of law principles.
Please countersign and return the enclosed copy of this letter evidencing
Comanco's agreement to the foregoing.
Very truly yours,
Commonfund Institutional Funds
by: /s/ Robert L. Bovinette
--------------------------------
Robert L. Bovinette
President
Acknowledges and Agreed:
Commonfund Asset Management Company
by: /s/ Todd E. Petzel
----------------------------
Todd E. Petzel
President
<PAGE> 1
Exhibit (q)
COMMONFUND INSTITUTIONAL FUNDS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned director
and/or officer of Commonfund Institutional Funds (the "Company"), a business
trust organized under the laws of the State of Delaware, hereby constitutes and
appoints Marita K. Wein and John W. Auchincloss, and each of them singly, his
true and lawful attorney-in-fact and agent, to sign for him and in his name,
place and stead, and in the capacity indicated below, to sign any and all
registration statements and all amendments thereto relating to the offering of
the Company's shares under the provisions of the Investment Company Act of 1940
and/or the Securities Act of 1933, each such Act as amended, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney-in-fact
and agent, full power and authority to do and perform each and every act and
thing requisite or necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agents, or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Robert L. Bovinette Date: 8/12/99
- ------------------------------------------- ------------
Robert L. Bovinette, Director and President
<PAGE> 2
COMMONFUND INSTITUTIONAL FUNDS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned director
and/or officer of Commonfund Institutional Funds (the "Company"), a business
trust organized under the laws of the State of Delaware, hereby constitutes and
appoints Robert L. Bovinette, Marita K. Wein and John W. Auchincloss, and each
of them singly, his true and lawful attorney-in-fact and agent, to sign for him
and in his name, place and stead, and in the capacity indicated below, to sign
any and all registration statements and all amendments thereto relating to the
offering of the Company's shares under the provisions of the Investment Company
Act of 1940 and/or the Securities Act of 1933, each such Act as amended, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agents, or any of
them, or their substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ John B. Carroll Date: 10/12/99
- --------------------------------- ----------
John B. Carroll, Director
<PAGE> 3
COMMONFUND INSTITUTIONAL FUNDS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned director
and/or officer of Commonfund Institutional Funds (the "Company"), a business
trust organized under the laws of the State of Delaware, hereby constitutes and
appoints Robert L. Bovinette, Marita K. Wein and John W. Auchincloss, and each
of them singly, his true and lawful attorney-in-fact and agent, to sign for him
and in his name, place and stead, and in the capacity indicated below, to sign
any and all registration statements and all amendments thereto relating to the
offering of the Company's shares under the provisions of the Investment Company
Act of 1940 and/or the Securities Act of 1933, each such Act as amended, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agents, or any of
them, or their substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Louis M. Moelchert, Jr. Date: 10/12/99
- --------------------------------- ----------
Louis M. Moelchert, Jr., Director
<PAGE> 4
COMMONFUND INSTITUTIONAL FUNDS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned director
and/or officer of Commonfund Institutional Funds (the "Company"), a business
trust organized under the laws of the State of Delaware, hereby constitutes and
appoints Robert L. Bovinette, Marita K. Wein and John W. Auchincloss, and each
of them singly, his true and lawful attorney-in-fact and agent, to sign for him
and in his name, place and stead, and in the capacity indicated below, to sign
any and all registration statements and all amendments thereto relating to the
offering of the Company's shares under the provisions of the Investment Company
Act of 1940 and/or the Securities Act of 1933, each such Act as amended, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agents, or any of
them, or their substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ William T. Spitz Date: 10/12/99
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William T. Spitz, Director
<PAGE> 5
COMMONFUND INSTITUTIONAL FUNDS
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned director
and/or officer of Commonfund Institutional Funds (the "Company"), a business
trust organized under the laws of the State of Delaware, hereby constitutes and
appoints Robert L. Bovinette, Marita K. Wein and John W. Auchincloss, and each
of them singly, his true and lawful attorney-in-fact and agent, to sign for him
and in his name, place and stead, and in the capacity indicated below, to sign
any and all registration statements and all amendments thereto relating to the
offering of the Company's shares under the provisions of the Investment Company
Act of 1940 and/or the Securities Act of 1933, each such Act as amended, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agents, or any of
them, or their substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
as of the date set forth below.
/s/ Jerald L. Stevens Date: 10/12/99
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Jerald L. Stevens, Director
