As filed with the Securities and Exchange Commission on April 30, 1997.
File Nos. 33-73408,811-8234
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
X
Pre-Effective Amendment No.
Post-Effective Amendment No. 6
X
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
X
Amendment No. 10
X
TIFF INVESTMENT PROGRAM, INC.
(Exact name of registrant as specified in charter)
2405 Ivy Road, Charlottesville, VA 22903
(Address of principal executive offices)
Registrant's telephone number: 800-984-0084
DAVID A. SALEM, President
Foundation Advisers, Inc.
2405 Ivy Road, Charlottesville, VA 22903
(Name and address of agent for service)
With a copy to:
WILLIAM E. VASTARDIS
AMT Capital Services, Inc.
600 Fifth Avenue, 26th Floor
New York, NY 10020
It is proposed that this filing will become effective (check appropriate box)
X immediately upon filing pursuant to paragraph (b) of Rule 485.
on __________(date) pursuant to paragraph (b) of Rule 485.
60 days after filing pursuant to paragraph (a) of Rule 485.
on ______ pursuant to paragraph (a) of Rule 485.
Registrant has registered an indefinite number of shares pursuant to Rule
24f-2 under the Investment Company Act of 1940. The Registrant filed the notice
required thereunder for the fiscal year ended December 31, 1996 on February
28, 1997.
The total number of pages is ______.
The Exhibit Index is on page ______.
CROSS REFERENCE SHEET
Pursuant to Rule 481(a)
Form N-1A Location in Prospectus and
Item No. Statement of Additional
Information
1. Cover Page Cover Page of Prospectus
2. Synopsis Highlights; Fees and Annual
Operating Expenses (in
Prospectus)
3. Financial Highlights Financial Highlights (in
Prospectus)
4. General Description of TIP's Origins and Mission;
Registrant Management and Administration
of the Funds;
Money Managers; Investment
Objectives, Policies, and
Restrictions; Policy
Implementation and Risks; Risk
Factors (in Prospectus)
5. Management of the Fund Fees and Annual Fund Operating
Expenses; Management and
Administration of the Funds;
Member Voting Rights and
Procedures; Purchases and
Redemptions (in Prospectus)
5A. Management's Discussion of Not applicable
Fund Performance
6. Capital Stock and Other Purchases and Redemptions;
Securities Dividends and Distributions;
Tax Considerations (in
Prospectus)
7. Purchase of Securities Being Purchases and Redemptions;
Offered Dividends and Distributions;
Member Inquiries (in Prospectus)
8. Redemption or Repurchase Purchases and Redemptions;
Dividends and Distributions (in
Prospectus)
9. Pending Legal Proceedings Not applicable
10. Cover Page Cover Page of Statement of
Additional Information
11. Table of Contents Statement of Additional
Information Table of Contents
12. General Information and History Organization of TIP (in
Statement of Additional
Information)
13. Investment Objectives and Policies Supplemental Discussion of Fund
Management and Administration;
Supplemental Discussion of
Policy Implementation and Risks
(in Statement of Additional
Information)
14. Management of the Fund Supplemental Discussion of Fund
Management and Administration;
Performance-Based Fees for
Money Managers (in Statement of
Additional Information)
15. Control Persons and Principal Control Persons and Principal
Holders of Securities Holders of Securities
(in Statement of Additional
Information)
16. Investment Advisory and Other Distribution of Fund Shares;
Services Supplemental Discussion of Fund
Management and Adminstration;
Fund Transactions (in Statement
of Additional Information)
17. Brokerage Allocation and Other Fund Transactions (in
Practices Statement of Additional
Information)
18. Capital Stock and Other Securities Distribution of Fund Shares;
Organization of TIP (in
Statement of Additional
Information)
19. Purchase, Redemption and Pricing Distribution of Fund Shares;
of Securities Being Offered Determination of Net Asset
Value (in Statement of
Additional Information)
20. Tax Status Tax Considerations (in
Statement of Additional
Information)
21. Underwriters Distribution of Fund Shares (in
Statement of Additional
Information)
22. Calculation of Performance Data Calculation of Performance Data
(in Statement of Additional
Information)
23. Financial Statements Financial Highlights (in
Prospectus); Financial
Statements (in Statement of
Additional Information)
- ii - U:\MCC\AMT\62248.17
TIFF PROSPECTUS
INVESTMENT
PROGRAM, INC. April 28, 1997
Including These Funds: Available through:
TIFF Multi-Asset Fund Foundation Advisers, Inc.
TIFF International Equity Fund 2405 Ivy Road
TIFF Emerging Markets Fund Charlottesville, VA 22903
TIFF U.S. Equity Fund phone (804) 984-0084
TIFF Bond Fund fax (804) 977-4479
TIFF Short-Term Fund
TIFF Investment Program, Inc. ("TIP") is a no-load, open-end management
investment company that seeks to improve the net investment returns of its
shareholders ("Members") by making available to them a series of investment
vehicles (the "Funds"), each with its own investment objective and
policies. The Funds are available exclusively to foundations and other
501(c)(3) organizations except educational endowments (see ELIGIBLE INVESTORS).
The Funds and their Adviser, Foundation Advisers, Inc. ("FAI"), have been
organized by a nationwide network of foundations. FAI is a non-stock
corporation, no part of the earnings of which may inure to any private
individual or corporation. FAI is responsible for selecting Money Managers
for each Fund and for allocating Fund assets among these Money Managers,
subject to the approval of TIP's board of directors. With the exception of
FAI's President, all FAI and TIP directors serve as unpaid volunteers.
Because FAI does not seek to earn a profit, it may waive a portion of its
fees from time to time.
The Funds currently available are: (1) TIFF Multi-Asset Fund ("Multi-Asset
Fund"); (2) TIFF International Equity Fund ("International Equity Fund");
(3) TIFF Emerging Markets Fund ("Emerging Markets Fund"); (4) TIFF U.S.
Equity Fund ("U.S. Equity Fund"); (5) TIFF Bond Fund ("Bond Fund"); and
(6) TIFF Short-Term Fund ("Short-Term Fund"). With the exception of the
Short-Term Fund, which is designed primarily as a vehicle for investment of
funds that Members intend to spend or distribute within one year, the Funds
are intended as vehicles for the implementation of long-term asset allocation
policies.
Shares of each Fund may be purchased through FAI as a branch office of TIP's
distributor, AMT Capital Services, Inc. The minimum initial investment in
each Fund is $100,000, with the exception of the Short-Term Fund which has a
minimum initial investment of $50,000. The minimum for subsequent purchases
and exchanges among Funds is $5,000. Because of the nature of certain
investments made by the Multi-Asset, International Equity, and Emerging Markets
Funds, shares of these Funds are available only to investors who invest at
least $500,000 in TIP or whose net worth exceeds $1 million. This Prospectus
sets forth concisely the information about the Funds that a prospective Member
should know before investing. Additional information about TIP is contained in
the Statement of Additional Information dated April 28, 1997, which has been
filed with the Securities and Exchange Commission (the "Commission"), and which
can be obtained without charge by contacting FAI at the address and telephone
number above. The Statement of Additional Information is incorporated herein
by reference. This Prospectus should be read carefully and retained for future
reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE
CONTRARY IS A CRIMINAL OFFENSE.
CONTENTS
HIGHLIGHTS 3
FEES AND ANNUAL FUND OPERATING EXPENSES 5
FINANCIAL HIGHLIGHTS 7
TIP'S ORIGINS AND MISSION 8
ELIGIBLE INVESTORS 10
MANAGEMENT AND ADMINISTRATION OF THE FUNDS 10
MONEY MANAGERS 15
INVESTMENT OBJECTIVES, POLICIES, AND RESTRICTIONS 18
POLICY IMPLEMENTATION AND RISKS 25
PURCHASES AND REDEMPTIONS 42
DIVIDENDS AND DISTRIBUTIONS 44
TAX CONSIDERATIONS 46
MEMBER VOTING RIGHTS AND PROCEDURES 46
PERFORMANCE AND EXPENSE INFORMATION 47
MEMBER INQUIRIES 47
MONEY MANAGER AND COMMINGLED INVESTMENT VEHICLE PROFILES APPENDIX A
SERVICE PROVIDER PROFILES APPENDIX B
DESCRIPTION OF INDICES APPENDIX C
QUALITY RATINGS APPENDIX D
HIGHLIGHTS
TIP'S ORIGINS AND MISSION. TIP seeks to fulfill its Mission of improving the
net investment returns of grantmaking foundations and other 501(c)(3)
organizations by providing a series of no-load open-end mutual funds to its
Members on an economical and convenient basis. The Funds seek to provide
eligible organizations with multiple benefits, including:
The opportunity to delegate responsibility for certain tasks,
especially those which are time- or data-intensive, to a group of investment
professionals with significant experience investing eleemosynary assets.
These tasks include vendor selection and monitoring and, with respect to the
Multi-Asset Fund, the formulation of asset allocation policies and strategies
that have the potential to produce real or inflation-adjusted returns
sufficient to preserve the purchasing power of Members' invested assets.
The opportunity to exploit more fully the economies of scale inherent
in many aspects of investing. These potential economies of scale include
enhanced diversification of assets across investment styles and money
managers, enhanced access to money managers that might otherwise be
unavailable due to account size minimums, and reduced investment-related
expenses.
Monthly statements and periodic reports to Members designed to be
responsive to the idiosyncratic needs of participating foundations, including
especially private foundation tax requirements.
The Funds and their Adviser, Foundation Advisers, Inc., have been
organized by a nationwide network of grantmaking foundations. FAI is a
non-stock corporation, no part of the earnings of which may inure to any
private individual or corporation. FAI is responsible for selecting Money
Managers for each Fund and for allocating Fund assets among these Money
Managers, subject to the approval of TIP's board of directors. All of TIP's
and FAI's Directors have extensive experience investing institutional assets
and hold or have held senior investment-related positions at foundations,
endowments, or other institutional funds. With the exception of FAI's
President, all FAI and TIP directors serve as unpaid volunteers. PAGES 8-10
ELIGIBLE INVESTORS are grantmaking foundations and other 501(c)(3)
organizations except educational endowments. Because of the nature of certain
investments made by the Multi-Asset, International Equity, and Emerging Markets
Funds, shares of these Funds are available only to investors who invest at
least $500,000 in TIP or whose net worth exceeds $1 million. PAGE 10
MEMBER VOTING RIGHTS AND PROCEDURES provide for ultimate Member control of
the composition of TIP's board of directors and the Funds' fundamental
investment objectives, policies, and restrictions. PAGES 48
PURCHASES AND REDEMPTIONS of shares include no sales loads or 12b-1
charges. However, there are transaction charges payable to the Funds (not to
FAI or other service providers) on purchases ("entry fees") and redemptions
("exit fees") of shares of the Multi-Asset (0.75%), International Equity
(0.75%), Emerging Markets (1.00%), and U.S. Equity (0.25%) Funds. Shares are
offered and orders to purchase are accepted on each business day. Redemption
of shares may be requested on any business day. PAGES 43-45
DIVIDENDS AND DISTRIBUTIONS may be reinvested in additional shares or
received in cash. Dividends from net investment income are declared daily and
paid monthly by the Short-Term and Bond Funds; declared and paid quarterly by
the U.S. Equity Fund; declared and paid semi-annually by the International
Equity, and Multi-Asset Funds; and declared and paid annually by the Emerging
Markets Fund. All Funds declare distributions from net realized capital gains,
if any, at least annually. PAGES 45-47
INVESTMENT OBJECTIVES, POLICIES, AND RESTRICTIONS apply to each Fund, and
are summarized in the table on this page. While a Fund's performance objective
serves an important function in monitoring the success of TIP's multi-manager
approach over a full market cycle, the performance of each Fund compared to
the specified index can be expected to vary from year to year. For these
purposes, market cycle is defined as the period from the peak of one rising
market to the peak of the next rising market, or the corresponding troughs of
falling markets. The Funds will attempt to attain their performance
objectives over a combination of rising and falling markets, not during a
single rising or falling market or a defined time period (such as one year).
There can be no assurance that a Fund will attain its investment or
performance objective. PAGES 19-26
Fund Investment Objective Performance Objective
Multi-Asset Provide a growing stream Outperform the following
of current income and constructed index annually
appreciation of principal over a market cycle net of all
that at least offsets expenses: 25% Wilshire 5000
inflation [U.S.] Index; 30% MSCI All
Country World ex USA Index; 15%
Treasury Bills plus 5% per
annum; 10% resource-related
sectors of MSCI World Index (7%
Energy Sources and Equipment; 2%
Gold Mines; 1% Metals plus
Forest Products plus Misc.
Materials); 15% Lehman Aggregate
Bond Index; and 5% Lehman Majors
ex US Bond Index
International
Equity Provide a growing stream Outperform the MSCI All Country
of current income and World ex USA Index (a
appreciation of principal capitalization-weighted index
that at least offsets of non-U.S. publicly traded
inflation common stocks) by 1.00% annually
over a market cycle net of all
expenses
Emerging
Markets Provide appreciation of Outperform the MSCI Emerging
principal that at least Markets Free Index (a
offsets inflation capitalization-weighted index
of common stocks publicly traded
on selected developing foreign
market exchanges) by 1.00%
annually over a market cycle net
of all expenses
U.S. Equity Provide a growing stream Outperform the Wilshire 5000
of current income and Index (a capitalization-
appreciation of principal weighted index of all publicly
that at least offsets traded U.S. stocks for which
inflation price quotations are readily
available) by 0.75% annually
over a market cycle net of all
expenses
Bond Provide: (1) a hedge Outperform the Lehman Aggregate
against deflation; and Bond Index (a market-weighted
(2) a high rate of current index of publicly traded U.S.
income, subject to dollar-denominated fixed income
restrictions designed to securities) by 0.50% annually
ensure liquidity and over a market cycle net of all
control exposure to expenses
interest rate and credit
risk
Short-Term Provide a high rate of Outperform the Merrill Lynch
current income, subject 182-Day Treasury Bill Index net
to restrictions designed of all expenses
to control share price
volatility
MANAGEMENT AND ADMINISTRATION OF THE FUNDS are provided by FAI and
external Money Managers selected by it, subject to approval by TIP's board of
directors. AMT Capital Services, Inc. ("AMT Capital"), a firm specializing in
mutual fund administration and distribution, supervises the Funds' day-to-day
operations other than portfolio management. Investors Bank & Trust Company
serves as the Funds' Custodian and Fund Accounting Agent, Transfer Agent, and
Dividend Disbursing Agent. Price Waterhouse LLP serves as the Funds'
independent accountant. PAGES 11-15
MONEY MANAGERS are selected by FAI in accordance with criteria that
represent a synthesis of the experience of FAI's directors and officers. Money
Managers have discretion to purchase and sell securities for their allocated
portions of a Fund's assets, subject to the Fund's written investment
objectives, policies, and restrictions and the specific strategies developed by
TIP's board of directors and FAI. Money Manager profiles appear in Appendix A.
Not all Money Managers profiled in Appendix A will be employed at all times.
Whether a given Money Manager is employed at given time depends on a Fund's
size, its projected growth rate, and FAI's perception of the relative
attractiveness of the Money Manager's approach in light of prevailing market
conditions. Although FAI is not expected to have a principal role in
actively investing a Fund's assets, FAI is responsible for investing funds
until they are allocated to a Money Manager. PAGES 15-19
POLICY IMPLEMENTATION AND RISKS describes the strategies, tactics, and
types of investments that the Funds are permitted to employ and certain
associated risks. Under normal market conditions, each Fund intends to be
substantially fully invested in accordance with its investment objective and
policies. Due to substantial differences in the securities in which they will
primarily invest, the Funds may exhibit varying levels of volatility. No
single Fund should be considered a complete investment program, and an
investment in any Fund other than the Short-Term Fund should be regarded as a
long-term commitment to be held through one or more market cycles. PAGES 26-43
FEES AND ANNUAL FUND OPERATING EXPENSES summarizes the fees to be paid by
Members and the effect of these fees on a hypothetical $1,000 investment over
time. With the exception of the Emerging Markets Fund, each Fund employs Money
Managers whose fees are based on their performance relative to benchmarks
deemed appropriate by TIP's directors in light of each Money Manager's
investment approach. Consequently, each Fund's overall expense ratio may
fluctuate over time. PAGES 5-7
FEES AND ANNUAL FUND OPERATING EXPENSES
ILLUSTRATIONS. The table below illustrates the fees and expenses that a Member
of TIP can expect to incur.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Multi- International Emerging U.S. Short-
Asset Equity Markets Equity Bond Term
Sales Loads
Sales Load on
Purchases None None None None None None
Sales Load on
Reinvested
Dividends None None None None None None
Deferred Sales
Load None None None None None None
Transaction
Charges Paid
to Funds (as
percentage of
transaction
amount)
Entry Fees on
Purchases [a] 0.75% 0.75% 1.00% 0.25% None None
Exit Fees on
Redemptions [a] 0.75% 0.75% 1.00% 0.25% None None
Exchange Fees [a] 0.75% 0.75% 1.00% 0.25% None None
Annual Operating
Expenses (as
percentage of
average
net assets)
Adviser Fees
(Paid to FAI) 0.20% 0.15% 0.15% 0.15% 0.10% 0.00%
Money Manager
Fees [b] 0.46% 0.61% 0.82% 0.42% 0.13% 0.10%
Administration
Fees (Paid to
AMT) 0.06% 0.06% 0.06% 0.06% 0.06% 0.05%
Custody Fees
(Paid to IBT) 0.22% 0.23% 0.51% 1.12% 0.22% 0.09%
Other Expenses [c] 0.09% 0.06% 0.08% 0.07% 0.07% 0.12%
Total Operating
Expenses 1.03% 1.11% 1.62%
0.82% 0.58% 0.36%
</TABLE>
EXAMPLE: EXPENSES PER $1,000 INVESTMENT. The table below illustrates the
expenses that an investor would pay on each $1,000 increment of its
investment over the indicated time periods, assuming (i) a 5% annual return;
(ii) fees and expenses (including entry and exit fees) paid at the rates
provided in the preceding tables; and (iii) reinvestment of all dividends and
distributions. For a discussion of the performance-based Money Manager fees,
see footnote [b] below.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Multi- International Emerging U.S. Short-
Asset Equity Markets Equity Bond Term
1 Year
With
redemption
at end of
period $26 $26 $37 $13 $6 $4
No redemption
at end of
period 18 19 26 11 6 4
3 Years
With redemption
at end of
period $48 $51 $72 $31 $19 $12
No redemption
at end of
period 40 43 61 29 19 12
5 Years
With redemption
at end of
period $73 $77 $109 $51 $32 $20
No redemption
at end of
period 64 68 97 48 32 20
10 Years
With redemption
at end of
period $143 $153 $214 $107 $73 $46
No redemption
at end of
period 132 142 200 104 73 46
</TABLE>
The purpose of the foregoing tables is to assist eligible organizations in
understanding the various costs and expenses that they would bear directly or
indirectly as Members of each Fund. These tables should not be considered
representative of future expenses or performance. Actual operating expenses
and annual returns may be greater or less than those shown.
[a] Entry and Exit Fees of Equity Funds. All Funds except the Bond and
Short-Term Funds assess entry and exit fees that are paid directly to the
Funds themselves, and not to FAI or other vendors supplying services to the
Funds. These are not sales charges; they apply to initial investments in
each Fund and all subsequent purchases, exchanges, or redemptions, but not to
reinvested dividends or capital gains distributions. These entry and exit
fees are designed to allocate transaction costs associated with purchases,
exchanges, and redemptions of shares of the Funds that assess such fees to
Members actually making such purchases, exchanges, and redemptions rather
than to the Funds' other Members. These fees are deducted automatically from
the amount invested or redeemed; they cannot be paid separately. Entry and
exit fees may be waived at the Adviser's discretion for transactions
involving in-kind purchases and redemptions. See PURCHASES AND REDEMPTIONS.
[b] Money Manager Fees. The Money Manager fees as noted in the table are
estimates for the current fiscal year. Commencing with the third calendar
month of investment operations of each Fund, the portfolio management fees
accrued by all Funds (except the Emerging Markets and Short-Term Funds in
the determination of daily net asset values are adjusted based on the
performance of certain Money Managers relative to specified indices.
However, with respect to the third through fourteenth calendar month of each
Fund's operation (except Emerging Markets and Short-Term) such accrued
performance fees (in excess of the minimum fee) will not be paid until after
the fourteenth calendar month of the Fund's operations. On an annual basis
the total fees payable to Money Managers that have agreed to performance-
based fee arrangements are likely to range as suggested in the graphs
furnished in Appendix A entitled MONEY MANAGER PROFILES and as described in the
section of the Statement of Additional Information entitled PERFORMANCE-BASED
FEES FOR MONEY MANAGERS. As described therein, starting with the third calendar
month of investment operations, total expenses of the Funds will depend in
part on the Money Managers' performance (which cannot be estimated with any
degree of certainty) and could be higher or lower than the estimated expenses
shown in the table. Certain Money Managers receive asset-based fees not tied
to performance. The Funds may also gain access to certain money managers via
other commingled investment vehicles. The Funds will bear their pro rata share
of management, performance, and other fees and expenses associated with
investments in other commingled investment vehicles.
[c] Other Expenses. This category includes legal, audit, and other
miscellaneous Fund expenses, as estimated for the current fiscal year.
FINANCIAL HIGHLIGHTS
The following audited financial information should be read in conjuction
with the audited fianacial statements containing the financial information
shown below which are incorporated by reference in the Statement of Additional
Information, and are available upon request from Foundation Advisers, Inc.
<TABLE>
<S> <C> <C>
Tiff Multi-Asset International Equity
For a share 1/1/96- 3/31/95* No Prior 1/1/96- 1/1/95 5/31/94*
outstanding
throughout 12/31/96 12/31/95 Periods 12/31/96 12/31/95 12/31/94
the period
Per Share
Data
Net asset
value,
beginning
of period $11.13 $10.00 $10.82 $9.98 $10.00
Income from
investment
operations
Investment
income, net+ 0.17 0.26 0.10 0.15 0.05
Net realized
and
unrealized
gain (loss) 1.45 1.14 1.62 0.83 0.06
Total from
investment
operations 1.62 1.40 1.72 0.98 0.11
Less distri-
butions from
Investment
income, net (0.18) (0.24) (0.09) (0.14) (0.04)
Amounts in
excess of
investment (0.13) 0.00 0.00 0.00 0.01
Net realized
gain (0.36) (0.03) (0.26) 0.00 0.00
Amounts in
excess of
net realized
gain 0.00 0.00 0.00 0.00 (0.08)
Total distri-
butions (0.67) (0.27) (0.35) (0.14) (0.13)
Net asset
value, end
of period $12.08 $11.13 $12.19 $10.82 $9.98
Total return 14.72% 13.87% [b] 15.94% 9.85% 0.98% b,c
Ratios /
Supplemental
Data
Net assets,
end of
period
(000,000) $218.2 $92.6 $219.5 $155.4 $89.3
Ratio of
expenses to
average net
assets 1.03% 0.80% [a] 1.11% 1.05% 1.08% [a]
Ratio of
expenses to
average net
assets
before
expense
waivers 1.03% 0.80% [a] 1.11% 1.05% 1.27% [a]
Ratio of net
investment
income to
average net
assets 1.99% 4.00% [a] 0.91% 1.48% 0.95% [a]
Portfolio
turnover 100.66% 97.35% [b] 32.40% 32.91% 14.71%[b]
Average
commission
rate per
share $0.01 [d] NA $0.01 [d] NA NA
+ Net of
waivers which
amounted to: NA NA NA NA $0.01
</TABLE>
* Commencement of operations. [a] Annualized. [b] Not annualized.
[c] Total return would be lower had certain expenses not been waived or
reimbursed. NA Not applicable. [d] Represents total commissions paid on
portfolio securities divided by the total number of shares purchased or sold
on which commissions were charged. This disclosure is required by the SEC
beginning in 1996.
<TABLE>
<S> <C> <C>
TIFF Emerging Markets Fund Tiff U.S Equity Fund
For a share
outstanding 1/1/96- 1/1/95- 5/31/94* 1/1/96- 1/1/95- 5/31/94*
throughout
period 12/31/96 12/31/95 12/31/94 12/31/96 12/31/95 12/31/94
Per Share
Data
Net asset
value,
beginning
of period $8.45 $9.24 $10.00 $12.36 $10.02 $10.00
Income from
investment
operations
Investment
income, net+ 0.01 0.00 0.01 0.20 0.20 0.15
Net realized
and unrealized
gain (loss) 0.21 (0.79) (0.71) 2.52 3.37
0.19
Total from
investment
operations 0.22 (0.79) (0.70) 2.72 3.57 0.34
Less distri-
butions from
Investment
income, net (0.04) (0.00)# (0.01) (0.17) (0.22) (0.15)
Amounts in
excess of
investment (0.00)# (0.00)# 0.00 (0.10) 0.00
(0.00)#
Net realized
gain (0.00)# 0.00 0.00 (1.07) (1.01) (0.01)
Amounts in
excess of
net realized
gain 0.00 (0.00)# (0.05) 0.00 0.00 (0.16)
Total
distributions (0.04) (0.00)# (0.06) (1.34) (1.23) (0.32)
Net asset value,
end of period $8.63 $8.45 $9.24 $13.74 $12.36 $10.02
Total return 2.51% (8.39%) (6.97%)b,c 21.91% 36.02% 3.49%b,c
Ratios /
Supplemental
Data
Net assets, end
of period
(000,000) $89.7 $59.5 $50.0 $176.8 $109.9 $58.2
Ratio of
expenses
to average
net assets 1.62% 2.35% 1.83% [a] 0.82% 0.93% 1.06%[a]
Ratio of
expenses
to average
net assets
before expense
waivers 1.62 2.35% 2.25% 0.82% 0.93% 1.06%[a]
Ratio of net
investment
income to
average net
assets 0.06% (0.15%) 0.40% [a] 1.41% 1.67% 2.52%[a]
Portfolio
turnover 79.96% 104.30% 26.37% [b] 105.18% 109.89% 44.59%[b]
Average
commission
rate per
share $0.01 [d] NA NA $0.02 [d] NA NA
+ Net of waivers
which amounted
to: NA NA $0.01 NA NA $0.01
</TABLE>
* Commencement of operations. [a] Annualized. [b] Not annualized.
[c] Total return would be lower had certain expenses not been waived or
reimbursed. NA Not applicable. # Rounds to less than 0.01. [d] represents
total commissions paid on portfolio securities divided by the total number of
shares purchased or sold on which commissions were charged. This disclosure is
required by the SEC beginning in 1996.
TIFF Bond Fund TIFF Short-Term Fund
For a share
outstanding 1/1/96- 1/1/95- 5/31/94* 1/1/96- 1/1/95- 5/31/94*
throughout
the period 12/31/96 12/31/95 12/31/94 12/31/96 12/31/95 12/31/94
Per Share
Data
Net Asset
Value,
beginning
of period $10.33 $9.68 $10.00 $10.01 $10.00 $10.00
Income from
investment
operations
Investment
income, net+ 0.67 0.67 0.36 0.54 0.58 0.28
Net realized
and unrealized
gain (loss) (0.27) 1.01 (0.32) (0.02) 0.05 0.02
Total from
investment
operations 0.40 1.68 0.04 0.52 0.63 0.30
Less distri-
butions from
Investment
income, net (0.67) (0.66) (0.36) (0.54) (0.58) (0.28)
Amounts in
excess of
investment (0.00)# (0.01) (0.00)# (0.00)# (0.00)# (0.00)#
Net realized
gain 0.00 (0.36) 0.00 0.00 (0.04) (0.01)
Amounts in
excess of
net realized
gain 0.00 0.00 0.00 0.00 (0.00)# (0.01)
Total distri-
butions (0.67) (1.03) (0.36) (0.54) (0.62) (0.30)
Net asset
value, end
of period $10.06 $10.33 $9.68 $9.99 $10.01 $10.00
Total Return 3.75% 18.07% 0.46% b,c 5.28% c 6.43% c 3.10% b,c
Ratios/
Supplemental
Data
Net assets,
end of period
(000,000) $127.5 $91.1 $79.7 $63.5 $96.6 $34.3
Ratio of
expenses to
average net
assets 0.58% 0.96% 0.62% a 0.36% 0.42% 0.40% a
Ratio of
expenses to
average net
assets before
expense waivers 0.58% 0.96% 0.94% a 0.47% 0.54% 1.72% a
Ratio of net
investment
income to
average net
assets 6.64% 6.34% 6.37% a 5.35% 5.67% 4.98% a
Portfolio
turnover 332.21% 406.24% 162.06% b NA NA NA
+ Net of
waivers which
amounted to: NA NA $0.02 $0.02 $0.01 $0.08
*Commencement of operations [a] Annualized. [b] Not annualized. [c] Total
return would be lower had certain expenses not been waived or reimbursed.
NA Not applicable. # Rounds to less than 0.01.
TIP'S ORIGINS AND MISSION
TIP'S ORIGINS. TIFF Investment Program, Inc. is a no-load, non-diversified,
open-end management investment company that seeks to improve the net
investment returns of its Members by making available to them a series of
investment vehicles, each with its own investment objective and policies.
The Funds are open exclusively to foundations and other 501(c)(3)
organizations except educational endowments (see ELIGIBLE INVESTORS). The Funds
are advised by Foundation Advisers, Inc., a non-stock corporation, no part of
the earnings of which may inure to any private individual or corporation.
FAI is responsible for selecting Money Managers for each Fund and for
allocating Fund assets among the Money Managers, subject to the approval of
TIP's board of directors. TIP and FAI were organized by The Investment Fund
for Foundations ("TIFF"), a tax-exempt, not-for-profit, member-controlled
organization dedicated to enhancing foundations' investment returns. TIFF
was established by grantmaking foundations. Although certain members of
TIFF's board of trustees serve as directors of TIP and FAI, TIFF does not
exercise control over TIP. The directors of TIP are elected by the Members
of the Funds described in this Prospectus. TIFF has provided financial
support to FAI in the form of approximately $200,000 in cash payments to FAI
to finance legal fees, FAI staff salaries and other expenses associated with
TIP's establishment. FAI is a director-controlled corporation and a majority
of its directors are not affiliated persons or interested persons of TIFF as
those terms are defined in the Investment Company Act of 1940 (the "1940 Act").
TIFF has agreed (but not irrevocably) to permit TIP to use the acronym
"TIFF" in its name as an expression of support for TIP's programs and
policies. TIFF's revocation of the right to use this acronym would compel
TIP to adopt a new legal name, and the withdrawal of TIFF's endorsement of
the Funds could also produce a large volume of redemption requests that could
impair the net asset value of shares held by remaining Members. The decision
to use the acronym "TIFF" reflects a decision by TIP's directors that the
advantages of doing so outweigh the risks associated with the potential
revocation of this privilege. This decision in turn reflects the directors'
belief that TIFF is unlikely to withdraw its endorsement of the Funds unless
TIP ceases pursuing TIP's Mission as described herein.
INVESTMENT EXPERIENCE OF DIRECTORS. All of TIP's and FAI's directors have
extensive experience investing institutional assets and hold or have held
senior investment-related positions at foundations, endowments, or other
institutional funds. Collectively, members of TIP's and FAI's boards have
over 250 years of experience supervising institutional funds and are employed
by or serve as trustees of 50 endowed institutions with aggregate assets
exceeding $15 billion.
TIP'S MISSION. The Funds seek to provide Members with a number of benefits,
including:
The opportunity to delegate responsibility for certain tasks,
especially those which are time- or data-intensive, to a group of
investment professionals with significant experience investing
eleemosynary assets. These tasks include vendor selection and
monitoring and, with respect to the Multi-Asset Fund, the formulation
of asset allocation policies and strategies that have the potential to
produce real or inflation-adjusted returns sufficient to preserve the
purchasing power of Members' invested assets.
The opportunity to exploit more fully the economies of scale inherent
in many aspects of investing. These potential economies of scale
include enhanced diversification of assets across investment styles and
Money Managers, enhanced access to Money Managers that might otherwise
be unavailable due to account size minimums, and reduced investment-
related expenses.
Monthly statements and periodic reports to Members designed to be
responsive to the idiosyncratic needs of participating foundations,
including especially private foundation tax requirements.
MULTI-MANAGER STRUCTURE. Each TIP Fund employs multiple Money Managers.
The directors of TIP and FAI believe that some Money Managers potentially are
able to achieve superior investment returns within selected asset classes and
investment sectors. FAI seeks to facilitate the attainment of each Fund's
investment and performance objectives by allocating a portion of a Fund's
assets to a number of Money Managers, each of whom is employed to specialize
in a particular market sector or to utilize a particular investment style.
The amount of assets that FAI allocates to a Money Manager may be based, in
part, on the weighting of the particular sector in which the Money Manager
specializes in the Fund's performance benchmark index.
Although currently it is anticipated that each of the Money Managers listed
in Appendix A will actively manage a portion of a Fund's assets, FAI may
adjust the allocation of a Fund's assets among its Money Managers.
ADDITIONAL INFORMATION ABOUT TIP. TIP was established under Maryland law
on December 23, 1993. TIP's Articles of Incorporation authorize issuance of
shares in series evidencing ownership of separate Funds and permit new series
of shares evidencing new Funds in addition to the six Funds that are
described in this Prospectus. TIP bears all of its own expenses, such as:
advisory fees; Money Manager fees; administration fees; custody and fund
accounting agent fees and expenses; transfer agent and dividend disbursing
agent fees and expenses; legal and auditing fees; expenses of preparing and
printing Member reports; registration fees and expenses; and proxy and annual
Member meeting expenses, if any. A portion of the costs incurred by TIP in
connection with the organization and initial registration of shares are being
amortized on a straight-line basis over a sixty-month period. The unamortized
balance of organizational expenses at December 31, 1996 was $44,165.
ELIGIBLE INVESTORS
ELIGIBILITY CRITERIA. Investment in TIP is available to organizations that:
(1) are organized and operated exclusively for charitable purposes, no part
of the net earnings of which inures to the benefit of any private individual
or corporation, (2) qualify for exemption from federal income taxes under
Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the
"Code"); and (3) are not eligible to invest through The Common Fund for
educational endowments. Eligible organizations include:
Private Foundations: Private (including corporate) foundations as defined in
Section 509(a) of the Code that are required to file Form 990-PF annually are
eligible to invest in TIP.
Community Foundations: Community foundations that qualify for membership in
the Council on Foundations (whether or not the organization is actually a
member of the Council) are eligible to invest in TIP. A list of these
qualifications is available upon request from FAI or the Council on
Foundations.
Other 501(c)(3) Organizations: Other non-profit organizations (except
educational endowments) that have received a letter of exemption under
Section 501(c)(3) of the Code are eligible to invest in TIP.
The Funds are also open to: (a) non-U.S.-based charitable organizations that
have received 501(c)(3) equivalency certificates from the Internal Revenue
Service; and (b) so-called planned giving or split interest assets of
eligible organizations. In order to be eligible, at least part of the income
or principal of such assets must be owned irrevocably by an eligible
organization, and the organization must have legal control over the
securities or vehicles in which such assets are invested.
ACCREDITED INVESTORS. Because of the nature of certain investments made
by the Multi-Asset, International Equity, and Emerging Markets Funds, shares of
these Funds are available only to investors who invest at least $500,000 in TIP
or whose net worth exceeds $1 million.
Organizations wishing to confirm their eligibility should contact FAI at
804-984-0084.
ACCOUNT APPLICATION. An organization interested in investing in TIP must
complete an Account Application and furnish a copy of its letter of
determination of exempt status from the IRS. Organizations admitted as Members
of TIP that are subsequently determined to be ineligible will be asked to
redeem all shares that they hold in all TIP Funds.
MANAGEMENT AND ADMINISTRATION OF THE FUNDS
DIRECTORS AND OFFICERS OF TIP AND FAI. FAI is responsible for selecting
Money Managers for each Fund and for allocating Fund assets among these Money
Managers, subject to the approval of TIP's board of directors. TIP's board
of directors is responsible for the overall management and supervision of
TIP. Individuals currently serving as directors or officers of TIP and FAI
are identified below. In the table, an asterisk (*) has been placed next to
the names of the two members of TIP's board of directors who are "interested
persons" in TIP, as such term is defined in the 1940 Act, by virtue of their
affiliations with FAI (the Funds' Adviser and exclusive Distributor).
Selection Process. Initial members of the Boards of FAI and TIP were
selected by the board of trustees of The Investment Fund for Foundations.
TIP's directors are subject to election by the Funds' Members (see MEMBER
VOTING RIGHTS AND PROCEDURES). Pursuant to FAI's organizing documents, FAI's
Directors are elected in accordance with procedures designed to ensure that
FAI's directors, officers and employees remain responsive to the needs of
foundations eligible to invest through TIP.
TIP FAI
Directors Officers Directors Officers
Unpaid Directors
Sheryl L. Johns Chair
William F. McCalpin Director
William F. Nichols Director
Fred B. Renwick Director
John E. Craig* Director Director
Gregory D. Curtis Director
Alice W. Handy Director
Robert A. Kasdin Director
John G. Mebane Chair
Jack R. Meyer Director
Carl W. Schafer Director
Nina F. Scherago Director
Ann B. Sloane Director
David F. Swensen Director
Arthur Williams III Director
Officers and
Paid Directors
David A. Salem* Director President Director President
Meredith A. Shuwall Vice President
Esther L. Cash Vice President/Secretary VP/Secretary/Treasurer
William E. Vastardis Treasurer
Carla E. Dearing Assistant Treasurer
Biographies of Unpaid Directors
* John E. Craig, Jr. is Executive Vice President and Treasurer of The
Commonwealth Fund, One East 75th Street, New York, NY, 10021, where he
oversees assets exceeding $400 million. Mr. Craig was formerly Assistant
Director of the John A. Hartford Foundation. He chairs the board of the Non-
Profit Coordinating Committee of New York; chairs the Investment Committee of
the Social Science Research Council; and is a member of the Publications
Committee of New York's City Journal. He is a member of the boards of the
Davidson College Board of Visitors, the Rockefeller Archive Center, and the
US-New Zealand Council; and chair of the board of The Investment Fund for
Foundations.
Gregory D. Curtis is President of Greycourt & Co., 607 College Street,
Pittsburgh, PA, 15232, an investment consulting firm. Mr. Curtis was formerly
President of the Laurel Foundation and C.S. May Associates, a diversified
investment and financial services firm. He is a trustee of Contemporary Arts
Stabilization Trust, The Ellis School, The Emerging International City, Inc.,
and St. John's College. He is also a director of several for-profit
corporations.
Alice W. Handy is Treasurer of the University of Virginia, Box 9012,
Charlottesville, VA, 22906, which has endowment assets exceeding $800
million. Ms. Handy was formerly Treasurer of the Commonwealth of Virginia.
She is a member of the Municipal Securities Rulemaking Board, a member of the
Investment Advisory Committee of the Virginia Retirement System, and a member
of the board of First Union Bank of Virginia.
Sheryl L. Johns is Vice President, Treasurer, and Chief Financial Officer
of the Houston Endowment, 600 Travis, Suite 6400, Houston, TX, 77002, a private
foundation with assets exceeding $1 billion. She was formerly a manager with
the accounting firm of Ernst & Young. Ms Johns is a Certified Management
Accountant as well as a Certified Public Accountant, and she serves on the
Budget and Finance Committee and Executive Committee of the Conference of
Southwest Foundations.
Robert A. Kasdin is Treasurer and Chief Investment Officer of The
Metropolitan Museum of Art, 1000 Fifth Avenue, New York, NY, 10028, where he
oversees assets exceeding $1 billion. Mr. Kasdin was formerly Vice President
and General Counsel of the Princeton University Investment Company. He is a
member of the Finance Committee of the Rockefeller Brothers Fund and of the
Board of Directors of the Institute for Ecosystem Studies.
William F. McCalpin is Director of Investments Related to Programs of The
John D. and Catherine T. MacArthur Foundation, 140 South Dearborn Street,
Suite 1100, Chicago, IL, 60603. Mr. McCalpin was formerly Program Officer and
Treasurer of the Rockefeller Brothers Fund. He is a member of the boards of
the Lingnan Foundation and The Investment Fund for Foundations.
John G. Mebane, Jr. is Chief Investment Officer of The Duke Endowment,
100 North Tryon Street, Charlotte, NC, 28202, a private foundation with assets
exceeding $1.5 billion. He was formerly Vice President and Manager of
Personal Trust Portfolio Management at Wachovia Bank in Winston-Salem, NC.
He serves on the Investment Committee of the Christ Episcopal Church
Foundation, on the board of Arthritis Patient Services, as a trustee of the
Mary Duke Biddle Foundation, and is a Chartered Financial Analyst.
Jack R. Meyer is President and Chief Executive Officer of Harvard Management
Company (HMC), 600 Atlantic Avenue, Boston, MA, 02110. HMC is the endowment
management subsidiary of Harvard University, which has endowment assets
exceeding $7 billion. Mr. Meyer was formerly Treasurer and Chief Investment
Officer of the Rockefeller Foundation, Deputy Comptroller of New York City,
and a Director of the Investor Responsibility Research Center.
William F. Nichols is Treasurer of the William and Flora Hewlett Foundation,
525 Middlefield Road #200, Menlo Park, CA, 94025, which has assets exceeding
$1.4 billion. He is also Treasurer and a trustee of Channing House and a
trustee of The Investment Fund for Foundations.
Fred B. Renwick is Professor of Finance at the Leonard M. Stern School of
Business, New York University, 4 West 4th Street, Suite 9-190, New York, NY,
10012. Professor Renwick is Chair of the Finance Committee of Morehouse
College; Chair of the Investment Committees of the American Bible Society and
Wartburg Home Foundation; and a trustee of The Investment Fund for
Foundations. He was formerly Vice Chair of the board of Pensions of the
Evangelical Lutheran Church of America.
Carl W. Schafer is President of The Atlantic Foundation, 16 Farber Road,
Princeton, NJ, 08540, which has assets exceeding $100 million. Mr. Schafer
was formerly Financial Vice President and Treasurer of Princeton University
and was also Chair of the Investment Advisory Committee of the Howard Hughes
Medical Institute. He is Chair of the board of Johnson Atelier and School of
Sculpture and a member of the board of Harbor Branch Institution. He is also
a director of Roadway Express, Wainoco Oil Corporation, and Evans Systems,
Inc.
Nina F. Scherago is Director of Private Investments of the Howard Hughes
Medical Institute, 4000 Jones Bridge Road, Chevy Chase, MD, 20815, where she
oversees a private investment portfolio of approximately $990 million. Ms.
Scherago was formerly with the investment banking firm of Alex Brown & Sons.
She is a Chartered Financial Analyst.
Ann Brownell Sloane is President of Sloane & Hinshaw, 165 East 72nd Street,
New York, NY, 10021, a firm that furnishes strategic, financial planning and
management services to foundations and other tax-exempt grantmaking
organizations. Ms. Sloane is a former trustee of Swarthmore College, and
continues as a member for 19 years of the Investment Committee of its Board
of Managers, and a trustee of The Investment Fund for Foundations.
David F. Swensen is Chief Investment Officer of Yale University, 230
Prospect Street, New Haven, CT, 06511-2107, which has assets exceeding $3.9
billion. Mr. Swensen was formerly a Senior Vice President at Lehman Brothers.
He also teaches finance and portfolio theory at the University, and serves as a
trustee of The Carnegie Institution of Washington. He is currently a member
of the Investment Advisory Committees of the Edna McConnell Clark Foundation
and Howard Hughes Medical Institute.
Arthur Williams III is President of Pine Grove Associates, Inc., 382
Springfield Avenue, Summit, NJ, 07901, a consulting and asset management firm
providing services to high net worth families and institutions. He is former
Director of Retirement Plan Investments and other investment programs for
McKinsey & Company, Inc., where he oversaw assets exceeding $700 million. He
is the author of Managing Your Investment Manager and a member of the
Nominating Committee of the Institute for Quantitative Research in Finance.
He also serves as trustee for a number of families.
Biographies of Officers
Esther L. Cash is Vice President, Secretary, and Treasurer of Foundation
Advisers Inc., 2405 Ivy Road, Charlottesville, VA, 22903, and Vice President
of Operations of The Investment Fund for Foundations. Prior to joining FAI,
Ms. Cash was employed by Grantham, Mayo, Van Otterloo & Co. ("GMO"), where
her responsibilities included operations, investment research, asset
allocation, regulatory compliance, and communications for GMO's institutional
mutual funds. Prior to joining GMO, she was employed by Cambridge
Associates, Inc., where she was involved in systems design, research, and
consulting.
Carla E. Dearing is President and co-founder of AMT Capital Services,
Inc., 600 Fifth Avenue, 26th Floor, New York, NY, 10020. (For a description of
AMT Capital, see ADDITIONAL SERVICE PROVIDERS.) Ms. Dearing was formerly a
Vice President of Morgan Stanley & Co. where her responsibilities included
product planning and development for Morgan Stanley Capital International
(MSCI).
* David A. Salem is President of Foundation Advisers, Inc., 2405 Ivy Road,
Charlottesville, VA, 22903 and President and Chief Executive Officer of The
Investment Fund for Foundations. Prior to assuming FAI's presidency in 1993,
Mr. Salem was a partner in the Boston-based investment advisory firm
Grantham, Mayo, Van Otterloo & Co., where his responsibilities included asset
allocation and strategic planning. Prior to joining GMO, Mr. Salem was a
Managing Director of Cambridge Associates, Inc., which provides investment
and financial planning services primarily to not-for-profit endowed
institutions. He has served on the faculties of Middlebury College (from
which he earned his undergraduate degree summa cum laude) and the University
of Virginia, and in the Office of the Counsel to the President of the United
States. He holds a J.D. cum laude from Harvard Law School and an MBA with
High Distinction from Harvard Business School, where he was elected a Baker
Scholar. Mr. Salem is a trustee of the Core Knowledge Foundation, and is
former co-chair of the Cabinet of the Thomas A. Jefferson Memorial Foundation
(Monticello).
Meredith A. Shuwall is Vice President of Foundation Advisers, Inc., 2405
Ivy Road, Charlottesville, VA 22903. Prior to joining FAI, Ms. Shuwall was a
Vice President at Vrolyk & Company, where her responsibilties included
providing financial advisory and merger and acquisition services for private
companies. Prior to joining Vrolyk, Ms. Shuwall was an Associate at Onyx
Partners, Inc., where she managed an opportunistic real estate fund.
William E. Vastardis is Senior Vice President of Fund Administration of AMT
Capital Services, Inc., 600 Fifth Avenue, 26th Floor, New York, NY, 10020.
Prior to joining AMT Capital, Mr. Vastardis served as Vice President and head
of the private label mutual fund administration division of the Vanguard
Group, Inc. (1984-92) and in Vanguard's fund accounting operations (1978-84).
The Vanguard Group, headquartered in Malvern, PA, is the second largest
mutual fund family in the U.S.
Remuneration of Directors and Officers; Reimbursement of Expenses. The
only individuals who receive remuneration for their services as directors or
officers of TIP or FAI are Ms. Cash, Ms. Dearing, Mr. Salem and Mr.
Vastardis. Ms. Cash and Mr. Salem are paid employees of FAI and receive no
compensation directly from TIP. Ms. Dearing and Mr. Vastardis are paid
employees of AMT Capital Services and receive no compensation directly from
FAI or TIP. FAI and TIP directors may be reimbursed for their out-of-pocket
outlays associated with attending board meetings.
ADVISER. Pursuant to criteria outlined below (see MONEY MANAGERS), the
assets of each Fund are allocated among one or more Money Managers recommended
by Foundation Advisers, Inc., 2405 Ivy Road, Charlottesville, VA, 22903.
Incorporated on August 20, 1993, FAI is a non-exempt membership corporation
that serves as the Adviser to all TIP Funds. FAI was formed to facilitate
investment by private foundations, community foundations, and other 501(c)(3)
organizations in stocks, securities, and other assets. The affairs of FAI
are managed by its board of directors. The directors of FAI are members of
the corporation and are "controlling persons" (as that term is defined in
the Rules and Regulations of the Commission) of FAI. Although not tax-
exempt, FAI does not seek to earn a profit and no part of the net earnings of
the corporation may inure to the benefit of or be distributable to its
directors, officers, or any other private persons. This limitation does not
prevent payment of reasonable compensation for services rendered in carrying
out FAI's activities. All of FAI's directors have extensive experience
investing foundation assets and hold or have held senior investment-related
positions at foundations or endowments.
Advisory Agreement. Pursuant to each Fund's Advisory Agreement with TIP (the
"Advisory Agreements"), FAI: (a) develops investment programs, selects
Money Managers from a broad universe of candidates, and monitors Money
Manager investment activities and results; (b) provides or oversees the
provision of all general management, investment advisory, and portfolio
management services to TIP; and (c) provides TIP with office space,
equipment, and personnel. The Advisory Agreements are summarized in the
Statement of Additional Information and the fees payable to FAI thereunder
are set forth above under "Fees and Annual Fund Operating Expenses."
Because FAI does not seek to earn a profit, it may waive a portion of its
fees from time to time.
DISTRIBUTOR. Shares of TIP are distributed by FAI as a registered branch
office of AMT Capital Services, Inc., pursuant to a Distribution Agreement
(the "Distribution Agreement") dated January 1, 1995 between TIP and AMT
Capital Services, Inc. No fees are payable by TIP pursuant to the
Distribution Agreement, and AMT Capital Services, Inc. and FAI bear the
expense of their distribution activities.
ADMINISTRATOR. Pursuant to an Administration Agreement dated February 10,
1994 as ammended January 1, 1995 between TIP and AMT Capital Services, Inc.,
AMT assists in managing and supervising certain day-to-day business activities
and operations of TIP, including custodial, transfer agency, dividend
disbursing, accounting, auditing, compliance, and related activities. AMT
Capital is a registered broker-dealer serving the institutional investment
management community with $3 billion in assets under administration.
MONEY MANAGERS
DISCRETION AFFORDED MONEY MANAGERS. Each Money Manager has discretion to
purchase and sell securities for its allocated portion of a Fund's assets,
subject to the Fund's written investment objectives, policies, and restrictions.
Although the Money Managers' activities are subject to general oversight by
the boards of directors and officers of TIP and FAI, neither the boards nor
the officers of FAI evaluate the investment merits of the Money Managers'
individual security selections.
MANAGER SELECTION PROCESS. With the exception of funds held in the form
of cash reserves pending allocation to Money Managers or distribution to
Members, the assets of each Fund will be allocated by FAI among the Money
Managers profiled in Appendix A who will employ the investment approaches
described therein. FAI is responsible for identifying qualified Money Managers
for each Fund and negotiating the terms of Agreements under which they are
willing to provide services to the Funds. These Agreements are then
submitted for approval by the board of directors of TIP, which retains the
right to disapprove the hiring of Money Managers recommended by FAI and to
terminate Agreements (subject to termination provisions contained therein)
between TIP and all vendors employed by it, including FAI and the Money
Managers. In identifying Money Managers, FAI reviews the historical
investment results of a universe of money managers, evaluates written
information about these money managers supplied by both the money managers
and outside parties, and conducts face-to-face interviews with the
individuals who would actually manage money for TIP were their firms to be
employed by it.
Other FAI Investment Advisory Duties. In addition to identifying
prospective Money Managers and negotiating Agreements with them, FAI is also
responsible for allocating and reallocating each Fund's assets among the Money
Managers employed by it, monitoring their performance, identifying appropriate
commingled investment vehicles in which to invest Funds' assets, and investing
funds held in the form of cash reserves pending allocation to Money Managers or
distribution to Members. Within FAI, responsibility for setting allocation
ranges for each Money Manager is retained by FAI's directors, who meet
regularly to establish and review these ranges, review TIP's relationship with
each Money Manager, and to evaluate the need for changes in the roster of Money
Managers employed by TIP. Responsibility for investing unallocated funds is
delegated by FAI's directors to FAI's President (David A. Salem), who is
assisted in this task by FAI's Vice President, Secretary, and Treasurer
(Esther L. Cash). Unallocated funds will be invested in accordance with each
Fund's stated investment objective and policies. See POLICY IMPLEMENTATION AND
RISKS.
Money Manager Agreements. Money Managers and the terms of Agreements under
which they provide services to the Funds must be approved by the board of
directors of TIP. In order to preserve the flexibility needed to respond to
changes in the environment in which TIP is operating, including especially
the relative performance of investment styles and individual Money Managers,
the Agreements between TIP and each Money Manager do not specify the
percentage of a Fund's assets to be allocated to the Money Manager, and TIP's
directors therefore rely on FAI to allocate and reallocate assets among Money
Managers in accordance with criteria set forth below. See MANAGER ALLOCATION
PROCESS.
Fees. The following table identifies Money Managers who provide services
to the Funds and the minimum and maximum fee rate under the Agreement between
each Money Manager and TIP. Unless otherwise indicated, the management fee
received by a Money Manager varies based on the Money Manager's investment
performance. See Appendix A for more detailed information about the Money
Managers.
Fee as Percent of Assets Managed
Minimum Maximum
TIFF Multi-Asset Fund
Bee & Associates 0.15 2.00
Canyon Capital Management, L.P. 1.00 1.00+
Concentric Capital Management 1.00 1.00+
Delaware International Advisers Ltd. 0.30* 0.50
Farallon Capital Management, LLC 1.00 1.00+
Genesis Asset Managers, Ltd. 0.60* 1.10
Grantham, Mayo, Van Otterloo & Co. LLC 0.30 1.00
Harding, Loevner Management, L.P. 0.10 1.50
Investment Research Company 0.10 1.20
Jacobs Levy Equity Management 0.15 1.25
Lazard Freres Asset Management 0.50** 0.50
Mercury Asset Management 0.50** 0.50
Palo Alto Investors 0.10 2.00
Pomboy Capital Corporation 1.00 1.00+
Standard Pacific Capital LLC 0.15 2.00
TCW Funds Management, Inc. 0.50* 0.75
Wellington Management Company 0.35* 0.45
Whippoorwill Associates, Inc. 1.50 1.50+
Wyser-Pratte Management Company, Inc. 1.00 1.00+
TIFF International Equity Fund
Bee & Associates 0.15 2.00
City of London Investment Management Co.,
Ltd. 1.50** 1.50
Delaware International Advisers Ltd. 0.30* 0.50
Everest Capital Limited 1.50 1.50+
Harding, Loevner Management, L.P. 0.10 1.50
Lazard Freres Asset Management 0.50** 0.50
Marathon Asset Management Ltd. 0.15 1.60
Mercury Asset Management 0.50** 0.50
TIFF Emerging Markets Fund
BEA Associates 0.60* 0.95
Blairlogie Capital Management 0.60* 0.95
City of London Investment Management Co.,
Ltd. 1.50** 1.50
Emerging Markets Management 0.40 2.00
Everest Capital Limited 1.50 1.50+
Genesis Asset Managers, Ltd. 0.60* 1.10
Lazard Freres Asset Management 0.50** 0.50
TIFF U.S. Equity Fund
Aronson + Partners 0.10 0.80
Concentric Capital Management 1.00 1.00+
Eagle Capital Management 0.00 2.00
Gotham Partners 1.00 1.00+
Investment Research Company 0.10 2.00
Jacobs Levy Equity Management 0.15 1.25
Martingale Asset Management, L.P. 0.05* 0.10
Palo Alto Investors 0.10 2.00
Westport Asset Management, Inc. 0.15 2.00
TIFF Bond Fund
Atlantic Asset Management Partners, L.L.C. 0.10 0.60
Fischer Francis Trees & Watts, Inc. 0.10 0.80
Seix Investment Advisors, Inc. 0.10 0.80
Smith Breeden Associates, Inc. 0.10 0.85
TIFF Short-Term Fund
Fischer Francis Trees & Watts, Inc. 0.15* 0.20
Smith Breeden Associates, Inc. 0.05 0.75
* Money Manager receives a fee that does not include performance component.
The Minimum Fee reflects "breakpoints" and is applied only to assets in
excess of the highest "breakpoint."
** Money Manager receives a straight asset-based fee regardless of the
amount of assets managed for TIP (i.e., there are neither "breakpoints"
in the fee agreement nor a performance component).
+ Money Manager receives an asset-based fee as well as a percentage of
profits, sometimes with a hurdle rate or high water mark component.
The combined fees charged by FAI and the Money Managers, to the extent that
they exceed 0.75% on an annualized basis, are higher than that charged by
some open-end investment companies.
Exemption from Requirement that Members Approve New Money Manager
Agreements. TIP has received an order from the Commission effective August 30,
1995 exempting each of the TIP Funds from the requirement that agreements
between regulated investment companies and their investment advisers or
subadvisers be approved by a vote of a majority of the outstanding voting
securities of such investment companies. TIP's board of directors believes that
such Member approval of agreements between the Funds and Money Managers employed
by them is not necessary for the protection of participating organizations
and would needlessly encumber the Funds' operations. Pursuant to this
exemption, TIP's board of directors may, without the approval of Members:
(1) employ a new Money Manager pursuant to the terms of a new Money Manager
Agreement, either as a replacement for an existing Money Manager or as an
additional Money Manager; (2) change the terms of a Money Manager Agreement;
or (3) continue to employ an existing Money Manager on the same terms where
an Agreement has been assigned because of a change in control of the Money
Manager. Any such action would be followed by written notice to Members,
which must include the information concerning the Money Manager that would
normally be included in a proxy statement.
MANAGER SELECTION CRITERIA. In determining which Money Managers to select, FAI
weighs a number of relevant factors, and makes its selection based on a
comparison of all such factors. However, each of the Disqualifying
Attributes noted below constitutes a sufficient ground for rejection or
dismissal of a Money Manager displaying it. The factors considered by FAI in
selecting the Fund's current Money Managers and in considering the selection
of other Money Managers include:
Important Attributes. (1) A well-defined investment philosophy that gives
the manager a discernible competitive advantage in the gathering or
processing of investment data; (2) a verifiable record that the firm has
faithfully executed this philosophy over time; (3) a proven capacity to
deliver reasonably uniform results to all clients' assets to which the
philosophy is applied; (4) a reasonable amount of assets under management to
which this philosophy is applied; (5) satisfactory returns versus relevant
benchmark indices; (6) a proven capacity to adapt to changes in financial
markets; (7) a proven willingness to invest adequately in its own business
(including technological resources) in light of such changes; and (8)
investment professionals who have strong personal incentives (both financial
and psychological) to produce satisfactory results for their clients.
Helpful Attributes. (1) Money management is the firm's sole (preferably) or
primary line of business; (2) the firm's decision-makers are seasoned
professionals or the firm's philosophy is unusually innovative (preferably
both); (3) the firm is willing to use performance-based fee arrangements as
an expression of confidence in its own abilities; and (4) the firm complies
fully with the Performance Standards promulgated by the Association for
Investment Management and Research.
Undesirable Attributes. (1) A high degree of personnel turnover; (2)
insufficiently trained administrative personnel; (3) insufficiently robust
investment accounting systems; (4) investment decision-makers who are unduly
burdened with administrative tasks; and (5) an unwillingness to specify asset
size limits for products or services that require such limits.
Disqualifying Attributes. (1) Investment decisionmakers who are engaged
primarily in brokerage or financial planning (as distinct from portfolio
management); (2) an inability to meet performance reporting deadlines; and
(3) relevant criminal convictions or sanctions by the Commission or other
federal or state regulatory agencies.
MANAGER ALLOCATION CRITERIA. As with the criteria employed by FAI in
selecting Money Managers for each Fund, the criteria employed by FAI in
allocating each Fund's assets among Money Managers represent a synthesis of the
combined investment experience of TIP's and FAI's directors and officers.
Multiple Variables Considered. In making manager allocation decisions, FAI
considers each Fund's investment and performance objectives as well as
several other variables, including: (a) each Money Manager's investment
approach, trading practices, and fee arrangements; (b) the potential
volatility of the Fund's relative return (i.e., the margin by which alternate
allocation decisions could cause the Fund to under- or outperform its
benchmark in any given time period); (c) the Fund's overall expense ratio;
and (d) the Fund's liquidity relative to the expected volume of Member
purchases and redemptions. To accommodate fluctuations in the relative sizes
of Money Managers' accounts caused solely by market movements, Money Manager
allocations formulated by FAI take the form of ranges: minimum, normal, and
maximum percentages of the assets of a Fund to be allocated to each Money
Manager retained by it. While these ranges are not expected to change
frequently, FAI has discretionary authority to alter these ranges and to
reallocate assets among Money Managers in response to changing market
conditions.
Phased Activation of Money Managers' Accounts. Not all Money Managers
profiled in Appendix A are employed at all times. Whether a given Money
Manager is employed at a given time depends on a Fund's size, its projected
growth rate, FAI's perception of the relative attractiveness of the Money
Manager's approach in light of prevailing market conditions, and the extent
to which a given Money Manager's investment style would complement those of
the other Money Managers to whom a Fund's assets have been allocated.
Because future market conditions are inherently unforecastable, TIP cannot
predict the amount to be allocated to each Money Manager over time. As a
general rule, however, in light of the incremental custodial costs of
activating a Money Manager's account, it is expected that the initial
allocation to each Money Manager managing a separate account on a Fund's
behalf will be at least $5 million. A Money Manager receives no compensation
from TIP until it is actually managing funds for TIP, and is entitled to no
compensation if, due to its own changed circumstances or changes in the
investment environment generally, FAI decides not to allocate funds to the
Money Manager. Members and prospective Members seeking to know the actual
allocation of each Fund's assets across Money Managers at a given time can
obtain this information by contacting FAI using the telephone number
furnished at the front of this Prospectus.
INVESTMENT OBJECTIVES, POLICIES, AND RESTRICTIONS
OVERVIEW. Each Fund has a fundamental investment objective and certain
fundamental policies and restrictions which may be changed only with the
approval of the Members holding a majority of the outstanding voting
securities of that Fund. Under the 1940 Act, a "majority" for this purpose
means the lesser of: (1) 67% of the shares represented at a meeting at which
more than 50% of the outstanding shares are represented; or (2) more than 50%
of the outstanding shares. Other policies and restrictions reflect proposed
practices of the Funds, and may be changed by the Funds without the approval
of Members. This section of the Prospectus describes the Funds' objectives,
policies, and restrictions.
INVESTMENT OBJECTIVES AND POLICIES. The following discussion sets forth
each Fund's investment objective, which is a fundamental policy that cannot be
changed without approval by a majority of the outstanding voting securities
of the Fund. There can be no assurance that a Fund will attain its
investment objectives. (See POLICY IMPLEMENTATION AND RISKS.) This discussion
also states the fundamental policy regarding the types of securities in which
each Fund will invest. Ordinarily, each Fund will invest more than 80% of its
assets in such securities. Performance objectives and certain other Fund
policies are not fundamental and may be changed without Member approval, upon
notice to Members.
Multi-Asset Fund. The investment objective of the Multi-Asset Fund is to
provide participating organizations with a growing stream of current income
and appreciation of principal that at least offsets inflation as measured by
the (U.S.) Consumer Price Index. The performance objective of the Fund is to
provide a total return that exceeds the net total return (after withholding
taxes) of the constructed index ("Constructed MAF Benchmark"), net of all
expenses, on an annualized basis over a market cycle (see table on
following page).
The Fund may underperform the Constructed MAF Benchmark. This Constructed
MAF Benchmark was selected by TIP's directors because they believe that it
constitutes an appropriate long-term asset mix for organizations which seek
to maintain the real or inflation-adjusted value of their invested assets
while distributing annually 4-6% of such assets. There is no assurance that
the Fund will achieve its objective of producing a 4-6% real or inflation-
adjusted return. See Appendix C for a description of the components of the
Constructed MAF Benchmark.
Asset Class Weight in
Fund's
Benchmark Asset Class Benchmark
U.S. Common Stocks 25% Wilshire 5000 Stock Index
Foreign Common Stocks 30% MSCI All Country World ex USA Index
Equity Substitutes 15% 3-Month Treasury Bills plus 5%
per annum
Specialized Equities 10% Resource-Related Sectors of MSCI
World Index:
7% Energy Sources; Energy Equipment
and Services
2% Gold Mines
1% Non-Ferrous Metals; Forest
Products and Paper; Misc. Materials
and Commodities
U.S. Bonds 15% Lehman Aggregate Bond Index
Foreign Bonds 5% Lehman Majors ex US Bond Index
The Fund will attempt to achieve its objective by investing primarily in
common stocks (including ADRs and EDRs), securities convertible into such
common stocks, rights, warrants, forward foreign currency exchange contracts,
securities of investment companies and other commingled investment vehicles
(subject to the 1940 Act and state limits on such investments), and available
debt securities such as those listed in the descriptions of the Bond and
Short-Term Funds.
The Fund will invest broadly in the available universe of securities
domiciled in the United States plus at least ten other countries, including:
(1) Europe, including Austria, Belgium, Denmark, Finland, France, Germany,
Ireland, Italy, Luxembourg, the Netherlands, Norway, Spain, Sweden,
Switzerland, and the United Kingdom; (2) the Pacific Rim, including
Australia, Hong Kong, Japan, Malaysia, New Zealand, and Singapore; (3)
Canada; and (4) countries with "emerging markets," as that term is defined
in the discussion of the Emerging Markets Fund above. Many of these
securities will be denominated in currencies other than the U.S. dollar.
Under normal circumstances, not more than 40% of the Fund's assets will be
invested in securities domiciled in countries with "emerging markets."
How Fund Seeks to Outperform Its Benchmark: The Fund seeks to outperform
its Multi-Asset Fund's Constructed Benchmark principally through two means:
Active Security Selection within Asset Class Segments: One means that the
Fund will employ in seeking to outperform its benchmark will be to retain
Money Managers that potentially can select securities that will outperform
the securities comprising each segment of the Multi-Asset Fund's Constructed
Benchmark. Example: an international equity manager that potentially can
outperform the 30% of the Multi-Asset Fund's Constructed Benchmark devoted to
stocks traded in foreign markets.
Strategic Asset Allocation: The second means that the Fund will employ in
seeking to outperform its benchmark will be to retain Money Managers that can
potentially enhance the Fund's returns by utilizing in a timely manner
authority conferred upon them by TIP's directors to rotate Fund assets among
multiple asset classes. Example: a manager that can potentially outperform
a hybrid stock/bond benchmark by making timely shifts between equity and
fixed income markets (each Manager's performance benchmark is described in
Appendix C).
International Equity Fund. The investment objective of the International
Equity Fund is to provide participating organizations with a growing stream
of current income and appreciation of principal that at least offsets
inflation as measured by the (U.S.) Consumer Price Index. The performance
objective of the Fund is to provide a total return that exceeds the net total
return (after withholding taxes) of the Morgan Stanley Capital International
("MSCI") All Country World ex USA Stock Index (a capitalization-weighted
index of non-U.S. stocks) by 1.00% (100 basis points), net of all expenses,
on an annualized basis over a market cycle. The Fund may underperform the
MSCI All Country World ex USA Stock Index. (See Appendix C for a description
of the MSCI All Country World ex USA Stock Index.)
The Fund will attempt to achieve its objective by investing primarily in
common stocks of companies domiciled in countries other than the United
States [including American Depositary Receipts ("ADRs") and European
Depositary Receipts ("EDRs")], securities convertible into such common
stocks, rights, warrants, forward foreign currency exchange contracts, and
securities of other commingled investment vehicles such as other registered
investment companies and private investment funds (subject to the 1940 Act
limits on such investments). The Fund may also invest in securities of
U.S. companies which derive, or are expected to derive, a significant portion
of their revenues from their foreign operations, although under normal
circumstances not more than 15% of the Fund's assets will be invested in
securities of U.S. companies.
The Fund will invest broadly in the available universe of common stocks of
companies domiciled in at least ten different countries (other than the
United States), including: (1) Europe, including Austria, Belgium, Denmark,
Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands,
Norway, Spain, Sweden, Switzerland, and the United Kingdom; (2) the Pacific
Rim, including Australia, Hong Kong, Japan, New Zealand, and Singapore; (3)
Canada; and (4) countries with "emerging markets," as that term is defined
in the discussion of the Emerging Markets Fund below. Most of these
securities will be denominated in currencies other than the U.S. dollar.
Under normal circumstances, not more than 30% of the Fund's assets will be
invested in common stocks of companies domiciled in countries with "emerging
markets."
Emerging Markets Fund. The investment objective of the Emerging Markets
Fund is to provide participating organizations with appreciation of principal
that at least offsets inflation as measured by the (U.S.) Consumer Price Index.
The performance objective of the Fund is to provide a total return that
exceeds the total return (net of withholding taxes) of the Morgan Stanley
Capital International Emerging Markets Free Index by 1.00% (100 basis
points), net of all expenses, on an annualized basis over a market cycle.
The Fund may underperform the MSCI Emerging Markets Free Index. (See
Appendix C for a description of the Morgan Stanley Capital International
Emerging Markets Free Index.)
The Fund will attempt to achieve its objective by investing primarily in
common stocks of companies domiciled in countries with emerging markets,
securities convertible into such common stocks, closed-end investment
companies, rights, warrants, forward foreign currency exchange contracts, and
securities of other investment companies and private investment funds
(subject to the 1940 Act limits on such investments).
Emerging markets include any countries: (1) having an "emerging stock
market" as defined by Morgan Stanley Capital International; (2) with low- to
middle-income economies according to the World Bank; or (3) listed in World
Bank publications as developing. Currently, all countries in the world are
included in these categories except: Australia, Austria, Belgium, Canada,
Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan,
Luxembourg, the Netherlands, New Zealand, Norway, Singapore, Spain, Sweden,
Switzerland, the United Kingdom, and the United States. In order to exploit
circumstances in which the Fund's Money Managers believe that securities
traded primarily in the developed markets listed immediately above are more
attractively priced than securities traded primarily in emerging markets, the
Fund may invest in these developed markets. The Fund may also invest in
securities of U.S. companies which derive, or are expected to derive, a
significant portion of their revenues from their foreign operations.
Most of the Fund's assets will be denominated in currencies other than the
U.S. dollar. Under normal circumstances, not more than 30% of the Fund's
assets will be invested in securities issued by companies domiciled in
developed markets, and not more than 15% of the Fund's assets will be
invested in securities issued by U.S. companies.
U.S. Equity Fund. The investment objective of the U.S. Equity Fund is to
provide participating organizations with a growing stream of current income
and appreciation of principal that at least offsets inflation as measured by
the Consumer Price Index. The performance objective of the Fund is to
provide a total return that exceeds the total return of the Wilshire 5000
Stock Index (a capitalization-weighted index of all publicly-traded U.S.
stocks for which price quotations are readily available) by 0.75% (75 basis
points), net of all expenses, on an annualized basis over a market cycle.
The Fund may underperform the Wilshire 5000 Stock Index. (See Appendix C for
a description of the Wilshire 5000 Stock Index.) The Fund will attempt to
achieve its objectives by investing primarily in common stocks, securities
convertible into common stocks, rights, and warrants.
The Fund will invest broadly in the available universe of common stocks
including: (1) large capitalization stocks such as those included in the
Standard and Poors 500 Composite Stock IndexTM; (2) growth-oriented stocks of
companies that are expected to experience higher than average growth of
earnings or growth of stock price; (3) value-oriented stocks with lower price
multiples (either price/earnings or price/book) than others in their
industry, or which have improving fundamentals (such as growth of earnings
and dividends); (4) income-oriented stocks with higher than average dividend
yields relative to other stocks of issuers in the same industry; (5) small
capitalization stocks, which are stocks with market capitalizations of less
than $300 million; and (6) stocks of non-U.S. companies, although under
normal circumstances not more than 15% of the Fund's assets will be invested
in common stocks of foreign issuers [i.e., 10% maximum in ADRs and 5% maximum
in other foreign securities]. The Fund may also invest in the securities of
other commingled investment vehicles such as other registered investment
companies or private investment funds (subject to the 1940 Act limits on such
investments).
Bond Fund. The investment objective of the Bond Fund is to provide
participating organizations with: (1) a high rate of current income, subject
to restrictions designed to ensure liquidity and manage exposure to interest
rate and credit risk; and (2) a hedge against deflation-induced declines in
common stock prices and dividend streams. The performance objective of the
Fund is to outperform the Lehman Brothers Aggregate Bond Index by 0.50% (50
basis points), net of all expenses, on an annualized basis over a market
cycle. The Fund may underperform the Lehman Brothers Aggregate Bond Index.
(See Appendix C for a description of the Lehman Brothers Aggregate Bond
Index.) The Fund will attempt to achieve its objectives by investing
primarily in U.S. and non-U.S. debt securities with varying maturities
denominated in various currencies.
The Fund will invest broadly in the universe of available debt securities,
including U.S. dollar and non-dollar: (1) obligations issued or guaranteed
by the United States Government, such as United States Treasury securities;
(2) obligations backed by the full faith and credit of the United States,
such as obligations of the Government National Mortgage Association and the
Export-Import Bank; (3) obligations issued or guaranteed by United States
Government agencies or instrumentalities where the Fund must look principally
to the issuing or guaranteeing agency for ultimate repayment; (4) obligations
issued or guaranteed by a foreign government, or any of its political
subdivisions, authorities, agencies, or instrumentalities or by supranational
organizations; (5) obligations of domestic or foreign corporations or other
entities; (6) obligations of domestic or foreign banks; (7) mortgage- and
asset-backed securities; (8) short-term securities such as time deposits,
certificates of deposit (including marketable variable rate certificates of
deposit), and bankers' acceptances issued by a commercial bank or savings and
loan association; (9) convertible securities; and (10) short-term securities
such as those listed in the description of the Short-Term Fund. The Fund may
own debt securities of all grades, including both rated and unrated
securities, provided, however, that not more than 10% of its assets may be
invested in securities that are rated below investment grade [i.e., BBB by
Standard & Poors Corporation ("S&P") or Baa by Moody's Investors Service,
Inc. ("Moody's)].
Certain Money Managers employed by the Fund may employ multi-currency fixed
income management techniques in an attempt to invest in debt securities that
offer the most attractive returns relative to inflation. Under normal
circumstances, not more than 40% of the Fund's assets will be invested in
non-dollar denominated securities, and not more than 30% of the Fund's assets
will be exposed to foreign currency exchange risk (i.e., invested in non-
dollar denominated securities on an unhedged basis).
Short-Term Fund. The investment objective of the Short-Term Fund is to
generate a high rate of current income, subject to restrictions designed to
ensure that the Fund's interest rate risk does not exceed the interest rate
risk of a portfolio invested exclusively in six-month U.S. Treasury
securities on a constant maturity basis. The performance objective of the
Fund is to outperform the Merrill Lynch 182-Day Treasury Bill Index net of
all expenses. The Fund will attempt to achieve its objectives by investing
primarily in U.S. and non-U.S. debt securities, including: (1) securities
issued or guaranteed by the U.S. Government and its agencies or
instrumentalities; (2) obligations issued or guaranteed by a foreign
government, or any of its political subdivisions, authorities, agencies or
instrumentalities or by supranational organizations; (3) obligations of
domestic or foreign corporations or other entities; (4) obligations of
domestic or foreign banks; (5) mortgage- and asset-backed securities; and (6)
short-term securities such as time deposits, certificates of deposit
(including marketable variable rate certificates of deposit), and bankers'
acceptances issued by a commercial bank or savings and loan association. The
Fund may own debt securities of all grades, including both rated and unrated
securities, provided, however, that not more than 5% of its total assets may
be invested in securities that are rated below investment grade.
As experienced foundation fiduciaries, members of the boards of TIP and
FAI recognize that many foundations seek to control downward fluctuations in
the monetary value of assets earmarked for spending or distribution (in the
form of grants) within twelve months ("current year spending") by investing
them exclusively in cash equivalents, either directly or via money market
funds. While such a policy comports well with the risk tolerances of some
foundation fiduciaries, numerous studies of the risk and return characteristics
of alternate short-term investment strategies suggest that a short-term bond
fund whose average maturity ranges between the one to three months typical of
regulated money market funds and the six months inherent in the Short-Term
Fund's performance benchmark has the potential to augment foundation
resources over time. To be sure, the higher starting yields that, for
example, three- to six-month instruments typically display relative to
shorter-term instruments may be insufficient to offset the larger principal
losses that the former may produce relative to the latter in environments of
sharply rising short-term interest rates. However, as the data provided
below indicate, there is a high probability of earning positive total returns
in any given month by investing exclusively in the instruments constituting
the Short-Term Fund's performance benchmark (i.e., six-month Treasury bills).
6-Month Treasury Bill Returns January 1975 - March 1997
Holding Periods That One-Month Holding Periods October 1979 -0.15%
Resulted in Negative February 1980 -0.10%
Returns August 1980 -0.03%
April 1981 -0.12%
Two-Month Holding Periods None NA
Arithmetic Average One-Month Holding Periods 267 Observations 0.64%
of All Observations Two-Month Holding Periods 266 Observations 1.28%
Risks of Investing Monies Earmarked for Near-Term Spending in Debt
Instruments with an Average Maturity of Six Months. As the above data
indicate, in the twenty-two years and three months ending March 31, 1997,
there were only four calendar months in which a portfolio invested
exclusively in six-month Treasury bills produced a negative total return.
The worst of these months produced a maximum loss of 0.15% (October 1979);
the average loss (four months, equally weighted) was 0.10%. Importantly,
this period encompasses several years (i.e., 1979-81) in which short-term
interest rates rose at unprecedentedly rapid rates to unprecedentedly high
levels. While there is no assurance that the Short-Term Fund's average
duration will be less than six months in an environment of rising short-term
interest rates, the Fund's Money Managers are authorized to shorten its
average duration if they expect short-term interest rates to rise, and they
are prohibited by the Fund's investment policy from maintaining a weighted
average duration exceeding six months. Consequently, in the opinion of TIP's
board, it is unlikely that rising interest rates alone will cause the Fund's
net asset value to decline materially over one-month (or longer) holding
periods even if short-term interest rates rise at the same rapid rate that
they rose in the 1979-81 time period. However, because the Fund will not be
invested exclusively in instruments backed by the full faith and credit of
the U.S. Government, it is possible that downgrades, defaults, and other
manifestations of credit (as distinct from interest rate) risk could cause
the Fund's net asset value to decline by more than 0.15% in any given one-
month holding period. In the judgment of TIP's board, the potential rewards
of investing monies earmarked for current year spending in a more aggressive
manner than that which is typical of money market funds in general, and
government money market funds in particular, outweigh the risks. However,
the board recognizes that many foundations may remain unpersuaded by the
arguments favoring a more aggressive approach toward the investment of current
year spending resources, and it encourages such foundations to invest such
monies not in the Short-Term Fund but rather in carefully selected,
institutionally-oriented money market funds with competitive expense ratios and
adequate restrictions on the maturity and quality of portfolio holdings.
Certain Money Managers employed by the Fund may employ multi-currency fixed
income management techniques in an attempt to invest in debt securities that
offer the most attractive returns relative to inflation. Under normal
circumstances, not more than 20% of the Fund's assets will be invested in
non-dollar denominated securities.
INVESTMENT RESTRICTIONS. The Funds have adopted certain fundamental investment
restrictions which cannot be changed without the approval of the holders of a
majority of the outstanding voting securities of a Fund. Under these
restrictions, which apply on a Fund-by-Fund basis, no Fund may:
1. Invest more than 25% of the value of the Fund's total assets in the
securities of companies engaged primarily in any one industry (other
than the U.S. government, its agencies and instrumentalities). For
purposes of this restriction, wholly-owned finance companies are
considered to be in the industry of their parents if their activities
are primarily related to financing the activities of their parents.
This restriction shall not apply, however, to the Short-Term Fund,
which may invest more than 25% of its total assets in domestic bank
obligations.
2. Acquire short positions in the securities of a single issuer (other
than the U.S. government, its agencies and instrumentalities) whose
value (as measured by the amounts needed to close such positions)
exceeds 2% of the Fund's total assets.
3. Borrow money, except from a bank for temporary or emergency purposes
provided that bank borrowing not exceed one-third (331/3%) of the
Fund's total assets at the time of borrowing; nor may any Fund borrow
for leveraging purposes. Reverse repurchase agreements, dollar roll
transactions, and collateralized securities loans that are covered with
cash or liquid high grade securities or other acceptable assets are not
considered borrowings subject to this restriction.
4. Issue senior securities [other than as permitted in (2) and (3)].
5. Make loans, except: (a) through the purchase of all or a portion of an
issue of debt securities in accordance with its investment objective,
policies, and limitations; (b) by engaging in repurchase agreements
with respect to portfolio securities; or (c) by lending securities to
other persons, provided that no securities loan may be made, if, as a
result, more than one-third (331/3%) of the value of the Fund's total
assets would be loaned to other persons.
6. Underwrite securities of other issuers.
7. Purchase or sell real estate, (other than marketable securities
representing interests in, or backed by, real estate and securities of
companies that deal in real estate or mortgages) or real estate limited
partnerships, or purchase or sell physical commodities or contracts relating
to physical commodities.
8. Invest directly in interests in oil, gas, or other mineral exploration
or development programs or mineral leases.
The Funds have adopted certain non-fundamental restrictions which may be
changed by the board of directors without Member approval. Under these
restrictions, no Fund may:
1. Acquire more than 10% of the outstanding voting securities or 10% of
all of the securities of any one issuer.
2. Acquire long positions in the securities of a single issuer (other than
the U.S. government, its agencies and instrumentalities) whose value
exceeds 10% of the Fund's total assets.
3. Purchase securities of any company having less than three years'
continuous operations (including operations of any predecessors) if
such purchase causes the value of the Fund's investments in all such
companies to exceed 5% of its total assets. This restriction shall not
apply, however, to purchases of investment company securities, U.S.
government securities, securities of issuers that are rated investment
grade by at least one nationally recognized statistical rating
organization, municipal obligations, and obligations issued by any
foreign governments, agencies or instrumentalities, or any political
subdivisions thereof.
4. Purchase securities of another investment company if such purchases
cause the percentage of such investment company's outstanding shares
owned by the TIP Fund in question to exceed 3%.
5. Invest in companies for the purpose of exercising control or management.
6. Invest more than 15% of the Fund's net assets in illiquid securities.
7. Invest more than 15% of the Fund's total assets in restricted securities.
8. Purchase puts, calls, straddles, spreads, and any combination thereof,
if the value of such purchases, excluding offsetting positions and in-
the-money amounts, exceeds 5% of the Fund's total assets.
Percentage Limitations Applied at Time of Purchase. Whenever an investment
policy or limitation states a maximum percentage of a Fund's assets that may
be invested in any security or other asset or sets forth a policy regarding
quality standards, such standard or percentage limitation shall be determined
immediately after and as a result of the Fund's acquisition of such security
or other asset. Accordingly, any later increase or decrease in a percentage
resulting from a change in values, assets, or other circumstances will not be
considered when determining whether that investment complied with the Fund's
investment policies and limitations.
POLICY IMPLEMENTATION AND RISKS
OVERVIEW. In attempting to achieve its investment objective, each Fund will
utilize certain investment strategies and tactics and certain types of
investments commonly used by institutional investors. "Strategy" as used
here is the allocation of Fund assets across asset classes (e.g., U.S. stocks
versus foreign stocks), subclasses (e.g., U.S. small companies versus large
companies), and individual securities based on return expectations over time
horizons appropriate to the strategies being employed. "Tactics" are the
precise methods by which strategies are implemented - decisions that
typically depend on market conditions at the particular instant a tactical
choice is made as well as expected changes in such conditions over a very
short time horizon. These strategies, tactics, and investments, and their
associated risks, are described below and in SUPPLEMENTAL DISCUSSION OF POLICY
IMPLEMENTATION AND RISKS in the Statement of Additional Information. Unless
otherwise noted, each Fund is authorized to employ each of the strategies,
tactics, and types of investments described below, subject to the
restrictions specified in this section and in INVESTMENT OBJECTIVES, POLICIES,
AND RESTRICTIONS. Members should understand that all investments involve risks
and there can be no guarantee against loss resulting from an investment in any
of the Funds, nor can there be any assurance that any Fund will achieve its
investment or performance objective.
Funds to Be Substantially Fully Invested. With the exception of the Short-
Term Fund, which is designed primarily as a vehicle for investment of funds
that participating organizations intend to spend or distribute within one
year, the Funds are intended as vehicles for the implementation of long-term
asset allocation strategies adopted by the governing boards of such
organizations. An investment in any Fund other than the Short-Term Fund
should be regarded as a long-term commitment to be held through one or more
market cycles. Because long-term asset allocation strategies are designed to
spread investment risk across the various segments of the securities markets
through investment in a number of Funds, after an appropriate time period
following the initial infusion of capital into it, each Fund intends to be
substantially fully invested in accordance with its investment objective and
policies under normal market conditions.
Deployment of Cash Reserves. Each Fund is authorized to invest its cash
reserves (funds awaiting investment in the specific types of securities in
which it will primarily invest) in money market instruments and in debt
securities that are at least comparable in quality to the Fund's permitted
investments. In lieu of having each of the Funds make separate, direct
investments in money market instruments, each Fund and its Money Managers may
elect to invest the Fund's cash reserves in other regulated investment
companies approved by TIP's board of directors, subject to the limitations
respecting Fund investments in other investment companies described in
INVESTMENT OBJECTIVES, POLICIES, AND RESTRICTIONS - INVESTMENT RESTRICTIONS.
Alternatively, FAI may exercise investment discretion or select a Money
Manager to exercise investment discretion over the cash reserves component of
a Fund. At FAI's discretion, the cash reserves segment of each Fund may be
used to create a temporary equity exposure for the Multi-Asset and U.S. Equity
Funds, or a foreign equity exposure for the Multi-Asset, International Equity,
and Emerging Markets Funds, or a fixed income exposure of suitable duration
for the Bond and Multi-Asset Funds, as the case may be, until those balances
are allocated to and invested by the Money Managers or used for Fund
transactions. The desired market exposure would be created with long positions
in the appropriate number of futures contracts or options on futures contracts,
within applicable regulatory limits. FAI receives no compensation for managing
cash reserves (or for rendering any other services to the Funds) other than the
fees to which it is entitled under the Advisory Agreement.
Portfolio Turnover. Decisions to buy and sell securities are made by the
Money Managers with respect to the assets assigned to them, and by FAI with
respect to cash reserves not allocated to Money Managers. Each Money Manager
makes decisions to buy or sell securities independently of other Money
Managers. Generally, the Multi-Asset, International Equity, Emerging Markets,
and U.S. Equity Funds will not trade in securities for short-term profits but,
when circumstances warrant, securities may be sold without regard to length
of time held. It is expected that the annual portfolio turnover rate normally
will not exceed 100%. However, due to some Money Managers' active management
styles, turnover rates for the Bond and Short-Term Funds may be higher than
other mutual funds investing primarily in debt securities and could exceed
100%. In the Bond and Short-Term Funds, the costs associated with turnover are
expected to be lower than equity fund turnover costs.
Primary Risks: High portfolio turnover may involve correspondingly
greater brokerage commissions and other transaction costs, which will
be borne by the Funds. In addition, high portfolio turnover rates may
result in increased short-term capital gains which, when distributed to
private foundation Members, are treated as ordinary income for purposes
of excise taxation. See TAX CONSIDERATIONS. If there is more than one
Money Manager for a Fund, one Money Manager could be selling a security
when another for the same Fund is purchasing the same security. In
addition, when a Money Manager's services are terminated and those of
another are retained, the new Money Manager may significantly
restructure the portfolio. These practices may increase the Funds'
portfolio turnover rates, realization of gains or losses, and brokerage
commissions.
INVESTMENT STRATEGIES. As multi-manager funds, each TIP Fund will employ a
variety of strategies and tactics, including those described below and in
Appendix A entitled MONEY MANAGER PROFILES.
Commingled Investment Vehicles. In addition to retaining Money Managers to
implement the Funds' investment and performance objectives via separate
accounts, the Funds may (subject to certain limitations described below) invest
a portion of their assets in securities issued by other commingled investment
vehicles whose expected returns are, in the judgment of FAI's directors,
superior to those of Money Managers that the Funds might employ directly.
Other Registered Investment Companies. Each Fund may invest in the shares
of another registered investment company so long as the Fund does not acquire
more than 3% of the shares of the acquired registered investment company that
are outstanding at the time such shares are purchased. The Funds will make
purchases of other registered investment companies in the open market and only
under such circumstances where no commission or profit beyond the customary
broker's commission results. As a shareholder in a registered investment
company, the Fund will bear its ratable share of that investment company's
expenses, including its advisory and administration fees. The Funds will not
purchase shares of open-end companies without waiving any duplicate management
fees.
Investment Companies Investing Primarily in Emerging Market Countries'
Securities. Due to retrictions on direct investment by foreign entities in
certain emerging market countries, investment in other investment companies
may be the most practical or only manner in which the Funds can invest in the
securities markets of certain emerging markets countries. Such investments may
involve the payment of premiums above the net asset value of such issuers'
portfolio securities, are subject to limitations under the 1940 Act, and are
constrained by market availability (e.g., these investment companies often are
"closed end" companies that do not offer to redeem their shares directly). The
Funds do not intend to invest in such investment companies unless, in the
judgment of FAI's directors, the potential benefits of such investments justify
the payment of any applicable premium or sales charge.
Private Investment Funds. FAI may invest a portion of a Fund's assets in
securities issued by private investment funds. For example, FAI might elect to
invest a portion of a Fund's assets in securities issued by an investment
partnership managed by an investment manager that FAI believes is especially
skillful, but which is closed to new separate accounts, is unwilling to manage
assets directly on a Fund's behalf, or whose services can be purchased
indirectly at a lower cost by investment in securities issued by an existing
partnership or other commingled investment vehicle. As an investor in the
securities of a private investment fund, a Fund would bear its ratable share
of such entity's expenses, and would be subject to its share of the management
and performance fees charged by such entity. In this regard, the fees charged
by many private investment funds are high in relation to the fees charged by
other investment entities (performance fees are often as high as 20% per annum
or realized and unrealized gains) and such performance-based compensation
arrangements can create an incentive for those making the investment decisions
for such entities to make investments that are riskier or more speculative than
would be the case in the absence of such performance-based compensation
arrangements. Additionally, there are often significant restrictions on
transfer and redemption of interests in private investment funds. Further,
because such private investment funds are not required to register as investment
companies under the 1940 Act, the provisions of the 1940 Act will not be
applicable to any such entity in which a Fund invests. Investment by a Fund in
the securities of a private investment company is not subject to the 3%
limitation imposed on shares held by a Fund in other registered investment
companies, but under the 1940 Act not more than 15% of any TIP Fund's assets
may be invested in securities (including interests in private investment funds)
that are not readily reducible to cash in seven business days.
Multi-Market and Multi-Currency Investing. Subject to the limitations on
foreign securities and foreign currency exposure in the table below and in
INVESTMENT OBJECTIVES, POLICIES, AND RESTRICTIONS, the Money Managers may
adjust the exposure of the Funds to different countries' markets and currencies
based on their perceptions of the relative valuations of these markets and
currencies. In doing so, the Money Managers will assess general market and
economic conditions, the relative yield and anticipated direction of interest
rates in particular markets, and the relationship of currencies of various
countries to each other. In their evaluations, the Money Managers will use
internal financial, economic, and credit analysis resources as well as
information obtained from external sources.
<TABLE>
<S> <C> <C> <C>
U.S. Securities Foreign Securities Currency Hedges*
Minimum/Normal/ Minimum/Normal/ Minimum /Normal/
Maximum Maximum Maximum
Multi-Asset 25/60/90 10/40/75 0/0/50
International Equity 0/0/15 85/100/100 0/0/50
Emerging Markets 0/0/15 85/100/100 0/0/50
U.S. Equity 85/100/100 0/0/15 0/100/100
Bond 60/100/100 0/0/30** 0/100/100
Short-Term 80/100/100 0/0/20 0/100/100
</TABLE>
* Expressed as a percentage of foreign securities exposure.
**The 30% limit on the Bond Fund's foreign securities increases to 40% if
incremental 10% is covered by currency hedges. The intent of permitting an
additional 10% in hedged foreign bonds is to permit the Fund's Money Managers
to exploit anticipated reductions in foreign interest rates without boosting
the Fund's exposure to foreign currencies beyond the 30% limit.
The preceding table indicates the percentage of each Fund's assets that,
under normal circumstances, will be invested in securities denominated in
currencies other than the U.S. dollar. The first column of the table
indicates the minimum, normal, and maximum percentages of each Fund's assets
that, under normal circumstances, may be invested in U.S. dollar-denominated
securities. The second column of the table indicates the minimum, normal,
and maximum percentages of each Fund's assets that, under normal
circumstances, may be invested in securities denominated in one or more
foreign currencies. The last column of the table indicates the minimum,
normal, and maximum percentages of each Fund's foreign securities that may be
covered by currency hedging transactions.
The ranges permit Money Managers employed by the U.S. Equity Fund to
respond to circumstances in which stocks of companies domiciled in foreign
countries are more attractively priced than stocks of companies domiciled in
the United States by investing up to 15% of the Fund's assets in foreign
stocks, and they permit Money Managers in the Multi-Asset, International
Equity, and Emerging Markets Funds to hedge up to 50% of the foreign currency
exposure of each Fund's assets. It is expected that adjustments to the
country and currency exposures of each Fund to be gradual and moderate,
especially within the U.S. Equity, Bond, and Short-Term Funds.
Primary Risks: There is no assurance that changes in a Fund's country
and currency allocations will enhance returns relative to more static
allocations or allocations that resemble more closely the country and
currency allocations inherent in a Fund's performance benchmark.
Duration Management. The Multi-Asset, Bond, and Short-Term Funds will invest
in debt securities of varying durations. Duration is a measure of the
expected life of a debt security on a present value basis. It takes the
length of the time intervals between the present time and the time that the
interest and principal payments are scheduled to be received, and weights
them by the present values of the cash to be received at each future point in
time. While duration is an appropriate measurement tool for securities for
which the timing of the receipt of principal and interest cash flows is
certain, it is a less accurate measurement tool in instances where the timing
of the receipt of cash flows is less certain due to the presence of options
embedded in the securities (e.g., callable bonds, prepayment impact on
mortgage-backed securities) or when securities have a floating rate. A more
appropriate measurement tool for these securities is effective duration.
Effective duration measures the price change that a given security will
exhibit as a result of a change in interest rates. Computing the effective
duration of a portfolio comprising option-embedded securities requires a
highly robust pricing model. The longer the duration or effective duration
of a debt security, the more its price will tend to fall as interest rates in
the economy generally rise, and vice-versa. For example, in a portfolio with
a duration of 5 years, a 1% increase in interest rates could result in
approximately a 5% decrease in market value. Money Managers can shorten the
weighted average duration of their holdings as interest rates fall by
replacing portfolio securities or by using derivative securities.
Duration of Fixed Income Derivatives. Futures, options, and options on
futures have durations which, in general, are closely related to the duration
of the securities underlying them. Holding long futures or call options will
lengthen a Fund's duration by approximately the same amount that holding an
equivalent amount of the underlying securities would. A short position in
such fixed income derivatives has the effect of reducing fund duration by
approximately the same amount that selling an equivalent amount of the
underlying securities would.
Duration Ranges for Bond, Short-Term, and Multi-Asset Funds. In allocating
assets among managers with different approaches to debt security portfolio
management, and in preparing guidelines for each manager to follow in
investing its segment of a Fund, FAI attempts to ensure that, under normal
circumstances: (1) the weighted average effective duration of the Bond
Fund's holdings ranges between 85% and 115% of the average duration of the
Lehman Aggregate Bond Index; (2) the weighted average effective duration of
the Short-Term Fund's holdings ranges between one and six months; and (3) the
weighted average effective duration of that portion of the Multi-Asset Fund's
assets invested in bonds ranges between 85% and 115% of the weighted average
duration of a constructed index (chosen to mimic precisely the Fund's
"normal" allocations to domestic and foreign bonds) comprising the Lehman
Aggregate Bond Index (75% weight) and the Lehman Majors ex-US Bond Index
(residual 25% weight). As of February 29, 1996, the approximate duration of
the Lehman Aggregate Bond Index was 4.65 years; the approximate duration of
the Lehman Majors ex US Bond Index was 4.98 years. The duration of the
Merrill Lynch 182-Day Treasury Bill Index, Short-Term Fund's performance
benchmark (i.e., a portfolio invested exclusively in six-month U.S. Treasury
securities sold at a discount and without interim interest payments), is
always equal to six months.
Primary Risks: Changes in the weighted average duration of the Funds'
holdings are not likely to be so large as to cause them to fall outside
the ranges specified above. However, there is no assurance that
deliberate changes in a Fund's weighted average duration will enhance
its return relative to more static duration policies or portfolio
structures. For example, a manager's decision to increase the duration
of its segment of the Bond Fund could reduce the Fund's return if
interest rates in the economy generally rise following the manager's
duration-lengthening trades.
Hedging and Income Enhancement Strategies. Each Fund may engage in various
portfolio strategies to: (1) enhance the Fund's income or total return; (2)
reduce certain risks of its investments; (3) adjust exposure to particular
securities or currencies to more closely reflect such securities' or
currencies' exposure in the Fund's benchmark; or (4) create suitable market
exposure for temporary cash balances.
Foreign Currency Hedging or Income Enhancement Strategies. Each Fund may
enter into forward foreign currency exchange contracts and may purchase and
sell exchange-traded and over-the-counter ("OTC") options on currencies,
foreign currency futures contracts, and options on foreign currency futures
contracts to hedge the currency exchange risk associated with its assets or
obligations denominated in foreign currencies or to adjust the exposure to a
particular currency to more closely reflect the exposure of that currency in
the Fund's benchmark. An example of a transaction entered into for hedging
purposes would be the sale of Yen futures contracts to partially offset the
currency exchange risk inherent in Yen-denominated stocks owned by the
International Equity Fund. An example of a transaction entered into to
adjust exposure to more closely reflect a Fund's benchmark would be the
purchase of Deutschemark futures contracts to increase the International
Equity Fund's exposure to Deutschemarks above the level produced by the
Fund's purchase of Deutschemark-denominated stocks. The use of the hedging
or investing techniques described in this paragraph could cause the net
exposure of each Fund to any one currency to differ from that of its total
assets denominated in such currency. Each Fund may decide whether to hedge
foreign currency positions or adjust currency exposure to more closely
reflect the exposure of a currency in the Fund's benchmark. Each Fund may
also engage in foreign currency transactions, including the speculative
purchase or sale of foreign currency futures or options contracts, in an
effort to profit from anticipated changes in the relation between or among
the rates of exchange between various currencies of the countries in which
they are permitted to invest.
Interest Rate Hedging. In order to hedge against changes in interest rates,
and in connection with the duration management strategies described above,
the Multi-Asset, Bond, and Short-Term Funds may purchase and sell exchange-
traded or OTC put and call options on any debt security in which they are
permitted to invest or on any security index or other index based on the
securities in which they may invest, and may purchase and sell financial
futures contracts for the future delivery of debt securities or contracts
based on financial indices, and options on such futures.
Income Enhancement Strategies. These strategies are described in the
subsection below entitled TYPES OF INVESTMENTS-Derivative Securities-Options.
Each Fund may also seek to enhance its income by engaging in securities
lending, which is described in the subsection below entitled INVESTMENT
TACTICS-Securities Lending.
Primary Risks of Hedging and Income Enhancement Strategies Generally:
These strategies typically require participation in the options or
futures markets or in currency exchange transactions. As such, these
strategies entail risks and transaction costs to which a Fund would not
be subject absent the use of these strategies. If a Money Manager's
expectations respecting movements in the direction of the securities,
foreign currency, or bond markets are inaccurate, the strategy may
leave the Fund in a worse position than if the strategy were not used.
Risks inherent in the use of options, foreign currency and futures
contracts, and options on futures contracts include: (1) dependence on
the Money Manager's ability to anticipate correctly movements in the
direction of interest rates, securities prices, and currency markets;
(2) imperfect correlation between the price of options and futures
contracts and options thereon and movements in the prices of the
securities being hedged; (3) the fact that skills needed to use these
strategies are different from those needed to select portfolio
securities; (4) the possible absence of a liquid secondary market for
any particular instrument at any time; and (5) the possible need to
defer closing out certain hedged positions to avoid adverse tax
consequences. Moreover, hedging transactions that are not entered into
on a U.S. or foreign exchange may subject a Fund to exposure to the
counterparty's credit risk.
INVESTMENT TACTICS. As multi-manager funds, each TIP Fund employs a variety of
investment tactics, including those described immediately below and in
Appendix A entitled MONEY MANAGER PROFILES.
Dollar Roll Transactions. Dollar roll transactions are transactions with
selected banks and registered broker-dealers in which the Fund sells
mortgage-backed securities for delivery in the current month and
simultaneously enters into an agreement to repurchase mortgage-backed
securities on a specified future date at the same price. During the roll
period, the Fund foregoes principal and interest paid on the securities in
return for use of the proceeds received on the sale of these securities. The
transaction will entail a gain (or loss) to the extent that earnings on the
cash proceeds of the sale exceed (are less than) transaction costs plus the
repurchase price. If the Fund agrees to repurchase substantially similar
(same type and coupon) securities, the dollar roll will be treated as a
borrowing (i.e., a financing transaction) rather than a purchase of
securities on a forward basis. The Fund will segregate an amount of cash,
U.S. government securities, or other acceptable assets equal in value to its
obligations in respect of dollar rolls.
Primary Risks: In addition to interest rate risk (defined below),
dollar roll transactions involve counterparty credit risk. The Fund
receives the cash proceeds of the initial sale; but in the event of
counterparty insolvency, its exposure is similar to that of a forward
purchase commitment.
Repurchase Agreements. Each Fund may enter into repurchase agreements. In a
repurchase agreement, the Fund buys a security from a seller that has agreed
to repurchase it at a mutually agreed upon date at a higher price reflecting
an agreed upon interest rate. The term of these agreements is usually from
overnight to one week and never exceeds one year. Repurchase agreements may
be viewed as fully collateralized loans of money by a Fund to the selling
counterparty. The Fund receives securities as collateral with a market value
at least equal to the purchase price, including accrued interest, and this
value is maintained during the term of the agreement. Repurchase agreements
held for more than seven days are deemed by the Commission to be illiquid.
Primary Risks: In addition to interest rate risk, a repurchase
agreement involves counterparty credit risk. In the event of
counterparty failure to perform or insolvency, cash transferred to the
counterparty may not be recoverable, and realization on securities held
in exchange may be delayed or otherwise restricted.
Reverse Repurchase Agreements. In a reverse repurchase agreement, the Fund
transfers possession of a security that the Fund owns to a bank or registered
broker-dealer in exchange for cash or high grade liquid debt obligations with
a market value at least equal to the security's market value. The Fund
retains record ownership of the security involved, including the right to
receive interest and principal payments. At an agreed upon future date, the
Fund repurchases the security by paying an agreed upon purchase price
reflecting the interest rate effective for the term of the agreement.
Reverse repurchase agreements may be viewed as the economic equivalent of
fully collateralized loans of money to a Fund by the counterparty. The Fund
will segregate an amount of cash, U.S. government securities, or other
acceptable assets equal in value to its obligations in respect of reverse
repurchase agreements.
Primary Risks: In addition to interest rate risk, a reverse repurchase
agreement involves counterparty credit risk. In the event of
counterparty failure to perform or insolvency, securities transferred
to the counterparty may not be recoverable, and realization on cash or
liquid assets held in exchange may be delayed or otherwise restricted.
Securities Lending. Each Fund may lend its securities to brokers, dealers,
domestic and foreign banks, or other financial institutions for the purpose
of increasing its net investment income. These loans must be secured
continuously by cash or equivalent collateral at least equal to the market
value of the securities loaned plus accrued interest or income. Cash
collateral received by the Fund will be invested in high grade liquid debt
securities. The Fund will retain most rights of beneficial ownership,
including dividends, interest, or other distributions on the loaned
securities. Voting rights may (but typically do not) pass with the lending.
The Funds will call loans to vote proxies if a material issue affecting the
investment is to be voted upon. A Fund will not enter into securities loan
transactions exceeding in the aggregate 331/3% of the market value of the
Fund's total assets.
Primary Risks: In addition to interest rate risk, a securities loan
involves counterparty credit risk similar to that involved in a reverse
repurchase agreement. In the event of counterparty failure to perform
or insolvency, securities loaned to the counterparty may not be
recoverable, and realization of cash or liquid assets held as
collateral may be delayed or otherwise restricted.
Short Selling. Each Fund may make short sales, which are transactions in
which a Fund sells a security it does not own in anticipation of a decline in
the market value of that security. Short selling provides the Money Managers
with flexibility to: (1) reduce certain risks of a Fund's portfolio
holdings; and (2) increase a Fund's total return.
Mechanics of Short Sales. To complete a short sales transaction, a Fund must
borrow the security to make delivery to the buyer. The Fund then is
obligated to replace the borrowed security, which generally entails
purchasing it at the market price at the time of replacement. Until the
security is replaced, the Fund is required to pay to the lender amounts equal
to any dividends or interest which accrue during the period of the loan. The
Fund also may be required to pay a premium to borrow the security. The
proceeds of the short sale will be retained by the broker, to the extent
necessary to meet margin requirements, until the short position is closed
out. To the extent that a Fund has sold securities short, it will: (1)
maintain a daily segregated account, containing cash or U.S. Government
securities, at such a level that (a) the amount deposited in the account plus
the amount deposited with the broker as collateral will equal the current
value of the security sold short and (b) the amount deposited in the
segregated account plus the amount deposited with the broker as collateral
will not be less than the market value of the security at the time it was
sold short; and (2) enter into long futures contracts on securities of the
type represented in the Fund's benchmark index to the extent necessary to
ensure that the combination of such contracts, plus any amounts deposited in
the segregated account or with the broker as collateral, produce investment
returns approximately equal to the returns that would be produced were the
deposits plus the collateral invested directly in the securities underlying
the contracts. The purpose of such futures transactions is to ensure that
short sales do not undermine a Fund's capacity to remain substantially fully
invested in securities of the type represented in its benchmark index. A
Fund may not enter into short sales exceeding 25% of the net equity of the
Fund and may not acquire short positions in securities of a single issuer if
the value of such positions exceeds the lesser of 2% of the securities of any
class of any issuer. The foregoing restrictions do not apply to the sale of
securities if the Fund contemporaneously owns or has the right to obtain
securities equivalent in kind and amount to those sold.
Primary Risks: A Fund will incur a loss as a result of a short sale if
the price of the security increases between the date of the short sale
and the date on which the Fund replaces the borrowed security. The
amount of any loss will be increased by the amount of any premium or
amounts in lieu of dividends or interest the Fund may be required to
pay in connection with a short sale. Unlike long positions, where the
potential loss is limited to the purchase price, the potential loss
from a short sale transaction is unlimited unless accompanied by the
purchase of an option to buy the security at a specified price.
TYPES OF INVESTMENTS
Equity Securities. This subsection describes the characteristics and primary
risks of certain equity securities in which the Funds may invest. The
special characteristics and primary risks of foreign equities are described
below in the subsection entitled OTHER INSTRUMENTS-Foreign Securities.
Primary Risks of Investing in Equity Securities Generally: As mutual
funds investing in equity securities, the Multi-Asset, International
Equity, Emerging Markets, and U.S. Equity Funds are subject to stock
market risk, i.e., the possibility that common stock prices will
decline over short or extended periods. Both the U.S. and foreign
stock markets tend to be cyclical, with periods when stock prices
generally rise and periods when prices generally decline.
Growth Stocks. Growth-oriented stocks are the stocks of companies that are
believed to have internal strengths, such as good financial resources, a
satisfactory rate of return on capital, a favorable industry position, and
superior management.
Primary Risks: Growth stocks tend to be more volatile and more
sensitive to market swings than the average stock, and will often
underperform the overall stock market during periods when investor time
horizons generally are shrinking and stock prices generally are falling.
Value Stocks. Value-oriented stocks have lower price multiples (either
price/earnings or price/book) than other stocks in their industry and can
sometimes also display weaker fundamentals such as growth of earnings and
dividends.
Primary Risks: Value stocks tend to be of lower quality than the
average stock, and will often underperform the overall stock market
during periods when investor time horizons generally are expanding and
stock prices generally are rising.
Small Capitalization Stocks. Small capitalization stocks are defined for
TIP's purposes as those stocks with market capitalizations of less than $300
million.
Primary Risks: Small capitalization stocks tend to be more volatile
and more sensitive to market swings than the average stock, and will
often underperform the overall stock market during periods of general
market weakness. Among the reasons for greater price volatility of
small capitalization stocks are the less certain growth prospects of
smaller firms, the lower degree of liquidity in the markets for such
stocks, and the greater sensitivity of small companies to changing
economic conditions. Besides exhibiting greater volatility, small
company stocks may, to a degree, fluctuate independently of larger
company stocks.
Warrants. Warrants are instruments which give the holder the right to
purchase the issuer's securities at a stated price during a stated term.
Primary Risks: Warrants involve a risk of loss of the warrant purchase
price if the market price of the securities subject to the warrants
does not exceed the price paid for the warrants plus the exercise price
of the warrants.
Debt Securities. This subsection describes the characteristics and primary
risks of certain debt securities in which the Funds may invest. The special
characteristics and primary risks of foreign debt securities are described in
the subsection below entitled OTHER INSTRUMENTS-Foreign Securities.
Primary Risks of Investing in Debt Securities Generally: Investing in
debt securities subjects the Funds to interest rate, prepayment, and
credit risks.
Interest Rate Risk: Interest rate risk is the risk of fluctuations in
bond prices due to changing interest rates. As a rule, bond prices
vary inversely with market interest rates. For a given change in
interest rates, longer-maturity bonds fluctuate more in price than
shorter-maturity bonds. To compensate investors for these larger
fluctuations, longer-maturity bonds usually offer higher yields than
shorter-maturity bonds, other factors, including credit quality, being
equal. As a mutual fund that attempts to outperform the Lehman
Aggregate Bond Index - an index with an intermediate-term average
weighted maturity - the Bond Fund is expected to be subject to a
moderate-to-high level of interest rate risk, as is that portion of the
Multi-Asset Fund normally invested in bonds (see the subsection above
entitled Duration Management).
Prepayment Risk: Prepayment risk is the possibility that, during
periods of declining interest rates, higher-yielding securities with
optional prepayment rights will be repaid before scheduled maturity,
and a Fund will be forced to reinvest the unanticipated payments at
lower interest rates. Debt obligations that can be prepaid (including
most mortgage-backed securities) will not enjoy as large a gain in
market value as other bonds when interest rates fall. In part to
compensate for prepayment risk, mortgage-backed securities generally
offer higher yields than bonds of comparable credit quality and maturity.
Credit Risk: Credit risk is the risk that an issuer of securities held
by a Fund will be unable to make payments of interest or principal.
The credit risk assumed by a Fund is a function of the credit quality
of its underlying securities. The average credit quality of the Bond
Fund, and of that portion of the Multi-Asset Fund normally invested in
bonds, is expected to be very high, and thus credit risk, in the
aggregate, should be low. The average credit quality of the Short-Term
Fund is expected to be high also, but not as high as the Bond Fund or
the bond segment of the Multi-Asset Fund due to these two portfolios'
(i.e., the Bond Fund as a whole and the bond segment of the Multi-Asset
Fund) expected heavier average weightings in government obligations.
All Funds will also be exposed to event risk, the risk that corporate
debt securities held by them may suffer a substantial decline in credit
quality and market value due to a corporate restructuring. Corporate
restructurings, such as mergers, leveraged buyouts, takeovers, or
similar events, are often financed by a significant increase in
corporate debt. As a result of the added debt burden, the credit
quality and market value of a firm's existing debt securities may
decline significantly. While event risk may be high for certain
securities held by the Funds, event risk for each Fund in the aggregate
should be low because of the number of issues expected to be held by
each Fund. For further discussion of credit and event risk, see Lower-
Rated Debt Securities below.
Bank Obligations. Each Fund may invest in obligations of domestic and
foreign banks, including time deposits, certificates of deposit, bankers'
acceptances, bank notes, deposit notes, Eurodollar time deposits, Eurodollar
certificates of deposit, variable rate notes, loan participations, variable
amount master demand notes, and custodial receipts. Time deposits are non-
negotiable deposits maintained in a banking institution for a specified
period of time at a stated interest rate. Certificates of deposit are
negotiable short-term obligations issued by commercial banks or savings and
loan associations against funds deposited in the issuing institution.
Variable rate certificates of deposit are certificates of deposit on which
the interest rate is adjusted periodically prior to their stated maturity
based upon a specified market rate. A bankers' acceptance is a time draft
drawn on a commercial bank by a borrower usually in connection with an
international commercial transaction (to finance the import, export,
transfer, or storage of goods). The Short-Term Fund may, from time to time,
concentrate more than 25% of its assets in domestic bank obligations.
Domestic bank obligations include instruments that are issued by U.S.
(domestic) banks; U.S. branches of foreign banks, if such branches are
subject to the same regulations as U.S. banks; and foreign branches of U.S.
banks, if FAI or a Money Manager determines that the investment risk
associated with investing in instruments issued by such branches is the same
as that of investing in instruments issued by the U.S. parent bank, in that
the U.S. parent bank would be unconditionally liable in the event that the
foreign branch fails to pay on its instruments.
Primary Risks: Bank obligations entail varying amounts of interest
rate and credit risk, with the lowest-rated and longest-dated bank
obligations entailing the greatest risk of loss to a Fund.
Foreign Government and International and Supranational Agency Debt
Securities. Each Fund may purchase debt obligations issued or guaranteed by
foreign governments or their subdivisions, agencies, and instrumentalities,
and debt obligations issued or guaranteed by international agencies and
supranational entities.
Lower-Rated Debt Securities. Each Fund may own debt securities of all
grades, including both rated and unrated securities, provided however that
not more than 5% of the Short-Term Fund and not more than 10% of the other
Funds may be invested in securities that are rated below investment grade.
"Investment grade" means a rating of "BBB" or better by S&P, "Baa" or
better by Moody's in the case of securities; "B" or better by Thomson
Bankwatch in the case of bank obligations; or "A-1" or better by S&P or
"Prime-1" or better by Moody's in the case of commercial paper; or
similarly rated by IBCA Ltd. ("IBCA") in the case of foreign bank obligations.
Debt securities rated Baa by Moody's are considered to have speculative
characteristics. Money Managers will be obligated to liquidate in a prudent
and orderly manner debt security portfolio holdings whose ratings fall below
investment grade if, as a result of such downgrades, more than 10% of the Bond
Fund's assets or 5% of the Short-Term Fund's assets allocated to the Money
Manager are invested in debt securities that are rated below investment grade.
Securities rated below investment grade are often referred to as "high yield"
or "junk" bonds. See Appendix D for a description of security ratings.
Primary Risks: The market values of lower-rated debt securities tend
to reflect individual corporate developments (or, in the case of lower-
rated securities of foreign governments, governmental developments) to
a greater extent than do higher-rated securities, which react primarily
to fluctuations in the general level of interest rates; and lower-rated
securities tend to be more sensitive to general economic conditions
than are higher-rated securities.
Mortgage-Backed Securities and Other Asset-Backed Debt Securities. Mortgage-
backed debt securities are secured or backed by mortgages or other mortgage-
related assets. Such securities may be issued by such entities as Government
National Mortgage Association ("GNMA"), Federal National Mortgage
Association ("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"),
commercial banks, savings and loan associations, mortgage banks, or by
issuers that are affiliates of or sponsored by such entities. Other asset-
backed securities are secured or backed by assets other than mortgage-related
assets, such as automobile and credit card receivables, and are issued by
such institutions as finance companies, finance subsidiaries of industrial
companies, and investment banks. Each Fund will purchase only asset-backed
securities that FAI or a Money Manager determines to be liquid. No Fund will
purchase non-mortgage, asset-backed securities that are not rated at least
"AA" by S&P or "Aa" by Moody's, or determined by FAI or a Money Manager to
be of comparable quality.
Primary Risks: An important feature of mortgage- and other
asset-backed securities is that the principal amount is generally
subject to partial or total prepayment at any time because the
underlying assets (i.e., loans) generally may be prepaid at any time.
If an asset-backed security is purchased at a premium to par, a
prepayment rate that is faster than expected will reduce yield to
maturity, while a prepayment rate that is slower than expected will
have the opposite effect of increasing yield to maturity. Conversely,
if an asset-backed security is purchased at a discount, faster than
expected prepayments will increase, while slower than expected
prepayments will decrease, yield to maturity. It should also be noted
that these securities may not have any security interest in the
underlying assets, and recoveries on repossessed collateral may not, in
some cases, be available to support payments on these securities.
Municipal Debt Securities. Each Fund may, from time to time, purchase
municipal debt securities when, in a Money Manager's opinion, such instruments
will provide a greater return than taxable instruments of comparable quality.
It is not anticipated that such securities will ever represent a significant
portion of any Fund's assets. Fund distributions that are derived from
interest on municipal debt securities will be taxable to Members in the same
manner as distributions derived from taxable debt securities.
Pay-In-Kind and Zero Coupon Debt Securities. Each Fund may invest in pay-in-
kind debt securities (bonds that pay interest through the issuance of
additional bonds) and zero coupon debt securities (bonds that pay no interest
but are sold at discounted original issue prices). These bonds may be
unrated or rated below investment grade; debt securities rated below
investment grade will only be purchased within the limits (specified above in
Lower-Rated Debt Securities) governing such investments.
Primary Risks: Because they do not pay interest until maturity, pay-
in-kind and zero coupon securities tend to be subject to greater
fluctuation of market value in response to changes in interest rates
than interest-paying securities of similar maturities. Additionally,
for tax purposes, these securities accrue income daily even though no
cash payments are received, which may require a Fund to sell securities
that would not ordinarily be sold to provide cash for the Fund's
required distributions. Pay-in-kind bonds tend to be low rated and
entail the risks described above in the subsection entitled Lower-Rated
Debt Securities.
U.S. Treasury and Other U.S. Government and Government Agency Debt
Securities. U.S. Government securities are issued by or guaranteed as to
principal and interest by the U.S. Government, its agencies, or
instrumentalities and supported by the full faith and credit of the United
States. These securities include those issued by a U.S. Government-sponsored
enterprise or federal agency that is supported either by its ability to
borrow from the U.S. Treasury (e.g., Student Loan Marketing Association) or
by its own credit standing (e.g., FNMA). Such securities do not constitute
direct obligations of the United States but are issued, in general, under the
authority of an Act of Congress.
Primary Risks: The basic principles of bond prices described in the
subsection above entitled Primary Risks of Investing in debt Securities
Generally apply to U. S. Government securities. A security backed by the
"full faith and credit" of the U.S. Government is guaranteed only as to
its stated interest rate and face value at maturity, not its current
market price. Like other debt securities, Government-guaranteed securities
will fluctuate in value when interest rates change and may involve
prepayment risk.
Derivative, Synthetic, and When-Issued Securities and Forward Commitments.
Each Fund may invest in derivative, synthetic, and when-issued securities,
and may make forward commitments, subject to certain limitations described
below and in INVESTMENT OBJECTIVES, POLICIES, AND RESTRICTIONS. This subsection
describes the types of derivative, synthetic, and when-issued securities in
which the Funds may invest, and the forward commitments they may make; the
so-called coverage requirements to which such positions will be subject; and
certain noteworthy risks associated with them. A more complete discussion of
some of these instruments and their associated risks appears in the section
entitled SUPPLEMENTAL DISCUSSION OF POLICY IMPLEMENTATION AND RISKS in the
Statement of Additional Information.
Coverage Requirements on Derivative Securities. All options on securities,
securities indices, other indices, and foreign currency written by a Fund
constitute commitments by the Fund and are required to be covered. For
example, when a Fund sells a "call option" (defined below), during the life
of the option the Fund must own or have the contractual right to acquire the
securities or foreign currency subject to the option, or, subject to any
regulatory restrictions, maintain with TIP's Custodian in a segregated
account cash or liquid high-grade securities in an amount at least equal to
the market value of the securities or foreign currency underlying the option.
When a Fund writes a "put option" (also defined below), the Fund will,
subject to any regulatory restrictions, maintain with TIP's Custodian in a
segregated account cash or liquid high-grade securities in an amount at least
equal to the exercise price of the option.
All futures and forward currency contracts purchased or sold by a Fund also
constitute commitments by the Fund and are required to be covered. For
example, when a Fund purchases a "futures contract" or "forward contract"
(discussed in further detail in the Statement of Additional Information), the
Fund will deposit an amount of assets in a segregated account with TIP's
Custodian so that the amount so segregated plus the amount of initial and
variation margin held for the account of its broker, if applicable, equal the
market value of the futures or forward currency contract. Assets maintained
in segregated accounts discussed here and elsewhere in this Prospectus may
consist of cash, cash equivalents, liquid high-grade securities, or other
acceptable assets. When a Fund sells a forward currency contract, during the
life of the contract the Fund will own or have the contractual right to
acquire the foreign currency subject to the forward currency contract or debt
securities denominated therein, or will maintain with TIP's Custodian in a
segregated account cash or liquid high-grade securities so that the amount so
segregated plus the amount of margin held for the account of its broker at
least equals the market value of the foreign currency underlying the forward
currency contract. If the market value of the contract moves adversely to
the Fund, or if the value of the securities in the segregated account
declines, the Fund will be required to deposit additional cash or securities
in the segregated account even at times when it may be disadvantageous to do
so. Segregation requirements apply to forward buys and forward sells.
However, when a forward buy is made to close a forward sell, or vice versa,
only the net difference must be segregated until settlement date.
Futures Contracts and Options on Futures Contracts. The Funds are permitted
to enter into financial futures contracts and related derivative securities
("futures contracts") in accordance with their investment objectives. A
"financial futures contract" is a contract to buy or sell a specified
quantity of financial instruments such as U.S. Treasury bonds, notes, or
bills, commercial paper, bank certificates of deposit, or the cash value of a
financial instrument index at a specified future date at a price agreed upon
when the contract is made. Substantially all futures contracts are closed
out before settlement date or called for cash settlement. A futures contract
is closed out by buying or selling an identical offsetting futures contract
which cancels the original contract to make or take delivery. The Funds may
purchase or sell options on futures contracts as an alternative to buying or
selling futures contracts. Options on futures contracts are similar to
options on the security underlying the futures contracts except that options
on stock index futures contracts give the purchaser the right to assume a
position at a specified price in a stock index futures contract at any time
during the life of the option. Upon entering into a futures contract, a Fund
is required to deposit the margin amount with its custodian for the benefit
of the futures broker as collateral for performance of the contract and to
maintain daily the margin collateral in an agreed amount.
Primary Risks: Futures contracts entail special risks. Among other
things, the ordinary spreads between values in the cash and futures
markets, due to differences in the character of these markets, are
subject to distortions. The possibility of such distortions means that
a correct forecast of general market, foreign exchange rate or interest
rate trends still may not result in a successful transaction. Although
TIP believes that use of futures contracts will benefit the Funds, if
predictions about the general direction of securities market movements,
foreign exchange rates or interest rates is incorrect, a Fund's overall
performance would be poorer than if it had not entered into any such
contracts or purchased or written options thereon. Additional risks of
participation in the futures markets are described in the subsection
above entitled INVESTMENT STRATEGIES-Hedging and Income Enhancement
Strategies and in the section of the Statement of Additional
Information entitled SUPPLEMENTAL DISCUSSION OF POLICY IMPLEMENTATION AND
RISKS.
Options. Each Fund may invest in options. There are two types of options:
calls and puts. A call option gives the purchaser, in exchange for a premium
paid, the right for a specified period of time to purchase the securities or
currency subject to the option at a specified price (the exercise price or
strike price). The writer of a call option, in return for the premium, has
the obligation, upon exercise of the option, to deliver, depending upon the
terms of the option contract, the underlying securities or a specified amount
of cash to the purchaser upon receipt of the exercise price. When a Fund
writes a call option, the Fund gives up the potential for gain on the
underlying securities or currency in excess of the exercise price of the
option during the period that the option is open. A put option gives the
purchaser, in return for a premium, the right, for a specified period of
time, to sell the securities or currency subject to the option to the writer
of the put at the specified exercise price. The writer of the put option, in
return for the premium, has the obligation, upon exercise of the option, to
acquire the securities or currency underlying the option at the exercise
price. A Fund might, therefore, be obligated to purchase the underlying
securities or currency for more than their current market price.
The Multi-Asset, International Equity, Emerging Markets, and U.S. Equity
Funds may purchase and write (sell) options on stocks, stock indices, and
foreign currencies. These options may be traded on national securities
exchanges or in the over-the-counter market. Options on a stock index are
similar to options on stocks except that there is no transfer of a security
except that there is no transfer of a security upon exercise of the option
and settlement in cash. the Fund may write covered put and call options to
generate additional income through the receipt of premiums, purchase put
options in a effort to protect against an increase in the price of securities
(or currencies) which that Fund intends to purchase. The Multi-Asset, Bond,
and Short-Term Funds may write covered put and call options on U.S. Government
securities to generate additional income through the receipt of premiums and
may purchase both put options in an effort to protect the value of securities
each Fund holds against a decline in market value and call options to offset
the impact of mortgage prepayments on market value. All options purchased or
sold by the Multi-Asset, Bond, or Short-Term Funds will be traded on U.S.
securities exchanges or will result from separate, privately negotiated
transactions with a primary government securities dealer recognized by the
Board of Governors of the Federal Reserve System.
Primary Risks: The benefit to a Fund from the purchase of options will
be reduced by the amount of the premium and related transaction costs.
In addition, where markets or currency exchange rates do not move in
the direction or to the extent anticipated, the Fund could sustain
losses on transactions in options that would require them to forego a
portion or all of the benefits of advantageous changes in such markets
or rates. Additional risks of participation in the options markets are
described in the subsection above entitled INVESTMENT STRATEGIES-Hedging
and Income Enhancement Strategies and in the section of the Statement
of Additional Information entitled SUPPLEMENTAL DISCUSSION OF POLICY
IMPLEMENTATION AND RISKS.
Foreign Currency Warrants. Foreign currency warrants such as currency
exchange warrants ("CEWs") are warrants that entitle the holder to receive
from their issuer an amount of cash (generally, for warrants issued in the
United States in U.S. dollars) that is calculated pursuant to a predetermined
formula and based on the exchange rate between a specified foreign currency
and the U.S. dollar as of the exercise date of the warrant. Foreign currency
warrants generally are exercisable upon their issuance and expire as of a
specified date and time. Foreign currency warrants have been issued in
connection with U.S. dollar-denominated debt offerings by major corporate
issuers in an attempt to reduce the foreign currency exchange risk that,
from the point of view of prospective purchasers of the securities, is
inherent in the international fixed income marketplace.
Primary Risks: The formula used to determine the amount payable upon
exercise of a foreign currency warrant may make the warrant worthless
unless the applicable foreign currency exchange rate moves in a
particular direction (e.g., unless the U.S. dollar appreciates or
depreciates against the particular foreign currency to which the
warrant is linked or indexed). In addition, foreign currency warrants
are subject to other risks associated with foreign securities,
including risks arising from complex political or economic factors.
Indexed Notes, Currency Exchange-Related Securities, and Similar Securities.
Each Fund may purchase notes, the principal amount of which and/or the rate
of interest payable on which is determined by reference to an index, which
may be: (1) the rate of exchange between the specified currency for the note
and one or more other currencies or composite currencies; (2) the difference
in the price or prices of one or more specified commodities on specified
dates; or (3) the difference in the level of one or more specified stock
indices on specified dates. Each Fund may also purchase principal exchange
rate-linked securities, performance-indexed paper and foreign currency
warrants. These instruments and their associated risks are discussed in the
section entitled SUPPLEMENTAL DISCUSSION OF POLICY IMPLEMENTATION AND RISKS in
the Statement of Additional Information.
Interest Rate and Currency Swaps. An interest rate swap is an agreement to
exchange the interest income generated by one fixed income instrument for the
interest income generated by another fixed income instrument. The payment
streams are calculated by reference to a specified index and agreed- upon
notional amount. The term "specified index" includes fixed interest rates
and prices, interest rate indices, fixed income indices, stock indices, and
commodity indices (as well as amounts derived from arithmetic operations on
these indices). Swap opportunities are available only from a limited number
of counterparties and involve counterparty credit risk. A Fund will not
engage in interest rate or currency swaps to the extent that the value of the
positions underlying such transactions represent more than 15% of the Fund's
assets. If a Fund engages in interest rate or currency swaps it will accrue
the net amount of the excess, if any, of its obligations over its
entitlements with respect to each swap on a daily basis and will segregate an
amount of cash or liquid securities having a value equal to such accrued
excess.
When-lssued and Forward Commitment Securities. Each Fund may purchase
securities on a "when-issued" basis and may purchase or sell securities on
a "forward commitment" basis in order to hedge against anticipated changes
in interest rates and prices. In such transactions, instruments are bought
with payment and delivery taking place in the future in order to secure what
is considered to be an advantageous yield or price at the time of the
transaction. Delivery of and payment for these securities may take more than
a month after the date of the purchase commitment, but will take place no
more than 120 days after the trade date. No income accrues prior to delivery
on securities that have been purchased pursuant to a forward commitment or on
a when-issued basis. At the time a Fund enters into a transaction on a when-
issued or forward commitment basis, a segregated account consisting of cash
or liquid securities equal to the value of the when-issued or forward
commitment securities will be established and maintained with its custodian
and will be marked to market daily. Forward commitments, or delayed
deliveries, are deemed to be outside the normal corporate settlement
structure. Like futures contracts, they are subject to segregation
requirements; however, when a forward commitment purchase is made to close a
forward commitment sale, or vice versa, the difference between the two may be
netted for segregation purposes until settlement date.
Primary Risks: Apart from market risk, when-issued or forward
commitment transactions involve counterparty risk and, in the event of
failure of performance or insolvency, accrued profits in a position may
not be available to a Fund.
Synthetic Securities. The Bond and Short-Term Funds may combine investments
in securities denominated in a given currency with forward contracts in order
to achieve desired credit and currency exposures. Such a combination is
referred to herein as a "synthetic security." To construct a synthetic
security, a Fund will enter into a forward contract for the purchase of a
given currency (the "Purchase Currency") at some future date against
payment in another currency (the "Sale Currency"). Simultaneously
therewith, a Fund will purchase a security denominated in the Sale Currency
with a maturity date and amount payable at maturity that coincides with the
delivery date and amount of the forward contract. The Fund will use the
amount payable at maturity of the security to satisfy its obligation to
deliver Sale Currency. Since the amount of Sale Currency payable at maturity
of the security will be exchanged for a specified amount of Purchase
Currency, the overall effect of the security and foreign exchange
transactions is similar to the purchase of a security denominated in the
Purchase Currency. The effect of the forward contract may be to increase or
decrease the return on the investment in the security, depending on changes
in exchange rates between the purchase date and the maturity date.
Primary Risks: The primary risks associated with utilization of
synthetic securities arise from the fluctuation of the exchange rates
between the Purchase and Sale Currencies during the period the
synthetic security is maintained, the matching of the principal and
interest from the security with the related forward contract and the
credit risks associated with the issuer of the security and the forward
contract counterparties. In addition, to the extent a synthetic
security is unwound prior to the maturity of the security, the Fund is
exposed to market risk with respect to the value of the security and to
currency exchange risk with respect to the offsetting transaction.
Certain of these risks are described in more detail below. The value
of securities denominated in foreign currencies may differ from their
United States dollar equivalents as a consequence of market movements
in the value of these currencies between the date on which the security
was purchased and the date on which it matures. These differences may
be accentuated with respect to synthetic securities by changes in the
relative values of the currencies subject to the forward contracts.
TIP believes that the management of synthetic securities and the risks
attendant thereto are not substantively different from the management
and risks of foreign currency-denominated securities generally.
OTHER INSTRUMENTS
Convertible Securities. A convertible security is a fixed income security (a
bond or preferred stock) which may be converted at a stated price within a
specified period of time into a certain quantity of the common stock of the
same or a different issuer. Convertible securities are senior to common
stock in a corporation's capital structure, but are usually subordinated to
similar non-convertible securities. Convertible securities provide, through
their conversion feature, an opportunity to participate in capital
appreciation resulting from a market price advance in common stock into which
the security may be converted.
Primary Risks: The price of a convertible security is influenced by
the market value of the underlying common stock and tends to increase
as the market value of the underlying stock rises, whereas it tends to
decrease as the market value of the underlying stock declines.
Foreign Securities Generally. Foreign securities include equity, debt, or
derivative securities denominated in currencies other than the U.S. dollar,
including any single currency or multi-currency units, plus ADRs and EDRs.
ADRs typically are issued by a U.S. bank or trust company and evidence
ownership of underlying securities issued by a foreign corporation. EDRs,
which are sometimes referred to as Continental Depositary Receipts, are
receipts issued in Europe, typically by foreign banks and trust companies,
which evidence ownership of either foreign or domestic underlying securities.
When investing in foreign securities, all Funds with the exception of the
Emerging Markets Fund will invest primarily in securities denominated in the
currencies of Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Hong Kong, Italy, Japan, the Netherlands, New Zealand, Norway,
Singapore, Spain, Sweden, Switzerland, and the United Kingdom, as well as
securities denominated in the European Currency Unit. The Multi-Asset,
International Equity, and U.S. Equity Funds may also invest selectively in,
and the Emerging Markets Fund will invest primarily in, emerging market
securities as defined below. Under certain adverse conditions, each Fund may
restrict the financial markets or currencies in which its assets are invested
and it may invest its assets solely in one financial market or in obligations
denominated in one currency.
Risks Associated with Foreign Securities Generally. Investing in a
mutual fund that purchases securities of companies and governments of
foreign countries, particularly developing countries, involves risks
that go beyond the usual risks inherent in a mutual fund limiting its
holdings to domestic investments. With respect to certain foreign
countries, there is the possibility of expropriation of assets,
confiscatory taxation, and political or social instability or
diplomatic developments that could affect investment in those
countries. There may be less publicly available information about a
foreign financial instrument than about a United States instrument and
foreign entities may not be subject to accounting, auditing, and
financial reporting standards and requirements comparable to those of
United States entities. A Fund could encounter difficulties in
obtaining or enforcing a judgment against the issuer in certain foreign
countries. In addition, certain foreign investments may be subject to
foreign withholding or other taxes, although the Fund will seek to
minimize such withholding taxes whenever practical. Members may be
able to deduct such taxes in computing their taxable income or to use
such amounts as credits against their United States taxes if more than
50% of a Fund's total assets at the close of any taxable year consists
of stock or securities of foreign corporations (see TAX CONSIDERATIONS).
Risks Associated with Currency Exchange Rate Changes. Changes in
foreign currency exchange rates may affect the value of investments of
a Fund. While a Fund may hedge its assets against foreign currency
risk, no assurance can be given that currency values will change as
predicted, and a Fund may suffer losses as a result of this investment
strategy. As a result of hedging techniques, the net exposure of each
such Fund to any one currency may be different from that of its total
assets denominated in such currency. The foreign currency markets can
be highly volatile and subject to sharp price fluctuations. Since each
of the Funds may invest in such instruments in an effort to enhance
total return, each such Fund will be subject to additional risks in
connection with the volatile nature of these markets to which the other
Funds are not subject (see also the subsection above entitled Hedging
and Income Enhancement Strategies). Although denominated in U.S.
dollars, ADRs entail essentially the same foreign currency exchange
risks as direct investments in the underlying foreign common stocks.
For example, if the Japanese yen falls by 5% relative to the U.S.
dollar, but the yen price of shares of Hitachi Ltd. remains unchanged
in Tokyo trading, price arbitraging transactions by global investors
will likely cause the U.S. dollar price of Hitachi Ltd. ADRs to fall by
approximately 5% also (albeit perhaps with certain leads and lags).
Emerging Markets Securities. For purposes of their investment policies, the
Funds define an emerging market as any country, the economy and market of
which is generally considered to be emerging or developing by MSCI or, in the
absence of an MSCI classification, by the World Bank. Under this definition,
the Funds consider emerging markets to include all markets except Australia,
Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy,
Japan, the Netherlands, New Zealand, Norway, Singapore, Spain, Sweden,
Switzerland, the United Kingdom, and the United States.
Primary Risks: The risks of investing in foreign securities may be
intensified in the case of investments in issuers domiciled or doing
substantial business in emerging markets or countries with limited or
developing capital markets. Security prices in emerging markets can be
significantly more volatile than in the more developed nations of the
world, reflecting the greater uncertainties of investing in less
established markets and economies. In particular, countries with
emerging markets may have relatively unstable governments, present the
risk of sudden adverse government action and even nationalization of
businesses, restrictions on foreign ownership, or prohibitions of
repatriation of assets, and may have less protection of property rights
than that provided by more developed countries. The economies of
countries with emerging markets may be based predominantly on only a
few industries, may be highly vulnerable to changes in local or global
trade conditions, and may suffer from extreme and volatile debt burdens
or inflation rates. Local securities markets may trade a small number
of securities and may be unable to respond effectively to increases in
trading volume, potentially making prompt liquidation of substantial
holdings difficult or impossible at times. Transaction settlement and
dividend collection procedures may be less reliable in emerging markets
than in developed markets. Securities of issuers located in countries
with emerging markets may have limited marketability and may be subject
to more abrupt or erratic price movements.
Illiquid and Restricted Securities. Under the 1940 Act, each Fund may
invest up to 15% of the value of its assets in illiquid assets. Illiquid assets
are investments that are difficult to sell at the price at which such assets are
valued by the Fund within seven days of the date a decision to sell them is
made. Securities treated as illiquid assets include: over-the-counter options;
repurchase agreements, time deposits, and dollar roll transactions maturing
in more than seven days; loan participations; securities without readily
available market quotations, including interests in private commingled
investment vehicles in which a Fund might invest; and certain restricted
securities. Illiquid and restricted securities, including private placements,
are generally subject to legal or contractual restrictions on resale. They can
be eligible for purchase without SEC registration by certain instutional
investors known as "qualified institutional buyers."
TIP's board may consider certain restricted securities, including but not
limited to Rule 144A and Section 4(s) commercial paper, liquid if such
securities meet specified criteria established by TIP's board.
Primary Risks: Due to the absence of an organized market for such
securities, interim valuations of the market value of illiquid
securities used in calculating Fund net asset values for purchases and
redemptions can diverge substantially from their true value,
notwithstanding the application of appraisal methods deemed appropriate
and prudent by TIP's board and the Funds' independent accountants. Due
to possible restrictions on the transferability of illiquid securities,
forced liquidation of such securities to meet redemption requests could
produce large losses.
Securities Denominated in Multi-National Currency Units or More than One
Currency. Each Fund may invest in securities denominated in a multi-national
currency unit, such as the European Currency Unit, which is a "basket"
consisting of specified amounts of the currencies of the member states of the
European Community, a Western European economic cooperative organization.
Each Fund may also invest in securities denominated in the currency of one
nation although issued by a governmental entity, corporation, or financial
institution of another nation.
Non-Diversified Status. Each Fund is classified as a "non-diversified"
investment company under the 1940 Act, which means the Fund is not limited by
the 1940 Act as to the proportion of its assets that may be invested in the
securities of a single issuer. However, each Fund intends to conduct its
operations so as to qualify as a regulated investment company for purposes of
the Code, which generally will relieve the Fund of any liability for federal
income tax to the extent its earnings are distributed to Members (see TAX
CONSIDERATIONS). To so qualify, among other requirements, each Fund will limit
its investments so that, at the close of each quarter of the taxable year,
(i) not more than 25% of the market value of the Fund's total assets will be
invested in the securities of a single issuer, and (ii) with respect to 50%
of the market value of its total assets, not more than 5% of the market value
of its total assets will be invested in the securities of a single issuer and
the Fund will not own more than 10% of the outstanding voting securities of a
single issuer. A Fund's investments in U.S. Government securities and the
securities of other regulated investment companies are not subject to these
limitations. Because a Fund, as a non-diversified investment company, may
invest in a smaller number of individual issuers than a diversified
investment company, an investment in a Fund may present greater risk to an
investor than an investment in a diversified company.
PURCHASES AND REDEMPTIONS
GENERAL INFORMATION. Purchases and redemptions of shares in the Funds
include no sales charges. However, the Multi-Asset, International Equity,
Emerging Markets, and U.S. Equity Funds assess entry and exit fees (described
immediately below).
ENTRY AND EXIT FEES ON PURCHASES AND REDEMPTIONS OF SHARES IN EQUITY
FUNDS.
While there are no sales commissions (loads) or 12b-1 fees, the U.S. Equity Fund
assesses entry and exit fees of 0.25% of capital invested; the Multi-Asset,
and International Equity Funds assess entry and exit fees of 0.75%; and the
Emerging Markets Fund assesses entry and exit fees of 1.00%. These fees,
which are paid to the Funds directly, not to FAI or other vendors supplying
services to the Funds, are designed to allocate transactions costs associated
with purchases and redemptions to Members actually making such purchases and
redemptions rather than to the Funds' other Members. These fees are deducted
automatically from the amount invested or redeemed; they cannot be paid
separately. Entry and exit fees may be waived at FAI's discretion when the
purchase or redemption will not result in significant transaction costs for
the affected Fund (e.g., for transactions involving in-kind purchases and
redemptions). The Funds reserve the right to redeem in-kind in readily
marketable securities in accordance with the Commission's procedures any
redemption request by a Member if the aggregate market value of the shares
being redeemed by that Member during any 90-day period exceeds the lesser of
$250,000 or 1% of the Fund's net asset value during such period.
Rationale for Entry and Exit Fees. The entry and exit fees represent
FAI's estimate of the probable average costs over time to the Funds of
portfolio transactions necessitated by purchases and redemptions. These costs
include: (1) brokerage commissions; (2) market impact costs, i.e., the increase
or decrease in market prices which may result when a Fund purchases or sells
securities; and (3) the effect of the "bid-ask" spread in over-the-counter
markets. (Securities in over-the-counter markets are typically bought at the
"ask" or purchase price, but are valued in each Fund at the mean of the
"bid," or sale, and "ask" prices; similarly, securities in the over-the-
counter markets are typically sold at the "bid" or sale price, but are
valued in each Fund at the mean of this "bid" price and the "ask" or
purchase price.) Without these fees, the Funds would incur these costs
directly, resulting in reduced investment performance for all Members. With
these fees, the costs of acquiring or liquidating securities are borne not by
all existing Members, but only by those Members making purchases or
redemptions. Because the costs of acquiring or liquidating debt securities
are generally very small, the Bond and Short-Term Funds do not assess entry
and exit fees.
OFFERING DATES, TIMES AND PRICES. The offering of shares of TIP is continuous
and purchases of shares may be made on the days when the New York Stock
Exchange, the Federal Reserve Bank of New York, the Distributor, the
Administrator, the Transfer Agent, and the Custodian are all open for business,
which is Monday through Friday, except for holidays (hereinafter, "Business
Day"). Shares of each Fund may be purchased at the net asset value per share of
the Fund next determined after an order and payment are received, the order has
been accepted, and any applicable entry fee has been deducted. Each Fund's net
asset value is determined on the basis of market prices. All purchases,
except in-kind purchases, must be made in U.S. dollars. The Funds reserve
the right to reject any purchase order. Share purchase orders are deemed
accepted when AMT Capital Services, Inc. receives a completed Account
Application (and other required documents) and funds become available to TIP
in TIP's account with the Custodian as set forth below.
MINIMUMS. The minimum initial investment in each Fund is $100,000, with
the exception of the Short-Term Fund which has a minimum initial investment of
$50,000. The individual Fund minimum may be waived if a Member invests at
least $500,000 in any combination of TIP Funds. Subsequent purchases and
exchanges have a minimum of $5,000. Redemptions may be made in any amount.
ORDER AND PAYMENT PROCEDURES. Purchases may be made on any Business Day by
wiring federal funds to the Funds' Custodian and Transfer Agent, Investors Bank
& Trust Company, Boston, Massachusetts. In order to purchase shares on a
particular Business Day, a purchaser must call FAI at 800-984-0084 prior to
11:00 a.m. Eastern time to inform TIP of the incoming wire transfer and must
clearly indicate which Fund is to be purchased. If federal funds are
received by TIP by 12:00 noon Eastern time, the order will be effective on
that day. If TIP receives notification after 11:00 a.m. Eastern time, or if
federal funds are not received by the Transfer Agent by 12:00 noon Eastern
time, such purchase order shall be executed as of the date that federal funds
are received by 12:00 noon Eastern time. Funds transferred by bank wire may
or may not be converted into federal funds the same day, depending on the
time the funds are received and the bank wiring the funds. If funds are not
converted the same day, they will be converted the next business day.
REDEMPTION PROCEDURES. TIP will redeem all full and fractional shares of
each Fund upon request of Members. The redemption price is the net asset value
per share next determined after receipt by the Transfer Agent of proper
notice of redemption as defined below. If such notice is received by the
Transfer Agent by 11:00 a.m. Eastern time on any Business Day, the redemption
will be effective and payment, less any applicable exit fee, will be made
within seven calendar days, but generally on the day following receipt of
such notice for the U.S. Equity, Bond, and Short-Term Funds, and generally on
two business days following receipt of such notice for the Multi-Asset,
International Equity, and Emerging Markets Funds. If the notice is received
on a day that is not a Business Day or after 11:00 a.m. Eastern time, the
redemption notice will be deemed received as of the next Business Day.
Redemptions may be executed in any amount requested by the Member up to the
amount such Member has invested in TIP. To redeem shares, a Member or any
authorized agent (so designated on the Account Application) must provide FAI
with the dollar or share amount to be redeemed, the account to which the
redemption proceeds should be wired (which account shall have been previously
designated by the Member on its Account Application), the name of the Member,
and the Member's account number.
Telephone Redemption Option. A telephone redemption option is made
available to Members of TIP on the Account Application. A Member may request
redemption by calling FAI at 804-984-0084. TIP, FAI, AMT Capital Services,
or the Transfer Agent may employ procedures designed to confirm that
instructions communicated by telephone are genuine. If TIP does not employ
such procedures, it may be liable for losses due to unauthorized or
fraudulent instructions. TIP, FAI, AMT Capital Services, or the Transfer
Agent may require personal identification codes and will only wire funds
through pre-existing bank account instructions. TIP will not be liable for
acting upon instructions communicated by telephone that it reasonably
believes to be genuine. No bank instruction changes will be accepted via
telephone.
Potential In-Kind Redemptions. The Funds reserve the right to redeem in-kind
(subject to the Commission's procedures) shares of a Fund redeemed in a
single transaction by an individual Member if the aggregate market value of
the shares being redeemed by that Member during any 90-day period exceeds the
lesser of $250,000 or 1% of the Fund's net asset value during such period.
Redemptions in-kind entail the distribution to a redeeming Member of readily
marketable securities held by the Fund whose shares it seeks to redeem,
selected by FAI in its discretion, as opposed to the cash distributions
normally made to redeeming Members.
EXCHANGE PRIVILEGE. Shares of a Fund may be exchanged for shares of any other
of TIP's Funds based on the respective net asset values of the shares
involved in the exchange. The minimum for such an exchange is $5,000. An
exchange order is treated the same as a redemption followed by a purchase for
tax purposes and for purposes of determining whether an entry or exit fee
should be assessed. Investors who wish to make exchange requests should
telephone FAI or the Transfer Agent. The exchange privilege is available
only in states where the exchange legally may be made.
WIRE TRANSFER INSTRUCTIONS. Wire transfer instructions are provided in the
Account Application that accompanies this Prospectus or can be obtained by
contacting FAI. A Member's bank may impose its own fee for processing either
outgoing wires (in connection with purchases of Fund shares) or incoming
wires (in connection with redemptions of Fund shares). A Member may change
its authorized agent or the account designated to receive redemption proceeds
at any time by writing to FAI, AMT Capital Services, or the Transfer Agent
with an appropriate signature guarantee. Further documentation may be
required when deemed appropriate by FAI, AMT Capital Services, or the
Transfer Agent.
DIVIDENDS AND DISTRIBUTIONS
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Multi- International Emerging U.S. Short-
Asset Equity Markets Equity Bond Term
Dividends
Declared Semi- Semi- Annually Quarterly Daily Daily
Annually Annually
Reinvested Jul/Dec Jul/Dec December Apr/Jul Last Last
Oct/Dec Business Business
Day of Day of
Month Month
Paid Jul/Dec Jul/Dec December Apr/Jul First First
Oct/Dec Day of Day of
Month Month
Capital Gains
Declared Annually Annually Annually Annually Annually Annually
Reinvested December Mid-Dec Mid-Dec Mid-Dec Mid-Dec Mid-Dec
Paid December Mid-Dec Mid-Dec Mid-Dec Mid-Dec Mid-Dec
</TABLE>
INTENDED DISTRIBUTION SCHEDULE. Each Fund intends to distribute to its
Members substantially all of its net investment income and its net realized long
- -and short-term capital gains. Net investment income includes dividends,
interest, and other ordinary income, net of expenses. The intended payment
schedules are summarized in the preceding table. In order to satisfy certain
distribution requirements, a Fund may declare special year-end dividends and
capital gains distributions, typically during October, November, or December,
to Members of record in such month. Such distributions, if paid to Members
by January 31 of the following calendar year, are deemed to have been paid by
a Fund and received by Members on December 31 of the year in which they were
declared. TIP will seek to provide to Members as much notice as possible
regarding the timing of all distributions.
DISTRIBUTION OPTIONS. Members may elect from among several options for handling
dividends and capital gains paid to them by each Fund in which they invest:
Option 1 - Reinvest. Dividends and capital gains are automatically
reinvested in additional shares of a Fund at the net asset value per share
according to the schedule listed above.
Option 2 - Receive Cash. Dividends and capital gains are paid in cash
according to the schedule listed above.
Option 3 - Receive Dividends in Cash and Reinvest Capital Gains. Dividends
are paid in cash and capital gains are automatically reinvested in additional
shares of a Fund at the net asset value per share according to the schedule
listed above.
ADDITIONAL REDEMPTION OPTIONS. At the suggestion of numerous grantmaking
officers with which it has consulted, TIP also offers various redemption
options to accommodate Members' spending needs. The options are elected while
completing the Account Application. Members wishing to adopt a fixed dollar
amount or percentage distribution should contact FAI to arrange for such
specific distributions. Members can change their distribution options by
contacting FAI or the Transfer Agent in writing by the record date of the
applicable dividend.
Tax-Related Warning to Private Foundations. If a private foundation subject
to excise taxation purchases shares shortly before a distribution of
dividends and capital gains, a portion of its investment will be classified
as a taxable distribution (regardless of whether it reinvests distributions
or takes them in cash).
TAX CONSIDERATIONS
The following discussion is for general information only. Members and
prospective Members should consult with their own tax advisers as to the tax
consequences of an investment in a Fund, including the status of
distributions from each Fund under applicable state or local laws.
FEDERAL TAXES. Each Fund intends to qualify annually and elect to be treated
as a regulated investment company ("RIC") under the Code. To qualify, a
Fund must meet certain income, distribution, and diversification
requirements. In any year in which a Fund qualifies as a RIC and distributes
all of its taxable income on a timely basis, the Fund generally will not pay
U.S. federal income or excise tax. Each Fund intends to distribute all of
its taxable income by automatically reinvesting such amount in additional
shares of the Fund and distributing those shares to its Members, unless a
Member elects, on the Account Application Form, to receive cash payments for
such distributions.
Tax Treatment of Distributions. Dividends paid by a Fund from its investment
company taxable income (including interest and net short-term capital gains)
will be taxable to a U.S. Member as ordinary income. If a portion of a
Fund's income consists of dividends paid by U.S. corporations, a portion of
the dividends paid by the Fund may be eligible for the corporate dividends-
received deduction (assuming that the deduction is otherwise allowable in
computing a Member's federal income tax liability). Any distributions of net
capital gains (the excess of net long-term capital gains over net short-term
capital losses) designated as capital gain dividends are taxable to Members
as long-term capital gains, regardless of how long they have held their Fund
shares. Dividends are taxable to Members in the same manner whether received
in cash or reinvested in additional Fund shares.
A distribution will be treated as paid on December 31 of the current calendar
year if it is declared by a Fund in October, November, or December with a
record date in any such month and paid by the Fund during January of the
following calendar year. Such distributions will be taxable to Members in
the calendar year in which the distributions are declared, rather than the
calendar year in which they are received. Each Fund will inform Members of
the amount and tax status of all amounts treated as distributed to them not
later than 60 days after the close of each calendar year.
Tax Treatment of Capital Transactions. Any gain or loss realized by a Member
upon the sale or other disposition of shares of a Fund, or upon receipt of a
distribution in a complete liquidation of the Fund, generally will be a
capital gain or loss which will be long-term or short-term, generally
depending upon the Member's holding period for the shares.
Back-Up Withholding. Each Fund may be required to withhold U.S. federal
income tax at the rate of 31% of all taxable distributions payable to Members
who fail to provide the Fund with their correct taxpayer identification
number or make required certifications, or who have been notified by the IRS
that they are subject to backup withholding. Backup withholding is not an
additional tax. Any amounts withheld may be credited against the Member's
U.S. federal income tax liability. Corporate Members and certain other
Members [including organizations exempt from federal income taxation under
Code section 501(a)] are exempt from backup withholding.
FOREIGN INCOME TAXES. Income and gains received by the Funds from sources
within foreign countries may be subject to foreign withholding and other
income taxes. Because, with the possible exception of the International
Equity, Emerging Markets, and Multi-Asset Funds, it is not expected that more
than 50% of the value of a Fund's total assets at the end of its taxable year
will consist of stocks and securities of foreign corporations, it is not
expected that these Funds will be eligible to elect to "pass through" to
their Members the amount of foreign income and similar taxes paid by these
Funds. In the absence of such an election, the foreign taxes paid by a Fund
will reduce its investment company taxable income, and distributions of
investment company taxable income received by the Fund will be treated as U.S.
source income.
In the event that a Fund is eligible to and elects to "pass through" to its
Members the amount of foreign income and similar taxes paid by the Fund,
Members will be required to: (1) include in gross income, even though not
actually received, their respective pro rata share of such foreign taxes paid
by the Fund; (2) treat their pro rata share of such foreign taxes as paid by
them; and (3) either deduct their pro rata share of such foreign taxes in
computing their taxable income or use it within the limitations set forth in
the Code as a foreign tax credit against U.S. taxes (but not both). Each
Member of a Fund will be notified within 60 days after the close of each
taxable (fiscal) year of the Fund if the foreign taxes paid by the Fund will
"pass through" for that year, and, if so, the amount of each Member's pro
rata share (by country) of the foreign taxes paid and the Fund's gross income
from foreign sources. Members who are not liable for federal income taxes
other than the excise tax applicable to the net investment income of private
foundations will not be affected by any such "pass through" of foreign tax
credits.
STATE AND LOCAL TAXES. A Fund may be subject to state, local, or foreign
taxation in any jurisdiction in which it may be deemed to be doing business.
Fund distributions may be subject to state and local taxes. Distributions of
a Fund which are derived from interest on obligations of the U.S. Government
and certain of its agencies, authorities, and instrumentalities may be exempt
from state and local taxes in certain states. Members should consult their
own tax advisers regarding the particular tax consequences of an investment
in a Fund.
Further information relating to tax consequences is contained in the
Statement of Additional Information.
MEMBER VOTING RIGHTS AND PROCEDURES
Each Member has one vote in Director elections and on other matters
submitted to Members for their vote for each dollar of net asset value held by
the Member. Matters to be acted upon that affect a particular Fund, including
approval of the advisory and manager agreements with FAI and the Money
Managers, respectively, and the submission of changes of fundamental
investment policies of a Fund, will require the affirmative vote of a
majority of the Members of such Fund as defined in the 1940 Act. The
election of TIP's board of directors and the approval of TIP's independent
public accountants are voted upon by Members on a TIP-wide basis. As a
Maryland corporation, TIP is not required to hold annual Member meetings.
Member approval will be sought only for certain changes in TIP's or a Fund's
operation and for the election of directors under certain circumstances.
Directors may be removed by Members at a special meeting. A special meeting
of TIP shall be called by the directors upon written request of Members
owning at least 10% of TIP's outstanding shares.
PERFORMANCE AND EXPENSE INFORMATION
From time to time TIP may advertise a Fund's "yield," "total return," and
"annualized expense ratio." A Fund's yield for any 30-day (or one-month)
period is computed by dividing the net investment income per share earned
during such period by the maximum public offering price per share on the last
day of the period, and then annualizing such 30-day (or one month) yield in
accordance with a formula prescribed by the Commission which provides for
compounding on a semiannual basis. Advertisements of a Fund's total return
may disclose its average annual compounded total return for one-, five-, and
ten-year periods or since the Fund's inception. A Fund's total return for
such period is computed by finding, through use of a formula prescribed by
the Commission, the average annual compounded rate of return over the period
that would equate an assumed initial amount invested to the value of the
investment at the end of the period. For purposes of computing total return,
dividends and capital gains distributions paid on shares are assumed to have
been reinvested when received. From time to time, the Funds may compare
their performance to that of the comparative indices specified in their
investment objectives and further described in Appendix C. Total return and
yield figures are based on a Fund's historical performance and are not
intended to indicate future performance. The value of an investment in a
Fund will fluctuate and the shares in an investor's account, when redeemed,
may be worth more or less than their original cost. A Fund's annualized
expense ratio is the ratio of its annual operating expenses for a given time
period to its average net assets for the same time period, stated in
percentage terms. From time to time, the Funds may compare their performance
or expense ratios to those of other investment companies pursuing similar
investment objectives.
MEMBER INQUIRIES
Inquiries concerning TIP may be made by writing to FAI at:
Foundation Advisers, Inc.
2405 Ivy Road
Charlottesville, VA 22903
or by calling FAI at 804-984-0084.
TIFF INVESTMENT PROGRAM, INC.
TIFF Investment Program, Inc. is a no-load, open-end management investment
company that seeks to improve the net investment returns of its Members by
making available to them a series of commingled investment vehicles, each
with its own investment objective and policies. The Funds are open
exclusively to grantmaking foundations and other 501(c)(3) organizations.
Adviser Foundation Advisers, Inc.
2405 Ivy Road;
Charlottesville, VA 22903
(804) 984-0084
Fund Administrator and Distributor AMT Capital Services, Inc.
600 Fifth Avenue, 26th Floor;
New York, NY 10020
Custodian and Transfer Agent Investors Bank & Trust Company
P.O. Box 1537; Boston, MA 02205
Independent Accountant Price Waterhouse LLP
1177 Avenue of the Americas;
New York, NY 10036
Legal Counsel Dechert Price & Rhoads
1500 K Street, N.W.;
Washington, DC 20005
TIFF TIFF TIFF TIFF TIFF
Multi- Intl Emerging U.S. TIFF Short-
Asset Equity Markets Equity Bond Term
Fund Fund Fund Fund Fund Fund
Aronson + Partners ..................................X.......................
Atlantic Asset Management
Partners, L.L.C. ..........................................X................
Bee & Associates, Inc. ...X.......X..........................................
Canyon Capital Management,
L.P.. ...................X..................................................
City of London Investment
Management Co., Ltd..............X..........X...............................
Concentric Capital
Management...............X..........................X.......................
Delaware International
Advisers, Ltd............X.......X..........................................
Eagle Capital Management ............................X.......................
Emerging Markets Management .................X...............................
Everest Capital Limited...........X..........X...............................
Farallon Capital
Management, LLC..........X..................................................
Fischer Francis
Trees & Watts, Inc. ......................................X.........X.......
Genesis Asset
Managers, Ltd. ..........X..................X...............................
Gotham Partners, LP....................................... X.................
Grantham, Mayo, Van
and Otterloo & Co. LLC...X..................................................
Harding, Loevner
Management, L.P. ........X.......X..........................................
Investment Research
Company ................X................................X.................
Jacobs Levy Equity
Management ..............X................................X.................
Lazard Freres Asset
Management ..............X.......X..........X...............................
Marathon Asset
Management, Ltd. ...............X..........................................
Martingale Asset
Management, L.P. ........................................X.................
Mercury Asset
Management .............X.......X..........................................
Palo Alto Investors ......X................................X.................
Pomboy Capital
Corporation..............X..................................................
Seix Investment
Advisors, Inc. ............................................. .....X.........
Smith Breeden
Associates, Inc. .................................................X.....X...
TCW Funds
Management, Inc. ........X..................................................
Varde Partners, Inc.......X..................................................
Wellington Management
Company .................X..................................................
Westport Asset
Management, Inc. ................................. .......X.................
Whippoorwill
Associates, Inc. ........X..................................................
Wyser-Pratte
Management Company,
Inc. ....................X.................................................
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any of the securities offered hereby in any state to any person
to whom it is unlawful to make such an offer. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implications that there has been no change in the affairs of the Funds or
the Money Managers since the date hereof; however, if any material change
occurs while this Prospectus is required by law to be delivered, this
Prospectus will be amended or supplemented accordingly.
APPENDIX A
MONEY MANAGER AND COMMINGLED INVESTMENT
VEHICLE PROFILES
The following profiles include a summary of the investment approach
utilized by each Money Manager and each commingled investment vehicle in
which the Funds may invest, based on materials provided by each Money
Manager and each commingled vehicle. These summaries are furnished as a
means of assisting Members and prospective Members in understanding how each
Money Manager or commingled investment vehicle describes its own approach.
Each profile also includes a description of fees to be paid by TIP to each
Money Manager and a description of fees chargeable to TIP as an investor in
each commingled investment vehicle. The performance-based fees of Money
Managers are presented in the form of graphs and formulas. For a detailed
description of the performance-based fee structure and the reasons underlying
it, see PERFORMANCE-BASED FEES FOR MONEY MANAGERS in the Statement of
Additional Information.
ORGANIZATION
230 South Broad Street
Philadelphia, PA 19102
phone: 215-546-7500
fax: 215-546-7506
Independent Investment Counsel
Controlled by Theodore Aronson, Partner
Founded in 1984
Total Assets under Management: $702 mm (3/31/97)
REPRESENTATIVE CLIENTS
John D. and Catherine T. MacArthur
Foundation
Spelman College
State of Florida
Virginia Retirement System
PERSONNEL
Key TIP Account Manager
Theodore R. Aronson, CFA, CIC, Partner
MBA/BS, Wharton
1984-present: Aronson + Partners
previous experience: Addison Capital;
Drexel Burnham Lambert
Other Personnel
Kevin M. Johnson, Partner
PhD, North Carolina; BS, Delaware
DuPont Pension; Vanguard Group
Martha E. Ortiz, CFA, CIC, Partner
MBA, Wharton; BA, Harvard
Wilshire Associates; Continental Grain
Money Manager for the TIFF U.S. Equity Fund
INVESTMENT PHILOSOPHY
Philosophy: Large Cap Equity
Assets Using This Philosophy: $519 mm (3/31/97)
Account Type: Separate Account
INVESTMENT APPROACH
The firm focuses on asset-rich companies (stocks with low price-to-
book ratios), selling at relatively low market valuations (stocks with low
price-to-earnings ratios), with proven management talent (reflected in a
quantitative measure of historic management savvy and confidence, dubbed the
management factor). A strict selection algorithm is applied separately to
eleven economic sectors that include the 400 largest cap stocks. Risk-
adjusted relative strength and estimate revision tests and an assessment of
individual fundamental characteristics produce final selection adjustments and
determine individual position sizes. Economic sector weights are held to
within close tolerances of their weights in the S&P 500. Portfolio changes
are executed by a number of trading methods, including electronic crossing and
basket trades. The firm measures and monitors closely its trading costs,
including market impact and opportunity costs. Portfolios contain an average of
60 to 80 stocks, ranging in size from 0.4% to 5.0% of assets. Annual turnover
averages 100%.
MANAGER'S BENCHMARK
S&P 500 Stock Index
FEE PAID BY TIP TO THIS MANAGER
GRAPH: The graph represents the minimum and maximum number of basis points that
a performance-fee based Money Manager can receive under its current
agreement.
Fee = 15 + [ .250 x ( Excess Return - 90 ) ] subject to
Floor of 10 bp; Cap of 80 bp
Measurement Period = Trailing 12 Months
Excess Return = Manager's Return - Benchmark Return
ATLANTIC ASSET MANAGEMENT PARTNERS, L.L.C.
ORGANIZATION
40 Signal Road
Stamford, CT 06902
phone: 203-363-5100
fax: 203-363-5110
Independent Investment Counsel
Controlled by Ronald W. Sellers,
President
Founded in 1992
Total Assets under Management: $3.2 bil (3/31/97)
REPRESENTATIVE CLIENTS
Associated Foods
Catholic Foundation
Local 282
Local 803
National Maritime Union
Omaha School Employees' Retirement System
Sharp Healthcare & Grossmont
PERSONNEL
Key TIP Account Managers
Ronald W. Sellers, President
MBA, Oklahoma State; MA, College of
Holy Names; AB, California-Berkeley
1992-present: Atlantic Asset Management Partners, L.L.C.
1985-92: Weiss Peck & Greer, Partner, Co-Director, Fixed Income
Connice A. Bavely, Senior Vice President
MA, Maryland; BA, North Carolina
1992-present: Atlantic Asset Management Partners, L.L.C.
1988-92: Weiss Peck & Greer, Special Partner
Elaine S. Hunt, CFA, Senior Vice President
MBA, Chicago; BA, Beloit College
1992-present: Atlantic Asset Management Partners, L.L.C.
Weiss, Peck & Greer; William M. Mercer
Janet K. Navon, Senior Vice President
MBA, Columbia; BSFS, Georgetown
1992-present: Atlantic Asset Management Partners, L.L.C.
Columbus Circle Investors; JP Morgan
Donald W. Trotter, CFA, Senior Vice President
MBA, Missouri; BS/BA, Kansas
1992-present: Atlantic Asset Management Partners, L.L.C.
DeMarche Associates, Inc.; Phillips Petroleum
Money Manager for the TIFF Bond Fund
INVESTMENT PHILOSOPHY
Philosophy: Constant Duration
Assets Using This Philosophy: $178 mm (3/31/97)
Account Type: Separate Account
INVESTMENT APPROACH
Atlantic Asset Management manages fixed income portfolios using a proprietary
analytic framework that eliminates the need for economic or interest rate
forecasting. Quantitative methods are used to target and control portfolio
risk exposures. Portfolio duration is held constant, a strategy designed to
benefit from interest rate volatility. This strategy entails the purchase of
longer maturity bonds as interest rates rise (prices fall) and their sale as
rates fall (prices rise) in order to maintain a constant duration for the
total portfolio. The firm's exploitation of yield curve anomalies
is based on statistical analysis of recent past relationships between the
shape of the yield curve and subsequent returns. In the corporate sector, a
well diversified portfolio is constructed by screening companies to
identify issuers with improving margins and strong cash flows, thereby
increasing the probability of credit upgrades while reducing the possibility
of downgrades. In the mortgage sector, option adjusted valuation models are
used to identify securities that can produce returns from interest rate
movements which are consistent with the overall duration and yield strategy.
The components of the strategy are combined through the use of
optimization programs to provide the best expected return profile in a
unified portfolio. Portfolio contains an average of 50 to 80 positions.
Annual turnover averages 200%.
MANAGER'S BENCHMARK
Lehman Government/Corporate Bond Index
FEE PAID BY TIP TO THIS MANAGER
GRAPH: The graph represents the minimum and maximum number of basis points
a performance-fee based Money Manager can receive under its current
agreement.
Fee = 15 + [ .200 x ( Excess Return - 65 ) ] subject to Floor of 10 bp;
Cap of 60 bp
Measurement Period = Trailing 12 Months
Excess Return = Manager's Return - Benchmark Return
BEE & ASSOCIATES, INC.
ORGANIZATION
370 Seventeenth Street
Suite 3560
Denver, Colorado 80202
phone: 303-572-5090
fax: 303-572-5099
Independent Investment Counsel
Controlled by Bruce Bee and Edward McMillan
Founded in 1989
Total Assets under Management: $400 mm (3/31/97)
REPRESENTATIVE CLIENTS
Brown & Williamson
Coutts & Co.
Dartmouth College
Gates Family Foundation
Hughes Aircraft Co.
Pfizer, Inc.
Riverside Church of New York
Scripps College
Strategic Investment Partners
PERSONNEL
Key TIP Account Managers
Bruce B. Bee, President and CEO
JD, Georgetown; BA, University of Kansas
1989-present: Bee & Associates, Inc.
Other Personnel
Edward McMillan, Principal
MBA, University of California; BA, University of Colorado
First Boston Asset Management, President and CEO
Money Manager for the TIFF Multi-Asset, and International Equity Funds
INVESTMENT PHILOSOPHY
Philosophy: Global Small Cap
Assets Using This Philosophy: $400 mm (3/31/97)
Account Type: Separate Account
INVESTMENT APPROACH
The firm has a value-driven, bottom-up approach to stock selection and
portfolio construction. Emphasis is placed on finding businesses whose
stock prices are low relative to their intrinsic value and have above average
growth prospects. In general, the firm emphasizes companies with market
capitalizations of less than US $750 million. From the firm's global equity
universe, potential investment candidates are subjected to fundamental
analysis including: (1) a review of annual and interim reports; (2)
reconciliation of accounting practices to US GAAP and other necessary cross-
border analytical checks; and (3) present value analysis. The firm's
ideal candidate has a proprietary product or service; focused and
competent management; and is available at a significant discount to what the
firm believes another company would pay for it. These companies typically have
a history of above average growth in revenues, earnings, cash flow and
return on shareholders' equity, and reasonable prospects for continued
superior growth.
MANAGER'S BENCHMARK
MSCI All Country World Index or
MSCI All Country World ex USA Index
FEE PAID BY TIP TO THIS MANAGER
GRAPH: The graph represents the minimum and maximum number of basis points that
a performance-fee based Money Manager can receive under its current
agreement.
Fee = 15 + [ 0.270 x ( Excess Return - 115 ) ] subject to Floor of 15 bp;
Cap of 200 bp
Measurement Period = Trailing 12 Months
Excess Return = Manager's Return - Benchmark Return
CANYON CAPITAL MANAGEMENT, L.P.
ORGANIZATION
Canyon Partners Incorporated
9665 Wilshire Blvd., Suite 200
Beverly Hills, CA 90212
phone: 310-247-2700
fax: 310-247-2701
Independent Investment Adviser
Controlled by Joshua S. Freidman, Mitchell R. Julis, R.
Christian B. Evensen
Founded in 1990
Total Assets under Management: $370 mm (3/31/97)
REPRESENTATIVE CLIENTS
Grosvenor Capital Management, L.P.
Ivy Asset Management
McKinsey & Company, Inc.
Permal Asset Management
Pine Grove Associates
Worms Asset Management, Inc.
PERSONNEL
Key Tip Account Managers
Joshua S. Friedman, Managing Partner
JD/MBA/BA, Harvard; MA, Oxford University
1990-present: Canyon Capital Management, L.P.
Drexel Burnham Lambert
Mitchell R. Julis, Managing Partner
JD/MBA, Harvard; BA, Princeton
1990-present: Canyon Capital Management, L.P.
Drexel Burnham lambert
R. Christian B. Evensen, Managing Partner
BA, Williams College
1990-present: Canyon Capital Management, L.P.
Drexel Burnham Lambert
INVESTMENT PHILOSOPHY
Philosopy: The Value Realization Fund, L.P.
Assets Using This Philosophy: $370 mm (3/31/97)
Account Type: Commingled Vehicle
INVESTMENT APPROACH
The Fund seeks above average gains (both capital appreciation and current
income) with moderate risk by employing a "bottom up" approach to investing
in financial instruments perceived to be inefficiently priced as a result of
business, financial, or legal uncertainties. Capital preservation is a
fundamental priority, and as a result, the Fund has a strong debt orientation.
Generally, the Fund invests in event-driven situations, including bankruptcies,
reorganizations, mergers, spin-offs, and other special situations.
MANAGER'S BENCHMARK
91-Day Treasury Bills plus 5% per annum
FEE PAID BY TIP TO THIS MANAGER
1% of net assets per annum plus 20% of net profit. The net profit interest is
subject to a "high water mark" provision that prohibits the manager's receipt
of a profit participation unless the market value of each partner's interest
exceeds its cost basis.
CITY OF LONDON INVESTMENT MANAGEMENT CO., LTD.
ORGANIZATION
City of London
10 Eastcheap
London, England EC3M 1AJ
phone: 171-711-0771
fax: 171-711-0772
City of London
114 Birch Rund Drive
Suite 1
Coatesville, PA 19320
phone: 610-380-2110
fax: 610-380-2116
Independent Investment Adviser
Controlled by Barry Olliff and Halder Holdings
Founded in 1991
Total Assets under Management: $871 mm (3/31/97)
REPRESENTATIVE CLIENTS
Boettcher Foundation
Bush foundation
Duke University
General Mills
Robert Wood Johnson Foundation
Meadows Foundation
Southern Methodist University
University of Richmond
Wellesley College
PERSONNEL
Key Tip Account Managers
Barry Olliff, Chief Portfolio Manager
1991-present: City of London Investment Management Co., Ltd.
Kier Boley, Assistant Portfolio Manager
BA, Portsmouth University
MSc, Southampton University
1995-present: City of London Investment Management Co., Ltd.
1994-1996: Olliff & Partners
Money Manager for the TIFF International Equity amd
Emerging Markets Funds
INVESTMENT PHILOSOPHY
Philosophy: Investable Emerging Markets Country Fund
Assets Using This Philosophy: $116 mm (3/31/97)
Account Type: Commingled Vehicle
INVESTMENT APPROACH
City of London's (CoL) philosophy is to provide fully diversified access to
the enormous growth potential of emerging markets via closed-end country and
regional funds. CoL's performance turns on its ability to identify and
capitalize on inefficiencies which occur as a result of imperfect information
distribution. It is precisely these inefficiencies which result in high-quality
funds being traded at discounts to their NAVs. Frequently the greatest
inefficiencies are found in funds listed and traded solely in their own
"domestic" markets. Furthermore, the large majority of these domestic country
funds have obligatory termination dates at which liquidation at NAV will occur.
Gains arise from these discounts closing over time as markets become more
efficient and as funds approach their termination dates. CoL's proprietary
research is geared towards identifying and tracking these funds.
MANAGER'S BENCHMARK
MSCI Emerging Markets Free
FEE PAID BY TIP TO THIS MANAGER
1.5% of net assets per annum
CONCENTRIC CAPITAL MANAGEMENT
ORGANIZATION
Concentric Capital Management, L.P.
P.O. Box 130
Armonk, New York 10504
phone: 914-937-0400
fax: 914-937-0611
Independent Investment Adviser
Controlled by Jonathan Goodman
Founded in 1995
Total Assets under Management: $28 mm (3/31/97)
REPRESENTATIVE CLIENTS
Clients not disclosed
PERSONNEL
Key TIP Account Managers
Jonathan Goodman, Chief Investment Officer
MSE, University of Pennsylvania; BS, Yale College
1995-present: Concentric Capital Management
1989-95: Steinhardt Partners, L.P.
George Henry
MA, PhD, yale University; BBA, City College of NY
1995-present: Concentric Capital Management
1987-91995: private economics consultant
James Murphy
BSE, Princeton University
1996-present: Concentric Capital Management
1993-1996: Greenwich Energy Partners
Money Manager for the TIFF Multi-Asset and
U.S. Equity Funds
INVESTMENT PHILOSOPHY
Philosophy: Concentric Capital L.P.
Assets Using This Philosophy: $28 mm (3/31/97)
Account Type: Commingled Vehicle
INVESTMENT APPROACH
The firm seeks a consistent rate of return by employing a disciplined and
quantitatively rigorous methodology to shift capital among a variety of
arbitrage and relative value strategies. Specifically, the firm tries to
purchase securities and securities-related assets which have particlar
characteristics and tries to sell short related financial instruments when
such a short sale improves the risk/return relationship of the investment.
The firm invests in a variety of core "relative value arbitrages," and monitors
a wide selection of possible "convergence trades," moving capital among these
strategies based primarily on objective quantitative measures of value and
secondarily on the judgement of the fund manager. The firm increases and
decreases exposure to these various strategies as opportunities arise and
diminish and, absent compelling investments, has a neutral position of cash.
The firm also attempts to identify and exploit anomalous pricing opportunities
in a variety of securities markets.
MANGER'S BENCHMARK
91-Day Treasury Bills plus 5% per annum or Wilshire 5000
FEE PAID BY TIP TO THIS MANAGER
1% of net assets per annum plus 15% of net profit
DELAWARE INTERNATIONAL ADVISERS LTD.
ORGANIZATION
Portfolio Management:
Veritas House, 125 Finsbury Pavement
London, England EC2A 1NQ
phone: 0171-638-2493
fax: 0171-638-2099
U.S. Liaison Office:
Delaware Management Company, Inc. (Affiliate)
One Commerce Square
Philadelphia, PA 19103
phone: 215-972-2312
fax: 215-972-8849
Independent Investment Counsel
Controlled by Lincoln National
Founded in 1990 (Predecessor firm founded in 1929)
Total Assets under Management: $528 bil (3/31/97)
REPRESENTATIVE CLIENTS
Allied-Signal, Inc.
Father Flanagan's Boy's Town (DPT)
Illinois State Board of Investment
McDermott International
Sandia National Laboratories
Salvation Army (DPT)
Stanford Management Company
The Amherst H. Wilder Foundation (DPT)
The Richard King Mellon Foundation
Warner Lambert Company
PERSONNEL
Key TIP Account Managers
David G. Tilles, Managing Director, CIO
Sorbonne/Warwick University/Heidelberg University
1990-present: Delaware International Advisers Ltd.
1974-90: Hill Samuel Investment Advisers, CIO
Hamish O. Parker, Director and Senior Portfolio Manager
Oxford University
1990-present: Delaware International Advisers Ltd.
1986-90: Hill Samuel Investment Advisers, Senior Portfolio Manager
Other Personnel
Wayne A. Stork, Chairman, CEO
Graduate work, New York University; BA, Brown Univ.
Irving Trust Company
Money Manager for the TIFF Multi-Asset, and TIFF
International Equity Funds
INVESTMENT PHILOSOPHY
Philosophy: Value-oriented International Equity Mgmt
Assets Using This Philosophy: $3.3 bil (3/31/976)
Account Type: Separate Account
INVESTMENT APPROACH
Delaware International is a value-oriented defensive manager. The
company's senior investment professionals have worked together for
many years. The firm invests in securities where dividend discount
analysis identifies value in terms of the long term flow of income. The
firm uses the same dividend discount valuation model of future income
streams across all countries, securities, and industries. This
distinguishes Delaware International from many of its competitors that use
different investment criteria in each country and sector. The most important
aspects of the firm's security selection process are fundamental
company analyses and a comprehensive program of visiting each current and
prospective holding. Equity market valuations are based on inflation-
adjusted dividend discount analysis, coupled with long term purchasing power
parity analysis of currencies. The resulting valuations are then analyzed
with the help of a computer- based optimization program, which produces a
list of attractive portfolio allocations for consideration by Delaware
International's Investment Committee. As a defensive measure to protect
real returns, Delaware International will hedge a currency when its inflation
- -adjusted exchange rate suggests that it is overvalued. The company's
portfolios normally exhibit high income yields and low P/E ratios.
Portfolios contain an average of 35 stocks. Annual turnover generally averages
25%.
MANAGER'S BENCHMARK
MSCI EAFE Index
FEE PAID BY TIP TO THIS MANAGER
0.50% per annum on first $50 million
0.35% per annum on next $50 million
0.30% per annum on remainder
EAGLE CAPITAL MANAGEMENT
ORGANIZATION
323 Main Street
Chatham, NJ 07928
phone: 800-977-3245
fax: 201-701-9232
Independent Investment Counsel
Controlled by Ravenel B. Curry III,
President, CIO, and Co-Founder; Richard A. Kimball, Co-Founder
Founded in 1988
Total Assets under Management: $334 mm (3/31/97)
REPRESENTATIVE CLIENTS
Atlantic Richfield
University of Delaware
Iona Preparatory School
The Mercersburg Academy
New York Daily News
University of Oregon
Salvation Army
University of Vermont
PERSONNEL
Key TIP Account Manager
Ravenel B. Curry III, President and CIO
MBA, University of Virginia; BA, Furman
1988-present: Eagle Capital Management
Other Personnel
Richard A. Kimball, Co-Founder
BA, Yale University
White, Weld, Director
Elizabeth Curry, Senior Research Analyst
MBA/BA, Queens College
Summit Trust Company, Analyst
Money Manager for the TIFF U.S. Equity Fund
INVESTMENT PHILOSOPHY
Philosophy: Undervalued Growth Assets Using This
Philosophy: $334 mm (3/31/97)
Account Type: Separate Account
INVESTMENT APPROACH
Eagle Capital emphasizes undervalued growth stocks, focusing on companies
whose earnings it believes will grow at rates well above those implicit in
their current stock price. Particular attention is given to companies whose
managements are perceived to: (1) invest capital for the long term; (2)
have a real-return orientation; and (3) have a vision to move the company to a
significantly higher level of sales and profitability. Eagle relies primarily
on in-house research to identify companies capable of generating earnings
per share equal to at least 20% of their current stock price over the next
three to five years. Eagle recognizes that growth in most companies is not
consistent, and that some companies may reach Eagle's growth expectations
through uneven quarterly progression. The firm attempts to reduce the
emotional aspects of investing by employing several disciplines. For example,
the weighted average price-earnings ratio for the portfolio may not exceed
the P/E of the market. Portfolios contain an average of 25 to 35 high
- -quality stocks, characterized by below-market yields and dividend payout
ratios, above-market earnings and dividend growth rates and superior returns
on equity. Annual turnover averages 35%.
MANAGER'S BENCHMARK
S&P 500 Stock Index
FEE PAID BY TIP TO THIS MANAGER
GRAPH: The graph represents the minimum and maximum number of basis points that
a performance-fee based Money Manager can receive under its current
agreement.
Fee = 15 + [ 0.160 x ( Excess Return - 90 ) ] subject to Floor of 0 bp;
Cap of 200 bp
Measurement Period = Trailing 12 Months
Excess Return = Manager's Return - Benchmark Return
EMERGING MARKETS MANAGEMENT
ORGANIZATION
1001 Nineteenth Street North, 16th Floor
Arlington, VA 22209-1722
phone: 703-243-5200
fax: 703-243-2464
Independent Investment Adviser
A General Partnership, the managing partner of which is Emerging Markets
Investors Corporation, a Delaware corporation controlled by Antoine van Agtmael
Founded in 1987
Total Assets under Management: $3.3 bil (3/31/97)
REPRESENTATIVE CLIENTS
Harvard Management Company
The Rockefeller Foundation
Yale University
PERSONNEL
Key TIP Account Manager
Antoine W. van Agtmael, President & CIO
MBA, New York University; MA, Yale; BA, Netherlands School of Economics
1987-present: Emerging Markets Management
Other Personnel
Michael Duffy, CFA, Managing Director
PhD/MA,Chicago; BA, Michigan
World Bank Pension Plan, Senior Pension Investment Officer
Felicia Morrow, Portfolio Manager and Senior Analyst
(Latin America)
MBA, Harvard; BA, Stanford
World Bank, Consultant
John Niepold, Portfolio Manager and Analyst (Africa)
MBA, UNC-Chapel Hill; BA, Davidson
Crosby Securities, Senior Investment Analyst
Dobrinka Cidrof, CoPortfolio Manager & Analyst
(Emerging Europe)
MBA, George Washington Univ; BA, Bosphorous Univ
TEB Investment Bank
Martin Horn, Portfolio Manager (Quantitative Strategies)
Education in Germany
Citibank Global Asset Management London
Money Manager for the TIFF Emerging Markets Fund
INVESTMENT PHILOSOPHY
Philosophy: Emerging Markets
Assets Using This Philosophy: $523 mm (3/31/97)
Account Type: Separate Account
INVESTMENT APPROACH
EMM focuses on both maximizing long-term capital appreciation and on
minimizing volatility through broad diversification and a systematic,
disciplined, and quantitative investment approach. The firm's top-down
approach is to invest, in most of the countries that are part of the emerging
markets universe but to vary weights (relative to market weights) on the
basis of Emerging Markets' Management's proprietary country allocation model
(mean variance optimizing model with the key inputs being expected returns,
volatilty, and correlations among country indexes). No country is overweighted
more than four times its market weight and no country represents more than 25%
of the portfolio. The firm diversifies its equity investments over geographic
sectors and industries and through bottom-up selection of companies that
are characterized by attractive valuations and favorable return prospects over
a three- to five-year time horizon with market capitalizations typically at
least $15 million and having acceptable trading volumes for established core
positions. Increasingly, less well-researched (i.e., more neglected)
companies are making up the portfolio. The firm actively monitors a
universe of approximately 1,800 stocks in over 52 countries. Portfolios
contain an average of 300 stocks. About 50% of the ussues in a typical account
are drawn from outside IFC and MSCI Emerging Markets indices. Annual turnover
depends heavily on market conditions, but has typically averaged 35%.
MANAGER'S BENCHMARK
MSCI Emerging Markets Free Index
FEE PAID BY TIP TO THIS MANAGER
Fee = 105 + [.394 x (Excess Return - 205)] subject to Floor of
40 bp; Cap of 300 bp
Measurement Period = Trailing 12 Months
Excess Return = Manager's Return - Benchmark Return
EVEREST CAPITAL LIMITED
ORGANIZATION
Everest Capital Limited
The Bank of Butterfield Building
65 Front Street, 6th Floor
Hamilton HM 12, Bermuda
phone: 441-292-2200
fax: 441-292-2285
Independent Investment Adviser
Controlled by Marko Dimitrijevic
Founded in 1990
Total Assets under Management: $1.5 bil (3/31/97)
REPRESENTATIVE CLIENTS
Brown University
University of Iowa
PERSONNEL
Key TIP Account Managers
Marko Dimitrijevic, President
MBA, Stanford; BS, Univ of Lausanne (Switzerland)
1990-present: Everest Capital Limited
Jean-Philippe Chomette, Senior Vice President
ESSEC Business School
1994-present: Everest Capital Limited
Banque Paribas (New York and London)
Andrew D. Fredman, Senior Vice President
MBA, Columbia; BA, Tulane
1994-present: Everest Capital Limited
Banque Paribas (New York)
Tim Mistele, Senior Vice President
1997-present: Everest Capital Limited
Gabelli & Co. (Rye, New York)
Money Manager for the TIFF International Equity
and Emerging Markets Funds
INVESTMENT PHILOSOPHY
Philosophy: Everest Capital Frontier Fund
Assets Using This Philosophy: $350 mm (3/31/97)
Account Type: Commingled Vehicle
INVESTMENT APPROACH
Everest invests on an opportunistic basis in debt and equity securities that
are neglected, distressed, or inefficiently priced. Typical strategies and
investments include: (1) capital structure arbitrage - purchase long and sell
short two bonds of the same sovereign issuer to exploit aberrations in the
bonds' relative pricing or as a hedged way to maintain a long exposure; (2)
high yield and distressed debt - the purchase of bonds of emerging countries
or companies trading at distressed prices; (3) value investment - because much
emerging investing is done on a top-down or micro basis, many opportunities
exist for value investing employing fundamental bottom-up analysis; (4)
arbitrages and special situations - the purchase of undervalued convertible
securities and closed-end funds, outright or via arbitrage strategies. In
addition, the Fund seeks arbitrages between a company's various classes of
stocks and its U.S. listed ADRs.
MANAGER'S BENCHMARK
MSCI Emerging Markets Free
FEE PAID BY TIP TO THIS MANAGER
1.5% of net assets per annum plus 20% of net profit
FARALLON CAPITAL MANAGEMENT LLC
ORGANIZATION
1 Maritime Plaza, Suite 1325
San Francisco, CA 94111
phone: 415-421-2132
fax: 415-421-2133
Independent Investment Adviser
Controlled by Thomas F. Steyer
Founded in 1990
Total Assets under Management: $2.1 bil (3/31/97)
REPRESENTATIVE CLIENTS
Carnegie Institution of Washington
Mt. Sinai School of Medicine
Museum of Modern Art
Duke University
Stanford University
United States-Japan Foundation
Yale University
PERSONNEL
Key TIP Account Manager
Thomas F. Steyer, Chief Investment Officer
MBA, Stanford University; BA, Yale University
1990-present: Farallon Capital Management, LLC
Other Personnel
Enrique Boilini
David Cohen
Joseph Downes
Fleur Fairman
Jason Fish
Andrew Fremder
William Mellin
Stephen Millham
Meridee Moore
Money Manager for the TIFF Multi-Asset Fund
INVESTMENT PHILOSOPHY
Philosophy: Farallon Capital Institutional Partners, LP
Assets Using This Philosophy: $657 mm (2/28/97)
Account Type: Commingled Vehicle
INVESTMENT APPROACH
Farallon's current investments are primarily "event-driven," in which a known
or expected event will cause an appreciation in the value of a particular
portfolio position. Investments include securities and other claims in
reorganizations, bankruptcies, liquidations, recapitalizations, mergers,
tender offers, exchange offers, non-performing and sub-performing mortgages,
investments in securities affected by litigation, emerging market securities,
and fixed income arbitrage. Merger arbitrage opportunities have improved over
the last year and risk arbitrage remains a core business for Farallon. In
addition, a significant portion of Farallon's investments have been in the
bank debt of troubled companies and in loans to private limited partnerships and
LLCs which invest in underlying assets such as real estate and mortgage loans.
Convertible securities arbitrage, direct investments, and liquidations make up
the balance of Farallon's portfolio. Farallon maintains a diversified portfolio
in which no single investment determines success or failure. The portfolio
consists of approximately 150 core positions. It is unusual for any one
position to be greater than five percent of the overall portfolio.
MANAGER'S BENCHMARK
91-Day Treasury Bills plus 5% per annum
FEE PAID BY TIP TO THIS MANAGER
1% of net assets per annum plus 20% of net profit
FISCHER FRANCIS TREES & WATTS, INC.
ORGANIZATION
200 Park Avenue, 46th Floor
New York, NY 10166
phone: 212-681-3000
fax: 212-681-3250
Independent Investment Counsel
Controlled by Charter Atlantic
Corporation
Founded in 1972
Total Assets under Management: $23.5 bil (3/31/97)
REPRESENTATIVE CLIENTS
Ameritech Corporation
BankAmerica
BASF Corporation
Campbell Soup Company
Monsanto Company
Railways Pension Trustee Company Ltd.
(British Rail)
The World Bank
PERSONNEL
Key TIP Account Managers
Liaquat Ahamed, Managing Director
AM, Harvard; BA, Cambridge
1988-present: Fischer Francis Trees & Watts, Inc.
1978-87: World Bank, Division Chief
Simon Hard, Managing Director
M Phil, Cambridge; MA, Oxford
1989-present: Fischer Francis Trees & Watts, Inc.
1988-89: S.G. Warburg, Senior Portfolio Manager
Other Personnel
Adnan Akant, Managing Director
PhD/MS, MIT
World Bank, Senior Investment Officer
Karen McKeel Calby, Director, Client Service
MBA, Wharton; AB, Dartmouth College
Oliver, Wyman & Company, Partner
Philippe Lespinard, Managing Director
MS, ENSIMAG
World Bank, Investment Officer
Money Manager for the TIFF Bond Fund
INVESTMENT PHILOSOPHY
Philosophy: Global Hedged Bond
Assets Using This Philosophy: $2.8 bil (3/31/97)
Account Type: Separate Account
INVESTMENT APPROACH
FFTW seeks relative value opportunities among fixed income securities of the
world's major markets (e.g., Japan, Canada, Australia, and the various
European countries). The same approach is applied independently to currency
selection decisions. In both cases, an emphasis is placed on maintaining
diversified exposures to reasonably low risk but attractive return
opportunities. Significant security and currency allocations to less-
correlated sectors are also made but less frequently; given the higher
degree of risk, a higher degree of confidence in the potential for achieving
incremental gains is required. In all instances, emphasis is placed on
controlling the aggregate riskiness of the portfolio relative to that of the
benchmark. Throughout, a number of proprietary computer aids are employed.
These include a portfolio optimization algorithm that suggests portfolio
structures in accord with the investment scenarios developed by the
investment team, incorporating views on currency and interest rate
relationships; a risk-control model to monitor the multiple exposures of
global portfolios; and a performance attribution system to segregate the
various sources of return. Portfolios contain an average of 20 to 30
positions. Annual turnover averages 5 to 7 times.
MANAGER'S BENCHMARK
JP Morgan Global Government Bond Index (Hedged)
FEE PAID BY TIP TO THIS MANAGER
GRAPH: The graph represents the minimum and maximum number of basis points that
a performance-fee based Money Manager can receive under its current
agreement.
Fee = 20 + [ .138 x ( Excess Return - 70 ) ] subject to Floor of 10 bp;
Cap of 80 bp
Measurement Period = Trailing 12 Months
Excess Return = Manager's Return - Benchmark Return
FISCHER FRANCIS TREES & WATTS, INC.
ORGANIZATION
200 Park Avenue, 46th Floor
New York, NY 10166
phone: 212-681-3000
fax: 212-681-3250
Independent Investment Counsel
Controlled by Charter Atlantic Corporation
Founded in 1972
Total Assets under Management: $23.5 bil (3/31/97)
REPRESENTATIVE CLIENTS
American Brands
Dow Chemical Company
Genentech, Inc.
Lucille P. Markey Charitable Trust
Monsanto Company
Sprint Corporation
The World Bank
PERSONNEL
Key TIP Account Managers
David J. Marmon, Managing Director
MA, Duke; BA, Alma College
1990-present: Fischer Francis Trees & Watts, Inc.
1988-90: Yamaichi International, Vice President
Stewart M. Russell, Managing Director
MBA, New York University; BA, Cornell
1992-present: Fischer Francis Trees & Watts, Inc.
1987-92: JP Morgan, Vice President
Other Personnel
Karen McKeel Calby, Director, Client Service
MBA, Wharton; AB, Dartmouth College
Oliver, Wyman & Company, Partner
O. John Olcay, Managing Director
MBA/MA, Wharton; BA, Robert College
W. Greenwell, Managing Partner
Money Manager for the TIFF Short-Term Fund*
INVESTMENT PHILOSOPHY
Philosophy: Enhanced Cash
Assets Using This Philosophy: $1.6 bil (3/31/97)
Account Type: Separate or Commingled
INVESTMENT APPROACH
FFTW seeks to outperform its benchmark while simultaneously limiting risk by
making frequent small changes in positions. The firm focuses on five
specific areas (in rough order of potential return contribution): duration
exposure, maturity selection (or yield curve), sector allocation, credit, and
selection of individual securities. FFTW assesses the possibilities and
opportunities in each of these dimensions and takes exposures away from the
benchmark, relying on technical analysis, historical spread relationships,
economic and portfolio models, and market convictions. Throughout the
process, a number of proprietary computer models are employed. These include
a portfolio optimization model that suggests portfolio structures in accord
with investment scenarios suggested by the investment team and an unemployment
model that projects forthcoming employment data and translates portfolio
managers' views of rate relationships into optimal portfolios. Portfolios
contain an average of 20 to 25 positions. Annual turnover averages 20 to 30
times per year.
MANAGER'S BENCHMARK
Merrill Lynch 182-Day Treasury Bill Index
FEE PAID BY TIP TO THIS MANAGER
0.20% on first $100 million
0.15% on remainder
* may also manage that portion of other TIFF Funds not yet allocated to
equity managers
GENESIS ASSET MANAGERS LTD.
ORGANIZATION
c/o Genesis Investment Management Ltd.
21 Knightsbridge
London, England SW1X 7LY
phone: 071-235-5040
fax: 071-235-8065
Independent Investment Counsel
Controlled by Genesis Holdings
International Ltd.
Founded in 1989
Total Assets under Management: $1 bil (3/31/97)
REPRESENTATIVE CLIENTS
Ameritech
The Common Fund
Duke University
Ford Foundation
Frank Russell Trust Company
General Electric
General Motors Pension Fund
Mead Corporation
NYNEX
Shell Pension Trust
Southern California Edison
State of New Hampshire
State of Oregon
State of Wisconsin
University of California
University of Notre Dame
Westinghouse Electric
PERSONNEL
Key TIP Account Manager
Anthony Newsome, Managing Director
Trinity College, Oxford University
1989-93: Genesis Investment Management Ltd.
1980-89: Baring International Investment Management, Director
Other Personnel
Christopher Brown
Richard Carss
Paul Greatbatch
Mark Lightbown
Jeremy Paulson-Ellis
Jonathan Points
Catherine Vlasto
Alexander Wilberforce
Karen Yerburgh
Money Manager for the TIFF Multi-Asset, and TIFF Emerging
Markets Funds
INVESTMENT PHILOSOPHY
Philosophy: Global Emerging Markets
Assets Using This Philosophy: $1 bil (3/31/97)
Account Type: Separate Account
INVESTMENT APPROACH
Genesis believes that structural changes in developing economies offer
companies significant profit opportunities as markets open and
develop. The firm believes further that superior rates of return can best
be achieved by identifying those companies most able to exploit these
opportunities over the long term, rather than spreading investments
broadly across a market, or solely in the largest capitalization stocks.
Drawing on past experience to focus its search, Genesis investment directors
engage in the identification and assessment of potential existing
investments through an intensive schedule of visits to companies.
Emphasis is placed on assessment of management as well as on financial
analysis. The results of this research are distilled into five-year
projections of corporate earnings, which are then adjusted for local
inflation to enable cross-border comparisons to be made through the
medium of a proprietary data base covering around 300 companies in over
30 countries. Stocks are selected for investment on the basis of their
undervaluation relative to their real future earnings stream. Asset
allocation techniques are not used, but care is taken to reduce risk through
geographical diversification. A prudential limit of 15% at time of
purchase is placed on exposure to any one country. Portfolios contain an
average of 90-120 stocks, and typically include about 30 countries. Annual
turnover averages 28%.
MANAGER'S BENCHMARK
MSCI Emerging Markets Free Index
FEE PAID BY TIP TO THIS MANAGER
1.10% on first $50 million
0.90% on next $50 million
0.75% on next $25 million
0.60% on remainder
GOTHAM PARTNERS, L.P.
ORGANIZATION
110 East 42nd Street, 18th Floor
New York, NY 10017
phone: 212-286-0300
fax: 212-286-1133
Independent Investment Adviser
Controlled by William A. Ackman and David P. Berkowitz
Founded in 1993
Total Assets under Management: $180 mm (3/31/97)
REPRESENTATIVE CLIENTS
Clients not disclosed
PERSONNEL
Key Tip Account Managers
William A. Ackman, Partner
MBA/BA, Harvard Business School
1993-present: Gotham Partners
David P. Berkowitz, Partner
MBA, Harvard; BA, MIT
1993-present: Gotham Partners
Money Manager for the TIFF U.S. Equity Fund
INVESTMENT PHILOSOPHY
Philosophy: Gotham Partners, L.P.
Assets Using This Philosophy: $143 mm (3/31/97)
Account Type: Commingled Vehicle
INVESTMENT APPROACH
Gotham's investment methodology is predominantly value-based and research
intensive. It seeks investments in businesses or assets that generate
predictable cash flow streams at valuations which offer a substantial margin
of safety against loss and attractive long-term rates of return. The firm's
holdings comprise four categories: great businesses at fair prices; good
businesses of assets at extremely attractive prices; mispriced options; and
special situations. It is comfortable investing in any part of a company's
capital structure as long as the security offers an appropriate balance between
risk and return. Gotham often creates derivative securities when securities in
the marketplace do not offer the risk/reward profile it seeks. It generally
avoids investments that have infinite exposure to loss and limited potential
for gain, i.e., certain types of short selling, option writing, swaps and/or
futures. It also avoids securities that require a rapid resolution in order to
achieve an attractive rate of return. The firm prefers to concentrate its
investments rather than diluting its best ideas for the sake of greater
diversification. It generally does not use margin leverage and is comfortable
holding substantial cash balances when extraordinary investment opportunities
are unavailable.
MANAGER'S BENCHMARK
Wilshire 5000
FEE PAID BY TIP TO THIS MANAGER
1% of net assets per annum plus 20% of net profit above a hurdle rate equal
to a 10% preferred return (10% hurdle plus Gotham's annual fee).
GRANTHAM, MAYO, VAN OTTERLOO & Co. LLC
ORGANIZATION
40 Rowes Wharf
Boston, MA 02110
phone: 617-330-7500
fax: 617-261-0134
Independent Investment Counsel
Controlled by Jeremy Grantham, Richard Mayo, Eyk Van
Otterloo, and Kingsley Durant
Founded in 1977
Total Assets under Management: $26.7 bil (3/31/97)
REPRESENTATIVE CLIENTS
Brookings Institution
Duke University
GTE
Princeton University
Rockefeller Brothers Fund
PERSONNEL
Key Tip Account Managers
Jeremy Grantham
MBA, Harvard; BA, Sheffield University (UK)
1977-present: Grantham, Mayo, Van Otterloo & Co. LLC
Forrest Berkley
MBA/JD, Harvard; BA, Yale
1986-present: Grantham, Mayo, Van Otterloo & Co. LLC
Nardin Baker
MBA/MS/BS, University of Illinois
1995-present: Grantham, Mayo, Van Ottelroo & Co. LLC
1987-1995: National Investment Services
Mason Smith
BA, University of Virginia
1987-present: Grantham, Mayo, Van Otterloo & Co. LLC
Money Manager for the TIFF Multi-Asset Fund
INVESTMENT PHILOSOPHY
Philosophy: GMO Global Asset Allocation
Assets Using This Philosophy: $9.7 bil (3/31/97)
Account Tupe: Commingled Vehicle
INVESTMENT APPROACH
Asset allocation at GMO focuses on long-term fundamental value, overweighting
those asset classes expected to perform well over a five to ten year holding
period. Asset class weights therefore move relatively slowly over time,
following multi-year asset valuation cycles. The goal is to create a portfolio
that will outpreform its benchmark over the long term with lower volatility and
a bias towards performing well in bear markets.
MANAGER'S BENCHMARK
25% Wilshire 5000 / 55% EAFE Extended / 20% J.P.
Morgan Non-US Government Bond Index
FEE PAID BY TIP TO THIS MANAGER
Prorated based on account's actual asset mix, which must conform with asset
allocation ranges specified by TIP's directors. Asset class-specific fees
range from approximately 0.30% (30 bp) for fixed income to 1.00% (100 bp) for
emerging markets.
HARDING, LOEVNER MANAGEMENT, L.P.
ORGANIZATION
50 Division Street, Suite 401
Somerville, NJ 08876
phone: 908-218-7900
fax: 908-218-1915
Independent Investment Counsel
Controlled by Daniel D. Harding, CIO; David R. Loevner, CEO
Founded in 1989
Total Assets under Management: $1.4 bil (3/31/97)
REPRESENTATIVE CLIENTS
Carleton College
Columbia Foundation
Children's Hospital of Philadelphia
Drexel University
Richard and Rhoda Goldman Foundation
Johns Hopkins University
Robert Wood Johnson Foundation
National Gallery of Art
Philadelphia Musuem of Art
Public Welfare Foundation
Stuart Foundations
U.S. Olympic Foundation
PERSONNEL
Key TIP Account Managers
Simon Hallett, Senior Portfolio Manager
MA, Oxford
1991-present: Harding, Loevner Management
1984-90: Jardine Fleming Investment Management, Director
Daniel D. Harding, CFA, CIO
BA, Colgate University
1989-present: Harding, Loevner Management
1978-89: Rockefeller & Co., Senior Investment Manager
Other Personnel
David R. Loevner, CEO
MPhil/MSc, Oxford; AB, Princeton
Rockefeller & Co., Ltd., Managing Director
World Bank, Economist
Money Manager for the TIFF Multi-Asset and TIFF International Equity Funds
INVESTMENT PHILOSOPHY
Philosophy: International Equity
Assets Using This Philosophy: $1.0 bil (3/31/97)
Account Type: Separate Account
INVESTMENT APPROACH
HLM's investment approach is "bottom up." Stock selection criteria include
growth, quality, and value considerations. HLM seeks to identify
companies with capital strength, sustainable internally-generated
growth, high financial returns, capable and forthright management, and enduring
competitive advantages. It invests only in companies that it knows well,
generally through research and visitation conducted over a period of
years. Qualitative judgments formulated through contact with company
management and other global investors is supplemented by factual information
gathered from various sources, including stockbrokers. Valuation
tests, including local market and cross-border comparisons, help
determine when to invest in companies meeting the firm's growth and quality
standards. HLM invests for the long term, divesting only if a company's
shares become greatly overvalued or if its business results, management
quality, or competitive position change for the worse. Portfolios are broadly
diversified by country, industry, and size. Country weightings reflect the
results of stock selection, rather than any explicit allocation process.
However, prospects for its respective industry, national economy, and stock
market are important factors in HLM's evaluation of an individual stock and
thus strongly influence portfolio weightings. Foreign currency exposure
is hedged occasionally. Portfolios contain an average of 40 stocks.
Annual turnover averages 35%.
MANAGER'S BENCHMARK
MSCI All Country World ex US Index
FEE PAID BY TIP TO THIS MANAGER
GRAPH: The graph represents the minimum and maximum number of basis points that
a performance-fee based Money Manager can receive under its current
agreement.
Fee = 30 + [ .185 x ( Excess Return - 130 ) ] subject to Floor of 10 bp;
Cap of 150 bp
Measurement Period = Trailing 12 Months
Excess Return = Manager's Return - Benchmark Return
INVESTMENT RESEARCH COMPANY
ORGANIZATION
16236 San Dieguito Road, #2-20
Rancho Santa Fe, CA 92067
phone: 619-759-2949
fax: 619-759-2944
Independent Investment Counsel
Controlled by United Asset Management
Founded in 1985
Total Assets under Management: $7 bil (3/31/97)
REPRESENTATIVE CLIENTS
AHA Investments
Ameritech Corporation
Lockheed Corporation
Louisiana Municipal Employees
Retirement System
Minnesota Mining & Manufacturing
Oregon Retail Pension Trust Fund
Shell Oil Company
Virginia Retirement System
Western States OPEIU
PERSONNEL
Key TIP Account Managers
F.J. (Jerry) Gould, PhD, Chairman and CIO
PhD, University of Chicago
1985-present: Investment Research Company
previous experience: University of Chicago, Hobart W. Williams Professor
John D. Freeman, Executive Vice President
MA, University of Michigan; BA, University of Vermont
1996-present: Investment Research Company
previous experience: Martingale Asset Management
Ming Wang, Senior Vice President
MS, Princeton; MS, Courant Institute
1996-present: Investment Research Company
previous experience: TIAA-CREF
Other Personnel
C.B. (Tom) Garcia, PhD, Senior Vice President
PhD, Rensselaer Polytechnic Institute
University of Chicago, Professor
Money Manager for the TIFF Multi-Asset, and TIFF U.S. Equity Funds
INVESTMENT PHILOSOPHY
Philosophy: Large Cap Core Equity
Assets Using This Philosophy: $933 mm (3/31/97)
Account Type: Separate Account
INVESTMENT APPROACH
IRC believes that in order to achieve a competitive advantage in obtaining
above-market compound returns over extended time horizons, it is necessary
to go beyond the traditional playing field of in-depth analysis of a
relatively few groups of stocks. The firm's investment philosophy is that
optimal results are achieved by strategies and tactics which aim to
produce modest but consistent annual excess returns. At the outset, risk
control is achieved by holding twenty sectors at market weights and by the
application of high P/E and low dividend screens to eliminate those
stocks in each sector that are most vulnerable in market downslides.
Then, in each sector proprietary research is employed to adjust stock
weights to tilt sector characteristics toward those of the top performing
quintile of the overall market. These characteristics are quantified in terms
of many economic and fundamental parameters. In this way, computer-
based technology is used to process large amounts of data in order to focus
on characteristics of each stock in the benchmark universe and how those stocks
can be most effectively combined to create the desired total portfolio
characteristics. Style characteristics of the IRC portfolios will vary with
time so that excess returns are independent of dominant market style
(value or growth) and whether the market is in a rising or falling cycle.
Portfolios contain an average of 200 stocks. Annual turnover averages 80%.
MANAGER'S BENCHMARK
S&P 500 Stock Index
FEE PAID BY TIP TO THIS MANAGER
GRAPH: The graph represents the minimum and maximum number of basis points that
a performance-fee based Money Manager can receive under its current
agreement.
Fee = 20 + [ .242 x ( Excess Return - 95 ) ] subject to
Floor of 10 bp; Cap of 120 bp
Measurement Period = Trailing 12 Months
Excess Return = Manager's Return - Benchmark Return
INVESTMENT RESEARCH COMPANY
ORGANIZATION
16236 San Dieguito Road, #2-20
Rancho Santa Fe, CA 92067
phone: 619-759-2949
fax: 619-759-2944
Independent Investment Counsel
Controlled by United Asset Management
Founded in 1985
Total Assets under Management: $7 bil (3/31/97)
REPRESENTATIVE CLIENTS
AHA Investments
Ameritech Corporation
Lockheed Corporation
Louisiana Municipal Employees
Retirement System
Minnesota Mining & Manufacturing
Oregon Retail Pension Trust Fund
Shell Oil Company
Virginia Retirement System
Western States OPEIU
PERSONNEL
Key TIP Account Managers
F.J. (Jerry) Gould, PhD, Chairman and CIO
PhD, University of Chicago
1985-present: Investment Research Company
previous experience: University of Chicago, Hobart W. Williams Professor
John D. Freeman, Executive Vice President
MA, University of Michigan; BA, University of Vermont
1996-present: Investment Research Company
previous experience: Martingale Asset Management
Ming Wang, Senior Vice President
MS, Princeton; MS, Courant Institute
1996-present: Investment Research Company
previous experience: TIAA-CREF
Other Personnel
C.B. (Tom) Garcia, PhD, Senior Vice President
PhD, Rensselaer Polytechnic Institute
University of Chicago, Professor
Money Manager for the TIFF U.S. Equity Fund
INVESTMENT PHILOSOPHY
Philosophy: Market Neutral Defensive Equity
Assets Using This Philosophy: $228 mm (3/31/97)
Account Type: Separate Account
INVESTMENT APPROACH
IRC's Market Neutral Defensive Equity Strategies seeks to provide absolute
returns in excess of those produced by short-term Treasury bills, regardless
of whether the stock market is up or down. The firm attempts to generate
such returns by combining long positions in stocks it expects will outperform
the average stock with an equal dollar amount of short positions in stocks it
expects will underperform the average stock. Long positions are selected
from a 500 stock universe. Return expectations for each stock are based on
proprietary computer-based analytical tools that evaluate both fundamental
and technical aspects of company and stock performance. To ensure that funds
allocated by TIP to IRC are fully exposed to general stock market movements,
that portion of IRC's portfolios not committed to long stock positions is
overlaid with long positions in stock index futures. Gains or losses on these
futures positions are excluded from IRC's performance when computing
performance-based fees paid to the firm. Portfolios are dollar neutral
(dollars long = dollars short) in each of 20 industry sectors. Portfolios
contain an average of 200 to 300 stocks. Annual turnover on both long and
short portfolios averages 100%.
MANAGER'S BENCHMARK
Merrill Lynch 91-Day Treasury Bill Index
FEE PAID BY TIP TO THIS MANAGER
GRAPH: The graph represents the minimum and maximum number of basis points that
a performance-fee based Money Manager can receive under its current
agreement.
Fee = 30 + [ .098 x ( Excess Return - 105 ) ] subject to
Floor of 10 bp; Cap of 200 bp
Measurement Period = Trailing 12 Months
Excess Return = Manager's Return - Benchmark Return
JACOBS LEVY EQUITY MANAGEMENT
ORGANIZATION
280 Corporate Center, 3 ADP Blvd.
Roseland, NJ 07068
phone: 201-716-0066
fax: 201-716-0249
Independent Investment Counsel
Controlled by Bruce Jacobs and Kenneth Levy
Founded in 1986
Total Assets under Management: $7 bil (3/31/97)
REPRESENTATIVE CLIENTS
Digital Equipment
Deere & Company
Georgia-Pacific
GTE
New York State Common Retirement Fund
PERSONNEL
Key TIP Account Managers
Bruce I. Jacobs, Principal
PhD/MA, Wharton School
MSIA, Carnegie-Mellon University MS/BA, Columbia University
1986-present: Jacobs Levy Equity Management
Kenneth N. Levy, Principal
MBA/MA, Wharton School BA, Cornell University
1986-present: Jacobs Levy Equity Management
Money Manager for the TIFF Multi-Asset, and TIFF U.S. Equity Funds
INVESTMENT PHILOSOPHY
Philosophy: Active Broad Market
Assets Using This Philosophy: $2.0 bil (3/31/97)
Account Type: Separate Account
INVESTMENT APPROACH
Jacobs Levy has designed a proprietary quantitative system to identify and
exploit numerous stock market inefficiencies. The system is dynamic
and forward-looking, adjusting to the market's changing opportunities. Over
the course of the market cycle, the approach emphasizes a wide variety of
different stock characteristics, including growth, value, capitalization
size, earnings and price momentum, industry affiliations, and many others.
Stock selection derives from daily and weekly ranking of a universe consisting
of the 3000 most liquid U.S. stocks. Purchase candidates are generally taken
from the top 5 to 15% of the ranking. Attractive stocks will tend to have
characteristics and industry affiliations the system finds favorable
given economic conditions and investor psychology. Portfolio optimization is
utilized for an appropriate blend of risk and return, sufficient
diversification, and risk control relative to the benchmark. The Core
Equity (Broad Market) strategy is designed to outperform the Wilshire
5000 on a consistent basis, with a similar risk profile and low tracking
error. Industries are typically over- or underweighted by no more than
5 to 10% relative to the benchmark. Short selling, options and futures
contracts may also be utilized. Trading is highly systematized, relying
on passive and electronic techniques and networks to achieve low
transactions costs with highly efficient execution. Portfolios
contain an average of 150 or more stocks, with small individual position
sizes. Turnover averages 100% or more annually.
MANAGER'S BENCHMARK
Wilshire 5000 Stock Index
FEE PAID BY TIP TO THIS MANAGER
GRAPH: The graph represents the minimum and maximum number of basis points that
a performance-fee based Money Manager can receive under its current
agreement.
Fee = 20 + [ .324 x ( Excess Return - 95 ) ] subject to
Floor of 15 bp; Cap of 125 bp
Measurement Period = Trailing 12 Months
Excess Return = Manager's Return - Benchmark Return
LAZARD FRERES ASSET MANAGEMENT
ORGANIZATION
30 Rockefeller Plaza
New York, NY 10020
phone: 212-632-6000
fax: 212-332-5913
Independent Investment Counsel
Wholly owned by Lazard Freres & Company
Founded in 1848
Total Assets under Management: $8 bil (3/31/97)
Closed-End Funds $770 mm (3/31/97)
REPRESENTATIVE CLIENTS
General American Investors
Glaxo Group Pension Fund
GTE Investment Management
Howard Hughes Medical Institute
ITT Pension Fund
Marathon Oil
Phoenix Mutual
Transco Pension Fund
US Steel & Carnegie
PERSONNEL
Key TIP Account Managers
Alexander Zagoreos, Managing Director
MIA/MBA/BA, Columbia University
1977-present: Lazard Freres Asset Management
Guy Christie, Senior Vice President
Member of the Institute of Chartered Accountants in England and Wales
BA, Exeter University
1992-present: Lazard Freres Asset Management
1989-92: Lazard Brothers (London)
1985-92: Deloitte Haskins & Sells (London)
Lee Ann Cannon, Vice President
MBA, New York University; BA, University of Delaware
1991-present: Lazard Freres Asset Management
1990-91: Mitsubishi Bank
1989-90: Economic Consulting & Planning, Inc.
Money Manager for the TIFF Multi-Asset, and TIFF International Equity Funds
INVESTMENT PHILOSOPHY
Philosophy: International Active
Assets Using This Philosophy: $393 mm (3/31/97)
Account Type: Separate or Commingled
INVESTMENT APPROACH
Lazard Freres Asset Management seeks long-term capital appreciation
primarily through investing in an internationally diversified portfolio
of closed-end funds that invest in companies outside the United States.
The closed-end funds in which the Fund invests will ordinarily be trading at a
discount to their underlying net asset value. The manager uses a top down
approach seeking markets that it deems undervalued on a price to earnings,
price to cash, price to book, and return on asset basis. Using these
parameters, the manager uses closed end funds that have strong performance
records and that trade at steep discounts to asset value.
MANAGER'S BENCHMARK
MSCI All Country World Index or
MSCI All Country World ex US Index
(to be determined by FAI prior to account funding)
FEE PAID BY TIP TO THIS MANAGER
0.50% straight asset-based fee
LAZARD FRERES ASSET MANAGEMENT
ORGANIZATION
30 Rockefeller Plaza
New York, NY 10020
phone: 212-632-6000
fax: 212-332-5913
Independent Investment Counsel
Wholly owned by Lazard Freres & Company
Founded in 1848
Total Assets under Management: $38 bil (3/31/97)
Closed-End Funds $770 mm (3/31/97)
REPRESENTATIVE CLIENTS
Glaxo Group Pension Fund
Howard Hughes Medical Institute
ITT Pension Fund
Marathon Oil
Mayo Foundation
Phoenix Mutual
Swarthmore College
US Steel
Yale University
PERSONNEL
Key TIP Account Managers
Alexander Zagoreos, Managing Director
MIA/MBA/BA, Columbia University
1977-present: Lazard Freres Asset Management
Guy Christie, Senior Vice President
Member of the Institute of Chartered Accountants in England and Wales
BA, Exeter University
1992-present: Lazard Freres Asset Management
1989-92: Lazard Brothers (London)
1985-92: Deloitte Haskins & Sells (London)
Lee Ann Cannon, Vice President
MBA, New York University; BA, University of Delaware
1991-present: Lazard Freres Asset Management
1990-91: Mitsubishi Bank
1989-90: Economic Consulting & Planning, Inc.
Money Manager for the TIFF Multi-Asset,TIFF International Equity
and TIFF Emerging Markets Funds
INVESTMENT PHILOSOPHY
Philosophy: Emerging Markets Portfolio
Assets Using This Philosophy: $377 mm (3/31/97)
Account Type: Separate or Commingled
INVESTMENT APPROACH
Lazard Freres Asset Management seeks long-term capital appreciation
primarily through investing in an internationally diversified portfolio
of closed-end funds that invest in companies outside the United States.
The closed-end funds in which the Fund invests will ordinarily be trading at a
discount to their underlying net asset value. The manager uses a top down
approach seeking markets that it deems undervalued on a price to earnings,
price to cash, price to book, and return on asset basis. Using these
parameters, the manager uses closed end funds that have strong performance
records and that trade at steep discounts to asset value.
MANAGER'S BENCHMARK
MSCI Emerging Markets Free Index
FEE PAID BY TIP TO THIS MANAGER
0.50% straight asset-based fee
MARATHON ASSET MANAGEMENT LTD.
ORGANIZATION
Orion House
5 Upper St. Martin's Lane
London, England WC2H 9EA
phone: 071-497-2211
fax: 071-497-2399
Independent Investment Counsel
Controlled by William J. Arah, Jeremy J. Hosking, and
Neil M. Ostrer, Investment Directors
Founded in 1986
Total Assets under Management: $7.1 bil (3/31/97)
REPRESENTATIVE CLIENTS
Asea Brown Boveri Inc.
Allied Signal Corporation
GTE Corporation
Pennsylvania Public School Employee's Retirement System
US Air, Inc.
PERSONNEL
Key TIP Account Managers
Jeremy J. Hosking, Director
MA, Cambridge University
1986-present: Marathon Asset Management, Ltd.
previous experience: G.T. Management (Asia) Ltd.
William J. Arah, Director
MA, Oxford University
1987-present: Marathon Asset Management, Ltd.
previous experience: Goldman Sachs & Co. (Tokyo)
Neil M. Ostrer, Director
MA, Cambridge University
1986-present: Marathon Asset Management, Ltd.
Carnegie International, Director, Institutional Sales
GT Management, Manager and Director
Money Manager for the TIFF International Equity Fund
INVESTMENT PHILOSOPHY
Philosophy: Active International Equities
Assets Using This Philosophy: $5.1 bil (3/31/97)
Account Type: Separate Account
INVESTMENT APPROACH
The firm believes that above-market returns can be generated from
disciplined stock-picking in global equity markets. Marathon employs three
qualitative disciplines, all of which it believes have predictive power for
shareholder value. The essence of the firm's approach, which it refers to as
"supply side" analysis, is to focus on variables that are under the control
of companies, rather than the economic environment. In particular, Marathon
monitors the competitive environment within industries, focusing on
industries marked by consolidation and a declining number of competitors,
eschewing industries with rising competition. Levels of capital spending
are also monitored closely. At the company level, Marathon visits company
managements and evaluates specific reinvestment strategies within an
industry context. In country selection, priority is given to top down monetary
conditions rather than economic growth. Portfolios typically represent a hybrid
of value, growth and economic themes whose attributes would be difficult to
replicate using quantitative techniques. Portfolios contain an
average of 120 to 140 stocks. Annual turnover averages 50%.
MANAGER'S BENCHMARK
MSCI All Country World ex US Index
FEE PAID BY TIP TO THIS MANAGER
GRAPH: The garph represents the minimum and maximum number of basis points that
a performance-fee based Money Manager can receive under its current
agreement.
Fee = 40 + [ .167 x ( Excess Return - 140 ) ] subject to
Floor of 15 bp; Cap of 160 bp
Measurement Period = Trailing 12 Months
Excess Return = Manager's Return - Benchmark Return
MARTINGALE ASSET MANAGEMENT, L.P.
ORGANIZATION
222 Berkeley Street
Boston, MA 02116
phone: 617-424-4700
fax: 617-424-4747
Independent Investment Counsel
Controlled by Commerz International Capital Management
Founded in 1987
Total Assets under Management: $598 mm (3/31/97)
REPRESENTATIVE CLIENTS
Amoco Corporation
Nikko Securities
Saint-Gobain Corporation
UFCW International Union
PERSONNEL
Key TIP Account Manager
William E. Jacques, CFA, Executive Vice President, Chief Investment Officer
MBA, Wharton School; BA, Lafayette College
1987-present: Martingale Asset Management, L.P.
previous experience: Batterymarch Financial Management, Vice President, Trustee
Other Personnel
Patricia J. O'Connor, Sr. Vice President, Treasurer
University of Massachusetts, Boston College
Batterymarch Financial Management
Arnold S. Wood, President, CEO
BA, Trinity College
Batterymarch Financial Management
Mr. James X. Wilson, Sr. Vice President, Director of Marketing
MBA, Boston College; BA, Merrimack College
The Boston Company
Money Manager for the TIFF U.S. Equity Fund
INVESTMENT PHILOSOPHY
Philosophy: Active Completeness Manager
Assets Using This Philosophy: $232 mm (3/31/97)
Account Type: Separate Account
INVESTMENT APPROACH
The functions of the Martingale active completeness portfolio are, stated in
order of importance: (1) to ensure that the U.S. Equity Fund is not overly
under- or overweighted in important market sectors; (2) to minimize the
undesirable "misfit risk" characteristic of most multi-manager
fund structures, thereby limiting the Fund's exposure to uncompensated
volatility of its returns relative to returns on the Wilshire 5000; and (3)
in attempting to perform the two preceding functions, to add value where
possible through the selection of fundamentally underpriced stocks. It is
reasonable to think of the active completeness portfolio as customized
diversification. Many institutional funds experience risk from chronic
underexposure to the electric utility and telephone industries. Commonly used
asset weighting policies of active managers systematically underrepresent
large capitalization stocks. Overweighted positions in higher
volatility stocks, notably health care and drug companies, add uncompensated
risk. In performing its assigned duties, Martingale employs a variety of
computer-based analytical tools, including stock valuation techniques
that emphasize heavily an assessment of perceived investor preferences. The
firm uses a variety of sector-specific models (e.g., cyclical stocks are
analyzed differently than utilities) to analyze the prices investors currently
pay for earnings, assets, growth, and risk . Differences between the
perceived "fair market value" of issues and their market prices
represent opportunities for Martingale to generate incremental returns while
also ensuring that the Fund's holdings are properly diversified. Martingale
puts all trades out for competitive bid among several brokers and attempts to
keep trading costs well below instituitonal norms. Portfolios
contain an average of 200 to 300 stocks. Annual turnover ranges from
60% to 100%.
MANAGER'S BENCHMARK
Customized for TIFF U.S. Equity Fund
FEE PAID BY TIP TO THIS MANAGER
0.10% on first $100 million
0.08% on next $200 million
0.07% on next $200 million
0.05% on excess over $500 million
Percentages apply to total U.S. Equity Fund assets (reflecting Martingale's
unique role as active completeness manager)
MERCURY ASSET MANAGEMENT
ORGANIZATION
33 King William Street
London, England EC4R9AS
phone: 071-280-2800
fax: 071-280-2820
780 Third Avenue
New York, NY 10017
phone: 212-751-8340
fax: 212-751-8553
Independent Investment Counsel
Founded in 1975
Total Assets under Management: $6.5 bil (3/31/97)
REPRESENTATIVE CLIENTS
Asea Brown Boveri Inc.
Federal Express Corporation
General Motors Corporation
Hall Foundation
Howard Hughes Medical Institute
International Monetary Fund
MacArthur Foundation
Philip Morris
UMWA Health and Retirement Funds
United Nations Joint Staff Pension Fund
Washington State Investment Board
The World Bank
PERSONNEL
Key TIP Account Manager
C. Consuelo Brooke, Director
BS, Southampton University
1987-present: Mercury Asset Management (formerly Warburg Investment Management)
Other Personnel
James P. Hordern, Portfolio Manager
BA, Durham University
Deutsche Bank, Analyst
1990-present: Mercury Asset Management (formerly Warburg Investment Management)
Edoardo L.R. Mercadante, CFA, Portfolio Manager
MSc, City University Business School (London)
1993-present: Mercury Asset Management
Money Manager for the TIFF Multi-Asset, and TIFF International Equity Funds
INVESTMENT PHILOSOPHY
Philosophy: European Small Cap Equity
Assets Using This Philosophy: $2.0 bil (3/31/97)
Account Type: Separate Account
INVESTMENT APPROACH
European specialist management is a bottom-up stock picking approach that
focuses on small-capitalization companies. The firm's style has no
allocation restraints among the European markets, and its country
weightings are determined solely based on stock selection. The majority of
the firm's holdings are in smaller-capitalization issues with a market
value under $1 billion, and three-quarters of its holdings are not
represented in the MSCI European Index. Mercury invests in stocks in 18
European countries and the number of countries represented in a portfolio
will generally range from twelve to fourteen. Stock selection emphasizes
individual security selection based on fundamental analysis. Investment ideas
are generated by the firm's internal European research team and its
extensive network of contacts. Portfolios contain an average of 75
stocks, with no position representing more than 4%. Annual turnover averages
30%.
MANAGER'S BENCHMARK
NWS (FT) European Smaller Companies Stock Index
FEE PAID BY TIP TO THIS MANAGER
0.50% straight asset-based fee
PALO ALTO INVESTORS
ORGANIZATION
431 Florence Street, Suite 200
Palo Alto, CA 94301
phone: 415-325-0772
fax: 415-325-5028
Independent Investment Counsel
Controlled by William L. Edwards, President
Founded in 1989
Total Assets under Management: $50 mm (3/31/97)
REPRESENTATIVE CLIENTS
Clients not disclosed
PERSONNEL
Key TIP Account Manager
William L. Edwards, President
MS/BS, Stanford
1989-present: Palo Alto Investors
1987-89: Volpe & Covington, Partner
1982-87: T. Rowe Price, Vice President
Money Manager for the TIFF Multi-Asset, and TIFF U.S. Equity Funds
INVESTMENT PHILOSOPHY
Philosophy: Micro-Cap Opportunistic Small Cap Value
Assets Using This Philosophy: $50 mm (3/31/97)
Account Type: Separate Account
INVESTMENT APPROACH
Palo Alto Investors specializes in very small, publicly-traded equities. The
firm concentrates on companies with market values under $150 million; its
median capitalization is typically between $60 and $90 million. These
securities tend to have a very low correlation to the market and are less
efficiently priced than larger capitalization stocks. Palo Alto does
its own extensive, original research. This work is designed to enable the
firm to look beyond past earnings difficulties or product transitions to
find companies with limited downside risk and excellent upside potential.
The firm believes that quality management is extremely important,
particularly in small companies. It visits every company in which it
invests, looking for high inside ownership and competent and motivated
management teams. In doing so, the firm seeks demonstrable proof that
management's goals are aligned with shareholder goals, which is often a
reliable predictor of above-average stock market performance. Portfolios
are highly concentrated and have low (30-40%) annual turnover.
MANAGER'S BENCHMARK
Russell 2000 Stock Index
FEE PAID BY TIP TO THIS MANAGER
GRAPH: The graph represents the minimum and maximum number of basis points that
a performance-fee based Money Manager can receive under its current
agreement.
Fee = 20 + [ .198 x ( Excess Return - 95 ) ] subject to
Floor of 10 bp; Cap of 200 bp
Measurement Period = Trailing 12 Months
Excess Return = Manager's Return - Benchmark Return
POMBOY CAPITAL CORPORATION
ORGANIZATION
Pomboy Investors, LP
Two Pickwick Plaza, Suite 210
Greenwich, CT 06830
phone: 203-622-2927
fax: 203-622-3025
Independent Investment Adviser
Controlled by Richard M. Pomboy
Founded in 1992
Total Assets under Management: $115 mm (3/31/97)
REPRESENTATIVE CLIENTS
Clients not disclosed
PERSONNEL
Key Tip Account Managers
Richard M.Pomboy
MBA, Harvard; AB, Dartmouth
1992-present: Pomboy Capital Corporation
previous experience: Goldman Sachs & Co.
Mark G. DeFranco
MBA, Columbia; BA, Bates College
1994-present: Pomboy Capital Corporation
1989-94: Comstock Partners
previous experience: Solomon Brothers
INVESTMENT PHILOSOPHY
Philosophy: Pomboy Investors, LP
Assets Using This Philosophy: $115 mm (3/31/97)
Account Type: Commingled Vehicle
INVESTMENT APPROACH
Pomboy Investors invest primarily in stocks of gold mining companies. While
manyof these firms operate in developing countries, virtually all portfolio
securities are traded on exchanges in Australia, Canada, South Africa or the
U.S. The portfolio's objective is to outperform the XAU gold stock index by
a substantial margin, and to participate fully in the appreciation of gold
shares that rising gold prices would likely produce. However, in an effort to
outperform its benchmark during periods of flat or falling gold prices, the
firm invests substantially (at least 50% of partnership capital) in smaller gold
mining firms with high expected growth rates. The firm conducts independent
research on purchase candidates, with purchase decisions based primarily on
its assessment of each firm's net present value per share relative to its
current stock price. Due to the paucity of brokerage-sponsored research of
gold shares, the firm's external sources comprise primarily gold industry
executives, plus private investors who specialize in gold mining shares. The
portfolio occasionally contains put or call options on the XAU gold stock
index or on individual gold shares. Typically, the actual dollar amount spent
on puts or calls is less than 2% of the total portfolio. The partnership has
not invested in gold bullion futures and has no plans to do so.
MANAGER'S BENCHMARK
91-Day Treasury Bills plus 5% per annum
FEE PAID BY TIP TO THIS MANAGER
1% of net assets per annum plus 20% of net profit
SEIX INVESTMENT ADVISORS, INC.
ORGANIZATION
300 Tice Boulevard
Woodcliff Lake, NJ 07675-7633
phone: 201-391-0300
fax: 201-391-0303
Independent Investment Counsel
Controlled by Christina Seix, Chairman and CIO
Founded in 1992
Total Assets under Management: $1.0 bil (3/31/97)
REPRESENTATIVE CLIENTS
City of Hope
Denver Employees
Indiana State Teachers
Los Angeles Philharmonic
Pacific Gas & Electric
Sisters of Mercy
Town of Fairfield (CT)
The Turrell Foundation
United Methodist Church
University of Pittsburgh Medical Center
Systems
PERSONNEL
Key TIP Account Managers
Christina Seix, CFA, Chairman and CIO
MA, State University of New York; BA, Fordham
1992-present: Seix Investment Advisors, Inc.
1987-92: MacKay-Shields, Chairman and CEO
John Talty, CFA, President
BA, Connecticut College
1993-present: Seix Investment Advisors, Inc.
1991-92: JP Morgan Securities, Senior
Fixed Income Strategist
1988-91: Morgan Stanley & Co., Portfolio Strategist
Barbara Hoffmann, Managing Director - Fixed Income
1994-present: Seix Investment Advisors, Inc.
1993-94: MetLife Investment Management
Corp., Senior Bond Portfolio Manager
1991-93: Capital Growth Management, Senior Bond Portfolio Manager
Money Manager for the TIFF Bond Fund
INVESTMENT PHILOSOPHY
Philosophy: Full Market Bond
Assets Using This Philosophy: $721 mm (3/31/97)
Account Type: Separate Account
INVESTMENT APPROACH
The firm's fixed income investment approach is founded on four
cornerstones: (1) Targeted Duration; (2) Yield Tilt; (3) Comprehensive
Sector Construction; and (4) the use of Proprietary Analytics. Targeted
Duration: Portfolios are managed with a duration that is close to the duration
of their benchmark. Value is added through sector, security, and yield
curve decisions rather than maturity management. Yield Tilt: Although
portfolios are managed on a total return basis, a premium is placed on
yield. Income is considered the most powerful contributor to fixed income
returns. Non-Treasury sectors generally play a dominant role in the
portfolio. The yield of the benchmark is used as a performance goal in
addition to its total return. Comprehensive Sector Construction:
Sector commitments are made based on the duration contribution of each
sector to the overall duration of the portfolio rather than the sector
weighting. Proprietary Analytics: Because of the growing complexity of
the bond market, the firm believes that the use of proprietary techniques is
key to identifying value and to adequately controlling risk.
Portfolios contain an average of 40 to 50 positions. Annual turnover averages
200% to 250%.
MANAGER'S BENCHMARK
Lehman Government/Corporate Bond Index
FEE PAID BY TIP TO THIS MANAGER
GRAPH: The graph represents the minimum and maximum number of basis points that
a performance-fee based Money Manager can receive under its current
agreement.
Fee = 15 + [ .231 x ( Excess Return - 65 ) ] subject to
Floor of 10 bp; Cap of 80 bp
Measurement Period = Trailing 12 Months
Excess Return = Manager's Return - Benchmark Return
SMITH BREEDEN ASSOCIATES, INC.
ORGANIZATION
100 Europa Drive, Suite 200
Chapel Hill, NC 27514
phone: 919-967-7221
fax: 919-933-3157
Independent Investment Counsel
Controlled by Douglas T. Breeden, Chairman of the Board
Founded in 1982
Total Assets under Management: $3.2 bil (3/31/97)
REPRESENTATIVE CLIENTS
Amdahl Corporation
Columbia/HCA Healthcare Corporation
Eastman Kodak Company
Federal Home Loan Mortgage Corporation
State of Florida, Division of Treasury
State of New Mexico Public Employees
Retirement Association
Unisys Corporation
PERSONNEL
Key TIP Account Managers
Daniel C. Dektar, Principal, Director
MBA, Stanford; BS, California-Berkeley
1986-present: Smith Breeden Associates, Inc.
Timothy D. Rowe, Principal
MBA, Chicago; BA, Duke University
1988-present: Smith Breeden Associates, Inc.
William F. Quinn, Principal
MS/BS, MIT
1986-present: Smith Breeden Associates, Inc.
Key TIP Contact
Stephen A. Eason, CFA, Principal, Director
MBA, Wharton; BS, Arkansas
Salomon Brothers, Vice President
Chase Manhattan Bank, Assistant Treasurer
Other Personnel
Douglas T. Breeden, Chairman of the Board
PhD, Stanford; BS, MIT
Stanford/Chicago/Duke, Professor of Finance
The Journal of Fixed Income, Editor
Michael J. Giarla, President and COO
MBA, Stanford; BA, Harvard
Goldman Sachs & Company, Associate
Money Manager for the TIFF Bond Fund
INVESTMENT PHILOSOPHY
Philosophy: Bond
Assets Using This Philosophy: $2.3 bil (3/31/97)
Account Type: Separate Account
INVESTMENT APPROACH
Smith Breeden believes that in-depth research can provide a superior
understanding of fixed income security relative value, and the goal of its
research effort is to identify investments that generate risk-adjusted
returns in excess of the market return. By constructing a portfolio of such
securities and matching the portfolio's effective duration to the benchmark
duration the firm seeks to produce a total return in excess of the benchmark
return without incremental interest rate risk. Smith Breeden"s research
seeks to identify attractive investment opportunities in the Agency mortgage-
backed security market, and the firm's portfolios are typically concentrated
in this high credit quality sector. The firm's prepayment forecasting and
mortgage option-adjusted pricing techniques are the outgrowth of fifteen
years of proprietary research and development. This technology has
enabled Smith Breeden portfolio managers to detect and measure
differences in prepayment forecasts among different sets of investors, and
in turn to construct portfolios that seek to exploit these market
inefficiencies. Smith Breeden believes that the incremental return available
from relative value analysis and research is significantly greater and
more consistent than the incremental return from predicting the direction of
interest rates; therefore, its professionals do not incorporate any
interest rate forecasts into their investment decisions. Portfolios
contain an average of 30 to 50 positions. Annual turnover averages
between 200% and 300%.
MANAGER'S BENCHMARK
Lehman Mortgage Backed Securities Index
FEE PAID BY TIP TO THIS MANAGER
GRAPH: The graph represents the minimum and maximum number of basis points that
a performance-fee based Money Manager can receive under its current
agreement
Fee = 20 + [ .315 x ( Excess Return - 70 ) ] subject to
Floor of 10 bp; Cap of 85 bp
Measurement Period = Trailing 12 Months
Excess Return = Manager's Return - Benchmark Return
SMITH BREEDEN ASSOCIATES, INC.
ORGANIZATION
100 Europa Drive, Suite 200
Chapel Hill, NC 27514
phone: 919-967-7221
fax: 919-933-3157
Independent Investment Counsel
Controlled by Douglas T. Breeden, Chairman of the Board
Founded in 1982
Total Assets under Management: $3.2 bil (3/31/97)
REPRESENTATIVE CLIENTS
Amdahl Corporation
Columbia/HCA Healthcare Corporation
Eastman Kodak Company
Federal Home Loan Mortgage Corporation
State of Florida, Division of Treasury
State of New Mexico Public Employees
Retirement Association
Unisys Corporation
PERSONNEL
Key TIP Account Managers
Daniel C. Dektar, Principal, Director
MBA, Stanford; BS, California-Berkeley
1986-present: Smith Breeden Associates, Inc.
Timothy D. Rowe, Principal
MBA, Chicago; BA, Duke University
1988-present: Smith Breeden Associates, Inc.
William F. Quinn, CFA, Principal
MS/BS, MIT
1986-present: Smith Breeden Associates, Inc.
Key TIP Contact
Stephen A. Eason, CFA, Principal, Director
MBA, Wharton; BS, Arkansas
Salomon Brothers, Vice President
Chase Manhattan Bank, Assistant Treasurer
Other Personnel
Douglas T. Breeden, Chairman of the Board
PhD, Stanford; BS, MIT
Stanford/Chicago/Duke, Professor of Finance
The Journal of Fixed Income, Editor
Michael J. Giarla, President and COO
MBA, Stanford; BA, Harvard
Goldman Sachs & Company, Associate
Money Manager for the TIFF Short-Term Fund*
INVESTMENT PHILOSOPHY
Philosophy: Custom 6-month
Assets Using This Philosophy: $765 mm (3/31/97)
Account Type: Separate Account
INVESTMENT APPROACH
Smith Breeden believes that in-depth research can provide a superior
understanding of fixed income security relative value, and the goal of its
research effort is to identify investments that generate risk-adjusted
returns in excess of the market return. By constructing a portfolio of such
securities and matching the portfolio's effective duration to the benchmark
duration, the firm seeks to produce a total return in excess of the benchmark
return without incremental interest rate risk. Smith Breeden's research
seeks to identify attractive investment opportunities in the Agency mortgage-
backed security market, and the firm's portfolios are typically concentrated
in this high credit quality sector. The firm's prepayment forecasting and
mortgage option-adjusted pricing techniques are the outgrowth of fifteen
years of proprietary research and development. This technology has
enabled Smith Breeden portfolio managers to detect and measure
differences in prepayment forecasts among different sets of investors, and
in turn to construct portfolios that seek to exploit these market
inefficiencies. Smith Breeden believes that the incremental return available
from relative value analysis and research is significantly greater and
more consistent than the incremental return from predicting the direction of
interest rates; therefore, its professionals do not incorporate any
interest rate forecasts into their investment decisions. Portfolios
contain an average of 30 to 50 positions. Annual turnover averages
between 200% and 300%.
MANAGER'S BENCHMARK
Merrill Lynch 182-Day Treasury Bill
Index
FEE PAID BY TIP TO THIS MANAGER
GRAPH: The graph represents the minimum and maximum number of basis points that
a performance-fee based Money Manager can receive under its current
agreement.
Fee = 10 + [ .400 x ( Excess Return - 20 ) ] subject to
Floor of 5 bp; Cap of 75 bp
Measurement Period = Trailing 12 Months
Excess Return = Manager's Return - Benchmark Return
* may also manage that portion of TIFF Funds not yet allocated to equity
managers
STANDARD PACIFIC CAPITAL LLC
ORGANIZATION
600 California Street
Suite 1880
San Francisco, CA 94108
phone: 415-352-7100
fax: 415-352-7117
Indepdend Investment Counsel
Controlled by Andrew Midler
Founded in 1995
Total Assets under Management: $520 mm (3/31/97)
REPRESENTATIVE CLIENTS
Dartmouth College
Princeton University
Sun America
PERSONNEL
Key TIP Account Managers
Andrew Midler, Portfolio Manager
MBA, Harvard; MA/BA, Stanford University
1995-present: Standard Pacific Capital LLC
1994-1995: CS First Boston Investment Mgmt
Ralph Long, Chief Financial Officer
BA, Haverford College
1996-present: Standard Pacific Capital LLC
1993-1996: Bank of America
Daniel Martin, Investment Principal
MBA, Harvard; BA, Stanford University
1995-present: Standard Pacific Capital LLC
1994-1995: Strome, Susskind Investment Management
David Wagonfeld, Investment Principal
MBA, Harvard; BA, Stanford Univesity
1995-present: Standard Pacific Capital LLC
1994-1995: The Boston Consulting Group
Chris Kang, Investment Principal
BA, UCLA
1996-present: Standard Pacific Capital LLC
1995-1996: Morgan Stanley
Money Manager for the TIFF Multi-Asset Fund
INVESTMENT PHILOSOPHY
Philosophy: Opportunistic
Assets Using This Philosophy: $310 mm (3/31/97)
Account Type: Separate Account
INVESTMENT APPROACH
Standard Pacific employs fundamental, "bottom up" research in an effort to
identify misunderstood or ignored companies with improving fundamentals whose
stock prices appear unduly low. While the firm devotes more time and energy to
researching U.S. issues than it does to foreign ones, a typical portfolio
comprises issues from approximately 20 countries with at least five countries
overweighted relative to their index weightings at any point in time. Because
the firm favors companies whose strategies and prospects are misunderstood or
ignored by other investors, portfolios tend to be biased toward companies
with small or moderate market capitalizations ($50 milion - $2 billion).
Holding periods are determined primarily by stock price movements. However,
when initiating a position the firm seeks to identify a catalyst that will
cause sufficient appreciation to occur with six months. In practice, the firm's
holding period averages one year. A typical portfolio contains 100 issues.
as a matter of conscious choice by the firm's principals, most of the capital
managed by Standard Pacific is subject to performance-based fees (including
funds managed on behalf of TIP).
MANAGER'S BENCHMARK
67% S&P 500
33% MSCI All Country World ex US
FEE PAID BY TIP TO THIS MANAGER
GRAPH: The graph represents the mimimum and maximum number of basis points that
a performance fee based money manager can receive under its current
agreement.
Fee = 15 + [.270 x (Excess Return - 115)] subject to Floor of 15 bp;
Cap of 200 bp
Measurement Period = Trailing 12 Months
Excess Return = Manager's Return - Benchmark Return
TCW FUNDS MANAGEMENT, INC.
A member of the TCW Group
ORGANIZATION
865 South Figueroa
Los Angeles, California 90017
phone: 213-244-0000
fax: 213-488-3366
Independent Investment Counsel
May be deemed to be controlled by Robert A. Day, Chairman
of the Board of Directors of the Money Manager, by virtue
of the aggregate ownership of Mr. Day and his family of
more than 25% of the outstanding voting stock of The TCW
Group, Inc.
Founded in 1971
Total Assets under Management: $53 bil (12/31/96)
REPRESENTATIVE CLIENTS
The Rose Hills Foundation
University of Florida Foundation
PERSONNEL
Key TIP Account Managers
Stefan D. Abrams, CFA, Managing Director and Chief Investment Officer for Asset
Allocation
MBA, AB, Harvard University
1992 to present: TCW Funds Management, Inc. and Trust Company of the West
1989-92: Kidder, Peabody, Managing Director
1973-89: Oppenheimer & Co., General Partner
Edward C. Franks, Managing Director - Asset Allocation
PhD, RAND Graduate School for Public Policy Analysis;
MS, MIT; BA, University of California at San Diego
1993-present: TCW Funds Management, Inc. and Trust Company of the West
1991-92: TSA Capital Management, Consultant
1988-91: Huntington Advisors, CIO
Jeffrey E. Gundlach, Managing Director - Fixed Income
AB, Darbmouth College
1985-present: TCW Funds Management, Inc. and affiliates
Money Manager for the TIFF Multi-Asset Fund
INVESTMENT PHILOSOPHY
Philosophy: Multi-Strategy Fixed Income
Assets Using This Philosophy: $1 bil (2/28/97)
Account Type: Separate or Commingled
INVESTMENT APPROACH
TCW's fixed income management services have historically emphasized specialized
investment of portfolio in a variety of fixed income niche markets by experts
in those areas. For the TIFF Multi-Asset Fund, the portfolio can be allocated
among U.S. Government Securities, U.S. Corporate Bonds, Mortgage-Backed
Securities, High Yield Bonds, International Investment Grade Securities, and
Emerged Markets Fixed Income Securities. In addition, the portfolio managers
have the flexibility to allocate a small portion (up to 20%) of the portfolio
to equity securities.
Each portfolio component is managed by investment specialists who work
exclusively in defined bond market sectors. The essence of TCW's strategy is
to incorporate the bond market's most attractive sectors and to deliver
outperformance within each sector thus incorporating a bottom-up approach as
well as a top-down approach. The allocation of capital among various
components (within ranges agreed upon by each client) is done by specialist
managers working in concert with TCW's Multi-Strategy Fixed Income Committee.
The allocations are reconsidered formally each month or more frequently at
ad hoc meetings as needed.
MANAGER'S BENCHMARK
100% Lehman Aggregate Bond Index
FEE PAID BY TIP TO THIS MANAGER
0.35% on first $100 million
0.30% on next $100 million
0.25% on remainder (over $200 million)
VARDE PARTNERS, INC.
ORGANIZATION
3600 West 80th Street
Minneapolis, MN 55431
phone: 612-893-1554
fax: 612-893-9613
Independent Investment Counsel
Controlled by George G. Hicks, Gregory S. McMillan,
and Marcia L. Page
Founded in 1993
Total Assets under Management: $170 mm (3/31/97)
REPRESENTATIVE CLIENTS
Carnegie Corporation of New York
EDS Retirement Plan
Father Flanagan's Boys Home
University of Louisville
University of Vermont
PERSONNEL
Key TIP Account Managers
George G. Hicks, Principal
JD, University of Minnesota; BA, Gustavus Adolphus College
1993-present: Varde Partners, Inc.
Gregory S. McMillan, Principal
MBA Indiana University; BA, University of Nebraska
1993-present: Varde Partners, Inc.
Marcia L. Page, Principal
MBA, University of Minnesota; BA, Gustavus Adolphus College
1994-present: Varde Partners, Inc.
Money Manager for the TIFF Multi-Asset Fund
INVESTMENT PHILOSOPHY
Philosophy: The Varde Fund IV
Assets Using This Philosophy: $170 mm (3/31/97)
Account Type: Commingled Account
INVESTMENT APPROACH
Varde focuses on nonperforming, subperforming, and non-investment grade debt
investments. The firm seeks to invest in debt obligations at below their
"intrinsic" value after having identified an exit catalyst, the occurence of
which will cause the debt obligation to appreciate in value. By monitoring
and participating in several niches of the distressed debt marketplace, Varde
seeks to allocate assets to those niches having the best reward-risk. Currently
Varde is invested in indebtedness of bankrupt and financially troubled
companies, capital structure arbitrage trading involving high yield bonds,
nonperforming and subperforming commercial and residential mortgage loans and
consumer debt and similar non-US debt obligations. Varde manages a well-
diversified portfolio with a typical position representing 4% to 5% of assets.
MANAGER'S BENCHMARK
91-Day Treasury Bills plus 5% per annum
FEE PAID BY TIP TO THIS MANAGER
1.5% of net assets per annum plus 20% of net profit
WELLINGTON MANAGEMENT COMPANY
ORGANIZATION
75 State Street
Boston, Massachusetts 02109
phone: 617-951-5000
fax: 617-263-4022
Independent Investment Counsel
Controlled by Managing Partners: Robert W. Doran,
Duncan M. McFarland and John R. Ryan
Founded in 1933
Total Assets under Management: $136 bil (3/31/97)
REPRESENTATIVE CLIENTS
AT&T Company
The Dow Chemical Company
Hartford Life Insurance Company
International Monetary Fund
J. Paul Getty Trust
Massachusetts Institute of Technology
SunAmerical Inc.
The Vanguard Group
PERSONNEL
Key TIP Account Manager
Ernst H. von Metzsch, Portfolio Manager
PhD, Harvard; MSC, University of Leiden
1973-present: Wellington Management Company, LLP
Karl E. Bandtel, Analyst
MS, University of Wisconsin
1990-present: Wellington Management Company, LLP
Paul M. Mecray, III, Analyst
MBA, Wharton
1968-present: Wellington Management Company, LLP
Nilesh Undavia, Analyst
MBA, Dartmouth (1993)
1993-present: Wellington Management Company, LLP
Kim Williams, Analyst
MSC, University of London
1986-present: Wellington Management Company, LLP
Money Manager for the TIFF Multi-Asset Fund
INVESTMENT PHILOSOPHY
Philosophy: Natural Resource-Related Stocks
Assets Using This Philosophy: $1.3 bil (3/31/97)
Account Type: Separate Account
INVESTMENT APPROACH
Fundamental research is central to the investment process of Wellington
Management Company. The firm's proprietary research efforts allow for
an independent evaluation of market opportunities. The firm expects to
outperform the market over time primarily through superior bottom-up
security selection. Value added decisions are typically accomplished
through analysis of the quality of companies' assets and internal
reinvestment opportunities, combined with the analysis of how companies
formulate their investment plans and react to changes in the environment.
Wellington's research-oriented approach to the natural resource sector
specifically draws upon investment professionals who are highly
specialized. The companies in which the firm invests vary widely with
respect to factors such as leverage, growth, yield, and risk. Companies
within the natural resource-related industries are subject to long cycles,
the length of which are determined by industry factors (the petroleum
industry), and general economic conditions (metals producers).
These industries also have cycles which are generally self-correcting;
consequently, the best prospective returns are typically in currently out-
of-favor securities. Identifying quality management teams is crucial to
determining which firm can capitalize on opportunities for increased
shareholder value.
MANAGER'S BENCHMARK
70% Energy sector of MSCI World Index
20% Gold Mines sector of MSCI World Index
10% Non-Ferrous Metals; Forest Products and Paper;Misc. Materials and
Commodities sectors of MSCI World Index
FEE PAID BY TIP TO THIS MANAGER
0.45% on first $50 million
0.40% on next $50 million
0.35% on remainder (over $100 million)
WESTPORT ASSET MANAGEMENT, INC.
ORGANIZATION
253 Riverside Avenue
Westport, CT 06880
phone: 203-227-3601
fax: 203-226-6306
Independent Investment Counsel
Controlled by Andrew J. Knuth, Chairman; Ronald H.Oliver, President
Founded in 1983
Total Assets under Management: $972 mm (3/31/97)
REPRESENTATIVE CLIENTS
American Red Cross
Army & Air Force Exchange Service Trust
Danbury Hospital Endowment
Harvard University
McGraw-Hill Master Trust
Rockefeller Brothers Fund
Yale University
PERSONNEL
Key TIP Account Manager
Andrew J. Knuth, CFA, Chairman
MBA, New York University; BA, Dickinson
1983-present: Westport Asset Management previous experience: Lazard Freres &
Co., Founder, Institutional Equity Group
Ronald H. Oliver, President
BS, San Jose State University
1981-present: Westport Asset Management
previous experience: Starwood Corporation, President
Other Personnel
Albert H. Cohn
BS, Northwestern University
David J. Greene & Co., Sr. Partner, Portfolio Manager
Paine Webber, Portfolio Manager
Money Manager for the TIFF U.S. Equity Fund
INVESTMENT PHILOSOPHY
Philosophy: Small Cap Value
Assets Using This Philosophy: $972 mm (3/31/97)
INVESTMENT APPROACH
Westport Asset Management emphasizes "small cap" low price/earnings
stocks. The firm seeks to generate superior investment returns without
assuming the risks generally associated with an "aggressive management"
style. The firm believes stock selection and adherence to relative
valuation analysis are the principal factors in superior long-term
performance. Its investment approach seeks to identify companies whose
future earnings, cash flow, or return on equity are expected to improve
materially. To be considered as investments, the firm must see
compelling evidence that a stock can appreciate a minimum of 50% over a 18
to 24 month period. These stocks must sell at or below market valuations or
below valuations of peer groups. The firm's portfolios emphasize but are not
limited to companies with capitalizations under $400 million.
Westport works to achieve 5% positions on each of its core holdings, however,
it will exceed that percentage if a company's fundamental outlook is
sufficiently attractive. Portfolios contain an average of 20 to 50 stocks
depending on the asset size of the portfolio. Annual turnover averages
20%.
MANAGER'S BENCHMARK
Russell 2000 Stock Index
FEE PAID BY TIP TO THIS MANAGER
GRAPH: The graph represents the minimum and maximum number of basis points that
a performance-fee based Money Manager can receive under its current
agreement.
Fee = 25 + [ .250 x ( Excess Return - 100 ) ] subject to
Floor of 15 bp; Cap of 200 bp
Measurement Period = Trailing 12 Months
Excess Return = Manager's Return - Benchmark Return
WHIPPOORWILL ASSOCIATES, INC.
ORGANIZATION
Management:
11 Maritime Avenue
White Plains, NY 10606
phone: 914-683-1002
fax: 914-683-1242
Administration:
Vega Offshore Fund, Ltd.
c/o Hemisphere Management, Ltd.
Hemisphere House
9 Church Street
P.O. Box HM 951
Hamilton HM DX, Bermuda
Independent Investment Counsel
Controlled by Shelley F. Greenhaus
Founded in 1990
Total Assets under Management: $635 mm (3/31/97)
REPRESENTATIVE CLIENTS
Harvard University
Fred Meyer Memorial Trust
Rockefeller Foundation
University of Virginia
PERSONNEL
Key TIP Account Managers
Shelley F. Greenhaus, President, Managing Director
MBA, New York University; BA, York College, City
University of New York
1990-present: Whippoorwill Associates, Inc.
1983-1990: Oppenheimer & Co., Inc.
Shelby S. Werner, VP, Managing Director
AAS, Bennett College
1990-present: Whippoorwill Associates, Inc.
1988-1990: Progressive Partners, LP
Pamela M. Lawrence, Managing Director
MBA, Pace University; BA, Marymount College
1992-present: Whippoorwill Associates, Inc.
1988-1992: Magten Asset Management Corp.
David A. Strumwasser, Managing Director and General
Counsel
JD, Boston College; BA, SUNY-Buffalo
1993-present: Whippoorwill Associates, Inc.
1984-1993: Berlack, Israels & Liberman
Money Manager for the TIFF Multi-Asset Fund
INVESTMENT PHILOSOPHY
Philosophy: Vega Offshore Fund, Ltd.
Assets Using This Philosophy: $76 mm (3/31/97)
Account Type: Commingled Vehicle
INVESTMENT APPROACH
The Vega Offshore Fund's investment objective is to realize long-term capital
appeciation by investing in the debt and equity securities, private claims and
other obligations of bankrupt or troubled companies. The Vega Offshore Fund
maintains a diversified portfolio consisting of both publicly traded debt
securities and private claims, as well as equity securities and other financial
instruments.
MANAGER'S BENCHMARK
91-Day Treasury Bills plus 5% per annum
FEE PAID BY TIP TO THIS MANAGER
1.5% of net assets pre annum plus 20% of net profit
WYSER-PRATTE MANAGEMENT COMPANY, INC.
ORGANIZATION
63 Wall Street
New York, NY 10005
phone: 212-495-5350
fax: 212-495-5360
Independent Investment Counsel
Controlled by Guy Wyser-Pratte
Founded in 1991
Total Assets under Management: $480 mm (3/31/97)
REPRESENTATIVE CLIENTS
Dassault Aviation
Eastman Kodak
McKinsey & Company
University of Rochester
PERSONNEL
Key TIP Account Managers
Guy Wyser-Pratte, President
MBA, New York University; BA, University of Rochester
1991-present: Wyser-Pratte Management Company, Inc.
Eric Longmire, Senior Managing Director
MBA/BA, Stanford University
1991-present: Wyser-Pratte Management Company, Inc.
Money Manager for the TIFF Multi-Asset Fund
INVESTMENT PHILOSOPHY
Philosophy: Euro-Partners Arbitrage Fund, Ltd.
Assets Using This Philosophy $480 mm (3/31/97)
Account Type: Commingled Vehicle
INVESTMENT APPROACH
Wyser-Pratte is an independent, employee-owned firm specializing solely in
global risk arbitrage (event arbitrage). Various investment arbitrage
techniques, such as options hedging and short selling, are used by the Fund to
insulate the position from general market movements so that the investment risk
is oriented toward the risk of completion or failure of the transaction rather
than the risk of general market movements. Wyser-Pratte takes an active role
in corporate governance positions to defend portfolio positions and enhance
potential returns.
MANAGER'S BENCHMARK
91-Day Treasury Bill plus 5% per annum
FEE PAID BY TIP TO THIS MANAGER
1% of net assets per annum plus 20% of net profit
APPENDIX B
SERVICE PROVIDER PROFILES
AMT CAPITAL SERVICES, INC.
ORGANIZATION DESCRIPTION OF SERVICES
AMT Capital Services, Inc. is a
mutual fund administration and
600 Fifth Avenue, 26th Floor distribution company. An
New York, NY 10020 affiliate of AMT Capital
phone: 212-332-5211 Advisers, Inc., a private
fax: 212-332-5190 investment and advisory firm
specializing in the financial
Mutual Fund Administrator and Distributor services industry, AMT Capital
Founded in 1992 Services was formed to fulfill
the needs of institutional
investment management firms
CLIENTS SERVED offering fund products to their
investors.
FFTW Funds, Inc. As Fund Administrator, AMT
Sponsored by Fischer Francis Trees & Capital Services is responsible
Watts, Inc. for supervising all aspects of
Harding, Loevner Funds, Inc. a funds' operations, including
Sponsored by Harding, Loevner Management, oversight of other fund service
LP providers, with the exception of
Holland Ballanced Fund investment advisers or sub-
Sponsored by Holland & Co., LLC advisers. The firm seeks to
TIFF Investment Program, Inc. lower each fund's administrative
Sponsored by Foundation Advisers, Inc. cost structure through its
application of technology,
experience in managing complex
KEY PERSONNEL operations in the mutual fund
industry, and through the
economics of scale of working
Alan M. Trager, Chairman with more than one fund group.
MPA, John F. Kennedy School of Government,
Harvard University The firm was organized in early
BA, Syracuse University 1992. Its owners are former
Morgan Stanley & Co., Managing Director officers of Morgan Stanley,
who helped develop and market
Carla E. Dearing, President, The Pierpont Funds, a $5
MBA, University of Chicago billion fund complex owned by
BA, University of Michigan J.P. Morgan. The head of fund
Morgan Stanley & Co., Vice President administration is the former
head of The Vanguard Group's
William E. Vastardis, Senior Vice President, Private Lable Administration
Fund Administration Group which provided full-
BS, Villanova University service administration to more
The Vanguard Group, Vice President and than 45 mutual funds with
head of Private Label Administration aggregate assets of
Group approximately $10 billion prior
to its sale to the Mutual Fund
Service Company in Boston.
AMT Capital Services currently
has almost $3 billion in assets
under administration in mutual
funds and partnerships
INVESTORS BANK & TRUST COMPANY
ORGANIZATION
89 South Street
Boston, MA 02111
phone: 617-330-6700
fax: 617-330-6033
Providing securities processing services since 1962
Aditional offices in Dublin, Toronto, and the Cayman Islands.
SERVICES
Global Custody Cash Management
Master/Feeder Processing Transfer Agency
Fund Administration Foreign Exchange
Hub & Spoke Processing Securities Lending
Offshore Administration
Multi-Currency Fund Accounting
DIMENSIONS
$110 billion in Custody Assets
1,270 Daily Priced Funds
60 Unit Investment Trusts
Global Network in 72 Countries
885 Employees
CUSTODIAL OR
TRANSFER AGENCY CLIENTS
Aeltus Investment Management M Financial Group
AMT Capital Advisers, Inc. Mass Mutual Life Insurance
Asia House Funds Massachusetts Financial Services
Atlas Funds Northeast Investors
Bank Julius Baer Paine Webber Incorporation
Barclays Global Investors Palladian
Brandes Investment Partners PanAngora Asset Management
The Copeland Companies Republic National Bank of New York
COVA Life RREEFF
David L. Babson & Co., Inc. Salomon Brothers Asset Management
Deutsche Bank Signature Financial Group
Diversified Investment Advisors
(AEGON) Smith Barney
Eaton Vance Corp. Standish Ayer & Wood
FFTW Funds, Inc. Thomas J. Herzfeld & Co. Inc.
Goldman Sachs Asset Management Touchstone Family of Funds
Grantham, Mayo, Van Otterloo & Co.
(GMO) Funds Union Bank of Switzerland
Guiness Flight Investment William Blair & Co.
Management Ltd. Wells Fargo Bank
Harvard Endowment Funds Western Reserve Life
John Hancock Funds and Assurance Company
Separate Accounts Wright Investors Services
Custodian and Transfer Agentfor TIFF Investment Program
SERVICE APPROACH
Investors Bank focuses its resources on developing the people, systems, and
technology to support the ever-changing financial services industry. The Bank
is committed to tailored, responsive service built on a conscious strategy
of employing professional personnel at all levels and supporting them with
extensive training and sophisticated technology. The Bank's structure is
designed to facilitate quick, accurate responses by expert professionals who
are dedicated to individual clients.
In order to provide clients with the best service at a competitive price,
Investors Bank relies on fully integrated, state-of-the-art systems. For
example, the high level of automation with the Investors Bank Fund Accounting
and Custody Tracking System (FACTS) has elevated the typical fund accountant's
role away from mundane tasks like data entry to more analytical and control-
oriented tasks. The benefits to clients are increased control, improved
accuracy, and ultimately, superior service.
Investors Bank's client base is global in scope and includes some of the most
recognized institutions in the business. Responsiveness and attention to
detail are the foundation for the long-term partnerships between the Bank and i
ts clients.
The Transfer Agency operations of Investors Bank focus on the
institutional investor. Highly trained shareholder servicing personnel are
dedicated to each client and become intimately familiar with that client's
products. The result is a satisfied investor whose inquiries are addressed
by a shareholder representative who knows both the investor's account
history and the product options available.
KEY PERSONNEL
Kevin Sheehan, President & CEO
BA, Accounting, University of Massachusetts
Bank of New England, Senior Vice President
Michael Rogers, Executive Managing Director, Custody/Fund Accounting
MBA, College of William and Mary
BA, Economics, Boston College
Bank of New England, Manager
Robert Mancuso, Marketing/Client Management
MBA, Boston College
BA, Finance, Boston College </R
APPENDIX C
DESCRIPTION OF INDICES
DESCRIPTION OF INDICES
OVERVIEW. This Appendix describes the various indices referenced in this
Prospectus and Statement of Additional Information. The indices described
below will be used to gauge the performance of individual Funds and
individual Money Managers, with certain Money Managers' fees tied directly to
the Money Managers' returns relative to the returns produced by their
respective indices (hereinafter referred to as "benchmarks"). The
following information with respect to each index has been supplied by the
respective preparer of the index or has been obtained from other publicly
available information.
EXPLANATION OF HOW INDICES WILL BE USED. The table below denotes the indices
relevant to each Fund and to those Money Managers whose compensation will be
tied to their relative performance. As shown, in some cases the Money
Managers have comparative indices different than the overall benchmark of the
Funds that employ them. In all such cases, however, the securities included
in the Money Managers' benchmarks are subsets of the securities included in
the relevant Fund's performance benchmark. For example, the Lehman
Government/Corporate Bond Index is a subset of the Lehman Aggregate Bond
Index.
Fund / Money Manager Index
TIFF Multi-Asset Fund Constructed Index (described on page C-3)
Bee & Associates, Inc. MSCI All Country World
Canyon Capital Management, L.P. 91-Day Treasury Bills plus 5% per annum
Concentric Capital Management 91-Day Treasury Bills plus 5% per annum
Delaware International Advisers Ltd. MSCI EAFE Index
Farallon Capital Management, LLC 91-Day Treasury Bills plus 5% per annum
Genesis Asset Managers Ltd. MSCI Emerging Markets Free Index
Grantham, Mayo, Van Otterloo
& Co., LLC 25% Wilshire 5000; 55% EAFE Extended;
20% J.P. Morgan Non-US Government Bond
Index
Harding, Loevner Management, L.P. MSCI All Country World or All Country
World ex USA
Investment Research Company S&P 500 Stock Index
Jacobs Levy Equity Management Wilshire 5000 Stock Index
Lazard Freres Asset Management MSCI Emerging Markets Free Index or MSCI
All Country World Index
Mercury Asset Management FTA European Smaller Companies Stock Index
Palo Alto Investors Russell 2000 Stock Index
Pomboy Capital Corporation 91-Day Treasury Bills plus 5% per annum
Standard Pacific Capital LLC 67% S&P 500; 33% MSCI All Country World
ex US
TCW Funds Management, Inc. Lehman Aggregate Bond Index
Varde Partners, Inc. 91-Day Treasury Bills plus 5% per annum
Wellington Management Company 70% Energy sector of MSCI World Stock
Index; 20% Gold Mines sector of MSCI
World Stock Index; 10% Commodities
sector of MSCI World Stock Index
Whippoorwill Associates, Inc. 91-Day Treasury Bills plus 5% per annum
Wyser-Pratte Management Company,
Inc. 91-Day Treasury Bills plus 5% per annum
TIFF International Equity Fund MSCI All Country World ex USA Index
Bee & Associates, Inc. MSCI All Country World ex USA Index
City of London Investment
Management Co., Ltd. MSCI Emerging Markets Free Index
Delaware International Advisers Ltd. MSCI EAFE Index
Harding, Loevner Management, L.P. MSCI All Country World ex USA Index
Lazard Freres Asset Management MSCI Emerging Markets Free Index or MSCI
All Country World Index
Marathon Asset Management Ltd. MSCI All Country World ex USA Index
Mercury Asset Management FTA European Smaller Companies Stock Index
TIFF Emerging Markets Fund MSCI Emerging Markets Free Index
City of London Investment
Investment Management Co., Ltd. MSCI Emerging Markets Free Index
Emerging Markets Management MSCI Emerging Markets Free Index
Everest Capital Limited MSCI Emerging Markets Free Index
Genesis Asset Managers Ltd. MSCI Emerging Markets Free Index
Lazard Freres Asset Management MSCI Emerging Markets Free Index
TIFF U.S. Equity Fund Wilshire 5000 Stock Index
Aronson + Partners S&P 500 Stock Index
Concentric Capital Management Wilshire 5000 Index
Eagle Capital Management S&P 500 Stock Index
Gotham Partners, L.P. Wilshire 5000 Index
Investment Research Co.-Large Cap S&P 500 Stock Index
Investment Research Co.
- Market Neutral* Merrill Lynch 91-Day Treasury Bill Index
Jacobs Levy Equity Management Wilshire 5000 Stock Index
Martingale Asset Management, L.P. Customized for TIFF U.S. Equity Fund
Palo Alto Investors Russell 2000 Stock Index
Westport Asset Management, Inc. Russell 2000 Stock Index
TIFF Bond Fund Lehman Brothers Aggregate Bond Index
Atlantic Asset Management
Partners, L.L.C. Lehman Government/Corporate Bond Index
Fischer Francis Trees & Watts, Inc. JP Morgan Global Government Bond Index
(Hedged)
Seix Investment Advisors, Inc. Lehman Government/Corporate Bond Index
Smith Breeden Associates, Inc. Lehman Mortgage Backed Securities Index
TIFF Short-Term Fund Merrill Lynch 182-Day Treasury Bill Index
Fischer Francis Trees & Watts, Inc. Merrill Lynch 182-Day Treasury Bill Index
Smith Breeden Associates, Inc. Merrill Lynch 182-Day Treasury Bill Index
* TIP employs stock index futures to ensure that assets allocated to this
Money Manager's "market neutral" portfolio will participate fully in
general stock market movements.
The intent of performance-based fee arrangements entailing benchmarks that
are narrower than the overall benchmark for the Fund employing such
arrangements is to compensate managers fairly based on their performance
relative to benchmarks that reflect adequately their particular focus and
investment disciplines. For example, although the Bond Fund's overall
benchmark is the Lehman Aggregate Bond Index, the Fund's mortgage-backed
securities specialist may invest substantially all of its segment of the Fund
in such securities, and it is both fairer to this Money Manager and in the
Fund's best interests to tie this Money Manager's fees to its performance
relative to the mortgage-backed securities component of the Lehman Aggregate
Bond Index, rather than to the entire Index. Although compensating managers
based on their performance relative to performance benchmarks that are
narrower than those of the Funds that employ them may mean that some managers
will receive relatively high fees even if the Funds that employ them
underperform their overall benchmarks, careful structuring of fee
arrangements and careful allocation of assets among money managers can reduce
the probabilities that a given Fund will fail to meet its performance
objective. As noted in the section of this Prospectus entitled INVESTMENT
OBJECTIVES, POLICIES AND RESTRICTIONS, each Fund seeks to produce total returns
net of all expenses that exceed those of its performance benchmark.
EXPLANATION OF "CAPITALIZATION WEIGHTING." Several of the indices described
below are "capitalization weighted." Capitalization weighting is a method of
weighting each component security in an index by its market value (also
commonly referred to as "capitalization") so that it will influence the
index in proportion to its respective size. The price of any stock
multiplied by the number of shares outstanding gives the current market value
for that particular issue. This market value determines the relative
importance of the security. Market values for individual stocks are added
together to obtain their group market value. With respect to fixed income
indices, the term "capitalization weighting" is seldom used, but the method
used to prepare such indices resembles capitalization weighting in the sense
that each issue's weighting in the index reflects the total outstanding
market value of that issue as of the measurement date. This method is
sometimes referred to as "market value weighting."
TIFF MULTI-ASSET FUND BENCHMARK. The Multi-Asset Fund's benchmark is a
constructed index comprising 25% Wilshire 5000; 30% MSCI All Country World ex
US; 15% 3-Month Treasury Bill plus 5% per annum; 10% inflation-hedging
index; 15% Lehman Aggregate Bond Index; and 5% Lehman Majors ex US Bond
Index. The inflation-hedging index comprises 70% MSCI Energy Sources plus
Energy Equipment & Services; 20% MSCI Gold Mines; and 10% MSCI Non-Ferrous
Metals plus Forest Products & Paper plus Miscellaneous Materials & Commodities.
FOREIGN COMMON STOCK INDICES
Financial Times Actuaries European Smaller Companies Index. The FTA European
Smaller Companies Index comprises the bottom 10% by market capitalization of
each country in the European sector of the FTA Indices. The Index consists
of approximately 350 stocks traded in 14 countries. Using the bottom 10% of
each country rather than of the entire universe ensures that each country has
roughly the same weighting as within the full FTA World Indices. Because
most of the markets are very top heavy, the bottom 10% by market
capitalization may represent up to 50% of the number of stocks in a given
country. The Smaller Companies Index is rebalanced semi-annually to reflect
new stocks that have been added to the FTA World Indices. Stocks that are
eliminated from the FTA World Indices are also eliminated from the Smaller
Companies Index at the same time (usually 3 to 4 times per year).
Morgan Stanley Capital International All Country World Stock Index. The
MSCI All Country World Index is a capitalization-weighted index intended to
portray the total return produced by a representative group of all
domestically listed stocks in each component country. As of March 31, 1997
the MSCI All Country World Index consisted of 2,504 companies traded on stock
markets in over 47 countries. The weighting of the Index by country is
indicated in the exhibit entitled MSCI Country Weightings. Unlike certain
other broad-based indices, the number of stocks included in the MSCI All
Country World Index is not fixed and may vary to enable the Index to continue
to reflect the primary home markets of the constituent countries. Changes in
the Index will be announced when made.
MSCI All Country World ex US Stock Index. Similar to the MSCI All
Country World Stock Index, the MSCI All Country World ex US Stock Index is a
capitalization-weighted index intended to portray the total return produced
by a representative group of all domestically listed stocks in each component
country. As of March 31, 1997, the MSCI All Country World ex US Index
consisted of 2,126 companies traded on stock markets in over 46 countries.
The MSCI All Country World ex US is used as the performance benchmark for the
International Equity Fund because, in the opinion of TIP's Directors, it
represents the universe of non-U.S. stocks in which a properly diversified
group of active international equity managers of the type FAI seeks to
assemble invest.
MSCI Europe, Australia and Far East Index (EAFE). The MSCI EAFE Index
is composed of a sample of companies representative of the market structure
of 20 European and Pacific Basin countries and 38 industries worldwide. As
of March 31, 1997, the EAFE Index comprised almost 1,100 companies, and
represented approximately 82% of the MSCI All Country World ex US Index.
MSCI Emerging Markets Free Index. The MSCI Emerging Markets Free Index
is a market capitalization weighted stock index composed of a sample of
companies representative of the market structure of Asian, Latin American,
and European emerging markets which are open to foreign investment. The
Index commenced on January 1, 1988, and includes 26 countries, representing
approximately 60% of the capitalization of each underlying market. As of
March 31, 1997, the Index comprised 1,015 companies, and represented
approximately 14% of the MSCI All Country World ex US Index.
U.S. COMMON STOCK INDICES
Russell 2000 Stock Index. The Russell 2000 Stock Index is a
capitalization-weighted index that consists of the smallest 2,000 companies in
the Russell 3000 Index, which is composed of 3,000 large U.S. companies, as
determined by market capitalization. The Russell 3000 Index represents
approximately 98% of the investable U.S. equity market. The companies in the
Russell 2000 Index represent approximately 10% of the Russell 3000 Index
total market capitalization, with an average capitalization of $640 million
as of March 31, 1997. The largest company in the index had an approximate
market capitalization of $2.5 billion. The market capitalization of each
security is adjusted for private holdings and cross-ownership to determine its
weight in the Index. This method counts only the "investable" portion of the
universe, i.e., that segment in which investors can freely transact shares.
Only common stocks belonging to corporations domiciled in the U.S. and its
territories are eligible for inclusion in the Russell indices.
S&P 500 Stock Index. The S&P 500 Stock Index is a capitalization-weighted
index intended to portray the total return produced by a representative group
of U.S. common stocks. Construction of the index proceeds from industry
groups to the whole. Currently there are four groups: 400 Industrials, 40
Utilities, 20 Transportation, and 40 Financial. Since some industries are
characterized by companies of relatively small stock capitalization, the
index does not comprise the 500 largest U.S. publicly traded companies.
Component stocks are chosen solely with the aim of achieving a distribution
by broad industry groupings that approximates the distribution of these
groupings in the New York Stock Exchange common stock population, taken as
the assumed model for the composition of the total market. Each stock added
to the index must represent a viable enterprise and must be representative of
the industry group to which it is assigned. lts market price movements must,
in general, be responsive to changes in industry affairs. The formula
adopted by Standard & Poors is generally defined as a "base-weighted
aggregate" expressed in relatives with the average value for the base period
(1941-43) equal to 10. These group values are expressed as a relative, or
index number, to the base period (1941-43) market value.
Wilshire 5000 Stock Index. The Wilshire 5000 Stock Index is a
capitalization-weighted index which consists of all U.S. common stocks that
trade on a regular basis on either the New York or American Stock Exchange or
on the NASDAQ over-the-counter market. More than 6,000 stocks are included
in the Wilshire 5000 Index. These stocks include the large-capitalization
stocks that comprise the S&P 500 Index, (with the exception of Royal Dutch
and Unilever, N.V., which trade on the New York Stock Exchange as ADRs), as
well as the medium- and small-capitalization companies that comprise the
Wilshire 4500 Index. The Wilshire 5000 is used as the performance benchmark
for the U.S. Equity Fund because, in the opinion of TIP's Directors, it
represents the universe of stocks in which most active domestic equity
managers invest and is representative of the performance of publicly traded
domestic equities most institutional investors purchase. The capitalization
of the Index is approximately 85% NYSE, 2% AMEX, and 13% OTC.
BOND INDICES
Lehman Brothers Aggregate Bond Index. This Index measures the total
investment return (capital change plus income) provided by a universe of
fixed income securities, weighted by the market value outstanding of each
security. The Index encompasses four classes of investment grade fixed
income securities in the United States: U.S. Treasury and agency securities,
corporate debt obligations, mortgage-backed securities, and asset-backed
securities. As of March 31, 1996, these four classes represented the
following proportions of the Index's total market value:
U.S. Treasury and Agency Securities 51%
Corporate Debt Securities 18%
Mortgage-Backed Securities 30%
Asset-Backed Securities 1%
As of March 31, 1997, approximately 5,857 issues (including bonds,
notes, debentures, and mortgage issues) were included in the Index,
representing more than $4.6 trillion in market value. The securities included
in the Index generally meet the following criteria, as defined by Lehman
Brothers: an effective maturity of not less than one year; an outstanding
market value of at least $100 million for U.S. Government issues and $25
million for all other issues; and investment grade quality - i.e., rated a
minimum of Baa by Moody's Investors Service, Inc. or rated a minimum BBB by
Standard & Poors Corporation. Price, coupon, and total return are reported for
all sectors on a month-end to month-end basis. All returns are market value
weighted inclusive of accrued interest.
On March 31, 1997, the Index's effective weighted average maturity and
duration were 8.75 years and 4.68 years, respectively, and the weighted
average quality of issues comprising the Index was Aaa1 (using credit ratings
of Moody's Investor Service, Inc.).
Lehman Brothers Government/Corporate Index. This Index, a subset
representing approximately 70% of the Lehman Brothers Aggregate Bond Index,
comprises the Government and Corporate Bond Indices. The Government Bond
Index comprises: (1) all public obligations of the U.S. Treasury, excluding
flower bonds and foreign targeted issues; (2) all publicly issued debt of
U.S. Government agencies and quasi-federal corporations; and (3) corporate
debt guaranteed by the U.S. Government. The Corporate Bond Index includes:
(1) all publicly issued, fixed-rate, non-convertible investment grade
domestic corporate debt; and (2) Yankee bonds, which are dollar-denominated
SEC registered public, non-convertible debt issued or guaranteed by foreign
sovereign governments, municipalities or governmental agencies, or
international agencies.
Lehman Brothers Mortgage-Backed Securities Index. This Index is also a
subset of the Lehman Brothers Aggregate Bond Index, representing the residual
29% of the Index not included in the Government/Corporate subset. This Index
comprises all fixed-rate securities backed by mortgage pools of the GNMA,
FHLMC, and FNMA. Graduated Payment Mortgages (GPMs) are included, but
Graduated Equity Mortgages (GEMs) are not included.
Lehman Brothers Majors ex US Bond Index. The Lehman Brothers Majors ex US
Bond Index measures the total investment return of the 12 largest global
government bond markets, excluding the US. These markets include Australia,
Belgium, Canada, Denmark, France, Germany, Italy, Japan, the Netherlands,
Spain, Sweden, and the United Kingdom. All country components are weighted
according to market capitalization except Japan, which is weighted according
to the market capitalization of the 40 largest Japanese government bonds.
J.P. Morgan Global Government Bond Index. The J.P. Morgan Government Bond
Index, calculated daily, tracks traded, fixed-rate domestic government bonds
from thirteen countries. The Index measures the total, principal, and
interest returns of the markets of these countries. The countries included
in the Index are: Australia, Belgium, Canada, Denmark, France Germany,
Italy, Japan, the Netherlands, Spain, Sweden, the United Kingdom, and the
United States. The weightings of each market are determined by the
individual security weighting on a gross market value basis, and on a net
market value for the principal return. The Index tracks only issues that are
readily available for purchase at actively quoted prices. All instruments
included in the Index must be tradable and redeemable for cash, and they must
not appeal exclusively to domestic investors for local tax or regulatory
reasons. Of the total non-U.S. fixed income domestic government bonds in the
world, approximately 60% are considered to be "investable." The Index
tracks only issues within this traded universe. Security types included in
the Index are straight, put, call, sinking fund, purchase fund, extendible,
conversion and double-dated. All bonds have maturities of greater than one
year.
J.P. Morgan Global Government Non-US Bond Index. The J.P. Morgan Global
Government Non-US Bond Index is a subset of the J.P. Morgan Global Government
Bond Index, and includes countries listed above except the United States.
SHORT-TERM INDICES
Merrill Lynch 91-Day Treasury Bill Index. The Merrill Lynch 91-Day
Treasury Bill Index is a 3-month constant maturity total rate of return
index. This calculation includes a daily mark-to-market of the portfolio,
and upon the issuance of a "new" Treasury Bill, the "old" Treasury Bill is
sold and the gain or loss is included in the portfolio return.
Merrill Lynch 182-Day Treasury Bill Index. The Merrill Lynch 182-Day
Treasury Bill Index is a 6-month constant maturity total rate of return
index. This calculation includes a daily mark-to-market of the portfolio,
and upon the issuance of a "new" Treasury Bill, the "old" Treasury Bill is
sold and the gain or loss is included in the portfolio return.
MSCI Country Weightings
As of February 29, 1996
MSCI MSCI MSCI
All Country All Country EAFEE MSCI Emerging
Index: World World ex USA Markets Free
Benchmark for: Certain TIFF TIFF International Certain TIFF TIFF Emerging
Managers Equity Fund Managers Markets Fund
Europe 29.2% 49.3% 60.0%
Austria 0.2% 0.3% 0.4%
Belgium 0.6% 1.1% 1.3%
Denmark 0.5% 0.8% 1.0%
Finland 0.4% 0.6% 0.7%
France 3.6% 6.1% 7.5%
Germany 4.5% 7.6% 9.3%
Ireland 0.2% 0.3% 0.4%
Italy 1.6% 2.6% 3.2%
Netherlands 2.5% 4.20% 5.1%
Norway 0.3% 0.5% 0.6%
Spain 1.1% 1.9% 2.3%
Sweden 1.3% 2.2% 2.7%
Switzerland 3.0% 5.1% 6.2%
United Kingdom 9.5% 16.0% 19.5%
Pacific 18.2% 30.6% 37.3%
Australia 1.5% 2.5% 3.0%
Hong Kong 1.7% 2.9% 3.6%
Japan 14.1% 23.9% 29.1%
New Zealand 0.2% 0.3% 0.4%
Singapore 0.6% 1.1% 1.3%
North America 43.0% 4.0%
Canada 2.3% 4.0%
United States 40.7%
Emerging Markets 9.6% 16.2% 2.7% 100.0%
Argentina 0.3% 0.5% 3.4%
Brazil 1.2% 2.0% 13.8%
Chile 0.3% 0.5% 3.7%
China 0.0% 0.1% 0.5%
Colombia 0.1% 0.1% 0.8%
Czech Republic 0.1% 0.2% 1.1%
Greece 0.1% 0.2% 1.4%
Hungary 0.0% 0.1% 0.5%
India 0.4% 0.8% 5.3%
Indonesia 0.4% 0.7% 5.1%
Israel 0.2% 0.3% 2.1%
Jordan 0.0% 0.0% 0.1%
Korea* 0.7% 1.1% 3.9%
Malaysia 1.3% 2.2% 2.7% 15.4%
Mexico 0.7% 1.2%
Mexico Free 8.0%
Pakistan 0.1% 0.1% 0.7%
Peru 0.1% 0.1% 1.1%
Philippines 0.3% 0.5%
Philippines Free
Poland 0.0% 0.1% 3.3%
Portugal 0.2% 0.3% 2.1%
South Africa 1.0% 1.6% 11.5%
Sri Lanka 0.0% 0.0% 0.1%
Taiwan 1.5% 2.6% 9.0%
Thailand 0.3% 0.5% 3.8%
Turkey 0.2% 0.3% 1.9%
Venezuela 0.1% 0.1% 1.0%
Total 100.0% 100.0% 100.0% 100.0%
* Korea and Taiwan are included in the Emerging Markets Free Index at 50% of
their market capitalization.
Source: Morgan Stanley Capital International Perspective, April, 1997.
Note: Numbers may not add to totals due to rounding.
APPENDIX D
QUALITY RATING DESCRIPTIONS
QUALITY RATING DESCRIPTIONS
STANDARD & POORS CORPORATION
AAA Bonds rated AAA are highest grade debt obligations. This rating
indicates an extremely strong capacity to pay principal and interest.
AA Bonds rated AA also qualify as high-quality obligations. Their
capacity to pay principal and interest is very strong, and in the
majority of instances they differ from AAA issues only by a small
degree.
A Bonds rated A have a strong capacity to pay principal and interest,
although they are more susceptible to the adverse effects of changes
in circumstances and economic conditions.
BBB Bonds rated BBB are regarded as having adequate capacity to pay
interest or principal. Although these bonds normally exhibit
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and principal.
BB and Lower Bonds rated BB, B, CCC, CC and C are regarded, on balance,
as predominately speculative with respect to the issuer's capacity to
pay interest and principal in accordance with the terms of the
obligation. BB indicates the lowest degree of speculation and C the
highest degree of speculation. While such bonds may have some
quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.
The ratings AA to C may be modified by the addition of a plus or
minus sign to show relative standing within the major rating
categories.
Municipal notes issued since July 29, 1984 are designated "SP-1,"
"SP-2," or "SP-3." The designation SP-1 indicates a very strong
capacity to pay principal and interest. A plus sign is added to
those issues determined to possess overwhelming safety characteristics.
A-1 Standard & Poors Commercial Paper ratings are current assessments of
the likelihood of timely payments of debts having original maturity
of no more than 365 days. The A-1 designation indicates that the
degree of safety regarding timely payment is very strong.
A-2 The capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as high as
for issues designated A-1.
MOODY'S INVESTORS SERVICE, INC.
Aaa Bonds rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or
exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, foreseeable
changes are most unlikely to impair the fundamentally strong
position of such issues.
Aa Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, 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 because fluctuations of protective elements may be of
greater amplitude, or because there may be other elements present
that make the long-term risks appear somewhat larger than the Aaa
securities.
A Bonds rated A possess many favorable investment attributes and may
be considered as upper-medium grade obligations. Factors giving
security to principal and interest are considered adequate, but
elements may be present that suggest a susceptibility to impairment
sometime in the future.
Baa Baa rated bonds are considered medium-grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present, but certain
protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements
because their future cannot be considered as well assured.
Uncertainty of position characterizes bonds in this class, because
the protection of interest and principal payments may be very
moderate and not well safeguarded.
B and Lower Bonds which are rated B generally lack characteristics of a
desirable investment. Assurance of interest and principal payments
or of maintenance of other terms of the security over any long
period of time may be small. Bonds which are rated Caa are of poor
standing. Such securities may be in default of there may be present
elements of danger with respect to principal or interest. Bonds
which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings. Bonds which are rated C are the lowest rated class of
bonds and issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
Moody's applies the numerical modifiers 1, 2, and 3 in each generic
rating classification from Aa through C in its corporate bond rating
system. The modifier 1 indicates that the security ranks in the
higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates that the issue
ranks in the lower end of its generic rating category.
Moody's ratings for state, municipal and other short-term
obligations are designated Moody's Investment Grade ("MIG"). This
distinction is in recognition of the differences between short-term
credit risk and long-term risk. Factors affecting the liquidity of
the borrower are uppermost in importance in short-term borrowing,
while various factors of great importance in long-term borrowing
risk are of lesser importance in the short run.
MIG-1 Notes bearing this designation are of the best quality, enjoying
strong protection, whether from established cash flows of funds for
their servicing or from established and broad-based access to the
market for refinancing, or both.
MIG-2 Notes bearing this designation are of favorable quality, with all
security elements accounted for, but lacking the undeniable strength
of the previous grade. Market access for refinancing, in particular,
is likely to be less well established.
P-1 Moody's Commercial Paper ratings are opinions of the ability of
issuers to repay punctually promissory obligations not having an
original maturity in excess of nine months. The designation "Prime-
1" or "P-1" indicates the highest quality repayment capacity of
the rated issue.
P-2 Issuers have a strong capacity for repayment of short-term
promissory obligations.
THOMSON BANKWATCH, INC.
A The company issuing the debt obligation possesses an exceptionally
strong balance sheet and earnings record, translating into an
excellent reputation and unquestioned access to its natural money
markets. If weakness or vulnerability exists in any aspect of the
company's business, it is entirely mitigated by the strengths of the
organization.
A/B The company issuing the debt obligation is very solid financially
with a favorable track record and no readily apparent weakness. Its
overall risk profile, while low, is not quite as favorable as that
of companies in the highest rating category.
IBCA LIMITED
A1 Short-term obligations rated A1 are supported by a very strong
capacity for timely repayment. A plus sign is added to those issues
determined to possess the highest capacity for timely payment.
TIFF STATEMENT OF
INVESTMENT ADDITIONAL INFORMATION
PROGRAM, INC. April 30, 1997
Including These Funds: Available through:
TIFF Multi-Asset Fund Foundation Advisers, Inc.
TIFF International Equity Fund 2405 Ivy Road
TIFF Emerging Markets Fund Charlottesville, VA 22903
TIFF U.S. Equity Fund
TIFF Bond Fund Fund phone (804) 984-0084
TIFF Short-Term Fund fax (804) 977-4479
TIFF Investment Program, Inc. ("TIP") is a no-load, open-end management
investment company that seeks to improve the net investment returns of its
shareholders ("Members") by making available to them a series of investment
vehicles (the "Funds"), each with its own investment objective and
policies. The Funds are available exclusively to grantmaking foundations and
501(c)(3) organizations (see ELIGIBLE INVESTORS). The Funds and their
investment adviser, Foundation Advisers, Inc. ("FAI") have been organized
by a nationwide network of private and community foundations. FAI is a non-
stock corporation no part of the earnings of which may inure to any private
shareholder or individual. FAI is responsible for selecting Money Managers
for each Fund and for allocating Fund assets among these Money Managers,
subject to the approval of TIP's board of directors. With the exception of
FAI's President, all FAI and TIP directors serve as unpaid volunteers.
The Funds currently available in the TIP series are: (1) TIFF Multi-Asset
Fund ("Multi-Asset Fund"); (2) TIFF International Equity Fund
("International Equity Fund"); (3) TIFF Emerging Markets Fund ("Emerging
Markets Fund"); (4) TIFF U.S. Equity Fund ("U.S. Equity Fund"); (5) TIFF
Bond Fund ("Bond Fund"); and (6) TIFF Short-Term Fund ("Short-Term Fund").
With the exception of the Short-Term Fund, which is designed primarily as a
vehicle for investment of funds that members intend to spend or distribute
within one year, the Funds are intended as vehicles for the implementation of
long-term asset allocation policies.
This Statement of Additional Information is not a Prospectus and should be
read in conjunction with the Prospectus of TIP, dated April 30, 1997 (the
"Prospectus"), which has been filed with the Securities and Exchange
Commission (the "Commission") and which is incorporated herein by
reference. The Prospectus can be obtained without charge by writing to or
calling FAI at the address and telephone number provided above.
CONTENTS
ORGANIZATION OF TIP 3
SUPPLEMENTAL DISCUSSION OF TIP'S ORIGIN 3
SUITABILITY OF TIP'S FUNDS 3
SUPPLEMENTAL DISCUSSION OF FUND MANAGEMENT AND ADMINISTRATION 8
PERFORMANCE-BASED FEES FOR MONEY MANAGERS 11
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES 15
DISTRIBUTION OF FUND SHARES 16
SUPPLEMENTAL DISCUSSION OF INVESTMENT OBJECTIVES, POLICIES,
AND RESTRICTIONS 17
SUPPLEMENTAL DISCUSSION OF POLICY IMPLEMENTATION AND RISKS 17
FUND TRANSACTIONS 34
TAX CONSIDERATIONS 35
MEMBER INFORMATION 39
CALCULATION OF PERFORMANCE DATA 40
DETERMINATION OF NET ASSET VALUE 41
ADDITIONAL SERVICE PROVIDERS 42
ORGANIZATION OF TIP
TIP was incorporated on December 23, 1993. The authorized capital stock of
TIP consists of 3,500,000,000 shares with $.001 par value, allocated in
increments of 500,000,000 shares to each of the Multi-Asset, International
Equity, Emerging Markets, U.S. Equity, Bond, and Short-Term Funds (500,00,000
unallocated). Each share of each Fund has an equal voting right as to each
share of such Fund. Members have one vote for each dollar of net asset value
they hold. All shares issued and outstanding are fully paid and non-
assessable, transferable, and redeemable at net asset value at the option of
the member. Shares have no preemptive or conversion rights.
The shares of TIP have non-cumulative voting rights, which means that the
holders of more than 50% of the shares voting for the election of directors
can elect 100% of the directors if they choose to do so, and, in such event,
the holders of the remaining less than 50% of the shares voting for the
election of directors will not be able to elect any person or persons to the
board of directors.
No Fund of TIP shall be liable for the obligations of any other Fund.
SUPPLEMENTAL DISCUSSION OF TIP'S ORIGIN
RESOURCES NEEDED TO INVEST EFFECTIVELY. TIP is the outgrowth of several years
of research into the need for a foundation investment cooperative, including
extensive studies on foundation investment practices by The Investment Fund
for Foundations ("TIFF"). These studies suggest that many of America's
approximately 34,000 private and community foundations lack the resources
needed to earn superior net investment returns. The necessary resources
include: an asset base sufficient to diversify across asset classes and
investment styles in an economic manner; staff and trustees with the time and
expertise needed to select outstanding Money Managers and monitor and adjust
manager and asset class weightings; and the bargaining power and skills
needed to strike attractive fee arrangements with money managers, custodians,
accountants, lawyers, and other vendors.
REORIENTING TRUSTEE TIME ALLOCATION. Another large-scale survey of foundation
investment practices conducted by Salomon and Voytek (Managing Foundation
Assets, 1988) revealed that "less than a quarter of the foundations surveyed
have a formal guideline spelling out the maximum portion of their assets that
could be held in common stock, perhaps the most basic kind of guideline that
might be expected." Investing through TIP enables governing boards to
delegate responsibility for time-intensive tasks (e.g., vendor selection and
evaluation and fee negotiations), thus providing them with more time to
devote to the sensitive and supremely important task of formulating
appropriate asset allocation guidelines.
SUITABILITY OF TIP'S FUNDS
INVESTING THROUGH A NEWLY ESTABLISHED ORGANIZATION. Some investors may
question whether it is prudent to invest through a newly established
organization. This is an important issue that relates not only to TIP but also
to some of the outside vendors it employs. In the opinion of TIP's and FAI's
directors, the number of years that an investment management organization has
been functioning is only one of many variables that fiduciaries must assess in
determining whether to entrust the assets they supervise to it. Variables of
greater importance are the expertise of the individuals who comprise the
organization's governing board and staff, the resources the organization
commands (both internally and via relationships with outside vendors), and
the extent to which its goals and interests are congruent with those of its
clients or members. The money managers selected by FAI on behalf of TIP are
all experienced investment professionals with verifiable performance records
that FAI's directors have reviewed as part of the manager selection process
described in the Prospectus. These directors (and the FAI staff that
supports them) have extensive experience performing their assigned functions,
as do the principals and supporting staff of all outside vendors employed by
TIP.
When evaluating persons who might potentially manage money for TIP, FAI's
directors consider carefully the financial viability and stability of the
firms with which they are associated, but they do not assume that the age (or
size) of an investment management organization and the quality of its
services are always positively correlated. Indeed, if properly structured
and managed, a newly established investment management organization - be it
a mutual fund family such as TIP or a money manager - has the potential to
deliver superior services to its clients or members at a lower cost than
competing suppliers precisely because its human and technological resources
have been assembled recently: technology is evolving so rapidly that
organizations structured and equipped specifically to compete under current
as distinct from past market conditions often have a discernible edge -
provided, of course, that the persons leading them are sufficiently skilled
and experienced.
CHANGING EXISTING INVESTMENT MANAGEMENT ARRANGEMENTS. Changing investment
management practices is almost always costly. It can also be time-consuming and
painful, especially when long-standing relationships must be disrupted. For
these reasons, change for its own sake should be avoided. At the same time,
foundation fiduciaries should recognize that investment markets and the vast
universe of vendors that furnish investment-related services to foundations
are highly dynamic - so dynamic that the uncertain but very real costs of
not changing settled practices sometimes can exceed the known costs of
steering a different course. This is especially true with respect to the
difficult and time-consuming task of selecting superior money managers: due
to the very powerful mean-reverting tendencies of investment markets - the
tendency for the performance of a manager (or investment style) generating
superior returns over a given time period to regress to the mean or average
of all managers over future time periods - sticking with a proven winner
can, paradoxically, be very perilous, unless the winning organization is
itself committed to the task of continuously reviewing and revising its own
working assumptions, strategies, and tactics. One of the chief reasons TIP
was created was to permit foundation trustees who themselves lack the time or
expertise to monitor continuously the rapid evolution of markets and managers
to delegate this task to a group of investment professionals (the directors
of TIP and FAI) who have significant experience investing foundation assets.
ACTIVE INVESTMENT APPROACHES. While conceding that few professional Money
Managers can accurately and consistently forecast major highs or lows in
financial markets, the directors of TIP and FAI believe that some Money
Managers are indeed able to pursue superior returns within selected asset
classes and investment sectors. By combining in a prudent manner investment
approaches appropriate to a given asset class, and then selecting Money
Managers based on their proven ability to implement successfully such
approaches, a foundation potentially can enhance its long-term investment
returns.
MULTI-ASSET FUND. The TIFF Multi-Asset Fund is TIP's response to requests from
many foundations throughout the U.S. for assistance with asset allocation.
Asset allocation is critically important because the longer money is put to
work the wider the gap grows between returns on individual asset classes.
For truly long-term investors, these differences between asset class returns
dwarf differences in returns attributable to manager selection, fee
negotiations, or other investment-related tasks that TIP performs on behalf
of its Members. All of TIP's Funds enable Members to delegate to TIP
responsibility for the time-intensive tasks of selecting and monitoring money
managers and other vendors. The Multi-Asset Fund goes beyond this by
providing governing boards with an opportunity also to delegate to TIP
responsibility for determining which asset classes to hold and in what
proportions to hold them. Consistent with its view that strategic and
tactical (as distinct from policy) decisions are best made by full-time
investment professionals, TIP in turn delegates responsibility for strategic
and tactical shifting of the Multi-Asset Fund's invested capital to outside
Money Managers recommended by FAI.
Return Objective that Reflects Foundations' Spending Rates. The Fund's
return objective is to provide a solution to the principal investment problem
confronting most grantmaking foundations: how to preserve the purchasing
power of their endowments while simultaneously distributing about five
percent of their assets annually. While Congress' decision (in 1969) to
compel private foundations to distribute annually at least five percent of
their assets was not rooted in the same studies of capital market history
that underlay the spending rates of eleemosynary funds that are free to adopt
their own spending rates (e.g., community foundations or university
endowments), these studies confirm that the goal of preserving fund
purchasing power while simultaneously withdrawing five percent per annum is
ambitious indeed. For example, to earn a five percent real return over the
time period 1926-1993, a foundation investing solely in domestic stocks and
bonds on a buy-and-hold basis would have had to maintain at least an 80%
commitment to stocks. Foundations that distribute more than five percent of
their assets annually must recognize that even highly aggressive investment
programs are unlikely to produce real or inflation-adjusted returns
sufficient to maintain fund purchasing power in the face of such high
withdrawal rates, unless new gifts flow into the fund.
Based on their own study of capital market history, TIP's directors have
concluded that the achievement of five percent or higher real returns
presupposes a willingness to invest in risky (i.e., volatile) assets. The
TIFF Multi-Asset Fund's return objective is to produce an adequate (i.e.,
five percent or higher) real return for participating foundations in as
consistent a manner as possible - not every quarter or even every year;
capital markets are seldom so accommodating - but with sufficient
consistency over multi-year time periods to induce member foundations to
"stay the course": to adhere to asset allocation policies that comport
better with their long-term goal of preserving fund purchasing power than do
policies that place more emphasis on controlling short-term price
fluctuations.
Difficulty of Maintaining All-Equity Portfolios. TIP's directors recognized
that an all-equity portfolio would not fulfill the asset allocation needs of
grantmaking foundations in at least two important respects. First, many
governing boards cannot withstand the downside risks inherent in all-equity
portfolios, even those that are invested on a truly global basis. Second,
even if trustees have the discipline needed to maintain all-equity portfolios
during periods when stock prices are falling sharply, spending needs may
leave them with no choice but to sell equities at very depressed prices. It
is for these two reasons that TIP's directors elected to include in the
Fund's asset mix securities that have the potential to cushion price declines
in economic environments that are especially inhospitable to equity
investors: deflation, or very high rates of unanticipated inflation. These
securities are held primarily in the "volatility control" segment of the
Fund and include specialized equities, bonds, and cash equivalents. It is
important to note that securities held in the volatility control segment of
the Fund can themselves be quite volatile: the term "volatility control"
denotes such securities' potential to cushion losses experienced in the
"total return" segment of the Fund.
Unique Deflation-Hedging Role of Bonds. The Fund's 20% "normal" allocation
to bonds reflects the directors' judgment that such bond holdings could prove
uniquely useful in a deflationary environment like the 1930s, when trustees
would otherwise be forced to sell stocks at depressed prices to meet annual
spending needs. To provide adequate deflation-hedging protection, a bond
portfolio must emphasize intermediate or longer maturity, high quality, non-
callable bonds - an imperative that is reflected in the benchmarks against
which the Fund's bond commitments will be measured.
The Need for a Hedge against High Rates of Unanticipated Inflation.
Similarly, the Fund's 10% "normal" allocation to a "Specialized Equities"
portfolio emphasizing natural resource-related equities reflects the
directors' judgment that such stock holdings could prove uniquely useful in a
highly inflationary environment like the 1970s, when many stocks of companies
engaged in industries other than those in which the Fund's specialized equity
portfolio invests produced sharply negative inflation-adjusted returns.
There is no assurance that the "Specialized Equities" portfolio will
produce satisfactory real returns in an environment of rapidly rising
inflation, but TIP's directors believe that it has the potential to serve as
a more reliable hedge than alternate "inflation hedges" that regulated
investment companies are permitted to own (e.g., shares of real estate
investment trusts).
The Fund does not hold direct investments in real estate because SEC
regulations prohibit regulated investment companies from doing so. While the
Fund does not hold real estate-related equities on a permanent basis [e.g.,
shares of publicly traded real estate investment trusts ("REITs")], the
guidelines set forth for several of the Fund's Money Managers permit them to
hold such securities on an opportunistic basis. The reason that TIP's
directors rejected a permanent allocation to real-estate-related equities
such as REIT shares is because the directors believe that returns on such
securities have a disturbingly high correlation with stock market indices
when inflation is spiraling upward, i.e., they provide unreliable inflation-
hedging protection. Although there is no assurance that the natural
resource-related securities in which the Fund's "Specialized Equities"
portfolio will invest will produce satisfactory real returns in environments
of unexpectedly high inflation, TIP's directors believe that such securities
constitute more reliable inflation hedges than real estate-related equities.
The directors' experience suggests that firms engaged in producing or
distributing natural resources can more readily pass through inflation-
induced cost increases to their customers than can landlords, who must wait
for leases to expire to negotiate price increases. This constraint also
undermines the inflation-hedging protection of direct real estate
investments, which several institutional funds represented on TIP and FAI's
Boards hold but which are not necessarily expected to provide high real
returns when inflation is high and accelerating.
Potential Value-Added from Active Management. In determining which asset
classes and strategies the Fund should employ for total return - as distinct
from hedging - purposes, TIP's directors sought to avoid a mistake common to
many investment programs: in allocating assets among asset classes, many
investors use expected returns, which assume that all assets will be managed
passively (i.e., indexed), even though they themselves intend to rely heavily
on active managers. Mindful that all TIP Funds employ primarily active
management techniques (passive approaches already being available to eligible
foundations at a lower cost than TIP could ever offer them), TIP's directors
considered carefully the extent to which active managers could potentially
add value (net of fees) to each asset class that the Multi-Asset Fund might
hold. This consideration is the chief reason that the Fund's guidelines
emphasize: (1) foreign (and especially emerging) stock markets to a greater
extent than do the guidelines employed by most U.S.-based institutions at
present; and (2) opportunistic total return strategies such as global risk
arbitrage and distressed securities investing.
Perceived Inefficiency of Foreign Stock Markets. TIP's directors believe
that foreign stock markets are less efficient than the U.S. stock market in a
valuation sense, and are likely to remain so for some time. This perception
creates a presumption on their part that carefully selected active managers
can produce higher excess returns investing in foreign stocks than they can
investing in U.S. stocks. Unless one believes that U.S. stocks generally are
attractively priced relative to foreign stocks, the assumption that active
management will produce higher excess returns (net of fees and trading costs)
in foreign markets justifies a heavier commitment to foreign stocks than the
modest allocations maintained by many U.S.-based investors.
Potential Risk Reduction from Investing in Assets with Low Return
Correlations. Although their perceived potential for attractive returns
through active management is the chief reason that TIP's directors endorse
the use of such "non-traditional" or "alternative" assets such as foreign
stocks and opportunistic total return portfolios, the case for including
these allocations is reinforced by the tendency of returns on these non-
traditional investments to be imperfectly (or, in some cases, negatively)
correlated with returns on domestic stocks. To be sure, there have been and
will no doubt continue to be occasions when foreign stocks (whether traded in
developed or emerging markets), global risk arbitrage portfolios, distressed
securities, and other investments that the Fund might hold strictly for total
return purposes will join domestic stocks in producing negative returns, but
this unfortunate fact does not undermine the fundamental soundness of a
diversified approach to long-term asset allocation. So long as investments
held by the Fund as domestic equity substitutes generate long-term returns at
least equal to those expected from domestic stocks, the general tendency of
such investments to rise and fall at different times than domestic stocks
creates opportunities to enhance the Fund's long-term returns through
periodic rebalancing of the Fund's asset class weightings back to more normal
percentages. The supposition here is that market movements will periodically
cause such weightings to differ from whatever initial "norms" TIP's
directors might establish: through a combination of manager-induced and
board-induced rebalancing moves, the Fund can potentially benefit from the
inherent volatility of the assets and strategies it employs. As perhaps the
most comprehensive study of this phenomenon concludes, "disciplined
rebalancing can boost returns as much as a fairly large shift in the policy
mix itself" (Arnott and Lovell, 1992).
Determining Asset Class Ranges. The Multi-Asset Fund's asset class ranges
were arrived at using a combination of resources: computer simulations
quantifying the damage to long-term returns of forced sales of stocks at
depressed prices under both of the disaster scenarios described above
(deflation and very high rates of unanticipated inflation); plus other
qualitatively driven analyses of the risk tolerance of foundation governing
boards and their capacity to reduce budgeted grant outlays (consistent with
legally mandated payout requirements) during periods when common stock prices
are falling sharply. While appreciative of the advantages of purely
statistical approaches to asset allocation, TIP's directors also recognize
that such approaches can and often do attempt to achieve a false precision,
and the Fund's asset allocation guidelines therefore reflect qualitative as
well as quantitative judgments about asset class weightings best suited to
the long-term needs of the many foundations that have turned to TIP for help
with investment-related tasks.
Statistical Justification of Fund's Guidelines. TIP and FAI do not provide
such statistics for several reasons. First, even very long-term studies of
the risk and return characteristics of asset classes and investment
strategies are highly sensitive to starting and ending dates. An attempt to
depict how a hypothetical portfolio managed in accordance with the Fund's
guidelines would have performed over time could prove misleading.
Second, some of the asset classes and strategies that the Fund will employ
have relatively short histories (e.g., emerging market stocks, for which
reliable return series extend back less than a decade at present). This
compounds the problem of time-period sensitivity just mentioned, especially
with respect to that portion of the Fund to be allocated to opportunistic
equity strategies such as global risk arbitrage that seek to outperform
absolute return benchmarks (Treasury bills plus five percent). While TIP's
decision to employ such strategies bespeaks its directors' judgment that
capital markets will continue to provide opportunities for the Money Managers
within such segments to generate satisfactory absolute returns, there is no
assurance that they will do so and it would be unwise for prospective
investors to extrapolate past results into the future.
Third, it is precisely their concern that they lack the time or expertise to
assess intelligently statistics-laden studies that has induced many governing
boards to seek TIP's assistance in formulating asset allocation guidelines.
Burdening such trustee groups with quantitative justifications of the Fund's
guidelines would contravene their stated wishes and could also provide a
false sense of security that the Fund will produce superior risk-adjusted
returns relative to more conventional asset mixes comprising only domestic
stocks and bonds. The Fund has the potential to do so, but there is no
assurance that it will do so, and the Fund could potentially underperform
more conventional asset mixes in certain market environments (e.g., when
foreign stocks and bonds are performing materially worse than their domestic
equivalents).
Fund's Suitability for Foundations with "Conservative" Boards. Whether the
Fund is suitable for a foundation that favors conservative investment
policies depends on one's definition of "conservative." Many investors who
describe themselves as "conservative" pursue strategies that in fact entail
the risk of large losses, especially to the ravages of inflation. Examples
include: (1) investors willing to own only short-term Treasury bills, which
provide safety of principal but which have historically generated less than
one-fifth of the real returns needed to preserve the long-term purchasing
power of funds with withdrawal rates of five percent per annum; (2) investors
willing to own only very high grade bonds, which provide safety of principal
if held to maturity but can produce large interim losses if interest rates
spike upward; or (3) investors willing to own only the highest quality (i.e.,
"safest") stocks, such as IBM in 1987 ($175 per share on its way to less
than $50 per share just five years later) or Philip Morris in 1992 ($86 per
share on its way to $49 per share less than one year later). When
scrutinized carefully, the investment policies of many investors who consider
themselves "conservative" are in fact not conducive to wealth preservation
- - certainly not after adjusting for inflation. A more apt label for such
policies would be "conventional."
TIP's directors believe that the most relevant measure of conservatism for
foundation investors is not how closely their investment policies comport
with traditional norms - norms that as recently as the 1950s dictated a
strong bias in favor of long-term and hence highly risky bonds - but how
effective such policies are in maintaining fund purchasing power within
acceptable volatility constraints. Diversifying among many asset classes,
strategies and money managers can be a powerful means of improving the
return-to-risk ratio of an investment program, and it is for this reason that
most of the institutional funds represented on the TIP and FAI boards make
extensive use of assets other than domestic stocks and bonds and strategies
other than conventional long-only approaches. While still the norm for most
institutional portfolios, long-only approaches preclude money managers from
acting upon much of their research. For example, the typical 40-60 stock
portfolios maintained by many active U.S. equity managers are actually the
economic equivalent of an index fund (all stocks in the S&P 500, held in
accordance with their weightings in that index) combined with a long-short
portfolio: the latter portfolio comprises long positions in the 40-60 stocks
the manager deems most attractive, plus short positions in all stocks in the
S&P 500 not held in the overall portfolio.
SUPPLEMENTAL DISCUSSION OF
FUND MANAGEMENT AND ADMINISTRATION
TIP AND FAI BOARDS. There is considerable overlap among the boards of TIP
and FAI, but not complete overlap, for two reasons. First, given the highly
dynamic character of financial markets, it is important that decision-making
at all levels of the proposed cooperative be as streamlined as possible - an
imperative that is best fulfilled by keeping the number of individuals
responsible for a given task (e.g., selecting and monitoring of money
managers) to a reasonable minimum. Second, there are securities law
conditions which preclude complete overlap between the boards of TIP and FAI.
Specifically, to ensure that the cooperative complies with laws discouraging
direct control of the affairs of regulated investment companies by the
entities that sponsor them, persons serving on FAI's board cannot occupy more
than 49% of the seats on TIP's board of directors. For this reason, and also
because the duties of TIP's board presuppose extensive audit and operations
experience, a majority of TIP's board of directors are persons who serve or
have served on the Audit and Operations Committee of The Investment Fund for
Foundations, the not-for-profit organization that coordinated TIP's
establishment. In contrast, most of the members of FAI's board are persons
who serve or have served on TIFF's Investment Committee. FAI's board is
chaired by John Mebane, Chief Investment Officer of The Duke Endowment
(Charlotte, NC). Mr. Mebane is a member of the board of Trustees of The
Investment Fund for Foundations and chairman of its Investment Committee. A
complete list of the directors of TIP and FAI is provided in the section of
the Prospectus entitled MANAGEMENT AND ADMINISTRATION OF THE FUNDS.
ADVISORY AGREEMENT. Pursuant to its Advisory Agreement with TIP (the
"Advisory Agreement"), FAI provides the following services to TIP and the TIP
Funds: (1) provides or oversees the provision of all general management,
investment advisory, and portfolio management services; (2) provides TIP with
office space, equipment, and personnel; and (3) develops the investment
programs, selects the Money Managers from a broad universe of investment
managers, negotiates agreements with Money Managers on behalf of the board of
directors of TIP (which has final authority for the approval or disapproval of
such agreements), allocates and reallocates assets among Money Managers, and
monitors the Money Managers' investment activities and results. As
compensation for services rendered by FAI under the Advisory Agreement, each
Fund pays FAI a maximum monthly fee calculated by applying the following
annual basis point rates to such Fund's average daily net assets for the
month (100 bp equals 1.00%):
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Multi- Inter- Emerging U.S Short-
national
Assets Asset Equity Markets Equity Bond Term
On first $500 million 20 bp 15 bp 15 bp 15 bp 10 bp 3 bp
On next $500 million 18 bp 13 bp 13 bp 13 bp 8 bp 3 bp
On next $500 million 15 bp 11 bp 11 bp 11 bp 6 bp 2 bp
On next $500 million 13 bp 9 bp 9 bp 9 bp 5 bp 2 bp
On next $500 million 11 bp 7 bp 7 bp 7 bp 4 bp 1 bp
On remainder
(>$2.5 billion) 9 bp 5 bp 5 bp 5 bp 3 bp 1 bp
</TABLE>
Because FAI does not seek to earn a profit, it may waive a portion of its
fees from time to time. FAI is currently waiving its advisory fees on the
Short-Term Fund and has agreed to continue to do so until further notice.
The Advisory Agreement will remain in effect for two years following its
date of execution and thereafter will automatically continue for successive
annual periods so long as such continuance is specifically approved at least
annually by (a) the board of directors or (b) the vote of a "majority" [as
defined in the Investment Company Act of 1940 (the "1940 Act")] of a Fund's
outstanding shares voting as a single class; provided that in either event
the continuance is also approved by at least a majority of the board of
directors of TIP who are not "interested persons" (as defined in the 1940
Act) of TIP or FAI by vote cast in person at a meeting called for the purpose
of voting on such approval. The Advisory Agreement was approved by the
initial members of the International Equity, Emerging Markets, U.S. Equity,
Bond, and Short-Term Funds on March 29, 1994, and by the initial members of the
Multi-Asset Fund on September 13, 1994. The Advisory Agreement is
terminable without penalty on not less than 60 days' notice by the board of
directors of TIP or by a vote of the holders of a majority of the relevant
Fund's outstanding shares voting as a single class, or upon not less than 60
days' notice by FAI. The Advisory Agreement will terminate automatically in
the event of its "assignment" (as defined in the 1940 Act).
PAYMENT OF FAI'S EXPENSES. FAI pays all of its expenses arising from the
performance of its obligations under the Advisory Agreement, including all
executive salaries and expenses of the directors and officers of TIP who are
employees of FAI and office rent of TIP. Subject to the expense
reimbursement provisions described in the Prospectus, other expenses incurred
in the operation of TIP are borne by the Funds themselves, including, without
limitation: Money Manager fees; brokerage commissions; interest; fees and
expenses of administrators, independent attorneys, auditors, custodians,
accounting agents, and transfer agents; taxes; cost of stock certificates;
expenses (including clerical expenses) of issue, sale, repurchase or
redemption of shares; expenses of registering and qualifying shares of TIP
under federal and state laws and regulations; expenses of printing and
distributing reports, notices and proxy materials to existing members;
expenses of printing and filing reports and other documents filed with
governmental agencies; expenses of annual and special members' meetings;
expenses of directors of TIP who are not employees of FAI; membership dues in
the Investment Company Institute; insurance premiums; and extraordinary
expenses such as litigation expenses. Fund expenses directly attributable to
a Fund are charged to that Fund; other expenses are allocated proportionately
among all of the Funds in relation to the net assets of each Fund.
FUND ADMINISTRATOR. Consistent with their Mission of helping foundations
exploit the economies of scale inherent in many aspects of investing, TIP and
FAI rely heavily on outside vendors to perform most functions that their
directors deem delegable, including what is known in the mutual fund industry
as "fund administration." A mutual fund's administrator oversees its day-
to-day operations, typically by performing certain tasks itself (e.g.,
preparing regulatory filings) while supervising closely the work of other
vendors employed by the fund (e.g., its custodian, transfer agent, dividend
disbursing agent, accountant, etc.) Because it specializes in such work, AMT
Capital Services, Inc. can perform these important functions better and at a
lower cost than can FAI.
ADMINISTRATION AGREEMENT. As Administrator for the TIP Funds, AMT Capital
receives a monthly fee at an annual rate of: (a) 0.07% of the average daily
net assets of TIP for the first $300 million; (b) 0.05% for the next $2.7
billion; (c) 0.04% for the next $2.0 billion; and (d) 0.03% over $5.0 billion
of assets under management. TIP also reimburses AMT Capital for certain
costs. In addition, TIP has agreed to pay AMT Capital an incentive fee not
to exceed 0.02% for reducing the expense ratio of one or more Funds of TIP
below certain levels specified for such Funds. A profile of AMT Capital is
provided in Appendix B of the Prospectus.
MONEY MANAGER AGREEMENTS. The Money Manager agreements between TIP and
the Money Managers (the "Money Manager Agreements") will automatically
continue in effect for successive annual periods, so long as such continuance
is specifically approved at least annually by (a) the board of directors or (b)
the vote of a "majority" (as defined in the 1940 Act) of a Fund's
outstanding shares voting as a single class, provided that in either event
the continuance is also approved by at least a majority of the board of
directors who are not "interested persons" (as defined in the 1940 Act) of
TIP or FAI by vote cast in person at a meeting called for the purpose of
voting on such approval.
In negotiating Money Manager fee agreements, FAI's staff analyzes a number of
variables, including: (1) the proposed size of a manager's account; (2) the
manager's historical and expected future performance against relevant
benchmarks; (3) the historical and expected future volatility of the
manager,s relative returns; (4) the manager's assets under management; (5)
the impact (if any) that linking a manager,s compensation to its performance
might have on its decision-making process; and (6) other organizational
attributes. Many of the Funds' Money Manager Agreements entail performance-
based fees, which are discussed in detail in the section entitled PERFORMANCE-
BASED FEES FOR MONEY MANAGERS.
Not all of the Money Managers profiled in the Prospectus are employed by
the Funds at all times. Whether a particular Money Manager selected by FAI,
approved by TIP's directors, and hence profiled in the TIP Prospectus is
actually employed by TIP at a given point in time depends on a Fund's size,
its projected growth rate, and FAI's perception of the relative
attractiveness of the Money Manager's approach in light of prevailing market
conditions. Foundations seeking to know the actual allocation of each Fund's
assets across Money Managers at a given time can obtain this information by
contacting FAI.
Termination of Money Manager Agreements. The Money Manager Agreements are
terminable without penalty on not less than 60 days' notice by the board of
directors of TIP or by a vote of the holders of a majority of the relevant
Fund's outstanding shares voting as a single class, or upon not less than 60
days' notice by the Money Manager. A Money Manager Agreement will terminate
automatically in the event of its "assignment" (as defined in the 1940
Act).
Arms-Length Relationships between Money Managers and TIP. The Money Managers
have no affiliations or relationships with TIP or FAI other than as
discretionary investment managers for all or a portion of a Fund,s assets.
TARGET EXPENSE RATIOS. The target expense ratios for the TIP Funds are:
TIFF Multi-Asset Fund 0.95%
TIFF International Equity Fund 1.00%
TIFF Emerging Markets Fund 1.50%
TIFF U.S. Equity Fund 0.65%
TIFF Bond Fund 0.50%
TIFF Short-Term Fund 0.35%
These target expense ratios reflect informed estimates by the Directors of
TIP and FAI of the costs that foundations must be prepared to incur to
realize the performance objectives that TIP's directors have articulated for
each Fund. For example, the performance objective of the U.S. Equity Fund is
to outperform the Wilshire 5000 Stock Index by 0.75% per annum net of fees
and the Fund's target expense ratio is 0.65%. Accordingly, FAI will seek to
allocate the Fund's assets across the Money Managers employed by it in a
manner that will cause its expense ratio to approximate 0.65% when the Fund's
assets themselves generate an incremental return over the Wilshire 5000 Stock
Index of 1.40% (i.e., the 0.65% in fees incurred in pursuit of the Fund's
objective plus the 0.75% margin by which the Fund seeks to outperform the
Index net of fees would equal the Fund's incremental return over the Wilshire
5000 Stock Index).
Because the fees each Fund will pay to its Money Managers are (in most
cases) tied to performance, it is possible that a Fund which outperforms its
benchmark by a material margin could display an expense ratio considerably in
excess of its target expense ratio. The target expense ratios are just that:
targets. They are based on the assumption that FAI will allocate assets
among Money Managers in a manner that is sensitive to the expressed aim of
TIP's board to keep each Fund's expense ratio at or below such targets,
except under circumstances where the Fund outperforms its performance
benchmark by a margin greater than that reflected in its stated performance
objective. Because some Money Managers have benchmarks different from the
overall benchmark for the TIP Fund employing them, it is possible that a
Fund's expense ratio in any given time period could exceed the Fund's target
expense ratio even if the Fund fails to achieve its return objective. Further,
as noted in the Prospectus, the Funds may invest in certain other commingled
investment vehicles, including other registered investment companies and
private investment funds. The Funds will be charged their pro rata share of
the fees and expenses associated with any such investment. In this regard, it
should be noted that the fees charged by many private investment funds are
high in relation to the fees charged by other investment funds (performance
fees for private investment funds are often as high as 20% per annum of realized
and unrealized gains).
With respect to the TIP Funds that employ performance-based fees for Money
Managers, each Fund's actual expense ratio could exceed its target expense
ratio if the performance of one or more Money Managers employed by it causes
the average fees paid to all of the Fund's Money Managers to exceed the
difference between (a) its target expense ratio and (b) all fees and expenses
paid by it other than Money Manager fees. For example, the U.S. Equity
Fund's target expense ratio is 0.65% per annum. As indicated in the TIP
Prospectus, all fees and expenses other than Money Manager fees to be paid by
the U.S. Equity Fund are not likely to exceed 0.32% per annum. In allocating
the Fund's assets among Money Managers, FAI will attempt to ensure that the
average fees paid by the Fund to its Money Managers only exceed 0.32% per
annum (i.e., its target expense ratio of 0.65% minus the 0.33% in other
expenses) if the Fund surpasses its performance objective. As noted in the
table in the Prospectus, the U.S. Equity Fund's performance objective is to
outperform the Wilshire 5000 Stock Index by 0.75% per annum net of fees. If
the condition just described is fulfilled - that the Fund's total expenses
may exceed 0.65% only if it surpasses its performance objective - then its
expense ratio will not exceed 0.65% unless its assets produce a gross return
that exceeds the return produced by the Wilshire 5000 Stock index by at least
1.40% (0.75% net excess return goal plus 0.65% fees). FAI's failure to
achieve this goal over a one-year holding period or longer would cause the
Fund to fail to achieve its performance objective of outperforming the
Wilshire 5000 Stock Index by 0.75% per annum.
PERFORMANCE-BASED FEES FOR MONEY MANAGERS
OVERVIEW. The following discussion outlines the principles that FAI follows
in negotiating Money Manager fees and describes the performance-based fee
structure that the Funds have entered into with many (but not all) of the
Money Managers employed by them. These principles are the product of both
the combined investment experience of members of its board and TIP's board
and policy choices made by TIP's board in its formulation of objectives and
guidelines for each Fund.
Optimizing versus Minimizing Expenses. Given the profound impact that even
modest differences in annual investment-related costs can have on a
foundation's cumulative returns when compounded over long time periods, it is
proper for foundation trustees to consider carefully the costs of alternative
investment vehicles. There is a crucial difference, however, between
minimizing the amount that a foundation spends to invests its capital and
optimizing these outlays. TIP aims to help member foundations do the latter,
not the former. To be sure, by pooling the investable assets of numerous
foundations, TIP can and does seek to minimize how much participating
foundations must spend on such investment-related services as custody and
portfolio accounting. But with respect to Money Manager fees, which
typically constitute the lion's share of investment-related expenses, the
directors of TIP and FAI believe that a strategy aimed at optimizing these
outlays is potentially more profitable than a strategy aimed merely at
minimizing them. For this reason, TIP relies primarily on active (as
distinct from passive) money management techniques, and makes extensive use
of performance-based fees in compensating Money Managers for services
rendered to TIP.
The fact that the exact costs of investing through each TIP Fund are
unknowable in advance is undeniably off-putting to some foundation investors.
While understandable, this reluctance to invest through vehicles whose exact
costs are unknowable in advance is somewhat ironic in light of another fact:
the annual standard deviations of the asset classes in which the TIP equity
and bond funds that utilize performance-based fees primarily invest - i.e.,
the non-diversifiable or systemic risks of each asset class - greatly exceed
the economic uncertainty associated with fluctuating manager fees, even under
worst case conditions. "Worst case" as used here means the increase in a
Fund's expense ratio associated with an instantaneous shift from paying all
Money Managers employed by it their minimum fees to paying all of them their
maximum fees. Differences between the minimum and maximum fees payable to any
Money Manager employed by the Funds are shown in the following table:
Number of Largest Difference Average Difference*
Managers Receiving between Minimum and between Mimimum and
Performance- Maximum Fees Payable Maximum Fees Payable
Based Fees to Any Money Manager to Any Money Manager
TIFF Multi-
Asset Fund 6 1.90% 1.53%
TIFF Inter-
national
Equity Fund 3 1.85% 1.57%
TIFF Emerging
Markets Fund 1 2.60% 2.60%
TIFF U.S.
Equity Fund 6 2.00% 1.44%
TIFF Bond
Fund 4 0.75% 0.66%
TIFF Short-
Term Fund 1 0.70% 0.70%
* Average assume equal manager allocations.
Based on their considerable investment experience, the directors of TIP and
FAI believe that, over the long term, TIP's member foundations are likely to
realize a net benefit for bearing the uncertainties associated with
performance-based fees.
Link between Funds' Objectives and Performance-Based Fee Structures. As
noted in the Prospectus, the performance objective of each Fund is to
outperform a relevant market benchmark by a modest increment net of fees.
FAI's chief aim in negotiating Money Manager fees is to ensure that such fees
are relatively low compared to institutional norms when each Money Manager's
performance is approximately equal to the level that is required to enable
the Fund that employs it to achieve its performance objective. A related aim
of FAI when negotiating Money Manager fees is to tie manager compensation as
closely as possible to manager performance. FAI's intent in linking Money
Manager fees to performance is discussed in detail below.
Money Manager Evaluation Criteria Seek to Discourage Undue Risk-Taking. TIP
does not employ performance-based fees as a means of inducing its Money
Managers to perform better than they would if they received straight asset-
based fees. Rather, it employs performance-based fees as one means among
many of seeking to achieve its aim of optimizing participating foundations'
investment-related expenses. Although not explicitly referred to in the
Agreements between the Funds and each Money Manager, a Money Manager's proven
capacity to deliver uniform results to all accounts managed in accordance
with the philosophy marketed to TIP is one of the essential criteria that FAI
screens for in recommending Money Managers for the Funds. (See the section
of the Prospectus entitled MONEY MANAGERS - Manager Selection Criteria.)
Because the Money Managers know that the criteria FAI employs in selecting
Money Managers initially are the same it employs in its ongoing evaluation of
Money Managers employed by TIP, they also know that portfolio decisions that
cause the performance of TIP's account to differ materially from the
performance of accounts that are purportedly managed similarly - whether
motivated by the desire to earn higher fees from TIP or not - could trigger
their dismissal by FAI.
On an ongoing basis, FAI compares the results each Money Manager produces for
TIP to the results it produces for its other clients. A Money Manager's
unwillingness to share these other results with FAI or its failure to manage
TIP's account in a manner that is as similar as possible to the manner in
which other accounts with the same mandate are managed also constitute
grounds for dismissal.
PREFERRED PERFORMANCE-BASED FEE STRUCTURE. While mindful that no fee
structure can possibly prove suitable to all Money Managers - even as a
starting point for discussion - in an effort to streamline the negotiation
process as much as possible, FAI has formulated a preferred performance-based
fee model. The graph below illustrates the application of this model to one
particular Money Manager. Herewith a summary of the model's chief attributes:
Common Characteristics. All agreements between the Funds and Money
Managers entailing performance-based fees have certain common characteristics,
including: (1) minimum fees ("floors"); (2) maximum fees ("caps") ; and
(3) fee formulae that, in the judgment of members of TIP's and FAI's boards,
produce fees that are reasonable in relation to the margin of outperformance
that a Money Manager must achieve to earn a given level of fees. In each
case, the formula embodies the concept of a "fulcrum fee," i.e., an
equation (disclosed in the profile of each Money Manager contained in the TIP
Prospectus) under which the actual fees paid to a Money Manager are always
proportionately related to performance above or below a given fulcrum point.
In each case, the formula is designed to augment a mutually agreed-upon basic
fee if the excess return on the portfolio managed by the Money Manager for
TIP (Actual Gross Total Return less Benchmark Total Return) exceeds a
specified level, and to reduce this basic fee if the excess return falls
below this level. As the graph illustrates, in each case the slope of the
fee line between the floor and the cap is uniform throughout.
Definition of Total Return. "Total Return" as used here means the change
in the market value of the Money Manager's portfolio, or the Benchmark Index,
as the case may be, over one month measurement periods, adjusted on a time-
weighted basis for any assets added to or withdrawn from the Money Manager's
portfolio. The total returns of portfolios or benchmark indexes over the
rolling twelve-month time periods used in computing performance-based
bonuses/penalties are, therefore, the sum of each of the monthly returns in
the applicable rolling twelve month period.
Manager-Specific Benchmark Indices. Importantly, the benchmark index used in
computing the Money Manager's excess return is the index deemed most relevant
for that Money Manager. In many cases, this benchmark index is the same as
the overall performance benchmark for the Fund retaining the Money Manager.
In some cases, however, FAI's objective of melding Money Managers espousing
different philosophies into an integrated manager structure that is both
effective and efficient dictates that a Money Manager's benchmark index be
different from the benchmark for the Fund that retains it.
Fee Function Tied to Fund's Overall Objective. One virtue of the
performance-based fee structure is that it permits FAI to craft manager-
specific fee agreements that link compensation to the return objectives of
the Fund in question. In crafting fee proposals, FAI and the directors of
TIP will ask a number of questions, including those discussed below. Answers
to all will be considered when evaluating fee arrangements.
1. What is a reasonable fee for this Money Manager if it outperforms its
benchmark by the same margin that the Fund employing it aims to outperform its
benchmark? For example, the TIFF U.S. Equity Fund seeks to outperform its
benchmark (Wilshire 5000) by 75 basis points net of fees. If analysis of all
relevant factors (including but not limited to: the proposed size of a Money
Manager's account, the Money Manager's historical deviations from the benchmark,
the volatility of such deviations, the Money Manager's assets under management,
and other organizational attributes) suggests that it is reasonable to pay
manager A 40 basis points for outperforming its benchmark by 75 basis points net
of fees, then FAI has defined one point on the fee line for Manager A: 115
basis points of excess return on the x-axis, 40 basis points of fees on the
y-axis.
2. What is a reasonable fee for this Money Manager if it performs as expected?
As a practical matter, most Money Managers screened by FAI for retention by
TIP expect to outperform their agreed-upon benchmark by a margin greater than
that reflected in the targeted excess return of the TIP Fund that they seek to
serve. For example, most U.S. equity managers screened by FAI seek to
outperform a relevant benchmark of U.S. equities by more than the 0.75% (75
basis points) that the TIFF U.S. Equity Fund seeks to outperform its performance
benchmark (the Wilshire 5000) net of all fees. The Money Managers establish
their fee-negotiating position with a view to what they would expect to earn
under a normal asset-based fee arrangement; they can be expected to seek a
performance-based fee schedule that will give them reasonable assurance of
payment comparable to their asset-based fee expectations. Particularly where
the Money Manager has an asset-based fee schedule in place for other clients,
FAI will begin negotiation on the premise that the Money Manager should be paid
an amount comparable to a reasonable asset-based fee if the Money Manager
performs in accordance with reasonable expectations.
3. What is the appropriate Fulcrum Point for this Money Manager?
The Fulcrum Point - the midpoint between the highest fee payable and the lowest
fee payable - is set to establish a fee structure in which the financial
incentives of the Money Manager are aligned with those of the Fund. The
Fulcrum Point is set at a performance level that the Money Manager can
reasonably expect to achieve with an investment approach that entails an
acceptable level of risk for the Fund. FAI and TIP will seek agreements in
which the Money Manager will have as much to lose as it has to gain if the
Money Manager chooses to increase the risk it takes with the Fund's account.
The table below identifies Money Managers that provide services to the Funds
with performance-based fees, the Fulcrum Fee under the Agreement between the
Money Manager and TIP, and the return that must be achieved by the Money
Manager in order to earn the Fulcrum Fee (100 bp equals 1.00%). See Appendix A
to the Prospectus for additional information about the Money Managers and the
Agreements.
4. What is a reasonable fee "floor" for this Money Manager? As with the
determination of all model inputs, FAI's choice of an appropriate "floor" for
each Money Manager is based on an analysis of both the Money Manager's
idiosyncratic attributes and the perceived availability of qualified alternate
Money Managers. Having identified an appropriate minimum fee for each Money
Manager, FAI then identifies the level of return at which the fee "bottoms out."
5. What is a reasonable fee "cap" for this Money Manager? Having identified
an appropriate floor, FAI then identifies, for each Money Manager, the
reciprocal fee "cap." In all cases, the cap and the level of excess return at
which it is reached are selected in accordance with criteria that aim to reward
the Money Manager adequately for superior performance without creating
incentives for either undue risk-taking or undue risk aversion (i.e., "closet
indexing" of portfolio assets to the agreed-upon benchmark).
Money Manager Fulcrum Fee Excess Return over
Manager's Benchmark
Required to Receive
Fulcrum Fee
Aronson + Partners 45 bp 210 bp
Atlantic Asset Management Partners, LLC 35 bp 165 bp
Bee & Associates Inc. 108 bp 458 bp
Eagle Capital Management 100 bp 621 bp
Emerging Markets Management 170 bp 370 bp
Fischer Francis Trees & Watts, Inc.
(Bond Fund) 45 bp 251 bp
Harding, Loevner Management, L.P. 80 bp 400 bp
Investment Research Company (Large Cap
Core Equity) 65 bp 281 bp
Investment Research Company
(Market Neutral Defensive Equity) 105 bp 870 bp
Jacobs Levy Equity Management 70 bp 249 bp
Marathon Asset Management Ltd. 88 bp 424 bp
Palo Alto Investors 105 bp 524 bp
Seix Investment Advisors, Inc. 45 bp 195 bp
Smith Breeden Associates, Inc.
(Bond Fund) 48 bp 157 bp
Smith Breeden Associates, Inc.
(Short-Term Fund) 40 bp 95 bp
Standard Pacific Capital LLC 108 bp 458 bp
Westport Asset Management, Inc. 108 bp 430 bp
COMPUTING AND REMITTING FEES. The computation and remittance procedures
that the Funds will employ are described immediately below. All fee schedules
are applied to the average daily net assets in each Money Manager's account for
the time period in question. For purposes of computing the Funds' daily net
asset values, however, performance-based fees are accrued based on investment
returns achieved during the current performance fee period.
Computing Fees. For the first two months following the inception of their
accounts, Money Managers will receive a straight asset-based fee equal to
150% of the minimum (floor) rate, regardless of performance. Thereafter,
they will be compensated in accordance with the performance-based fee
function negotiated with each Money Manager (depicted in its Money Manager
profile in Appendix A), with the fee for a given month (e.g., February 1998)
based on the Money Manager's performance for the twelve months ending two
months prior to that month (December 1997 in our example). Why a two-month
time lag? Because, while TIP's directors would prefer that fees paid by
members in a given month reflect the returns they actually earn in that
month, two facts preclude perfect linkage: (1) the law requires a minimum
12-month measurement period for performance-based fees; and (2) the returns
on some managers' benchmarks (e.g., certain foreign stock indices) are not
available until several days after month-end. This means that the closest
TIP can come to accruing fees that reflect how a Money Manager did for
shareholders of, for example, its International Equity Fund in February 1998
is to base them on each Money Manager's performance for the twelve months
ending December 31, 1997. Theoretically, the lag could be reduced to one
month plus the number of days following month-end that it takes vendors
(e.g., Morgan Stanley Capital International) to distribute benchmark returns,
but the practical difficulties of making intra-month adjustments in accrual
rates outweigh the advantages of achieving such precision. Of course, TIP
could voluntarily adopt a measurement period longer than one year, and TIP
would do so were it not for the fact that the longer the measurement period,
the looser the linkage between the level of performance-based fees paid by
the Funds and the gross returns they actually earn for their Members.
Remitting Fees. In order to comply with the legal requirement that there be
a minimum one-year measurement period for performance-based portfolio
management fees, in the third through fourteenth calendar month of their
employment by a Fund, Money Managers agreeing to performance-based fee
arrangements may receive only a portion of the fees accrued by a Fund with
respect to segments of the Fund managed by them. Specifically, during this
twelve month time period, the Money Managers will receive only the minimum
(floor) fee to which they are entitled. Upon determination (on or about the
tenth day of the fifteenth calendar month of its employment by the Fund) of
the precise amount of fees to which such Money Manager is entitled for
services rendered during the third through fourteenth months of its
employment by a Fund, any fees accrued by the Fund that are owed to the Money
Manager in light of its performance will be disbursed. The reason for
commencing accrual of performance-based fees in the third calendar month of
investment operations for each Fund rather than at an earlier date is that,
as noted, the indices with reference to which the Money Managers' performance
is computed are typically not available until five or more business days
after the close of each month. Since it is impractical to adjust fee accrual
rates intra-month (e.g., during the second calendar month of investment
operations based on performance achieved during the first month), the
earliest that such accruals can reflect Money Managers' actual performance is
the third calendar month that a Money Manager agreeing to performance-based
fee arrangements is employed by a Fund.
Advantages and Disadvantages of Accrual and Remittance Procedures. TIP's
board of directors recognizes that the procedure described above could give
rise to inequities among members, but such inequities are likely to be less
acute than those produced by performance-based fee arrangements entailing
measurement periods longer than one year. For example, some regulated
investment companies have performance-based portfolio management fee
arrangements entailing rolling 36-month performance measurement periods.
Under such arrangements, shareholders entering the Fund in, for example,
month 72 may be forced to pay the maximum fees to which a Money Manager is
entitled for several months following their initial purchase if the Money
Manager's performance was sufficiently good during months 36 through 71.
This could occur even though the manager's performance is not as good in the
months immediately following the new shareholder's entry (e.g., months 72
through 84), because the fees for these months will reflect the Money
Manager's performance during prior time periods. The one-year measurement
period that TIP will employ under performance-based fee arrangements does not
eliminate these intergenerational inequities among changing shareholder
populations, but it can help to minimize them, and it is because TIP's board
seeks to tie the portfolio management fees paid by individual members as
closely as possible to the gross investment returns such members actually
realize that the board has approved performance-based fee arrangements with
certain Money Managers entailing the minimum one-year measurement period
permitted by law.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of March 31, 1997, there were no "control persons" (as such term is
defined in the 1940 Act) of TIP. All shares of each Fund listed in this
section are Common Stock, $.001 per Share, and are directly held. As of
March 31, 1997, the following Members held five percent or more of the
outstanding shares of each Fund as indicated:
Multi-Asset Fund
Chemical Heritage Foundation; 315 Chestnut Street;
Philadelphia, PA 19106 11.9%
William Caspar Graustein Memorial Fund; 84 Trumbull Street
New Haven, CT 06511 11.9%
The Greater New Orleans Foundation; 2515 Canal St.,
Ste. 401; New Orleans, LA 70119 8.2%
William T. Grant Foundation, Inc.; 515 Madison Avenue, Sixth Floor
New York, NY 10022 5.9%
RosaMary Foundation; 6028 Magazine Street; New Orleans, LA 70118 5.3%
Benton Foundation; 1634 Eye St. N.W., 12th Fl.;
Washington, DC 20006 5.1%
The Rockefeller Foundation; 420 Fifth Avenue;
New York, NY 10018 22.6%
Houston Endowment Inc.; 600 Travis, Suite 6400;
Houston, TX 77002 18.0%
Fan Fox and Leslie R. Samuels Foundation, Inc.; 630 Fifth Avenue
Suite ww55, New York, NY 10111 5.6%
BellSouth Foundation, Inc.; 1155 Peachtree Street, Suite 14F05;
Atlanta, GA 30309 5.2%
Emerging Markets Fund
Mayo Foundations; 200 First Street S.W.; Rochester, MN 55905 26.5%
Pew Memorial Trust, c/c Glenmede Trust Co.;
One Liberty Plaza, Suite 1200; Philadelphia, PA 19103 17.9%
The Colorado Trust; 1600 Sherman Street; Denver, CO 80203 10.1%
The Commonwealth Fund; 1 East 75th Street;
New York, NY 10021 8.3%
Carnegie Corporation of New York; 437 Madison Avenue;
New York, NY 10022 6.1%
ACF/CRF Joint Fund; 3773 Cherry Creek North
Drive #955; Denver, CO 80209 6.0%
U.S. Equity Fund
William & Flora Hewlett Foundation; 525 Middlefield
Road #200; Menlo Park, CA 94025 18.2%
BellSouth Foundation, Inc.; 1155 Peachtree
Street; Atlanta, GA 30309 12.0%
Jacksonville Community Foundation; 112 W. Adams St.,
Suite 1414; Jacksonville, FL 32202 7.4%
Denver Foundation; 455 Sherman Street, Suite 220;
Denver, CO 80203 5.1%
Bond Fund
The Duke Endowment; 100 North Tryon Street,
Suite 3500; Charlotte, NC 28202 16.9%
Triangle Community Foundation; P.O. Box 12834;
Research Triangle Park, NC 27709 7.8%
RosaMary Foundation; 6028 Magazine Street;
New Orleans, LA 70118 7.5%
Jacksonville Community Foundation; 112 W. Adams St.,
Suite 1414; Jacksonville, FL 32202 5.2%
Short-Term Fund
Fox Family Foundation; 7701 Forsyth Boulevard, Suite 600
St. Louis, MO 63105 20.0%
Houston Endowment Inc.; 600 Travis, Suite 6400;
Houston, TX 77002 12.2%
Claude Worthington Benedum Foundation; P.O. Box 3198;
Pittsburgh, PA 15230 10.6%
Stewart W. and Wilma C. Hoyt Foundation; 105-107 Court Street
Suite 400; Binghamton, NY 13901 6.5%
East Tennessee Founfation; 550 West Main Street;
Knoxville, TN 37902 6.0%
DISTRIBUTION OF FUND SHARES
Shares of TIP are distributed by Foundation Advisers, Inc. as a registered
branch office of AMT Capital Services, Inc., pursuant to a Distribution
Agreement (the "Distribution Agreement") dated as of January 1, 1995
between TIP and AMT Capital Services. The Distribution Agreement requires
FAI and AMT Capital Services to use their best efforts on a continuing basis
to solicit purchases of shares of TIP. No fees are payable by TIP pursuant
to the Distribution Agreement, and FAI and AMT Capital Services bear the
expense of their distribution activities. TIP, FAI, and AMT Capital Services
have agreed to indemnify one another against certain liabilities.
PURCHASES. TIP reserves the right in its sole discretion to: (1) suspend the
offering of shares of any Fund; (2) reject purchase orders when in the
judgment of management such rejection is in the best interests of TIP; and
(3) reduce or waive the minimum for initial investments.
REDEMPTIONS. Each Fund may suspend redemption privileges or postpone the
date of payment: (1) during any period that TIP is closed; (2) during any
period when an emergency exists as defined by the rules of the Commission as
a result of which it is not reasonably practicable for a Fund to dispose of
securities owned by it, or fairly to determine the value of its assets; and
(3) for such other periods as the Commission may permit.
Potential In-Kind Redemptions. TIP reserves the right, if conditions exist
which make cash payments undesirable, to honor any request for redemption of
a Fund by making payment in whole or in part in readily marketable securities
chosen by TIP which are valued in the same manner as they are for purposes of
computing the Fund's net asset value (redemption-in-kind). If payment is
made in securities, a member may incur transaction expenses in converting
these securities to cash. TIP has elected, however, to be governed by Rule
18f-1 under the 1940 Act as a result of which TIP is obligated to redeem
shares, with respect to any one member during any 90-day period, solely in
cash up to the lesser of $250,000 or 1% of the net asset value of a Fund at
the beginning of the period, and is permitted to borrow to finance such
redemptions without regard to restrictions that might otherwise apply under
the 1940 Act.
SUPPLEMENTAL DISCUSSION OF
INVESTMENT OBJECTIVES, POLICIES, AND RESTRICTIONS
POTENTIAL BENEFITS AND COSTS OF INVESTING IN FOREIGN SECURITIES. Many
investors believe that foreign securities are riskier than domestic securities.
In some respects, they are right, especially when foreign securities are viewed
as stand-alone investments. However, many institutional investors have made
major commitments to foreign securities, typically for two reasons: (1) to
reduce the volatility of their overall returns (foreign markets and domestic
markets tend to rise and fall at different times); and (2) to enhance these
returns over the long term. A long-term investment horizon is appropriate
because it is dangerous to assume that foundation governing boards, which
typically meet on a part-time basis in an environment where consensus comes
first, can shift funds profitably between domestic and foreign markets in
anticipation of short-term market movements. The safer assumption is that
shifts of this sort will not produce profits net of trading costs. In the
opinion of TIP's directors, the opportunity to enhance long-term returns by
investing in foreign markets lies chiefly in their relative inefficiency:
because international money managers have far more companies (and countries)
to choose from than do managers investing solely in domestic securities, the
potential added value from active portfolio management is higher for
international stock portfolios than it is for purely domestic ones. The
costs are higher also, not only because management fees and custody costs
tend to be higher on international portfolios, but also because foreign
governments withhold a portion of the income that foundations earn when
investing abroad. Despite these higher costs, the dual benefits of
investing in foreign securities - increased diversification and the
opportunity to earn higher returns by exploiting valuation inefficiencies in
foreign markets - makes a substantial allocation to them worthy of serious
consideration by most foundation boards.
PERFORMANCE OBJECTIVES. The TIP Funds seek to outperform their performance
benchmarks by different margins (see the table in the section of the
Prospectus entitled HIGHLIGHTS). There are two reasons why these margins
differ. First, the costs of implementing each Fund's investment policies
differs. Second, the efficiency of the markets in which each Fund will
primarily invest differs, with the U.S. stock and fixed income markets
arguably being the most efficient (in a valuation sense) of all markets in
which the Funds will invest. The margin by which each Fund seeks to
outperform its performance benchmark thus reflects judgments by TIP's
directors of the excess return that a properly diversified, actively managed
fund might realistically seek to earn net of the costs that must be incurred
in producing this excess return. "Excess return" as used here means the
difference between a Fund's total return and the total return of its
performance benchmark.
SUPPLEMENTAL DISCUSSION OF POLICY IMPLEMENTATION AND RISKS
INVESTMENT STRATEGIES
Borrowing. Each Fund may borrow money temporarily from banks when: (1) it
is advantageous to do so in order to meet redemption requests; (2) a Fund
fails to receive transmitted funds from a member on a timely basis; (3) the
custodian of TIP fails to complete delivery of securities sold; or (4) a Fund
needs cash to facilitate the settlement of trades made by the Fund. In
addition, each Fund may make securities loans or lend securities by engaging
in reverse repurchase agreements and/or dollar roll transactions. By
engaging in such transactions, a Fund may, in effect, borrow money.
Securities may be borrowed under repurchase agreements.
Foreign Currency Exposure. TIP's directors have studied carefully the
impact of exchange rate changes on the U.S. dollar value of foreign securities
portfolios, and have concluded that the impact of such changes declines
dramatically as one's investment time horizon lengthens. This is especially
true with respect to foreign stock portfolios, for this reason: global
investors routinely adjust the prices they are willing to pay for shares of a
given firm in response to changes in the foreign exchange value of the
currencies in which its products (and costs) are denominated. For example,
while it is likely that a sudden 10% decline in the Japanese yen's value in
U.S. dollar terms will produce short-term losses in the dollar value of
shares of Japanese exporters, the increased competitiveness of such firms
typically will cause global investors to mark upwards such firms' relative
price/earnings or price/book value multiples, albeit with a lag.
Exchange rate movements can produce large losses over short- and even
medium-term time horizons, but TIP's directors strongly discourage foundations
from investing in foreign securities in pursuit of short-term gains, and they
believe that exchange rate movements are essentially a wash over the longer-
term time horizons which most global investors properly employ. The logic of
this position can be assessed by pondering the implications of the opposite
belief: that investors can earn an economic return over the very long term
merely by holding certain currencies (i.e., continually rolling over long
positions in a given currency or basket of currencies in the spot or futures
markets). While there have undeniably been short-term periods when currency
exposure per se produced positive real returns (e.g., holding Japanese yen
during the five years ending December 1993), global trade and capital flows
make it very difficult for the disequilibrium created by massive changes (up
or down) in the foreign exchange value of a given currency to persist.
Countries whose currencies plummet in value can suffer enormous hardships, as
can holders of shares of firms denominated in such currencies, but
devaluations ultimately enhance the competitiveness of such countries'
private sectors, thereby inducing global investors to sell shares of firms
domiciled in countries with revalued currencies in order to fund purchases of
shares of firms domiciled in countries with devalued ones.
Foreign Currency Hedging. Each of the Funds may enter into forward foreign
currency contracts (a "forward contract") and may purchase and write (on a
covered basis) exchange-traded or over-the-counter ("OTC") options on
currencies, foreign currency futures contracts, and options on foreign
currency futures contracts primarily to protect against a decrease in the
U.S. Dollar equivalent value of its foreign currency portfolio securities or
the payments thereon that may result from an adverse change in foreign
currency exchange rates. Each of the Funds may at times hedge all or some
portion of its currency exchange risk. Conditions in the securities,
futures, options, and foreign currency markets will determine whether and
under what circumstances TIP will employ any of the techniques or strategies
described below and in the section of the Prospectus entitled POLICY
IMPLEMENTATION AND RISKS. TIP's ability to pursue certain of these strategies
may be limited by applicable regulations of the Commodity Futures Trading
Commission ("CFTC") and the federal tax requirements applicable to
regulated investment companies (see TAX CONSIDERATIONS).
Forward Contracts. Sale of currency for dollars under such a contract
establishes a price for the currency in dollars. Such a sale insulates
returns from securities denominated in that currency from exchange rate
fluctuations to the extent of the contract while the contract is in effect.
A sale contract will be advantageous if the currency falls in value against
the dollar and disadvantageous if it increases in value against the dollar.
A purchase contract will be advantageous if the currency increases in value
against the dollar and disadvantageous if it falls in value against the
dollar.
Funds may use forward contracts to insulate existing security positions
against exchange rate movement ("position hedges") or to insulate proposed
transactions against such movement ("transaction hedges"). For example, to
establish a position hedge, a forward contract on a foreign currency might be
sold to protect the gain from a decline in the value of that currency against
the dollar. To establish a transaction hedge, a foreign currency might be
purchased on a forward basis to protect against an anticipated increase in
the value of that currency against the dollar.
Primary Risks: The success of currency hedging will depend on the
ability of Money Managers to predict exchange rate fluctuations.
Predicting such fluctuations is extremely difficult and thus the
successful execution of a hedging strategy is highly uncertain. An
incorrect prediction will cause poorer Fund performance than would
otherwise be the case. Forward contracts that protect against
anticipated losses have the corresponding effect of canceling possible
gains if the currency movement prediction is incorrect.
Precise matching of forward contract amounts and the value of portfolio
securities is generally not possible because the market value of the
protected securities will fluctuate while forward contracts are in
effect. Adjustment transactions are theoretically possible but time
consuming and expensive, so contract positions are likely to be
approximate hedges, not perfect.
The cost to a Fund of engaging in forward contracts will vary with
factors such as the foreign currency involved, the length of the
contract period, and the market conditions then prevailing, including
general market expectations as to the direction of the movement of
various foreign currencies against the U.S. dollar. Furthermore,
neither FAI nor the Money Managers may be able to purchase forward
contracts with respect to all of the foreign currencies in which the
Fund's portfolio securities may be denominated. In those circumstances
the correlation between the movements in the exchange rates of the
subject currency and the currency in which the portfolio security is
denominated may not be precise. Moreover, if the forward contract is
entered into in an over-the-counter transaction, as will usually be the
case, the Fund generally will be exposed to the credit risk of its
counterparty. If a Fund enters into such contracts on a foreign
exchange, the contract will be subject to the rules of that foreign
exchange. Foreign exchanges may impose significant restrictions on the
purchase, sale, or trading of such contracts, including the imposition
of limits on price moves. Such limits may significantly affect the
ability to trade such a contract or otherwise to close out the position
and could create potentially significant discrepancies between the cash
and market value of the position in the forward contract. Finally, the
cost of purchasing forward contracts in a particular currency will
reflect, in part, the rate of return available on instruments
denominated in that currency. The cost of purchasing forward contracts
to hedge portfolio securities that are denominated in currencies that
in general yield high rates of return may thus tend to reduce that rate
of return toward the rate of return that would be earned on assets
denominated in U.S. dollars.
Other Hedging Strategies and Tactics. Among the other hedging strategies and
tactics that a Fund may employ are interest rate, currency and index swaps,
and the purchase or sale of related caps, floors, and collars. Each Fund may
enter into these transactions primarily to preserve a return or spread on a
particular investment or portion of its portfolio, to protect against
currency fluctuations, as a duration management technique or to protect
against any increase in the price of securities the Fund anticipates
purchasing at a later date. Each Fund intends to use these transactions as
hedges and not as speculative investments and will not sell interest rate
caps or floors where it does not own securities or other instruments
providing the income stream the Fund may be obligated to pay. Interest rate
swaps involve the exchange by a Fund with another party their respective
commitments to pay or receive interest, for example, an exchange of floating
rate payments for fixed rate payments with respect to a notional amount of
principal. A currency swap is an agreement to exchange cash flows on a
notional amount of two or more currencies based on the relative value
differential among them and an index swap is an agreement to swap cash flows
on a notional amount based on changes in the values of the referenced
indices. The purchase of a cap entitles the purchaser to receive payments on
a notional principal amount from the party selling such cap to the extent
that a specified index exceeds a predetermined interest rate or amount. The
purchase of a floor entitles the purchaser to receive payments on a notional
principal amount from the party selling such floor to the extent that a
specified index falls below a predetermined interest rate or amount. A
collar is a combination of a cap and a floor that preserves a certain return
within a predetermined range of interest rates or values. With respect to
swaps, a Fund will accrue the net amount of the excess, if any, of its
obligations over its entitlements with respect to each swap on a daily basis
and will segregate an amount of cash or liquid securities having a value
equal to the accrued excess. Caps, floors and collars require segregation of
assets with a value equal to the Fund's net obligation, if any.
Long/Short Strategies. In the opinion of TIP's and FAI's directors, the
U.S. stock market is highly efficient in the valuation sense, and becoming more
so at a rapid rate due to the combined impact of falling computing costs,
globalization of financial markets, and regulatory changes. In short, with
so many powerful computers and skilled professionals attempting to exploit
valuation anomalies among U.S. stocks, it is becoming increasingly difficult
to outperform market averages. This is one reason why the U.S. Equity Fund
seeks to outperform its performance benchmark by a narrower margin than TIP's
international equity funds seek to outperform theirs. It is also the reason
that TIP's directors have authorized the U.S. Equity Fund to employ so-called
long/short investment strategies: strategies entailing the construction of a
portfolio comprising long positions in stocks which the Money Manager
supervising it perceives as undervalued, offset by an equivalent dollar
amount of short positions in stocks that the Money Manager perceives as
overvalued. Because the long and short subportfolios offset or neutralize
each other, long/short strategies are sometimes referred to as "market
neutral" strategies.
Long versus Short Positions. As noted in The New Stock Market, an
excellent treatise on stock investing written by Diana Harrington, Frank
Fabozzi, and Russell Fogler of (Probus Publishing, 1990):
There are two ways to make money [in the stock market]: buy low and
sell high, or sell high and buy low. A short sale is the latter.
Suppose you forecast that a stock's price will drop. If you do not own
any of it, you can profit from your forecast by borrowing some shares,
selling them, and buying them back later at the lower price. Your
broker helps you by borrowing stock from an investor who owns the stock
and giving them your IOU. The borrowed stock is sold, and you are
given the proceeds. Later, when you [close out the position], the
transaction is reversed. In the meantime, you must pay any dividends
declared by the company plus a fee for borrowing the stock.
Rationale for Strategy. From a foundation investor's viewpoint, the
rationale for using long/short strategies is simply stated: if you believe
that skilled active managers can identify stocks that are likely to
outperform market averages (undervalued issues), then is it not also logical
to assume that skilled active managers can also identify stocks that are
likely to underperform market averages (overvalued issues)? It is precisely
this assumption - that skilled money managers can indeed identify overvalued
stocks - that animates a major trend in institutional investing in the
1990s: the tendency of sophisticated institutional investors (including
several of the foundation and endowment officers who serve on the TIP or FAI
boards) to permit the money managers they employ to "short" stocks on a
highly selective, carefully controlled basis. In an increasingly efficient
market, "short" sale techniques are appealing because they exploit a
structural inefficiency in capital markets: the tendency of most investors
to focus on the identification of undervalued, as distinct from overvalued,
securities. Indeed, one of the chief reasons why it is becoming increasingly
difficult to outperform the U.S. stock market is that long/short strategies,
while still unconventional, are becoming increasingly popular among the large
institutions that dominate the U.S. stock market. Outperforming broad market
averages without using long/short strategies remains feasible, of course, but
in the opinion of TIP's directors the advantages of allocating a defined
portion (zero to 30%) of the U.S. Equity Fund to such strategies outweigh the
risks (discussed immediately below). TIP's other Funds do not currently
employ long/short or pure short-selling strategies, but are authorized to do
so by the TIP Prospectus.
Primary Risks: As discussed in detail in the TIP Prospectus, the risks
of shorting securities are distinctly different from the risks of
holding only long positions. Given the restrictions to which managers
employing long/short strategies on behalf of TIP are subject, however,
foundations investing in TIP's U.S. Equity Fund are not exposed to the
type of risk typically associated with short sales techniques - the
risk of losing all of the capital they have invested as a result of a
stratospheric increase in the value of a single security (or indeed the
stock market generally). As is true of the other institutions
employing long/short strategies with which the TIP and FAI directors
are associated, TIP employs several safeguards to control the risks of
such strategies: (1) any long/short portfolios constructed on the
Fund's behalf must comprise an approximately equivalent dollar amount
of long and short positions in a diversified list of issues, and must
be overlaid with long positions in stock index futures contracts, thus
limiting potential losses on the short positions caused by a rise in
stock prices generally; and (2) the TIP Prospectus states that the
dollar size of a short position in a single stock may not represent
more than 3% of the U.S. Equity Fund's net assets.
Securities Lending. As part of its continuing effort to make available to
all eligible foundations investment strategies and tactics to which they
might otherwise lack access, TIP avails itself of an opportunity created by
the increasingly widespread use of the same short-selling techniques that TIP
itself employs: lending portfolio securities to investors who need to borrow
them in order to implement long/short (or pure short) strategies. While most
large foundations have active securities lending programs in place, many
foundations do not. According to the 1993 Community Foundation Investment
Report (published jointly by the Council on Foundations and the Community
Foundation Fiscal and Administrative Officer's Group), less than 2% of
community foundations engage in securities lending.
Through its custodial bank, and subject to strict guidelines summarized below
and in the TIP Prospectus, TIP actively lends the securities held in all of
its Funds. The incremental income from such lending activities varies from
Fund to Fund, with U.S. securities typically commanding much narrower lending
"spreads" (according to Kohlberg and Associates, average lending income
might approximate 0.02% to 0.05% per annum) than foreign securities (0.15% to
0.75% per annum). These differences stem primarily from the far greater
availability of lendable U.S. securities in relation to borrowing demand than
exists in non-U.S. markets.
Each Fund is authorized to lend securities from its investment portfolios,
with a value not exceeding 331/3% of its total assets, to banks, brokers, and
other financial institutions if it receives collateral in cash, U.S.
Government securities, or irrevocable bank stand-by letters of credit
maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities. The loans will be terminable at any
time by TIP and the relevant Fund will then receive the loaned securities
within five days. During the period of such a loan, the Fund receives the
income on the loaned securities and a loan fee and may thereby increase its
total return. At the present time, the Staff of the Commission does not
object if an investment company pays reasonable negotiated fees in connection
with loaned securities, so long as such fees are set forth in a written
contract and approved by the investment company's board of directors. In
addition, voting rights may pass with the loaned securities, but if a
material event will occur affecting an investment on loan, the loan must be
called and the securities voted.
INVESTMENT TACTICS
Dollar Roll Transactions. "Dollar roll" transactions consist of the sale
by a Fund to a bank or broker-dealer (the "counterparty") of GNMA
certificates or other mortgage-backed securities together with a commitment
to purchase from the counterparty GNMA certificates or other mortgage-backed
securities at a future date, at the same price. The counterparty receives
all principal and interest payments, including prepayments, made on the
security while it is the holder. The Fund receives a fee from the
counterparty as consideration for entering into the commitment to purchase.
Dollar rolls may be renewed with a new purchase and repurchase price fixed
and a cash settlement made at each renewal without physical delivery of
securities. Moreover, the transaction may be preceded by a firm commitment
agreement pursuant to which the Fund agrees to buy a security on a future
date. A Fund will not use such transactions for leverage purposes and,
accordingly, will segregate cash, U.S. Government securities or other high
grade debt obligations in an amount sufficient to meet its purchase
obligations under the transactions.
Dollar rolls are similar to reverse repurchase agreements because they
involve the sale of a security coupled with an agreement to repurchase. Like
borrowings, a dollar roll involves costs to a Fund. For example, while a
Fund receives a fee as consideration for agreeing to repurchase the security,
the Fund may forego the right to receive all principal and interest payments
while the counterparty holds the security. These payments to the
counterparty may exceed the fee received by the Fund, thereby effectively
charging the Fund interest on its borrowing. Further, although the Fund can
estimate the amount of expected principal prepayment over the term of the
dollar roll, a variation in the actual amount of prepayment could increase or
decrease the cost of the Fund's entry into the dollar roll.
Primary Risks: The entry into dollar rolls involves potential risks of
loss which are different from those related to the securities
underlying the transactions. For example, if the counterparty becomes
insolvent, a Fund's right to purchase from the counterparty might be
restricted. Additionally, the value of such securities may change
adversely before the Fund is able to repurchase them. Similarly, a
Fund may be required to purchase securities in connection with a dollar
roll at a higher price than may otherwise be available on the open
market. Since the counterparty is not required to deliver an identical
security to a Fund, the security that the Fund is required to buy under
the dollar roll may be worth less than an identical security. Finally,
there can be no assurance that a Fund's use of cash that it receives
from a dollar roll will provide a return that exceeds borrowing costs.
Repurchase and Reverse Repurchase Agreements. When participating in
repurchase agreements, a Fund buys securities from a vendor (e.g., a bank or
securities firm) with the agreement that the vendor will repurchase the
securities at the same price plus interest at a later date. Repurchase
agreements may be characterized as loans secured by the underlying
securities. Such transactions afford an opportunity for the Fund to earn a
return on available cash at minimal market risk, although the Fund may be
subject to various delays and risks of loss if the vendor becomes subject to
a proceeding under the U.S. Bankruptcy Code or is otherwise unable to meet
its obligation to repurchase. The securities underlying a repurchase
agreement will be marked to market every business day so that the value of
such securities is at least equal to the value of the repurchase price
thereof, including the accrued interest thereon.
When participating in reverse repurchase agreements, a Fund sells U.S.
Government securities and simultaneously agrees to repurchase them at an
agreed-upon price and date. The difference between the amount the Fund
receives for the securities and the additional amount it pays on repurchase
is deemed to be a payment of interest. TIP will maintain for each Fund a
segregated custodial account containing cash, U.S. Government securities, or
other appropriate assets having an aggregate value at least equal to the
amount of such commitments to repurchase, including accrued interest, until
payment is made. Reverse repurchase agreements create leverage, a
speculative factor, but will not be considered borrowings for the purposes of
limitations on borrowings.
In addition, repurchase and reverse repurchase agreements may also involve
the securities of certain foreign governments in which there is an active
repurchase market. FAI and the Money Managers expect that such repurchase
and reverse repurchase agreements will primarily involve government
securities of countries belonging to the Organization for Economic
Cooperation and Development ("OECD"). Transactions in foreign repurchase
and reverse repurchase agreements may involve additional risks.
Primary Risks: The use of repurchase agreements involves certain
risks. For example, if the seller in the agreements defaults on its
obligation to repurchase the underlying securities at a time when the
value of these securities has declined, a Fund may incur a loss upon
their disposition. If the seller in the agreement becomes insolvent
and subject to liquidation or reorganization under the Bankruptcy Code
or other laws, a bankruptcy court may determine that the underlying
securities are collateral not within the control of the Fund and are
therefore subject to sale by the trustee in bankruptcy. Finally, it is
possible that the Fund may not be able to substantiate its interest in
the underlying securities. While TIP's management acknowledges these
risks, it is expected that they can be mitigated through stringent
security selection criteria and careful monitoring procedures.
TYPES OF INVESTMENTS. The different types of securities in which the
Funds may invest, subject to their respective investment objectives, policies
and restrictions, are described in the section of the Prospectus entitled
POLICY IMPLEMENTATION AND RISKS - Types of Investments. Additional information
concerning the characteristics and risks of certain of the Funds' investments
are set forth below.
Debt Securities
Bank Obligations. TIP limits its investments in U.S. bank obligations to
obligations of U.S. banks that in FAI's or the Money Managers' opinions meet
sufficient creditworthiness criteria. TIP limits its investments in foreign
bank obligations to obligations of foreign banks (including U.S. branches of
foreign banks) that, in the opinion of FAI or the Money Managers, are of an
investment quality comparable to obligations of U.S. banks in which each Fund
may invest.
Corporate Debt Securities. Corporate debt securities of domestic and foreign
issuers include such instruments as corporate bonds, debentures, notes,
commercial paper, medium-term notes, variable rate notes, and other similar
corporate debt instruments. As described in TIP's Prospectus, the Funds will
invest only in those securities that are rated at least "BBB" by S&P or
"Baa" by Moody's or determined by FAI or the Money Managers to be of
similar creditworthiness. Bonds rated in these categories are generally
described as investment-grade debt obligations with a very strong capacity to
pay principal and interest on a timely basis.
Currency-Indexed Notes. Each Fund may purchase a currency-indexed obligation
using the currency in which it is denominated and, at maturity, will receive
interest and principal payments thereon in that currency. The amount of
principal payable by the issuer at maturity, however, will vary (i.e.,
increase or decrease) in response to the change (if any) in the exchange rate
between the two specified currencies during the period from the date the
instrument is issued to its maturity date. The potential for realizing gains
as a result of changes in foreign currency exchange rates may enable a Fund
to hedge the currency in which the obligation is denominated (or to effect
cross-hedges against other currencies) against a decline in the U.S. dollar
value of investments denominated in foreign currencies while providing an
attractive market rate of return. Each Fund will purchase such indexed
obligations to generate current income or for hedging purposes and will not
speculate in such obligations.
Foreign Government and International and Supranational Agency Debt
Securities. Obligations of foreign governmental entities have various kinds
of government support and include obligations issued or guaranteed by foreign
governmental entities with taxing powers and those issued or guaranteed by
international or supranational entities. These obligations may or may not be
supported by the full faith and credit of a foreign government or several
foreign governments. Examples of international and supranational entities
include the International Bank for Reconstruction and Development ("World
Bank"), the European Steel and Coal Community, the Asian Development Bank,
the European Bank for Reconstruction and Development, and the Inter-American
Development Bank. The governmental shareholders usually make initial capital
contributions to the supranational entity and in many cases are committed to
make additional capital contributions if the supranational entity is unable
to repay its borrowings.
Loan Participations. A loan participation is an interest in a loan to a U.S.
corporation (the "corporate borrower") which is administered and sold by an
intermediary bank. The borrower in the underlying loan will be deemed to be
the issuer of the participation interest except to the extent the Fund
derives its rights from the intermediary bank which sold the loan
participation. Such loans must be to issuers in whose obligations a Fund may
invest. Any participation purchased by a Fund must be sold by an
intermediary bank in the United States with assets exceeding $1 billion.
Primary Risks: Because the bank issuing a loan participation does not
guarantee the participation in any way, the participation is subject to
the credit risks generally associated with the underlying corporate
borrower. In addition, because it may be necessary under the terms of
the loan participation for a Fund to assert through the issuing bank
such rights as may exist against the underlying corporate borrower, in
the event that the underlying corporate borrower should fail to pay
principal and interest when due, the Fund could be subject to delays,
expenses, and risks which are greater than those which would have been
involved if the Fund had purchased a direct obligation (such as
commercial paper) of the borrower. Moreover, under the terms of the
loan participation, the purchasing Fund may be regarded as a creditor
of the issuing bank (rather than of the underlying corporate borrower),
so that the Fund also may be subject to the risk that the issuing bank
may become insolvent. Further, in the event of the bankruptcy or
insolvency of the corporate borrower, the loan participation might be
subject to certain defenses that can be asserted by a borrower as a
result of improper conduct by the issuing bank. The secondary market,
if any, for these loan participation interests is limited, and any such
participation purchased by a Fund will be treated as illiquid, until
the board of directors determines that a liquid market exists for such
participations. Loan participations will be valued at their fair
market value, as determined by procedures approved by the board of directors.
Mortgage-Backed Debt Securities. Mortgage-backed securities are securities
which represent ownership interests in, or are debt obligations secured
entirely or primarily by, "pools" of residential or commercial mortgage
loans or other mortgage-backed securities (the "Underlying Assets"). In
the case of mortgage-backed securities representing ownership interests in
the Underlying Assets, the principal and interest payments on the underlying
mortgage loans are distributed monthly to the holders of the mortgage-backed
securities. In the case of mortgage-backed securities representing debt
obligations secured by the Underlying Assets, the principal and interest
payments on the underlying mortgage loans, and any reinvestment income
thereon, provide the funds to pay debt service on such mortgage-backed
securities. Mortgage-backed securities may take a variety of forms, but the
two most common are mortgage pass-through securities, which represent
ownership interests in the Underlying Assets, and collateralized mortgage
obligations ("CMOs"), which are debt obligations collateralized by the
Underlying Assets.
Certain mortgaged-backed securities are issued that represent an undivided
fractional interest in the entirety of the Underlying Assets (or in a
substantial portion of the Underlying Assets, with additional interests
junior to that of the mortgage-backed security), and thus have payment terms
that closely resemble the payment terms of the Underlying Assets.
In addition, many mortgage-backed securities are issued in multiple classes.
Each class of such multi-class mortgage-backed securities ("MBS"), often
referred to as a "tranche," is issued at a specific fixed or floating
coupon rate and has a stated maturity or final distribution date. Principal
prepayments on the Underlying Assets may cause the MBS to be retired
substantially earlier than their stated maturities or final distribution
dates. Interest is paid or accrues on all or most classes of the MBS on a
periodic basis, typically monthly or quarterly. The principal of and
interest on the Underlying Assets may be allocated among the several classes
of a series of an MBS in many different ways. In a relatively common
structure, payments of principal (including any principal prepayments) on the
Underlying Assets are applied to the classes of a series of an MBS in the
order of their respective stated maturities so that no payment of principal
will be made on any class of the MBS until all other classes having an
earlier stated maturity have been paid in full.
Mortgage-backed securities are often backed by a pool of Underlying Assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors on Underlying Assets to make payments, such
securities may contain elements of credit support. Such credit support falls
into two categories: (1) liquidity protection; and (2) protection against
losses resulting from ultimate default by an obligor on the Underlying
Assets. Liquidity protection refers to the provision of advances, generally
by the entity administering the pool of assets, to ensure that the receipt of
payments on the underlying pool occurs in a timely fashion. Protection
against losses resulting from ultimate default ensures ultimate payment of
obligations on at least a portion of the assets in the pool. Such protection
may be provided through guarantees, insurance policies or letters of credit
obtained by the issuer or sponsor from third parties, through various means
of structuring the transaction or through a combination of such approaches.
A Fund will not pay any additional fees for such credit support, although the
existence of credit support may increase the price of a security.
Governmental, government-related, and private entities may create new types
of mortgage-backed securities offering asset pass-through and
asset-collateralized investments in addition to those described above. As
such new types of mortgage-related securities are developed and offered to
investors, each Fund will, consistent with its investment objectives,
policies, and quality standards, consider whether such investments would be
appropriate.
The duration of a mortgage-backed security, for purposes of a Fund's average
duration restrictions, will be computed based upon the expected average life
of that security.
Primary Risks: Prepayments on securitized assets such as mortgages,
automobile loans, and credit card receivables ("Securitized Assets")
generally increase with falling interest rates and decrease with rising
interest rates; furthermore, prepayment rates are influenced by a
variety of economic and social factors. In general, the collateral
supporting non-mortgage asset-backed securities is of shorter maturity
than mortgage loans and is less likely to experience substantial
prepayments. In addition to prepayment risk, borrowers on the
underlying Securitized Assets may default in their payments creating
delays or loss of principal.
Non-mortgage asset-backed securities involve certain risks that are not
presented by mortgage-backed securities. Primarily, these securities
do not have the benefit of a security interest in assets underlying the
related mortgage collateral. Credit card receivables are generally
unsecured and the debtors are entitled to the protection of a number of
state and federal consumer credit laws, many of which give such debtors
the right to set off certain amounts owed on the credit cards, thereby
reducing the balance due. Most issuers of automobile receivables
permit the servicers to retain possession of the underlying
obligations. If the servicer were to sell these obligations to another
party, there is a risk that the purchaser would acquire an interest
superior to that of the holders of the related automobile receivables.
In addition, because of the large number of vehicles involved in a
typical issuance and technical requirements under state laws, the
trustee for the holders of the automobile receivables may not have an
effective security interest in all of the obligations backing such
receivables. Therefore, there is a possibility that recoveries on
repossessed collateral may not, in some cases, be available to support
payments on these securities.
Some forms of asset-backed securities are relatively new forms of
investments. Although each Fund will only invest in asset-backed
securities believed to be liquid, because the market experience in
certain of these securities is limited, the market's ability to sustain
liquidity through all phases of a market cycle may not have been
tested.
Municipal Debt Securities. Municipal debt securities may include such
instruments as tax anticipation notes, revenue anticipation notes, and bond
anticipation notes. Municipal notes are issued by state and local
governments and public authorities as interim financing in anticipation of
tax collections, revenue receipts or bond sales. Municipal bonds, which may
be issued to raise money for various public purposes, include general
obligation bonds and revenue bonds. General obligation bonds are backed by
the taxing power of the issuing municipality and are considered the safest
type of bonds. Revenue bonds are backed by the revenues of a project or
facility such as the tolls from a toll bridge. Industrial development
revenue bonds are a specific type of revenue bond backed by the credit and
security of a private user. Revenue bonds are generally considered to have
more potential risk than general obligation bonds.
Municipal obligations can have floating, variable, or fixed rates. The value
of floating and variable rate obligations generally is more stable than that
of fixed rate obligations in response to changes in interest rate levels.
Variable and floating rate obligations usually carry rights that permit a
Fund to sell them at par value plus accrued interest upon short notice. The
issuers or financial intermediaries providing rights to sell may support
their ability to purchase the obligations by obtaining credit with liquidity
supports. These may include lines of credit, which are conditional
commitments to lend, and letters of credit, which will ordinarily be
irrevocable, both of which are issued by domestic banks or foreign banks
which have a branch, agency or subsidiary in the United States. When
considering whether an obligation meets a Fund's quality standards, FAI and
the Money Managers will look at the creditworthiness of the party providing
the right to sell and will consider the quality of the obligation itself.
Municipal securities may be issued to finance private activities, the
interest from which is an item of tax preference for purposes of the federal
alternative minimum tax. Such "private activity" bonds might include
industrial development revenue bonds, and bonds issued to finance such
projects as solid waste disposal facilities, student loans or water and
sewage projects. Distributions of a Fund which are derived from interest on
municipal securities will be taxable to Members in the same manner as
distributions derived from interest on taxable debt securities.
Other Foreign Currency Exchange-Related Securities. Securities may be
denominated in the currency of one nation although issued by a governmental
entity, corporation, or financial institution of another nation. For
example, a Fund may invest in a British pound sterling-denominated obligation
issued by a United States corporation. Such investments involve credit risks
associated with the issuer and currency risks associated with the currency in
which the obligation is denominated. FAI or the Money Managers base their
decisions for a Fund to invest in any foreign currency exchange-related
securities that may be offered in the future on the same general criteria
applicable to the Adviser's or Money Manager's decision for such Fund to
invest in any debt security, including the Fund's minimum ratings and
investment quality criteria, with the additional element of foreign currency
exchange rate exposure added to FAI's or the Money Manager's analysis of
interest rates, issuer risk, and other factors.
Securities Denominated in Multi-National Currency Units or More than One
Currency. An illustration of a multi-national currency unit is the European
Currency Unit (the "ECU"), the value of which is based on a "basket"
consisting of specified amounts of the currencies of the member states of the
European Community, a Western European economic cooperative organization.
The specific amounts of currencies comprising the ECU may be adjusted by the
Council of Ministers of the European Community to reflect changes in relative
values of the underlying currencies. FAI and the Money Managers do not
believe that such adjustments will adversely affect holders of
ECU-denominated obligations or the marketability of such securities.
European supranational entities, in particular, issue ECU-denominated
obligations.
U.S. Treasury and U.S. Government Agency Securities. U.S. Government
securities include instruments issued by the U.S. Treasury, including bills,
notes, and bonds. These instruments are direct obligations of the U.S.
Government and, as such, are backed by the full faith and credit of the
United States. They differ primarily in their interest rates, the lengths of
their maturities, and the dates of their issuance. In addition, U.S.
Government securities include securities issued by instrumentalities of the
U.S. Government, such as the Government National Mortgage Association
("GNMA"), which are also backed by the full faith and credit of the United
States. U.S. Government Agency Securities are instruments issued by
instrumentalities established or sponsored by the U.S. Government, such as
the Student Loan Marketing Association ("SLMA"), the Federal National
Mortgage Association ("FNMA") and the Federal Home Loan Mortgage
Corporation ("FHLMC"). While these securities are issued, in general,
under the authority of an Act of Congress, the U.S. Government is not
obligated to provide financial support to the issuing instrumentalities
Variable Amount Master Demand Notes. Variable amount master demand notes
permit the investment of fluctuating amounts at varying rates of interest
pursuant to direct arrangements between a Fund (as lender) and the borrower.
These notes are direct lending arrangements between lenders and borrowers,
and generally are not transferable, nor are they rated ordinarily by either
Moody's or S&P.
Zero Coupon Securities and Custodial Receipts. Zero coupon securities
include securities issued directly by the U.S. Treasury, and U.S. Treasury
bonds or notes and their unmatured interest coupons and the receipts for
their underlying principal (the "coupons") which have been separated by
their holder, typically a custodian bank or investment brokerage firm. A
holder will separate the interest coupons from the underlying principal (the
"corpus") of the U.S. Treasury security. A number of securities firms and
banks have stripped the interest coupons and receipts and then resold them in
custodial receipt programs with a number of different names, including
"Treasury Income Growth Receipts" ("TIGRS") and "Certificate of Accrual
on Treasuries" ("CATS"). The underlying U.S. Treasury bonds and notes
themselves are held in book-entry form at the Federal Reserve Bank or, in the
case of bearer securities (i.e., unregistered securities which are owned
ostensibly by the bearer or holder thereof), in trust on behalf of the owners
thereof. Counsels to the underwriters of these certificates or other
evidences of ownership of the U.S. Treasury securities have stated that for
Federal tax and securities law purposes, in their opinion, purchasers of such
certificates, such as a Fund, most likely will be deemed the beneficial
holders of the underlying U.S. Treasury securities.
Recently, the U.S. Treasury has facilitated transfer of ownership of zero
coupon securities by accounting separately for the beneficial ownership of
particular interest coupon and corpus payments on Treasury securities through
the Federal Reserve book-entry recordkeeping system. The Federal Reserve
program as established by the Treasury Department is known as "Separate
Trading of Registered Interest and Principal of Securities" ("STRIPS").
Under the STRIPS program, a Fund is able to have its beneficial ownership of
zero coupon securities recorded directly in the book-entry recordkeeping
system in lieu of holding certificates or other evidences of ownership of the
underlying U.S. Treasury securities.
When U.S. Treasury obligations have been stripped of their unmatured interest
coupons by the holder, the principal or corpus is sold at a deep discount
because the buyer receives only the right to receive a future fixed payment
on the security and does not receive any rights to periodic interest (cash)
payments. Once stripped or separated, the corpus and coupons may be sold
separately. Typically, the coupons are sold separately or grouped with other
coupons with like maturity dates and sold in a bundled form. Purchasers of
stripped obligations acquire, in effect, discount obligations that are
economically identical to the zero coupon securities that the Treasury sells
itself.
Derivative Securities
Futures Contracts. Each Fund may enter into contracts for the purchase or
sale for future delivery (a "futures contract") of fixed income securities
or foreign currencies, or based on financial indices including any index of
common stocks, U.S. Government securities, foreign government securities, or
corporate debt securities. U.S. futures contracts have been designed by
exchanges which have been designated as "contracts markets" by the CFTC,
and must be executed through a futures commission merchant or brokerage firm
which is a member of the relevant contract market. Futures contracts trade
on a number of exchange markets and, through their clearing corporations, the
exchanges guarantee performance of the contracts as between the clearing
members of the exchange. A Fund will enter into futures contracts that are
based on debt securities that are backed by the full faith and credit of the
U.S. Government, such as long-term U.S. Treasury Bonds, Treasury Notes, GNMA-
modified pass-through mortgage-backed securities, and three-month U.S.
Treasury Bills. Each Fund also may enter into futures contracts based on
securities that would be eligible investments for such Fund and denominated
in currencies other than the U.S. dollar.
Futures contracts may be used in a number of different contexts. For
example, futures contracts on the S&P 500 might be sold by a Money Manager
holding a portfolio of equity securities which anticipates a near-term market
decline and wishes to obtain prompt protection pending an orderly portfolio
liquidation. In the event that the decline occurs, gains on the futures
contract will tend to offset the loss on the portfolio; if the Money Manager
is wrong and the market rises, the loss on the futures contract will tend to
offset gains the portfolio would otherwise earn.
Although futures contracts by their terms call for the actual delivery or
acquisition of securities or currency, in most cases the contractual
obligation is fulfilled before the date of the contract without having to
make or take delivery of the securities or currency. The offsetting of a
contractual obligation is accomplished by buying (or selling, as the case may
be) on a commodities exchange an identical futures contract calling for
delivery in the same month. Such a transaction, which is effected through a
member of an exchange, cancels the obligation to make or take delivery of the
securities or currency. Since all transactions in the futures market are
made, offset, or fulfilled through a clearinghouse associated with the
exchange on which the contracts are traded, a Fund will incur brokerage fees
when it purchases or sells futures contracts.
At the time a futures contract is purchased or sold, the Fund must allocate
cash or securities as a deposit payment ("initial margin"). It is expected
that the initial margin on U.S. exchanges may range from approximately 3% to
approximately 15% of the value of the securities or commodities underlying
the contract. Under certain circumstances, however, such as periods of high
volatility, the Fund may be required by an exchange to increase the level of
its initial margin payment. Additionally, initial margin requirements may be
increased in the future by regulatory action. An outstanding futures
contract is valued daily and the payment in cash of "variation margin"
generally will be required, a process known as "marking to the market."
Each day the Fund will be required to provide (or will be entitled to
receive) variation margin in an amount equal to any decline (in the case of a
long futures position) or increase (in the case of a short futures position)
in the contract's value since the preceding day.
Primary Risks: Futures contracts entail special risks. Among other
things, the ordinary spreads between values in the cash and futures
markets, due to differences in the character of these markets, are
subject to distortions relating to: (1) investors' obligations to meet
additional variation margin requirements; (2) decisions to make or take
delivery, rather than to enter into offsetting transactions; and (3)
the difference between margin requirements in the securities markets
and margin deposit requirements in the futures market. The possibility
of such distortions means that a correct forecast of general market,
foreign exchange rate or interest rate trends still may not result in a
successful transaction.
Although TIP believes that use of such contracts and options thereon
will benefit the Funds, if predictions about the general direction of
securities market movements, foreign exchange rates or interest rates
is incorrect, a Fund's overall performance would be poorer than if it
had not entered into any such contracts or purchased or written options
thereon. For example, if a Fund had hedged against the possibility of
an increase in interest rates that would adversely affect the price of
debt securities held in its portfolio and interest rates decreased
instead, the Fund would lose part or all of the benefit of the
increased value of its assets that it had hedged because it would have
offsetting losses in its futures positions. In addition, particularly
in such situations, if the Fund has insufficient cash, it may have to
sell assets from its portfolio to meet daily variation margin
requirements. Any such sale of assets may or may not be at increased
prices reflecting the rising market. Consequently, the Fund may have
to sell assets at a time when it may be disadvantageous to do so.
A Fund's ability to establish and close out positions in futures
contracts and options on futures contracts will be subject to the
development and maintenance of a liquid market. Although a Fund
generally will purchase or sell only those futures contracts and
options thereon for which there appears to be a liquid market, there is
no assurance that a liquid market on an exchange will exist for any
particular futures contract or option thereon at any particular time.
Where it is not possible to effect a closing transaction in a contract
at a satisfactory price, the Fund would have to make or take delivery
under the futures contract or, in the case of a purchased option,
exercise the option. In the case of a futures contract that a Fund has
sold and is unable to close out, the Fund would be required to maintain
margin deposits on the futures contract and to make variation margin
payments until the contract is closed.
Under certain circumstances, exchanges may establish daily limits in
the amount that the price of a futures contract or related option
contract may vary up or down from the previous day's settlement price.
Once the daily limit has been reached in a particular contract, no
trades may be made that day at a price beyond that limit. The daily
limit governs only price movements during a particular trading day and
therefore does not limit potential losses because the limit may prevent
the liquidation of unfavorable positions. Futures or options contract
prices could move to the daily limit for several consecutive trading
days with little or no trading and thereby prevent prompt liquidation
of positions and subject some traders to substantial losses.
Buyers and sellers of foreign currency futures contracts are subject to
the same risks that apply to the use of futures generally. In
addition, there are risks associated with foreign currency futures
contracts and their use as hedging devices similar to those associated
with forward contracts on foreign currencies. Further, settlement of a
foreign currency futures contract must occur within the country issuing
the underlying currency. Thus, a Fund must accept or make delivery of
the underlying foreign currency in accordance with any U.S. or foreign
restrictions or regulations regarding the maintenance of foreign
banking arrangements by U.S. residents and may be required to pay any
fees, taxes or charges associated with such delivery which are assessed
in the country of the underlying currency.
Options on Foreign Currencies. Each Fund may purchase and sell (or write)
put and call options on foreign currencies to protect against a decline in
the U.S. dollar-equivalent value of its portfolio securities or payments due
thereon or a rise in the U.S. dollar-equivalent cost of securities that it
intends to purchase. A foreign currency put option grants the holder the
right, but not the obligation, to sell at a future date a specified amount of
a foreign currency to its counterparty at a predetermined price. Conversely,
a foreign currency call option grants the holder the right, but not the
obligation, to purchase at a future date a specified amount of a foreign
currency at a predetermined price.
Primary Risks: As in the case of other types of options, the benefit
to a Fund from the purchase of foreign currency options will be reduced
by the amount of the premium and related transaction costs. In
addition, where currency exchange rates do not move in the direction or
to the extent anticipated, the Fund could sustain losses on
transactions in foreign currency options that would require them to
forego a portion or all of the benefits of advantageous changes in such
rates.
Each Fund may write options on foreign currencies for hedging purposes.
For example, where a Fund anticipates a decline in the dollar value of
foreign currency denominated securities due to adverse fluctuations in
exchange rates, instead of purchasing a put option, it could write a
call option on the relevant currency. If the expected decline occurs,
it is likely that the option will not be exercised, and the decrease in
value of portfolio securities will be offset by the amount of the
premium received.
Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the dollar costs of securities to be acquired,
a Fund could write a put option on the relevant currency which, if
rates move in the manner projected, will expire unexercised and allow
the Fund to hedge such increased costs up to the amount of the premium.
As in the case of other types of options, however, the writing of a
foreign currency option will constitute only a partial hedge up to the
amount of the premium, and only if rates move in the expected
direction. If this movement does not occur, the option may be
exercised and the Fund would be required to purchase or sell the
underlying currency at a loss which may not be fully offset by the
amount of the premium. Through the writing of options on foreign
currencies, a Fund also may be required to forego all or a portion of
the benefits that might otherwise have been obtained from favorable
movements in exchange rates.
Options on Futures Contracts. The purchase of a call option on a futures
contract is similar in some respects to the purchase of a call option on an
individual security or currency. Depending on the pricing of the option
compared to either the price of the futures contract upon which it is based
or the price of the underlying securities or currency, it may or may not be
less risky than ownership of the futures contract or the underlying
securities or currency. As with the purchase of futures contracts, when a
Fund is not fully invested it may purchase a call option on a futures
contract to hedge against a market advance due to declining interest rates or
a change in foreign exchange rates.
The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the security or foreign currency which is
deliverable upon exercise of the futures contract. If the futures price at
expiration of the option is below the exercise price, a Fund will retain the
full amount of the option premium which provides a partial hedge against any
decline that may have occurred in the Fund's portfolio holdings. The writing
of a put option on a futures contract constitutes a partial hedge against
increasing prices of the security or foreign currency which is deliverable
upon exercise of the futures contract. If the futures price at expiration of
the option is higher than the exercise price, the Fund will retain the full
amount of the option premium which provides a partial hedge against any
increase in the price of securities which a Fund intends to purchase. If a
put or call option a Fund has written is exercised, the Fund will incur a
loss that will be reduced by the amount of the premium it receives.
Depending on the degree of correlation between changes in the value of its
portfolio securities and changes in the value of its futures positions, a
Fund's losses from existing options on futures may to some extent be reduced
or increased by changes in the value of portfolio securities.
The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio securities.
For example, a Fund may purchase a put option on a U.S. Treasury Bond futures
contract to hedge its portfolio against the risk of rising interest rates.
Restrictions on the Use of Futures Contracts and Options on Futures
Contracts. Regulations of the CFTC applicable to the Funds require
that all of a Fund's futures and options on futures transactions
constitute bona fide hedging transactions, except that a transaction
need not constitute a bona fide hedging transaction and may be entered
into for other purposes if, immediately thereafter, the sum of the
amount of initial margin deposits on the Fund's existing futures
positions and premiums paid for related options would not exceed 5% of
the value of the Fund's total assets.
Primary Risks: The amount of risk a Fund assumes when it purchases an
option on a futures contract is the premium paid for the option plus
related transaction costs. In addition to the correlation risks
discussed above, the purchase of an option also entails the risk that
changes in the value of the underlying futures contract will not be
fully reflected in the value of the option purchased. Options on
foreign currency futures contracts may involve certain additional
risks. Trading options on foreign currency futures contracts is
relatively new. The ability to establish and close out positions in
such options is subject to the maintenance of a liquid secondary
market. To mitigate this problem, a Fund will not purchase or write
options on foreign currency futures contracts unless and until, in
FAI's or the Money Manager's opinion, the market for such options has
developed sufficiently that the risks in connection with such options
are not greater than the risks in connection with transactions in the
underlying foreign currency futures contracts. Compared to the
purchase or sale of foreign currency futures contracts, the purchase of
call or put options thereon involves less potential risk to the Fund
because the maximum amount at risk is the premium paid for the option
(plus transaction costs). However, there may be circumstances when the
purchase of a call or put option on a foreign currency futures contract
would result in a loss, such as when there is no movement in the price
of the underlying currency or futures contract, when use of the
underlying futures contract would not result in a loss.
Options on Securities. Each Fund also may enter into closing sale
transactions with respect to options it has purchased. A put option on a
security grants the holder the right, but not the obligation, at a future
date to sell the security to its counterparty at a predetermined price.
Conversely, a call option on a security grants the holder the right, but not
the obligation, to purchase at a future date the security underlying the
option at a predetermined price. A Fund would normally purchase put options
in anticipation of a decline in the market value of securities in its
portfolio or securities it intends to purchase. If such Fund purchased a put
option and the value of the security in fact declined below the strike price
of the option, such Fund would have the right to sell that security to its
counterparty for the strike price (or realize the value of the option by
entering into a closing transaction), and consequently would protect itself
against any further decrease in the value of the security during the term of
the option.
Conversely, if FAI or a Money Manager anticipates that a security it intends
to acquire will increase in value, it might cause a Fund to purchase a call
option on that security or securities similar to that security. If the value
of the security does rise, the call option may wholly or partially offset the
increased price of the security. As in the case of other types of options,
however, the benefit to the Fund will be reduced by the amount of the premium
paid to purchase the option and any related transaction costs. If, however,
the value of the security fell instead of rose, the Fund would have foregone
a portion of the benefit of the decreased price of the security in the amount
of the option premium and the related transaction costs. A Fund would
purchase put and call options on securities indices for the same purposes as
it would purchase options on securities. Options on securities indices are
similar to options on securities except that the options reflect the change
in price of a group of securities rather than that of an individual security
and the exercise of options on securities indices is settled in cash rather
than by delivery of the securities comprising the index underlying the
option. Transactions by a Fund in options on securities and securities
indices will be governed by the rules and regulations of the respective
exchanges, boards of trade, or other trading facilities on which the options
are traded.
The Funds will write only "covered" options. An option is covered if, so
long as a Fund is obligated under the option, it owns an offsetting position
in the underlying security or maintains cash, U.S. Government securities or
other liquid high-grade debt obligations with a value sufficient at all times
to cover its obligations.
Primary Risks: The writer of an option receives a premium that it
retains regardless of whether the option is exercised. The purchaser
of a call option has the right, for a specified period of time, to
purchase the securities or currency subject to the option at a
specified price (the "exercise price"). By writing a call option,
the writer becomes obligated during the term of the option, upon
exercise of the option, to sell the underlying securities or currency
to the purchaser against receipt of the exercise price. The writer of
a call option also loses the potential for gain on the underlying
securities or currency in excess of the exercise price of the option
during the period that the option is open.
Conversely, the purchaser of a put option has the right, for a
specified period of time, to sell the securities or currency subject to
the option to the writer of the put at the specified exercise price.
The writer of a put option is obligated during the term of the option,
upon exercise of the option, to purchase securities or currency
underlying the option at the exercise price. A writer might,
therefore, be obligated to purchase the underlying securities or
currency for more than their current market price or U.S. dollar value.
Each Fund may purchase and sell both exchange-traded and OTC options.
Currently, although many options on equity securities and options on
currencies are exchange-traded, options on debt securities are
primarily traded in the over-the-counter market. The writer of an
exchange-traded option that wishes to terminate its obligation may
effect a "closing purchase transaction." This is accomplished by
buying an option of the same series as the option previously written.
Options of the same series are options with respect to the same
underlying security or currency, having the same expiration date and
the same exercise price. Likewise, an investor who is the holder of an
option may liquidate a position by effecting a "closing sale
transaction." This is accomplished by selling an option of the same
series as the option previously purchased. There is no guarantee that
either a closing purchase or a closing sale transaction can be effected.
An exchange-traded option position may be closed out only where a
secondary market exists for an option of the same series. For a number
of reasons, a secondary market may not exist for options held by a
Fund, or trading in such options might be limited or halted by the
exchange on which the option is trading, in which case it might not be
possible to effect closing transactions in particular options the Fund
has purchased with the result that the Fund would have to exercise the
options in order to realize any profit. If the Fund is unable to
effect a closing purchase transaction in a secondary market in an
option which the Fund has written, it will not be able to sell the
underlying security or currency until the option expires or deliver the
underlying security or currency upon exercise or otherwise cover its
position.
Exchange-traded options in the United States are issued by a clearing
organization affiliated with the exchange on which the option is listed
which, in effect, guarantees every exchange-traded option transaction.
In contrast, over-the-counter options are contracts between a Fund and
its counterparty with no clearing organization guarantee. Thus, when
the Fund purchases OTC options, it relies on the dealer from which it
purchased the OTC option to make or take delivery of the securities
underlying the option. Failure by the dealer to do so would result in
the loss of the premium paid by the Fund as well as the loss of the
expected benefit of the transaction. The Funds will only purchase
options from dealers determined to be creditworthy.
Exchange-traded options generally have a continuous liquid market
whereas OTC options may not have one. Consequently, a Fund generally
will be able to realize the value of an OTC option it has purchased
only by exercising it or reselling it to the dealer who issued it.
Similarly, when the Fund writes an OTC option, it generally will be
able to close out the OTC option prior to its expiration only by
entering into a closing purchase transaction with the dealer to which
the Fund originally wrote the OTC option. Although a Fund will enter
into OTC options only with dealers who agree to enter into, and who are
expected to be capable of entering into, closing transactions with the
Fund, there can be no assurance that the Fund will be able to liquidate
an OTC option at a favorable price at any time prior to expiration.
Until the Fund is able to effect a closing purchase transaction in a
covered OTC call option the Fund has written, it will not be able to
liquidate securities used as cover until the option expires or is
exercised or different cover is substituted. In the event of
insolvency of the counterparty, the Fund may be unable to liquidate an
OTC option. In the case of options written by a Fund, the inability to
enter into a closing purchase transaction may result in material losses
to the Fund. For example, since the Fund must maintain a covered
position with respect to any call option on a security it has written,
the Fund may be limited in its ability to sell the underlying security
while the option is outstanding. This may impair the Fund's ability to
sell a portfolio security at a time when such a sale might be
advantageous.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely
basis. Quotation information available generally is representative of
very large transactions in the interbank market and thus may not
reflect relatively smaller transactions (i.e., less than $1 million)
where rates may be less favorable. The interbank market in foreign
currencies is a global, around-the-clock market. To the extent that
the U.S. options markets are closed while the markets for the
underlying currencies remain open, significant price and rate movements
may take place in the underlying markets which cannot be reflected in
the options market until they reopen. Because foreign currency
transactions occurring in the interbank market involve substantially
larger amounts than those that may be involved in the use of foreign
currency options, investors may be at a disadvantage by having to deal
in an odd lot market (generally consisting of transactions of less than
$1 million) for the underlying foreign currencies at prices that are
less favorable than for round lots.
As described above, a Fund may, among other things, purchase call
options on securities it intends to acquire in order to hedge against
anticipated market appreciation in the price of the underlying security
or currency. If the market price does increase as anticipated, the
Fund will benefit from that increase but only to the extent that the
increase exceeds the premium paid plus related transaction costs. If
the anticipated rise does not occur or if it does not exceed the amount
of the premium plus related transaction costs, the Fund will bear the
expense of purchasing the options without gaining an offsetting
benefit. If the market price of the underlying currency or securities
should fall instead of rise, the benefit the Fund obtains from
purchasing the currency or securities at a lower price will be reduced
by the amount of the premium paid for the call options plus transaction
costs.
Each Fund also may purchase put options on currencies or portfolio
securities when it believes a defensive posture is warranted.
Protection is provided during the life of a put option because the put
gives the Fund the right to sell the underlying currency or security at
the put exercise price, regardless of a decline in the underlying
currency's or security's market price below the exercise price. This
right limits the Fund's losses from the currency's or security's
possible decline in value below the exercise price of the option to the
premium paid for the option plus related transaction costs. If the
market price of the currency or the Fund's securities should increase,
however, the profit that the Fund might otherwise have realized will be
reduced by the amount of the premium paid for the put option plus
transaction costs.
The value of an option position will reflect, among other things, the
current market price of the underlying currency or security, the time
remaining until expiration, the relationship of the exercise price to
the market price, the historical price volatility of the underlying
currency or security and general market conditions. For this reason,
the successful use of options as a hedging strategy depends upon the
ability of FAI or the Money Managers to forecast the direction of price
fluctuations in the underlying currency or securities market.
Options normally have expiration dates of up to nine months. The
exercise price of the options may be below, equal to or above the
current market values of the underlying securities or currency at the
time the options are written. Options purchased by a Fund that expire
unexercised have no value, and therefore a loss will be realized in the
amount of the premium paid plus related transaction costs. If an
option purchased by any Fund is in-the-money prior to its expiration
date, unless the Fund exercises the option or enters into a closing
transaction with respect to that position, the Fund will not realize
any gain on its option position.
A Fund's activities in the options market may result in higher
portfolio turnover rates and additional brokerage costs. Nevertheless,
the Fund also may save on commissions and transaction costs by hedging
through such activities rather than by buying or selling securities or
foreign currencies in anticipation of market moves or foreign exchange
rate fluctuations.
Other Investments
Foreign Securities. Foreign financial markets, while growing in volume,
have, for the most part, substantially less volume than have United States
markets, and securities of many foreign companies are less liquid and their
prices are more volatile than securities of comparable domestic companies.
The foreign markets also have different clearance and settlement procedures,
and in certain markets there have been times when settlements have been
unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delivery of securities may not occur
at the same time as payment in some foreign markets. Delays in settlement
could result in temporary periods when a portion of the assets of a Fund is
uninvested and no return is earned thereon. The inability of a Fund to make
intended security purchases due to settlement problems could cause the Fund
to miss attractive investment opportunities. Inability to dispose of
portfolio securities due to settlement problems could result in losses to a
Fund due to subsequent declines in value of the portfolio security or, if the
Fund has entered into a contract to sell the security, could result in
possible liability to the purchaser.
As foreign companies generally are not subject to uniform accounting,
auditing and financial reporting standards and practices comparable to those
applicable to domestic companies, there may be less publicly-available
information about certain foreign companies than about domestic companies.
Generally there is less government supervision and regulation of exchanges,
financial institutions and issuers in foreign countries than there is in the
United States. A foreign government may impose exchange control regulations
which may have an impact on currency exchange rates, and there are
possibilities of expropriation or confiscatory taxation, political or social
instability, or diplomatic developments which could affect U.S. investments
in those countries.
Although the Funds will endeavor to achieve most favorable execution costs in
its portfolio transactions, fixed commissions on many foreign stock exchanges
are generally higher than negotiated commissions on U.S. exchanges. Certain
foreign governments levy withholding taxes against dividend and interest
income. Although in some countries a portion of these taxes are recoverable,
the non-recovered portion of foreign withholding taxes will reduce the income
received by the Funds on these investments. However, these foreign
withholding taxes are not expected to have a significant impact on the Funds,
since the Funds' investment objectives are to seek long-term capital
appreciation and any income should be considered incidental.
Foreign Bank Obligations. Obligations of foreign banks involve somewhat
different investment risks than those affecting obligations of United States
banks, including the possibilities that their liquidity could be impaired
because of future political and economic developments, that their obligations
may be less marketable than comparable obligations of United States banks,
that a foreign jurisdiction might impose withholding taxes on interest income
payable on those obligations, that foreign deposits may be seized or
nationalized, that foreign governmental restrictions such as exchange
controls may be adopted that might adversely affect the payment of principal
and interest on those obligations and that the selection of those obligations
may be more difficult because there may be less publicly available
information concerning foreign banks or the accounting, auditing and
financial reporting standards, practices and requirements applicable to
foreign banks may differ from those applicable to United States banks.
Foreign banks generally are not subject to examination by any United States
government agency or instrumentality. Also, investments in commercial banks
located in several foreign countries are subject to additional risks due to
the combination in such banks of commercial banking and diversified
securities activities.
Illiquid Securities. The staff of the Commission has taken the position
that purchased OTC options and the assets used as cover for written OTC options
are illiquid securities. Therefore, each Fund has adopted an investment
policy pursuant to which it generally will not purchase or sell OTC options
if, as a result of such transaction, the sum of the market value of OTC
options currently outstanding that are held by such Fund, the market value of
the underlying securities covered by OTC call options currently outstanding
that have been sold by such Fund, and margin deposits on such Fund's existing
OTC options on futures contracts exceed 15% of the net assets of such Fund,
taken at market value, together with all other assets of the Fund that are
illiquid or are not otherwise readily marketable. This policy as to OTC
options is not a fundamental policy of the Funds and may be amended by the
directors of TIP without the approval of TIP's or a Fund's members. However,
TIP will not change or modify this policy prior to a change or modification
by the Commission staff of its position.
Warrants. So long as it remains a policy of the State of Texas, a Fund's
investment in warrants, taken at the lower of cost or market value, may not
exceed 5% of the Fund's net assets. Not more than 2% of a Fund's net assets
may be invested in warrants not listed on the New York or American Stock
Exchange.
FUND TRANSACTIONS
The debt securities in which TIP invests are traded primarily in the over-
the-counter market by dealers who usually are acting as principals for their
own accounts. On occasion, securities may be purchased directly from the
issuer. The cost of securities purchased from underwriters includes an
underwriting commission or concession. Debt securities generally are traded
on a net basis and normally do not involve either brokerage commissions or
transfer taxes. The cost of executing transactions will consist primarily of
dealer spreads. In the markets in which a Fund buys and sells its assets and
depending upon the size of the transactions it will execute, the spread
between the bid and asked price of a security is typically below 1/32 of 1%
of the value of the transaction, and often is much less. The spread is not
included in the expenses of a Fund and therefore is not subject to the
expenses cap; nevertheless, the incurrence of this spread, ignoring the other
intended positive effects of each such transaction, will decrease the total
return of the Fund. However, a Fund will buy one asset and sell another only
if FAI or the Money Managers believe it is advantageous to do so after
considering the effects of the additional custodial charges and the spread on
the Fund's total return.
Since costs associated with transactions in foreign securities are generally
higher than costs associated with transactions in domestic securities, the
operating expense ratios of these Funds can be expected to be higher than
that of an investment company investing exclusively in domestic securities.
The selection of a broker or dealer to execute portfolio transactions is
usually made by a Money Manager. Subject to specific directions from TIP or
FAI, in executing portfolio transactions and selecting brokers or dealers the
principal objective is to seek the best overall terms available to the Fund.
Securities ordinarily will be purchased in their primary markets, and a Money
Manager will consider all factors it deems relevant in assessing the best
overall terms available for any transaction, 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 (for the specific transaction and on a continuing
basis).
In addition, in selecting brokers or dealers to execute a particular
transaction and in evaluating the best overall terms available, FAI and the
Money Managers are authorized to consider the "brokerage and research
services" [as those terms are defined in Section 28(e) of the Securities
Exchange Act of 1934] provided to the Funds, FAI, or to the Money Manager.
FAI and the Money Managers are authorized to cause the Funds to pay a
commission to a broker or dealer who provides such brokerage and research
services for executing a portfolio transaction which is in excess of the
amount of commission another broker or dealer would have charged for
effecting that transaction. TIP, FAI, or the Money Manager, as appropriate,
must determine in good faith that such commission was reasonable in relation
to the value of the brokerage and research services provided, viewed in terms
of that particular transaction or in terms of all the accounts over which FAI
or the Money Manager exercises investment discretion.
For the fiscal year ended December 31, 1996, the Funds paid brokerage
commissions as follows:
1/1/96- 1/1/95- 5/31/94-
12/31/96 12/31/95 12/31/94
TIFF Multi-Asset Fund $519,532 $168,881 * NA
TIFF International Equity Fund $449,353 $416,390 $109,064
TIFF Emerging Markets Fund $408,836 $370,320 $221,955
TIFF U.S. Equity Fund $214,787 $148,197 $ 45,042
TAX CONSIDERATIONS
The following summary of tax consequences, which does not purport to be
complete, is based on U.S. federal tax laws and regulations in effect on the
date of this Statement of Additional Information, which are subject to change
by legislative or administrative action.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY. Each Fund intends to qualify
for annually and elect to be treated as a regulated investment company ("RIC")
under the Internal Revenue Code of 1986, as amended (the "Code"). To
qualify as a RIC, a Fund must, among other things: (1) derive at least 90%
of its gross income each taxable year from dividends, interest, payments with
respect to securities loans and gains from the sale or other disposition of
securities or foreign currencies, or other income (including gains from
options, futures, or forward contracts) derived from its business of
investing in securities or foreign currencies (the "Qualifying Income
Requirement"); (2) derive less than 30% of its gross income each taxable
year from sales or other dispositions of certain assets, namely: (a)
securities; (b) options, futures, and forward contracts (other than those on
foreign currencies); and (c) foreign currencies (including options, futures,
and forward contracts on such currencies) not directly related to the Fund's
principal business of investing in stocks or securities (or options and
futures with respect to stocks or securities), held less than three months
(the "30% Limitation"); (3) diversify its holdings so that, at the end of
each quarter of the Fund's taxable year: (a) at least 50% of the market
value of the Fund's assets is represented by cash and cash items (including
receivables), U.S. Government securities, securities of other RICs, and other
securities, with such other securities of any one issuer limited to an amount
not greater than 5% of the value of the Fund's total assets and not greater
than 10% of the outstanding voting securities of such issuer and (b) not more
than 25% of the value of the Fund's total assets is invested in the
securities of any one issuer (other than U.S. Government securities or the
securities of other RICs); and (4) distribute at least 90% of its investment
company taxable income (which includes, among other items, interest and net
short-term capital gains in excess of net long-term capital losses) and its
net tax-exempt interest income, if any. The U.S. Treasury Department has
authority to promulgate regulations pursuant to which gains from foreign
currency (and options, futures, and forward contracts on foreign currency)
not directly related to a RIC's principal business of investing in stocks and
securities would not be treated as qualifying income for purposes of the
Qualifying Income Requirement. To date, such regulations have not been
promulgated.
If for any taxable year a Fund does not qualify as a RIC, all of its
taxable income will be taxed to the Fund at corporate rates. For each taxable
year that the Fund qualifies as a RIC, it generally will not be subject to
federal income tax on that part of its investment company taxable income and
net capital gains (the excess of net long-term capital gain over net short-term
capital loss) it distributes to its Members. In addition, to avoid a
nondeductible 4% federal excise tax, the Fund must distribute during each
calendar year at least 98% of its ordinary income (not taking into account
any capital gains or losses), determined on a calendar year basis, at least
98% of its capital gains in excess of capital losses, determined in general
on an October 31 year-end basis, and any undistributed amounts from previous
years. Each Fund intends to distribute all of its net income and gains by
automatically reinvesting such income and gains in additional shares of the
Fund unless a Member requests such distributions to be paid in cash. The 30%
Limitation may require that a Fund defer closing out certain positions beyond
the time when it otherwise would be advantageous to do so, in order not to be
disqualified as a RIC. Each Fund will monitor its compliance with all of the
rules set forth in the preceding paragraph.
TAX TREATMENT OF DISTRIBUTIONS. Dividends paid out of the Fund's
investment company taxable income will be taxable to the Fund's Members as
ordinary income. If a portion of a Fund's income consists of dividends paid by
U.S. corporations, a portion of the dividends paid by the Fund may be eligible
for the corporate dividends-received deduction (assuming that the deduction is
otherwise allowable in computing a Member's federal income tax liability).
Distributions of any net capital gains designated by the Fund as capital gain
dividends will be taxable to the Members as long-term capital gains,
regardless of how long they have held their Fund shares, and are not eligible
for the corporate dividends-received deduction. Members receiving
distributions in the form of additional shares, rather than cash, generally
will have a cash basis in each such share equal to the net asset value of a
share of the Fund on the reinvestment date. A distribution of an amount in
excess of a Fund's current and accumulated earnings and profits will be
treated by a Member as a return of capital which is applied against and
reduces the Member's basis in its Fund shares. To the extent that the amount
of any such distribution exceeds the Member's basis in its Fund shares, the
excess will be treated as gain from a sale or exchange of the shares. A
distribution will be treated as paid on December 31 of the current calendar
year if it is declared by a Fund in October, November, or December with a
record date in such a month and paid by the Fund during January of the
following calendar year. Such distributions will be taxable to Members in the
calendar year in which the distributions are declared, rather than in the
calendar year in which the distributions are received. Each Fund will inform
Members of the amount and tax status of all amounts treated as distributed to
them not later than 60 days after the close of each calendar year.
TAX TREATMENT OF SHARE SALES. Upon the sale or other disposition of shares of
a Fund, or upon receipt of a distribution in complete liquidation of a Fund, a
Member generally will realize a capital gain or loss which will be long-term
or short-term, generally depending upon the Member's holding period for the
shares. Any loss realized on the sale or exchange will be disallowed to the
extent the shares disposed of are replaced (including shares acquired
pursuant to a dividend reinvestment plan) within a period of 61 days
beginning 30 days before and ending 30 days after disposition of the shares.
In such a case, the basis of the shares acquired will be adjusted to reflect
the disallowed loss. Any loss realized by the Member on a disposition of
Fund shares held by the Member for six months or less will be treated as a
long-term capital loss to the extent of any distributions of net capital
gains deemed received by the Member with respect to such shares.
TAX TREATMENT OF ZERO COUPON SECURITIES. Investments by a Fund in zero coupon
securities will result in income to the Fund equal to a portion of the excess
of the face value of the securities over their issue price (the "original
issue discount") each year that the securities are held, even though the
Fund receives no cash interest payments. This income is included in
determining the amount of income which the Fund must distribute to maintain
its status as a RIC and to avoid the payment of federal income tax and the 4%
excise tax.
TAX TREATMENT OF HEDGING TRANSACTIONS. The taxation of equity options and over-
the-counter options on debt securities is governed by the Code section 1234.
Pursuant to that Code section, the premium received by a Fund for selling a
put or call option is not included in income at the time of receipt. If the
option expires, the premium is short-term capital gain to the Fund. If the
Fund enters into a closing transaction, the difference between the amount
paid to close out its position and the premium received is short-term capital
gain or loss. If a call option written by a Fund is exercised, thereby
requiring the Fund to sell the underlying security, the premium will increase
the amount realized upon the sale of such security and any resulting gain or
loss will be a capital gain or loss, and will be long-term or short-term
depending upon the holding period of the security. With respect to a put or
call option purchased by a Fund, if the option is sold, any resulting gain or
loss will be a capital gain or loss, and will be long-term or short-term,
depending upon the holding period of the option. If the option expires, the
resulting loss is a capital loss and is long-term or short-term, depending
upon the holding period of the option. If the option is exercised, the cost
of the option, in the case of a call option, is added to the basis of the
purchased security and, in the case of a put option, reduces the amount
realized on the underlying security in determining gain or loss.
Certain options, futures, and forward contracts in which a Fund may invest
are "section 1256 contracts." Gains and losses on section 1256 contracts
are generally treated as 60% long-term and 40% short-term capital gains or
losses ("60/40 treatment"), regardless of the Fund's actual holding period
for the contract. Also, a section 1256 contract held by a Fund at the end of
each taxable year (and generally, for the purposes of the 4% excise tax, on
October 31 of each year) must be treated as if the contract had been sold at
its fair market value on that day ("mark to market treatment"), and any
deemed gain or loss on the contract is subject to 60/40 treatment. Foreign
currency gains or losses (discussed below) arising from section 1256
contracts may, however, be treated as ordinary income or loss.
The hedging transactions undertaken by a Fund may result in "straddles" for
federal income tax purposes. The straddle rules may affect the character of
gains or losses realized by the Fund. In addition, losses realized by a Fund
on positions that are part of a straddle may be deferred under the straddle
rules rather than being taken into account in calculating the taxable income
for the tax year in which such losses are realized. Further, a Fund may be
required to capitalize, rather than deduct currently, any interest expense on
indebtedness incurred to purchase or carry any positions that are part of a
straddle. Because only a few regulations pertaining to the straddle rules
have been implemented, the tax consequences to the Funds for engaging in
hedging transactions are not entirely clear. Hedging transactions may
increase the amount of short-term capital gain realized by the Funds which is
taxed as ordinary income when distributed to Members.
A Fund may make one or more of the elections available under the Code that
are applicable to straddles. If a Fund makes any of the elections, the
amount, character, and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary
according to the election(s) made. The rules applicable under some of the
elections may accelerate the recognition of gains or losses from the affected
straddle positions.
Because the straddle rules may affect the amount, character, and timing of
gains or losses from the positions that are part of a straddle, the amount of
Fund income distributed to Members and taxed to them as ordinary income or
long-term capital gains may be greater or lesser as compared to the amount
distributed by a fund that did not engage in such hedging transactions.
TAX TREATMENT OF SHORT SALES. A Fund will not realize gain or loss on the
short sale of a security until it closes the transaction by delivering the
borrowed security to the lender. Pursuant to Code section 1233, all or a
portion of any gain arising from a short sale may be treated as short-term
capital gain, regardless of the period for which the Fund held the security
used to close the short sale. In addition, a Fund's holding period for any
security which is substantially identical to that which is sold short may be
reduced or eliminated as a result of the short sale. The 30% limitation and
the distribution requirements applicable to each Fund's assets may limit the
extent to which each Fund will be able to engage in short sales and
transactions in options, futures and forward contracts.
TAX TREATMENT OF PARTNERSHIP INVESTMENTS. The current position of the Internal
Revenue Service generally is to treat a RIC, i.e., each Fund, as owning its
proportionate share of the income and assets of any partnership in which it
is a partner in applying the Qualifying Income Requirement, the 30%
Limitation, and the asset diversification requirements which, as described
above, each Fund must satisfy to qualify as a RIC. These requirements may
limit the extent to which the Funds may invest in partnerships, especially in
the case of partnerships which do not primarily invest in a diversified
portfolio of stocks and securities.
TAX TREATMENT OF FOREIGN CURRENCY-RELATED TRANSACTIONS. Gains or losses
attributable to fluctuations in exchange rates which occur between the time a
Fund accrues receivables or payables denominated in a foreign currency and the
time the Fund actually collects such receivables, or pays such payables,
generally are treated as ordinary income or ordinary loss. Similarly, on
disposition of certain options, futures, and forward contracts and on
disposition of debt securities denominated in a foreign currency, gains or
losses attributable to fluctuations in the value of the foreign currency between
the date of acquisition of the security or contract and the date of disposition
also are treated as ordinary gain or loss. These gains or losses, referred to
under the Code as "section 988" gains or losses, may increase or decrease the
amount of a Fund's investment company taxable income to be distributed to
Members as ordinary income.
TAX TREATMENT OF PASSIVE FOREIGN INVESTMENT COMPANIES. If a Fund invests
in stock of certain foreign investment companies, the Fund may be subject to
U.S. federal income taxation on a portion of any "excess distribution" with
respect to, or gain from the disposition of, such stock. The tax would be
determined by allocating on a pro rata basis such distribution or gain to each
day of the Fund's holding period for the stock. The distribution or gain so
allocated to any tax year of the Fund, other than the tax year of the excess
distribution or disposition, would be taxed to the Fund at the highest
ordinary income rate in effect for such year, and the tax would be further
increased by an interest charge to reflect the value of the tax deferral
deemed to have resulted from the ownership of the foreign company's stock.
Any amount of distribution or gain allocated to the tax year of the
distribution or disposition would be included in the Fund's investment
company taxable income and, accordingly, would not be taxable to the Fund to
the extent distributed by the Fund as a dividend to its Members.
Each Fund may be able to make an election, in lieu of being taxable in the
manner described above, to include annually in income its pro rata share of
the ordinary earnings and net capital gain of any foreign investment company
in which it invests, regardless of whether it actually received any
distributions from the foreign company. These amounts would be included in
the Fund's investment company taxable income and net capital gain which, to
the extent distributed by the Fund as ordinary or capital gain dividends, as
the case may be, would not be taxable to the Fund. In order to make this
election, a Fund would be required to obtain certain annual information from
the foreign investment companies in which it invests, which in many cases may
be difficult to obtain. Other elections may become available to the Funds
that would provide alternative tax treatment for investments in foreign
investment companies.
FOREIGN WITHHOLDING TAXES. Income received by a Fund from sources within
foreign countries may be subject to withholding and other taxes imposed by
such countries. If more than 50% of the value of a Fund's total assets at
the close of its tax year consists of securities of foreign corporations, the
Fund will be eligible and may elect to "pass through" to the Fund's Members
the amount of foreign taxes paid by the Fund. Pursuant to this election, a
Member will be required to include in gross income (in addition to dividends
actually received) its pro rata share of the foreign taxes paid by the Fund,
and may be entitled either to deduct its pro rata share of the foreign taxes
in computing its taxable income or to use the amount as a foreign tax credit
against its U.S. federal income tax liability, subject to limitations. Each
Member will be notified within 60 days after the close of the Fund's tax year
whether the foreign taxes paid by the Fund will "pass through" for that year.
With the possible exceptions of the Multi-Asset, International Equity, and
Emerging Markets Funds, it is not anticipated that the Funds will be eligible
to make this "pass-through" election. If a Fund is not eligible to make the
election to "pass through" to its Members its foreign taxes, the foreign taxes
it pays will reduce its investment company taxable income and distributions by
the Fund will be treated as U.S. source income.
Generally, a credit for foreign taxes is subject to the limitation that it
may not exceed the Member's U.S. tax attributable to its foreign source
taxable income. For this purpose, if the pass-through election is made, the
source of the Fund's income flows through to its Members. With respect to
the Funds, gains from the sale of securities will be treated as derived from
U.S. sources and certain currency fluctuation gains, including fluctuation
gains from foreign currency-denominated debt securities, receivables and
payables, will be treated as ordinary income derived from U.S. sources. The
limitation on the foreign tax credit is applied separately to foreign source
passive income (as defined for purposes of the foreign tax credit), including
the foreign source passive income passed through by the Funds. Members who
are not liable for federal income taxes other than the excise tax applicable
to the net investment income of private foundations will not be affected by
any such "pass through" of foreign tax credits.
DEBT-FINANCED SHARES. If a Member that generally is exempt from federal
income taxation under Code section 501(a) incurs indebtedness in connection
with, or as a result of, its acquisition of Fund shares, the shares may be
treated as "debt-financed property" under the Code. In such event, part of
all of any income or gain derived from the Member's investment in those shares
could constitute "unrelated business taxable income." Unrelated business
taxable income in excess of $1000 in any year is taxable and will require a
Member to file a federal income tax return on Form 990-T.
BACKUP WITHHOLDING. A Fund may be required to withhold U.S. federal income tax
at the rate of 31% of all amounts distributed, or deemed to be distributed as
a result of the automatic reinvestment by the Fund of its income and gains in
additional shares of the Fund, and all redemption payments made to Members
who fail to provide the Fund with their correct taxpayer identification
numbers or to make required certifications, or who have been notified by the
Internal Revenue Service that they are subject to backup withholding. Backup
withholding is not an additional tax. Any amounts withheld will be credited
against a Member's U.S. federal income tax liability. Corporate Members and
certain other Members (including organizations exempt from federal income
taxation under Code section 501(a)) are exempt from such backup withholding.
OTHER TAX CONSIDERATIONS. A Fund may be subject to state, local, or foreign
taxes in any jurisdiction in which the Fund may be deemed to be doing
business. In addition, Members of a Fund may be subject to state, local, or
foreign taxes on distributions from the Fund. In many states, Fund
distributions which are derived from interest on certain U.S. Government
obligations may be exempt from taxation. Members should consult their own
tax advisers concerning the particular tax consequences to them of an
investment in the Funds.
MEMBER INFORMATION
MEMBER ACCOUNT RECORDS. Investors Bank & Trust Company ("IBT"), TIP"s Transfer
Agent, maintains an account for each member upon which the registration and
transfer of shares are recorded, and any transfers are reflected by
bookkeeping entry, without physical delivery. Certificates representing
shares of a particular Fund normally will not be issued to Members. Written
confirmations of purchases or redemptions are mailed to each Member. Members
also receive via mail monthly statements of account, which reflect shares
purchased as a result of a reinvestment of Fund distributions.
REQUESTS THAT MUST BE IN WRITING. The Transfer Agent will require that a Member
provide requests in writing, accompanied by a valid signature guarantee form,
when changing certain information in an account such as wiring instructions,
telephone privileges, etc. TIP, FAI, AMT Capital Services, and the Transfer
Agent will not be responsible for confirming the validity of written or
telephonic requests.
EXCHANGE PRIVILEGE. Shares of each Fund may be exchanged for shares of any
other Fund. Because an exchange is a redemption out of one Fund and a
purchase into another, the applicable entry and exit fees for purchases and
redemptions will apply to exchanges. Any such exchange will be based on the
respective net asset values of the shares involved as of the date of the
exchange. There is not a sales commission or charge of any kind. Before
making an exchange, a Member should consider the investment objectives of the
Fund to be purchased.
Exchange Procedures. Exchange requests may be made either by mail or
telephone and should be directed to FAI or the Transfer Agent. Telephone
exchanges will be accepted only if the shares to be exchanged are held by the
Fund for the account of the shareholder and the registrations of the two
accounts are identical. Telephone requests for exchanges received prior to
4:00 p.m. (Eastern time) will be processed as of the close of business on the
same day. Requests received after these times will be processed on the next
business day. Telephone exchanges may also be subject to limitations as to
amounts or frequency and to other restrictions established by the board of
directors to ensure that such exchanges do not disadvantage TIP and its
Members.
Tax Treatment of Exchanges. For federal income tax purposes an exchange
between Funds is a taxable event and, accordingly, a capital gain or loss may
be realized. Members may want to consult their tax advisers for further
information in this regard. The exchange privilege may be modified or
terminated at any time.
PROCEDURES FOR INVESTING THROUGH TIP. TIP has been designed so that foundations
may contact FAI with all questions and requests regarding their membership
and investment in TIP.
Initial Investment. Foundations seeking to invest through TIP are asked to
complete an Account Application. The completed Application is submitted to
FAI and AMT Capital Services for review (so that FAI may verify the
foundation's eligibility for membership). FAI will contact the foundation
immediately if there is a question about eligibility, if the application is
incomplete, or if for any other reason the account cannot be established by
the initial investment date specified by the foundation on the Application.
Funds should be wired by the foundation and received by Investors Bank &
Trust Company on the specified initial investment date. Detailed wiring
instructions are provided on the Account Application.
Subsequent Investments. In many cases, foundations may make additional
purchases in existing TIP accounts or increase the number of TIP Funds in
which they invest by contacting FAI by phone. To ensure that the transaction
can occur on the date preferred by the foundation, FAI should be provided
with as much advance notice as possible. Under certain circumstances, FAI or
AMT Capital Services may ask a member foundation to verify or supplement the
information in the Account Application that is on file.
In-Kind Purchases. Shares of the TIP Funds are normally issued for cash
only. In-kind purchases are accepted only when the securities being acquired
meet the following criteria: (1) are consistent with the investment
objectives and policies of the acquiring TIP Fund; (2) are acquired for
investment purposes (not for resale); (3) are not restricted as to transfer
either by law or market liquidity; and (4) can be readily valued (e.g.,
listed on a recognized exchange).
CALCULATION OF PERFORMANCE DATA
TIP may, from time to time, include the yield and total return of a Fund in
reports to members or prospective investors. Quotations of yield for a Fund
of TIP will be based on all investment income per share during a particular
30-day (or one month) period (including dividends and interest), less
expenses accrued during the period ("net investment income"), and are
computed by dividing net investment income by the maximum offering price per
share on the last day of the period, according to the following formula which
is prescribed by the Commission:
YIELD = 2 x { [ ((a - b) / (c x d)) + 1]^6 - 1 }
Where: a = dividends and interest earned during the period;
b = expenses accrued for the period (net of reimbursements);
c = the average daily number of Shares of a Fund 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 yield as defined above for the Funds for the 30-day period ended
December 31, 1996 were as follows:
U.S. Equity Fund 1.49%
Bond Fund 6.51%
Short-Term Fund 5.42%
Quotations of average annual total return will be expressed in terms of the
average annual compounded rate of return of a hypothetical investment in a
Fund of TIP over periods of 1, 5, and 10 years (up to the life of the Fund),
calculated pursuant to the following formula which is prescribed by the
Commission:
P(1 + T)^n = ERV
Where: P = a hypothetical initial payment of $1,000;
T = the average annual total return;
n = the number of years; and
ERV = the ending redeemable value of a hypothetical $1,000
payment made at the beginning of the period.
All total return figures assume that all dividends are reinvested when paid.
The total return calculations as defined above for the Funds for the year
ended December 31, 1996 are as follows:
12 Months Ended Annualized
12/31/95 since Inception Inception
Multi-Asset Fund 14.7% 16.4% 3/31/95
International Equity Fund 15.9% 10.2% 5/31/94
Emerging Markets Fund 2.5% -5.1% 5/31/94
U.S. Equity Fund 21.9% 23.1% 5/31/94
Bond Fund 3.7% 8.3% 5/31/94
Short-Term Fund 5.3% 5.7% 5/31/94
TIP may also, from time to time, compare its Funds' returns and expense
ratios to relevant market indices and manager or mutual fund averages, such
as those reported by Morningstar, Lipper Analytical Services, Valueline, or
other similar services.
When comparing the costs of investing through TIP to the costs of investing
elsewhere, foundations should consider the total costs of investing elsewhere
- - not merely a subset thereof. For example, when comparing the costs of
investing through TIP to the costs of investing the same dollar amount
through a Money Manager via a separate account, it is important to add to
that Money Manager's fees all costs of maintaining the separate account,
including relevant custody, accounting, and audit fees.
Indeed, even though their large asset bases enable them to employ Money
Managers with high separate account minimums, many large institutions
(including several foundations represented on the boards of TIP and FAI)
voluntarily elect to invest through funds managed by these same advisors in
order to reduce their custody, accounting, and audit costs. With respect to
accounting costs in particular, through the use of statements and reports
geared specifically to the needs of its member foundations, TIP seeks to
reduce both the complexity and the costs of complying with relevant state and
federal reporting requirements. In addition, foundations investing through
TIP benefit from a feature common to all mutual funds: complete automation
of the process by which the Money Managers, custodians, and other vendors
employed by TIP are compensated for services rendered to TIP's Members.
Pursuant to procedures mandated by either governmental authorities or the
Funds' independent accountant, the Funds' Custodian incorporates into its
daily calculation of the net asset value per share of each TIP Fund estimated
fees paid or owed (i.e., accrued) to vendors employed by the Fund. Thus, on
any given day, the reported market value of a participating foundation's
shares in a given TIP Fund (i.e., the number of shares the foundation owns
times the net asset value per share computed as of the prior day's close)
reflects the foundation's costs of investing in that Fund. As a corollary,
the performance of each TIP Fund (as reported in the monthly statements each
member foundation receives and in TIP's quarterly updates) also reflects the
costs of investing in it.
DETERMINATION OF NET ASSET VALUE
BUSINESS DAYS. Currently, there are eleven holidays during the year which
are not Business Days: New Year's Day, Martin Luther King's Birthday,
Presidents' Day, Good Friday, Memorial Day, Fourth of July, Labor Day,
Columbus Day, Veterans' Day, Thanksgiving, and Christmas. TIP will not
accept purchase or redemption orders on these holidays.
EQUITY FUNDS. The net asset value per share is determined by dividing the
total market value of each Fund's investments and other assets, less any
liabilities, by the total outstanding shares of the Fund. Net asset value
per share is determined as of the normal close of the New York Stock Exchange
(currently 4:00 p.m. Eastern time) on each day that the NYSE is open for
business.
BOND AND SHORT-TERM FUNDS. The net asset value per share of each Fund is
determined by adding the market values of all the assets of the Fund,
subtracting all of the Fund's liabilities, dividing by the number of shares
outstanding, and adjusting to the nearest cent. The net asset value is
calculated by TIP's Accounting Agent as of 4:00 p.m. Eastern time on each
Business Day.
METHODS USED TO CALCULATE INDIVIDUAL SECURITIES' VALUE. Securities listed
on a U.S. securities exchange for which market quotations are available are
valued at the last quoted sale price on the day the valuation is made. Price
information on listed securities is taken from the exchange where the
securities are primarily traded. Securities listed on a foreign exchange are
valued at the latest quoted sales price available before the time at which
such securities are valued. For purposes of calculating net asset value per
share, all assets and liabilities initially expressed in foreign currencies
(except for the Royal currencies of the United Kingdom, Ireland, European
Currency Units, Australia, and New Zealand) are converted into U.S. dollars
at the bid price of such currencies against U.S. dollars as provided by an
independent pricing vendor. The Royal currencies are converted at the ask
price. All Fund securities for which over-the-counter market quotations are
readily available (including asset-backed securities) are valued at the
latest bid price. Deposits and repurchase agreements are valued at their
cost plus accrued interest unless FAI or the Money Manager whose segment of a
Fund owns them determines in good faith, under procedures established by and
under the general supervision of TIP's board of directors, that such value
does not approximate the fair value of such assets. Positions (e.g., futures
and options) listed or traded on an exchange are valued at their last sale
price on that exchange or, if there were no sales that day for a particular
position, that position is valued at the closing bid price. Unlisted
securities and listed U.S. securities not traded on the valuation date for
which market quotations are readily available are valued not exceeding the
asked prices nor less than the bid prices. The value of other assets will be
determined in good faith by FAI (or the Money Manager whose segment of the
Fund owns them) at fair value under procedures established by and under the
general supervision of TIP's board of directors.
ADDITIONAL SERVICE PROVIDERS
SERVICE PROVIDER SELECTION CRITERIA. Consistent with their Mission of
helping foundations exploit the economies of scale inherent in many aspects of
investing, TIP and FAI rely heavily on outside vendors to perform most
functions that their Directors deem delegable. TIP's fund administrator,
custodian, transfer agent, independent accountant, and legal counsel were
selected by TIP's board of directors from a nationwide pool of qualified
candidates based on the following criteria: (1) corporate goals and cultures
that are consistent with TIP's Mission and Credo; (2) qualified, well-
trained, motivated personnel at all levels of the organization; (3) a
demonstrated commitment to providing high quality services at competitive
prices; and (4) a demonstrated mastery of the regulatory environment in which
they and their clients are operating.
CUSTODIAN, FUND ACCOUNTING AGENT, TRANSFER AGENT, REGISTRAR, AND
DISTRIBUTION DISBURSING AGENT. Investors Bank & Trust Company, P.O. Box 1537,
Boston, MA 02205-1537, serves as custodian of the Funds' assets, fund
accounting agent, transfer agent, registrar, and dividend disbursing agent for
the Funds. As custodian, IBT may employ sub-custodians outside the United
States which are approved by TIP's board of directors. A profile of IBT is
provided in Appendix B of the Prospectus.
LEGAL COUNSEL. Dechert Price & Rhoads, 1500 K Street, N.W., Washington, DC
20005, is legal counsel to TIP, for which it is compensated directly by TIP.
INDEPENDENT ACCOUNTANTS. Price Waterhouse LLP, 1177 Avenue of the Americas,
New York, NY 10036, serves as independent auditor for TIP and the TIP Funds.
Members receive unaudited semi-annual financial statements; the annual
financial statements which Members receive are audited by Price Waterhouse LLP.
Members may also receive additional reports concerning the Funds or their
Money Managers from FAI. Price Waterhouse LLP also renders accounting
services to FAI and certain Money Managers employed by the Funds.
Part C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements and Schedules:
Part A - Financial Highlights.
Part B - The financial statements, notes to financial
statements and reports set forth below by the
Registrant are specifically incorporated by reference
in Part B, and were previously filed with the
Securities and Exchange on March 7, 1997 under File
Number 811-08234.
- - Statements of Net Assets dated December 31, 1996
- - Statements of Operations for the period ended December 31, 1996.
- - Statement of Changes in Net Assets for the periods ended
December 31, 1996, and December 31, 1995.
- - Financial Highlights for the periods ended December 31, 1996,
December 31, 1995 and the December 31, 1994.
- - Notes to Financial Statements
(b) Exhibits
(1) Articles of Incorporation, dated December 24, 1993.
(previously filed as Exhibit No. (1) to Pre-Effective
Amendment No. 1 to Registrant's Registration Statement
on Form N-1A).
(2) By-laws. (previously filed as Exhibit No. (2) to Pre-
Effective Amendment No. 2 to Registrant's Registration
Statement on Form N-1A).
(3) Not Applicable.
(4) Not Applicable.
(5a) Advisory Agreement, dated February 10, 1994, between
the Registrant (TIFF U.S. Equity Fund) and Foundation
Advisers, Inc. (previously filed as Exhibit No. (5a)
to Pre-Effective Amendment No. 3 to Registrant's
Registration Statement on
N-1A).
(5b) Advisory Agreement, dated February 10, 1994, between
the Registrant (TIFF International Equity Fund)
and Foundation Advisers, Inc. (previously filed
as Exhibit No. (5b) to Pre-Effective Amendment No. 3
to Registrant's Registration Statement on N-1A).
(5c) Advisory Agreement, dated February 10, 1994, between
the Registrant (TIFF Emerging Markets Fund) and
Foundation Advisers, Inc.
(previously filed as Exhibit No. (5c) to Pre-
Effective Amendment No. 3 to Registrant's Registration
Statement on N-1A).
(5d) Advisory Agreement, dated February 10, 1994, between
the Registrant (TIFF Bond Fund) and Foundation
Advisers, Inc. (previously filed as Exhibit No. (5d)
to Pre-Effective Amendment No. 3 to Registrant's
Registration Statement on N-1A).
(5e) Advisory Agreement, dated February 10, 1994, between
the Registrant (TIFF Short-Term Fund) and Foundation
Advisers, Inc. (previously filed as Exhibit No. (5e)
to Pre-Effective Amendment No. 3 to Registrant's
Registration Statement on N-1A).
(5f) Money Manager Agreement, dated March 16, 1994, between
the Registrant (TIFF U.S. Equity Fund) and Aronson +
Fogler Investment Management (previously filed as
Exhibit No. (5f) to Pre-Effective Amendment No. 3 to
Registrant's Registration Statement on N1-A).
(5g) Money Manager Agreement, dated April 8, 1994, between
the Registrant (TIFF Bond Fund) and Atlantic Asset
Management Partners, Inc. (previously filed as Exhibit
No. (5g) to Pre-Effective Amendment No. 3 to
Registrant's Registration Statement on N1-A).
(5h) Money Manager Agreement, dated April 1, 1994, between
the Registrant (TIFF Emerging Markets Fund) and BEA
Associates (previously filed as Exhibit No. (5h) to
Pre-Effective Amendment No. 3 to Registrant's
Registration Statement on N1-A).
(5i) Money Manager Agreement, dated March 16, 1994, between
the Registrant (TIFF International Equity Fund) and
Blairlogie Capital Management, Ltd. (previously filed
as Exhibit No. (5i) to Pre-Effective Amendment No. 3
to Registrant's Registration Statement on N1-A).
(5j) Money Manager Agreement, dated March 16, 1994, between
the Registrant (TIFF Emerging Markets Fund) and
Blairlogie Capital Management, Ltd. (previously filed
as Exhibit No. (5j) to Pre-Effective Amendment No. 3
to Registrant's Registration Statement on N1-A).
(5k) Money Manager Agreement, dated April 18, 1994, between
the Registrant (TIFF International Equity Fund) and
Delaware International Advisers, Ltd. (previously
filed as Exhibit No. (5k) to Pre-Effective Amendment
No. 3 to Registrant's Registration Statement on N1-A).
(5l) Money Manager Agreement, dated March 16, 1994, between
the Registrant (TIFF U.S. Equity Fund) and Eagle
Capital Management. (previously filed as Exhibit No. (5l)
to Pre-Effective Amendment No. 3 to Registrant's
Registration Statement on N1-A).
(5m) Money Manager Agreement, dated May 27, 1994, between
the Registrant (TIFF Emerging Markets Fund) and
Emerging Markets Management (previously filed as
Exhibit No. (5m) to Post-Effective Amendment No. 1 to
Registrant's Registration Statement on N1-A).
(5n) Money Manager Agreement, dated April 18, 1994, between
the Registrant (TIFF U.S. Equity Fund) and First
Quadrant (previously filed as Exhibit No. (5n) to Pre-
Effective Amendment No. 3 to Registrant's Registration
Statement on N1-A).
(5o) Money Manager Agreement, dated May 16, 1994, between
the Registrant (TIFF Bond Fund) and Fischer Francis
Trees & Watts, Inc. (previously filed as Exhibit No.
(5o) to Post-Effective Amendment No.1 to Registrant's
Registration Statement on N1-A).
(5p) Money Manager Agreement, dated May 16, 1994, between
the Registrant (TIFF Short-Term Fund) and Fischer
Francis Trees & Watts, Inc. (previously filed as
Exhibit No. (5p) to Post-Effective Amendment No. 1 to
Registrant's Registration Statement on N1-A).
(5q) Money Manager Agreement, dated March 16, 1994, between
the Registrant (TIFF Emerging Markets Fund) and
Genesis Asset Managers, Ltd.(previously filed as
Exhibit No. (5q) to Pre-Effective Amendment No. 3 to
Registrant's Registration Statement on N1-A).
(5r) Money Manager Agreement, dated April 18, 1994, between
the Registrant (TIFF International Equity Fund) and
Harding, Loevner Management, L.P. (previously filed as
Exhibit No. (5r) to Pre-Effective Amendment No. 3 to
Registrant's Registration Statement on N1-A).
(5s) Money Manager Agreement, dated March 16, 1994, between
the Registrant (TIFF U.S. Equity Fund) and Investment
Research Company (previously filed as Exhibit No. (5s)
to Pre-Effective Amendment No. 3 to Registrant's
Registration Statement on N1-A).
(5t) Money Manager Agreement, dated March 16, 1994, between
the Registrant (TIFF U.S. Equity Fund) and Investment
Research Company (previously filed as Exhibit No. (5t)
to Pre-Effective Amendment No. 3 to Registrant's
Registration Statement on N1-A).
(5u) Money Manager Agreement, dated April 18, 1994, between
the Registrant (TIFF U.S. Equity Fund) and Jacobs Levy
Equity Management (previously filed as Exhibit No.
(5u) to Pre-Effective Amendment No. 3 to Registrant's
Registration Statement on N1-A).
(5v) Money Manager Agreement, dated March 16, 1994, between
the Registrant (TIFF U.S. Equity Fund) and Kayne,
Anderson Investment Management (previously filed as
Exhibit No. (5v) to Pre-Effective Amendment No. 3 to
Registrant's Registration Statement on N1-A).
(5w) Money Manager Agreement, dated March 16, 1994, between
the Registrant (TIFF International Equity Fund) and
Marathon Asset Management, Ltd. (previously filed as
Exhibit No. (5w) to Pre-Effective Amendment No. 3 to
Registrant's Registration Statement on N1-A).
(5x) Money Manager Agreement, dated March 16, 1994, between
the Registrant (TIFF U.S. Equity Fund) and Martingale
Asset Management, L.P. (previously filed as Exhibit
No. (5x) to Pre-Effective Amendment No. 3 to
Registrant's Registration Statement on N1-A).
(5y) Money Manager Agreement, dated March 16, 1994, between
the Registrant (TIFF U.S. Equity Fund) and Palo Alto
Investors (previously filed as Exhibit No. (5y) to
Pre-Effective Amendment No. 3 to Registrant's
Registration Statement on N1-A).
(5z) Money Manager Agreement, dated March 16, 1994, between
the Registrant (TIFF Bond Fund) and Seix Investment
Advisors, Inc. (previously filed as Exhibit No. (5z)
to Pre-Effective Amendment No. 3 to Registrant's
Registration Statement on N1-A).
(5aa) Money Manager Agreement, dated April 18, 1994, between
the Registrant (TIFF Bond Fund) and Smith Breeden
Associates, Inc. (previously filed as Exhibit No.
(5aa) to Pre-Effective Amendment No. 3 to Registrant's
Registration Statement on N1-A).
(5bb) Money Manager Agreement, dated April 18, 1994, between
the Registrant (TIFF Short-Term Fund) and Smith
Breeden Associates, Inc. (previously filed as Exhibit
No. (5bb) to Pre-Effective Amendment No. 3 to
Registrant's Registration Statement on N1-A).
(5cc) Money Manager Agreement, dated March 16, 1994, between
the Registrant (TIFF U.S. Equity Fund) and Turner
Investment Partners, Inc. (previously filed as Exhibit
No. (5cc) to Pre-Effective Amendment No. 3 to
Registrant's Registration Statement on N1-A).
(5dd) Money Manager Agreement, dated March 16, 1994, between
the Registrant (TIFF International Equity Fund) and
Warburg Investment Management International, Ltd.
(previously filed as Exhibit No. (5dd) to Pre-
Effective Amendment No. 3 to Registrant's Registration
Statement on N1-A).
(5ee) Money Manager Agreement, dated March 16, 1994, between
the Registrant (TIFF U.S. Equity Fund) and Westport
Asset Management, Inc. (previously filed as Exhibit
No. (5ee) to Pre-Effective Amendment No. 3 to
Registrant's Registration Statement on N1-A).
(5ff) Money Manager Agreement, between March 31, 1995
between the Registrant (TIFF Multi-Asset Fund) and
Bee and Associates, Inc. (previously filed as Exhibit
No. (5ff) to Post-Effective Amendment No. 4
to Registrant's Registration Statement on N1-A).
(5gg) Money Manager Agreement, dated March 31, 1995 between
the Registrant (TIFF Multi-Asset Fund) and Blairlogie
Capital Management (previously filed as Exhibit No.
(5gg) to Post-Effective Amendment No. 4 to Registrant's
Registration Statement on N1-A).
(5hh) Money Manager Agreement, dated March 31, 1995 between
the Registrant (TIFF Multi-Asset Fund) and
Delaware International Advisers, Ltd. (previously
filed as Exhibit No. 5hh) to Post-Effective Amendment
No. 4 to Registrant's Registration Statement on N1-A).
(5ii) Money Manager Agreement, dated March 31, 1995 between
the Registrant (TIFF Multi-Asset Fund) and First
Quadrant (previously filed as Exhibit No. (5ii) to
Post-Effective Amendment No. 4 to Registrant's Registration
Statement on N1-A).
(5jj) Money Manager Agreement, dated March 31, 1995 between
the Registrant (TIFF Multi-Asset Fund) and Harding,
Loevner Management, L.P. (previously filed as Exhibit No.
(5jj) to Post-Effective Amendment No. 4 to Registrant's
Registration Statement on N1-A).
(5kk) Money Manager Agreement, dated March 31, 1995 between
the Registrant (TIFF International Equity Fund) and Lazard
Freres Asset Management (previously filed as Exhibit No.
(5kk) to Post-Effective Amendment No. 4 to Registrant's
Registration Statement on N1-A).
(5ll) Money Manager Agreement, dated March 31, 1995 between
the Registrant (TIFF Multi-Asset Fund) and A. Gary
Shilling & Co., Inc. (previously filed as Exhibit No. (5ll) to Post-
Effective Amendment No. 4 to Registrant's Registration Statement
on N1-A).
(5mm) Money Manager Agreement, dated March 31, 1995 between the
Registrant (TIFF Multi-Asset Fund) and TCW Funds
Management, Inc. (previously filed as Exhibit No. (5mm) to
Post-Effective Amendment No. 4 to Registrant's Registration
Statement on N1-A).
(5nn) Sub-Advisory Agreement, dated March 31, 1995 between TCW
Funds Management, Inc. and TCW Asia Ltd. (previously
filed as Exhibit No. (5nn) to Post-Effective Amendment No. 4 to
Registrant's Registration Statement on N1-A).
(5oo) Sub-Advisory Agreement, dated March 31, 1995 between TCW
Funds Management, Inc. and TCW London International,
Ltd. (previously filed as Exhibit No. (5oo) to Post-
Effective Amendment No. 4 to Registrant's Registration
Statement on N1 -A).
(5pp) Money Manager Agreement, dated March 31, 1995 between the
Registrant (TIFF Multi-Asset Fund) and Wellington
Management Company (previously filed as Exhibit No. (5pp) to
Post-Effective Amendment No. 4 to Registrant's Registration
Statement on N1-A).
(5ww) Money Manager Agreement, dated March 31, 1995 between the
Registrant (TIFF U.S. Equity Fund) and Martingale Asset
Management L.P. (previously filed as Exhibit (5ww) to
Post-Effective Amendment No. 5 to Registrant's
Registration Statement on Form N1-A).
(5xx) Money Manager Agreement, dated January 5, 1996 between the
Registrant (TIFF Emerging Markets Fund) and Lazard
Freres Asset Management (previously filed as
Exhibit (5xx) to Post-Effective Amendment No. 5 to
Registrant's Registration Statement on Form N1-A).
(5yy) Money Manager Agreement, dated March 31, 1995 between the
Registrant (TIFF International Equity Fund) and Bee &
Associates, Inc. (previously filed as
Exhibit (5yy) to Post-Effective Amendment No. 5 to
Registrant's Registration Statement on Form N1-A).
(5zz) Advisory Agreement, dated March 31, 1995, between the
Registrant (TIFF Multi-Asset Fund) and Foundation
Advisers, Inc. (previously filed as Exhibit (5zz) to
Post-Effective Amendment No. 5 to Registrant's
Registration Statement on Form N1-A).
(5aaa) Money Manager Agreement, dated June 30, 1996,
between the Registrant (TIFF Multi-Asset Fund) and Standard
Pacific Capital LLC (filed herewith).
(5aab) Money Manager Agreement, dated January 1, 1997,
between the Registrant (TIFF Emerging Markets Fund) and Emerging
Markets Management (filed herewith).
(5aac) Money Manager Agreement, dated January 7, 1997,
between the Registrant (TIFF Multi-Asset Fund) and Grantham, Mayo,
Van Otterloo & Co. LLC (filed herewith).
(6) Distribution Agreement, dated February 10, 1994,
between the Registrant and Foundation Advisers, Inc.
(previously filed as Exhibit No. (6) to Pre-Effective
Amendment No. 3 to Registrant's Registration Statement on N-1A).
(6a) Distribution Agreement, dated January 1, 1995, between
Registrant and AMT Capital Services, Inc. (previously
filed as Exhibit No. (6a) to Post-Effective Amendment
No. 4 to Registrant's Registration Statement on N-1A).
(7) Not Applicable.
(8) Custodian Agreement, dated February 10, 1994, between the
Registrant and Investors Bank & Trust Company.
(previously filed as Exhibit No. (8) to Pre-
Effective Amendment No. 3 to Registrant's Registration
Statement on N-1A).
(8)(a) Amendment No. 1 to the Amended and Restated
Custodian Agreement between TIFF Investment Program,
Inc. and Investors Bank & Trust Company dated March
14, 1997 (filed herewith).
(9a) Transfer Agency and Service Agreement, dated February 10,
1994, between the Registrant and Investors Bank & Trust
Company. (previously filed as Exhibit No. (9a) to Pre-Effective
Amendment No. 3 to Registrant's Registration Statement on N-1A).
(9b) Administration Agreement, dated February 10, 1994,
between the Registrant and AMT Capital Services, Inc.
(previously filed as Exhibit No. (9b) to Pre-Effective
Amendment No. 3 to Registrant's Registration Statement
on N-1A).
(9c) Administration Agreement, dated February 10, 1994 as
amended January 1, 1995, between the Registrant and
AMT Capital Services, Inc. (previously filed as
Exhibit (9c) to Post-Effective Amendment No. 5 to
Registrant's Registration Statement on Form N1-A).
(10) Opinion and Consent of Counsel. (previously filed as
Exhibit No. (10) to Pre-Effective Amendment No. 3 to
Registrant's Registration Statement on N-1A).
(11) Consent of Independent Auditors (filed herewith).
(12) Not Applicable.
(13) Purchase Agreement, dated March 29, 1994, for Initial
Capital between Registrant and The John D. and Catherine T.
MacArthur Foundation. (previously filed as Exhibit No. (13) to
Pre-Effective Amendment No. 3 to Registrant's Registration
Statement on N-1A).
(14) Not Applicable.
(15) Not Applicable.
(16) Performance Information Schedule (filed herewith).
Item 25. Persons Controlled by or Under Common Control with Registrant
None.
Item 26. Number of Holders of Securities
As of March 31, 1997, there were 90 record holders of Capital
Stock of the U.S. Equity Fund; 83 record holders of Capital
Stock of the International Equity Fund; 38 record holders of
Capital Stock of the Emerging Markets Fund; 61 record holders
of Capital Stock of the Bond Fund; 46 holders of record of
Capital Stock of the Short-Term Fund; and 84 holders of record of
Capital Stock of the Multi-Asset Fund.
Item 27. Indemnification
The Registrant shall indemnify directors, officers, employees and
agents of the Registrant against judgments, fines, settlements
and expenses to the fullest extent allowed, and in the manner
provided, by applicable federal and Maryland law, including
Section 17(h) and (i) of the Investment Company Act of 1940. In
this regard, the Registrant undertakes to abide by the provisions
of Investment Company Act Releases No. 11330 and 7221 until
amended or superseded by subsequent interpretation of legislative
or judicial action.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Advisor
The business and other connections of Foundation Advisers, Inc.
(the Adviser) is on the Uniform Application for Investment Adviser
Registration ("Form ADV") as currently on file with the Commission
(File No. 801-45618) the text of which is hereby incorporated by
reference.
Item 29. Principal Underwriters
(a) AMT Capital Services, Inc. does act as principal
underwriter, depositor or investment adviser for other
investment companies (other than the Registrant) including
FFTW Funds, Inc., AMT Capital Fund, Inc., Harding, Loevner
Funds, Inc. and Holland Series Fund, Inc. AMT Capital
Services, Inc. is registered with the Securities and
Exchange Commission as a broker/dealer and is a member of
the National Association of Securities Dealers, Inc.
(b) The information required by this Item 29(b) with respect
to each director, officer or partner of AMT Capital
Services, Inc. is incorporated herein by reference to
Schedule A of Form BD filed by AMT Capital Services, Inc.
pursuant to the Securities Act of 1934 (SEC File No.8-
44718).
(c) Not applicable.
Item 30. Location of Accounts and Records
All accounts, book and other documents required to be maintained
by Section 31(a) of an Investment Company Act of 1940 and
the Rules (17 CFR 270.32a-l to 3la-3) promulgated thereunder will
be maintained by the following:
Accounting and Custodial Records - Investors Bank & Trust Company,
P.O. Box 1537, Boston, Massachusetts 02205-1537.
Dividend Disbursing Agent and Transfer Agent - Investors Bank &
Trust Company, P.O. Box 1537, Boston, Massachusetts
02205-1537.
Balance of Accounts and Records: AMT Capital Services, Inc., 600
Fifth Avenue, 26th Floor, New York, New York 10020 and Foundation
Advisers, Inc. 2405 Ivy Road, Charlottesville, VA 22903
Item 31. Management Services
None.
Item 32. Undertakings
The Registrant undertakes to call a meeting of shareholders for
the purpose of voting upon the question of removal of a
director or directors when requested in writing to do so by the
holders of at least 10% of the Registrant's outstanding shares and in
connection with such meeting to discuss matters relating to shareholder
communications.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Amendment to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Charlottesville and the Commonwealth
of Virginia on the 30th day of April, 1997.
TIFF INVESTMENT PROGRAM, INC.
Registrant
By: /s/ David A. Salem
David A. Salem, President
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement had been signed below by the following persons in
the capacities and on the dates indicated.
/s/ David A. Salem *
David A. Salem, President and Director William F. Nichols, Director
/s/ Esther Cash *
Esther Cash, Principal Financial Officer Alicia A. Philipp, Director
* *
John E. Craig, Director Fred B. Renwick, Director
* *
William F. McCalpin, Director Robert E. Wise, Director
*By: /s/ Esther Cash
Esther Cash, Attorney-in-Fact
Date: April 30, 1997
EXHIBIT INDEX
Exhibit No. Page
(5aaa) Money Manager Agreement (Standard Pacific Capital LLC)
(5aab) Money Manager Agreement (Emerging Markets Management)
(5aac) Money Manager Agreement (Grantham, Mayo, Van Otterloo & Co. LLC)
(8)(a) Amendment No. 1 to the Amended and Restated Custodian Agreement
between TIFF Investment Program, Inc. and Investors Bank & Trust Company
dated March 14, 1997.
(11) Consent of Independent Auditors
(16) Performance Information Schedule
Money Manager Agreement
This Agreement is between the TIFF Investment Program, Inc. ("TIP"), a
Maryland Corporation, for the account of its TIFF Multi-Asset Fund and such
other of its Funds as may from time to time allot assets for management under
this agreement (hereafter "Client"), and Standard Pacific Capital LLC
(hereafter "Manager") and is effective as of June 30, 1996 (the "Effective
Date").
Recitals
TIP is a non-diversified open-end management investment company
registered under the Investment Company Act of 1940 (the "1940 Act"); and
Client wishes to retain Manager to render advisory services to Client
and Manager is willing to render those services.
Now, therefore, the parties agree as follows:
1. Managed Assets
Manager will provide investment management services with respect to
assets placed with Manager on behalf of Client from time to time. Such
assets, as changed by investment, reinvestment, additions, disbursements of
expenses, and withdrawals, are referred to in this Agreement as the "Managed
Assets." Client may make additions to or withdraw all or any portion of the
Managed Assets from this management arrangement at any time.
2. Appointment and Powers of Manager; Investment Approach
(a) Appointment. TIP, acting on behalf of Client, hereby appoints
Manager to manage the Managed Assets for the period and on the terms set forth
in this Agreement. Manager hereby accepts this appointment and agrees to
render the services herein described in accordance with the Manager's
Investment Approach set forth in the Manager Profile (Manager's "Investment
Approach") as such approach may be elaborated and refined with the consent of
Foundation Advisers, Inc. ("FAI"), acting on behalf of Client. The Manager
Profile pertaining to Manager is included the prospectus (the "Prospectus")
which is part of the Registration Statement under the 1940 Act and the
Securities Act of 1933, as amended on Form N1-A as filed with the Securities
and Exchange Commission relating to Client and the shares of common stock in
Client. The Registration Statement, with all amendments thereto, is referred
herein as the "Registration Statement".
(b) Powers. Subject to the supervision of the Board of Directors of
TIP and subject to the supervision of FAI, which is Investment Adviser to
Client, Manager shall direct investment of the Managed Assets in accordance
with Manager's Investment Approach. Client grants the Manager authority to:
(i) acquire (by purchase, exchange, subscription, or otherwise),
to hold, and to dispose (by sale, exchange or otherwise)
investments and other securities;
(ii) determine what portion of the Managed Assets will be held
uninvested; and
(iii) enter into such agreements and make such representations
(including representations regarding the purchase of
securities for investment) as may be necessary or proper in
connection with the performance by Manager of its duties
hereunder.
(c) Power of Attorney. To enable Manager to exercise fully discretion
granted hereunder, TIP appoints Manager as its attorney in fact to invest,
sell, and reinvest the Managed Assets as fully as TIP itself could do.
Manager hereby accepts this appointment.
(d) Voting. Manager shall be authorized to vote on behalf of Client
any proxies relating to the Managed Assets, provided, however, that Manager
shall comply with instructions received from Client as to the voting of
securities and handling of proxies.
(e) Independent Contractor. Except as expressly authorized herein,
Manager shall for all purposes be deemed to be an independent contractor and
shall have no authority to act for or to represent TIP, Client, or FAI in any
way, or otherwise to be an agent of any of them.
3. Requirements; Duties
(a) Requirements. In performing services and otherwise discharging
its obligations under this Agreement, Manager shall act in conformity with the
following requirements (referred to collectively in this Agreement as the
"Requirements"):
(i) the Articles of Incorporation and By-Laws of TIP;
(ii) the Registration Statement, including the Manager's
Investment Approach set forth therein;
(iii) the 1940 Act, the Internal Revenue Code, and all other
applicable federal and state laws and regulations;
(iv) instructions and directions of the Board of Directors of
TIP;
(v) instructions and directions of FAI; and
(vi) the Manager's Investment Guidelines, which shall be amended
from time to time by the Investment Adviser.
(b) Responsibility with Respect to Actions of Others. TIP places the
investment portfolio of each of its Funds, including Client, with one or more
investment managers. To the extent the applicability of, or conformity with,
Requirements depends upon investments made by, or activity of, managers other
than Manager, Manager agrees to comply with such Requirements to the extent
Manager is provided with information sufficient to ascertain the applicability
of such Requirements. If it appears to Client at any time that Client may not
be in compliance with any Requirement and Client so notifies Manager, Manager
shall promptly take such actions not inconsistent with applicable law as
Client may specify to effect compliance.
(c) Responsibility with Respect to Performance of Duties. In
performing its duties under this Agreement, Manager will act solely in the
interests of Client and shall use reasonable care and its best judgment.
Manager will not deal with the Managed Assets in its own interest or for its
own account.
4. Recordkeeping and Reporting
(a) Records. Manager shall maintain proper and complete records
relating to the furnishing of investment management services under this
Agreement, including records with respect to the Client's securities
transactions required by Rule 31a-1 under the 1940 Act. All records
maintained pursuant to this Agreement shall be subject to examination by
Client and by persons authorized by it during reasonable business hours upon
reasonable notice. Records required by Rule 31a-1 maintained as specified
above shall be the property of Client; Manager will preserve such records for
the periods prescribed by Rule 31a-2 under the 1940 Act and shall surrender
such records promptly at the Client's request. Upon termination of this
Agreement, Manager shall promptly return records that are Client's property
and, upon demand, shall make and deliver to Client true and complete and
legible copies of such other records maintained as required by this Section
4(a) as Client may request. Manager may retain copies of records furnished to
Client.
(b) Reports to Custodian. Manager shall provide to Client's custodian
and to the Client on each business day information relating to all
transactions concerning the Managed Assets.
(c) Other Reports. Manager shall render to the Board of Directors of
TIP and to FAI such periodic and special reports as the Board or FAI may
reasonably request.
5. Purchase and Sale of Securities
(a) Selection of Brokers. Manager shall place all orders for the
purchase and sale of securities on behalf of Client with brokers or dealers
selected by Manager in conformity with the policy respecting brokerage set
forth in the Registration Statement. Neither the Manager nor any of its
officers, employees, or affiliates will act as principal or receive any
compensation in connection with the purchase or sale of investments by Client
other than the management fees provided for in Section 6 hereof.
(b) Aggregating Orders. On occasions when Manager deems the purchase
or sale of a security to be in the best interest of Client as well as other
clients of Manager, the Manager, to the extent permitted by applicable laws
and regulations, may, but shall be under no obligation to, aggregate the
securities to be so sold or purchased in order to obtain the most favorable
price or lower brokerage commissions and efficient execution. In such event,
the broker shall confirm the transactions on an average price basis and
allocation of securities so purchased or sold, as well as the expense incurred
in the transaction, will be made by Manager in the manner it considers to be
most equitable and consistent with its fiduciary obligations to Client and its
other clients.
6. Management Fees; Expenses
(a) Management Fees. Schedule 1 attached hereto sets out the fees to
be paid by Client to Manager by the tenth business day of the following month
in connection with this Agreement. The applicable fee rate will be applied to
the Manager's average daily net assets (gross of expenses except custodian
transaction charges), which is defined as that portion of the average daily
net assets (gross of expenses except custodian transaction charges) of the
Fund, computed as described in the Fund's Registration Statement, that is
managed pursuant to this Agreement by the Money Manager.
(b) Expenses. Manager shall furnish at its own expense all office
facilities, equipment and supplies, and shall perform at its own expense all
routine and recurring functions necessary to render the services required
under this Agreement including administrative, bookkeeping and accounting,
clerical, statistical, and correspondence functions. Client shall pay
directly, or, if Manager makes payment, reimburse Manager for, (i) custodial
fees for the Managed Assets, (ii) brokerage commissions, issue and transfer
taxes and other costs of securities transactions to which Client is a party,
including any portion of such commissions attributable to research and
brokerage services; and (iii) taxes, if any, payable by Client. In addition,
Client shall pay directly, or, if Manager makes payment, reimburse Manager
for, such non-recurring special out-of-pocket costs and expenses as may be
authorized in advance by Client.
7. Non-Exclusivity of Services
Manager is free to act for its own account to provide services to
others similar to those to be provided to Client hereunder. Client
acknowledges that Manager and its officers and employees, and Manager's other
clients may at any time have, acquire, increase, decrease or dispose of
positions in the same investments which are at the same time being held,
acquired for or disposed of under this Agreement for Client. Neither Manager
nor any of its officers or employees shall have any obligation to effect a
transaction under this Agreement simply because such a transaction is effected
for his or its own account or for the account of another client.
8. Liability
Manager shall not be liable to Client for any error of judgment but
Manager shall be liable to Client for any loss resulting from willful
misfeasance, bad faith, or gross negligence by Manager in providing services
under this Agreement or from reckless disregard by Manager of its obligations
and duties under this Agreement.
9. Representations
(a) Manager hereby confirms to Client that Manager is registered as an
investment adviser under the Investment Advisers Act of 1940, that it has full
power and authority to enter into and perform fully the terms of this
Agreement and that the execution of this Agreement on behalf of Manager has
been duly authorized and, upon execution and delivery, this Agreement will be
binding upon Manager in accordance with its terms.
(b) TIP hereby confirms to Manager that it has full power and
authority to enter into this Agreement and that the execution of this
Agreement on behalf of Client has been duly authorized and, upon execution and
delivery, this Agreement will be binding upon Client in accordance with its
terms.
10. Term
This Agreement shall continue in effect for a period of 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; provided however that this Agreement may be terminated without the
payment of any penalty, by the Client, if a decision to terminate is made by
the Board of Directors of Client or by a vote of a majority of the outstanding
voting securities (as defined in the 1940 Act) of the Client, or by the
Manager, in each case with at least 30 days' written notice from the
terminating party and on the date specified in the notice of termination.
This Agreement shall terminate automatically in the event of its
assignment (as defined in the 1940 Act).
11. Amendment
This Agreement may be amended by mutual consent, but the consent of
Client must be approved in conformity with the requirements of the 1940 Act
and any order of the Securities and Exchange Commission that may address the
applicability of such requirements in the case of Client.
12. Notices
Notices or other communications required to be given pursuant to this
Agreement shall be deemed duly given when delivered in person, or sent by
telecopy, or three days after mailing registered mail postage prepaid as
follows:
Client: TIFF Investment Program
c/o Foundation Advisers, Inc.
2405 Ivy Road
Charlottesville, Virginia 22903
Telecopy: 804-977-4479
Manager: Standard Pacific Capital LLC
600 California Street, Suite 1880
San Francisco, CA 94108
Attention: Andrew Midler
Telecopy: 415-352-7117
Each party may change its address by giving notice as herein required.
13. Sole Instrument
This instrument constitutes the sole and only agreement of the parties
to it relating to its object and correctly sets forth the rights, duties, and
obligations of each party to the other as of its date. Any prior agreements,
promises, negotiations or representations not expressly set forth in this
Agreement are of no force or effect.
14. Counterparts
This Agreement may be executed in counterparts each of which shall be
deemed to be an original and all of which, taken together, shall be deemed to
constitute one and the same instrument.
15. Applicable Law
This Agreement shall be governed by, and the rights of the parties
arising hereunder construed in accordance with, the laws of the Commonwealth
of Virginia without reference to principles of conflict of laws. Nothing
herein shall be construed to require either party to do anything in violation
of any applicable law or regulation.
IN WITNESS WHEREOF, the parties hereto execute this Agreement on and make it
effective on the effective date specified in the first paragraph of this
Agreement.
On behalf of Client by the On behalf of
TIFF Investment Program : Standard Pacific Capital LLC:
Signature Signature
Name / Title Name / Titl
Schedule I
Performance Fee Calculation
Compensation
As compensation for the services performed and the facilities and
personnel provided by the Manager pursuant to this Agreement, the Client
will pay to the Manager a fee according to the following formula:
Fee = 15 + [ 0.270 x (Excess Return - 115)]; subject to Floor of
15 b.p., Cap of 200 b.p.
and computed in accordance with the following provisions.
Certain Defined Terms
"Beginning Date" shall mean the date that the Manager begins (or
resumes after a hiatus) to render services under this Agreement.
"Managed Assets" is hereby defined as that portion of Client's
assets allocated to Manager.
"Minimum Fee" shall mean, with respect to any full calendar month,
the result obtained by multiplying the average daily value of the net
assets (gross of expenses) of Managed Assets during such month by 1/12th
of the "floor rate" set forth in this Agreement.
"Performance Adjusted Fee," with respect to a calendar month
subsequent to the Transitional Period, shall mean the result obtained by
multiplying the average daily value of the net assets of the Managed
Assets during the performance measurement period by 1/12th of the
Performance Fee Rate determined in accordance with the formula above,
where the performance measurement period is the one-year period
beginning on the first day of the thirteenth month prior to such month
and ending on the last day of the second month prior to such month.
"Performance Fee Rate" shall mean the rate of fee produced by
application of the formula set forth above. Under such formula, the
rate of fee varies directly with the time-weighted rate of return
achieved for the Client by the Manager over the applicable performance
measurement period, but is never greater than the "cap" rate nor less
than the "floor" rate specified in the formula. The rate of fee varies
above and below the "fulcrum" fee rate, i.e., the rate that is midway
between the cap rate and the floor rate, depending on the amount by
which the Manager's return exceeds, or is less than, the return of the
"benchmark" specified in the formula. (The rate of return at which the
Performance Fee Rate will equal the fulcrum fee rate is equal to the
benchmark return plus the "hurdle" rate incorporated in the formula.)
The rate at which the Performance Fee Rate changes in response to a
specified increment of change in the Manager's performance relative to
the performance of the benchmark (i.e., the slope of the line graph
appearing in Schedule 1) is constant (i.e., the graph's slope is a
straight line). The Performance Fee Rate will change as the Manager's
performance varies from the performance of the benchmark in increments
of one basis point.
"Start-Up Period" shall mean the period beginning on the Beginning
Date and ending on either (i) the last day of the first full calendar
month following the month in which the Beginning Date falls, where the
Beginning Date is the first day of a calendar month, or (ii) the last
day of the second full calendar month following the month in which the
Beginning Date falls, where the Beginning Date is a day other than the
first day of a calendar month.
"Transitional Performance Fee" shall mean the result obtained by
multiplying the average daily net assets (gross of expenses) of the
Managed Assets during the performance measurement period by the
Performance Fee Rate determined in accordance with the formula above,
where the performance measurement period is the period beginning on the
Beginning Date and ending on the last day of the tenth month of the
Transitional Period (annualized, should the Beginning Date not be the
first day of a calendar month).
"Transitional Period" shall mean the period of twelve consecutive
calendar months beginning on the day following the last day of the
Start-Up Period.
Fee For Services During Start-Up Period
For services rendered by the Manager hereunder during each
calendar month, or portion of a calendar month, during the Start-Up
Period, the Manager shall be entitled to a fee equal to 150% of the
Minimum Fee (prorated, with respect to any period of less than a full
calendar month, based on the number of days during such calendar month
that the Manager provided services hereunder), payable by the Client on
or about the tenth day of the month following the month in which such
fees are earned.
Fee For Services During Transitional Period
(a) Amount of Fee. For services rendered by the Manager
hereunder during the Transitional Period, the Manager shall be entitled
to a fee equal to the Transitional Performance Fee.
(b) Payment of Fee. On or about the tenth day of each month of
the Transitional Period, other than the first such month, the Client
shall pay to the Manager an amount equal to the Minimum Fee applicable
to the immediately preceding month. On or about the tenth day of the
month following the end of the Transitional Period, the Client shall pay
the Manager the difference between (i) the Transitional Performance Fee
and (ii) the sum of Minimum Fee payments made during the Transitional
Period.
(c) Early Termination. If the Manager ceases to render services
hereunder at any time during, and before the end of, the Transitional
Period, the Manager shall be entitled to a fee for services rendered
hereunder during the Transitional Period equal to 150% of the Minimum
Fee payments referred to in the immediately preceding paragraph
(prorated for any period of less than a full calendar month that the
Manager provided services hereunder based on the number of days during
such month that the Manager provided services hereunder), with any
amounts not previously paid being payable on or about the tenth day of
the month following the month in which the Manager ceased to render
services hereunder.
Fee For Services During Subsequent Months
(a) Fee. For services rendered by the Manager hereunder during
consecutive full calendar months subsequent to the end of the
Transitional Period, the Manager shall be entitled to a fee equal to the
Performance Adjusted Fee, payable by the Client on or about the tenth
day of the month following the month in which such fees are earned.
(b) Early Termination. If the Manager ceases to render services
hereunder at any time during, and before the end of, any such subsequent
month, the Manager shall be entitled to a fee for services rendered
hereunder during such month equal to 150% of the Minimum Fee (prorated
based on the number of days during such calendar month that the Manager
provided services hereunder) payable by the Client on or about the tenth
day of the month following the month in which the Manager ceased to
render services hereunder.
2
Money Manager Agreement
This Agreement is between the TIFF Investment Program, Inc. ("TIP"), a
Maryland Corporation, for its TIFF Emerging Markets Fund and such other of its
Funds as TIP may from time to time allot assets for management under this
agreement (hereafter, the "Fund"), and Emerging Markets Management (hereafter,
the "Manager") and is effective as of January 1, 1997 (the "Effective Date").
Recitals
TIP is a non-diversified open-end management investment company
registered under the Investment Company Act of 1940 (the "1940 Act"); and
The Fund wishes to retain the Manager to render advisory services to the
Fund, and the Manager is willing to render those services.
Now, therefore, the parties agree as follows:
1. Managed Assets
The Manager will provide investment management services with respect to
assets placed with the Manager on behalf of the Fund from time to time. Such
assets, as changed by investment, reinvestment, additions, disbursements of
expenses, and withdrawals, are referred to in this Agreement as the "Managed
Assets." The Fund may make additions to or withdraw all or any portion of the
Managed Assets from this management arrangement at any time.
2. Appointment and Powers of Manager; Investment Approach
(a) Appointment. TIP, acting on behalf of the Fund, hereby appoints
the Manager to manage the Managed Assets for the period and on the terms set
forth in this Agreement. The Manager hereby accepts this appointment and
agrees to render the services herein described in accordance with the Manager
Profile (appended to this Agreement as Schedule II) and Investment Guidelines
(appended to this Agreement as Schedule III, (together, the "Investment
Approach") as such approach may be elaborated, amended, and refined with the
mutual consent of Foundation Advisers, Inc. ("FAI"), acting on behalf of the
Fund, and the Manager.
(b) Powers. Subject to the supervision of the Board of Directors of
TIP and subject to the supervision of FAI, the Manager shall direct investment
of the Managed Assets in accordance with the Manager's Investment Approach.
The Fund grants the Manager authority to:
(i) Acquire (by purchase, exchange, subscription, or otherwise),
hold and dispose (by sale, exchange or otherwise)
investments and other securities;
(ii) Determine what portion of the Managed Assets will be held
uninvested; and
(iii) Enter into such agreements and make such representations
(including representations regarding the purchase of
securities for investment) as may be necessary or proper in
connection with the performance by the Manager of its duties
hereunder.
(c) Power of Attorney. To enable the Manager to exercise fully
discretion granted hereunder, TIP appoints the Manager as its attorney-in-fact
to invest, sell, and reinvest the Managed Assets as fully as TIP itself could
do. The Manager hereby accepts this appointment.
(d) Voting. The Manager shall be authorized to vote on behalf of the
Fund any proxies relating to the Managed Assets, provided, however, that the
Manager shall comply with any instructions received from the Fund as to the
voting of securities and handling of proxies.
(e) Independent Contractor. Except as expressly authorized herein,
the Manager shall for all purposes be deemed to be an independent contractor
and shall have no authority to act for or to represent TIP, the Fund or FAI in
any way or otherwise to be an agent of any of them.
(f) Reporting. The Manager shall furnish to TIP such information as
TIP reasonably may require to complete and submit any filing required by any
applicable state or federal securities law or regulation.
3. Requirements; Duties
(a) Requirements. In performing services for the Fund and otherwise
discharging its obligations under this Agreement, the Manager shall conform
its actions to the provisions in the following documents (referred to
collectively in this Agreement as the "Requirements"):
(i) The Articles of Incorporation and By-Laws of TIP;
(ii) TIP's Registration Statement, on Form N-1A, as amended from
time to time ("the "Registration Statement"), including the
Investment Approach set forth therein;
(iii) The 1940 Act, the Internal Revenue Code of 1986, as amended,
and all other applicable federal and state laws and
regulations which apply to the Manager in conjunction with
performing services for the Fund, if any;
(iv) Written instructions and directions of the Board of
Directors of TIP;
(v) Written instructions and directions of FAI; and
(vi) The Manager's Investment Guidelines, which shall be amended
from time to time through mutual agreement by the Manager
and FAI.
The Manager only shall be responsible for complying with those
requirements specified in this Paragraph 3 to the extent it has received from
TIP or FAI written instructions or directions or the document that contains or
states such requirements, other than the 1940 Act or the Internal Revenue Code
of 1986.
(b) Responsibility with Respect to Actions of Others. TIP places the
investment portfolio of each of its Funds, including the Fund, with one or
more investment managers. To the extent the applicability of, or conformity
with, Requirements depends upon investments made by, or activity of, managers
other than the Manager, the Manager agrees to comply with such Requirements:
(i) to the extent that such compliance is within the Manager's Investment
Guidelines and (ii) to the extent that the Manager is provided with
information sufficient to ascertain the applicability of such Requirements.
If it appears to the Fund at any time that the Fund may not be in compliance
with any Requirement and the Fund so notifies the Manager, the Manager shall
promptly take such actions not inconsistent with applicable law as the Fund
may reasonably specify to effect compliance.
(c) Responsibility with Respect to Performance of Duties. Except as
permitted by Paragraph 7 of this Agreement, in performing its duties under
this Agreement, the Manager will act solely in the interests of the Fund and
shall use reasonable care and its best judgment in matters relating to the
Fund. The Manager will not deal with the Managed Assets in its own interest
or for its own account.
4. Recordkeeping and Reporting
(a) Records. The Manager shall maintain proper and complete records
relating to the furnishing of investment management services under this
Agreement, including records with respect to the securities transactions for
the Managed Assets required by Rule 31a-1 under the 1940 Act. All records
maintained pursuant to this Agreement shall be subject to examination by the
Fund and by persons authorized by it during reasonable business hours upon
reasonable notice. Records required by Rule 31a-1 maintained as specified
above shall be the property of the Fund; the Manager will preserve such
records for the periods prescribed by Rule 31a-2 under the 1940 Act and shall
surrender such records promptly at the Fund's request. Upon termination of
this Agreement, the Manager shall promptly return records that are the Fund's
property and, upon demand, shall make and deliver to the Fund true and
complete and legible copies of such other records maintained as required by
this Section 4(a) as the Fund may request. The Manager may retain copies of
records furnished to the Fund.
(b) Reports to Custodian. The Manager shall provide to the Fund's
custodian and to the Fund on each business day information relating to all
transactions concerning the Managed Assets.
(c) Other Reports. The Manager shall render to the Board of
Directors of TIP and to FAI such periodic and special reports as the Board or
FAI may reasonably request.
5. Purchase and Sale of Securities
(a) Selection of Brokers. The Manager shall place all orders for the
purchase and sale of securities on behalf of the Fund with brokers or dealers
selected by the Manager in conformity with the policy respecting brokerage set
forth in the Registration Statement. Neither the Manager nor any of its
officers, employees, or any of its "affiliated persons", as defined in the
1940 Act, will act as principal or receive any compensation in connection with
the purchase or sale of investments by the Fund other than the management fees
provided for in Section 6 hereof. The Manager will not be liable to Client
for any acts or omissions made by the Administrator, Custodian or other
service provider to the Fund, unless such liability resulted from acts or
omissions of the Manager or from information from the Manager.
(b) Aggregating Orders. On occasions when the Manager deems the
purchase or sale of a security to be in the best interest of the Fund as well
as other advisory clients of the Manager, the Manager, to the extent permitted
by applicable laws and regulations, may, but shall be under no obligation to,
aggregate the securities to be so sold or purchased in order to obtain the
most favorable price or lower brokerage commissions and efficient execution.
In such event, allocation of securities so purchased or sold, as well as the
expense incurred in the transaction, will be made by the Manager in the manner
it considers to be most equitable and consistent with its fiduciary
obligations to the Fund and its other advisory clients.
6. Management Fees; Expenses
(a) Management Fees. Schedule I attached hereto sets out the fees to
be paid by the Fund to the Manager by the tenth business day of the following
month in connection with this Agreement. The applicable fee rate will be
applied to the average daily net assets (gross of expenses except custodian
transaction charges) of the Managed Assets, computed as described in the
Registration Statement, pursuant to this Agreement.
(b) Expenses. The Manager shall furnish at its own expense all office
facilities, equipment and supplies, and shall perform at its own expense all
routine and recurring functions necessary to render the services required
under this Agreement, including administrative, bookkeeping and accounting,
clerical, statistical and correspondence functions. The Manager shall not
have responsibility for calculating the net asset value of the Fund's
portfolio or for conducting a daily reconciliation of the Fund's portfolio;
however, the Manager will daily review the pricing of the Managed Assets with
such information as is available to the Manager. The Fund shall pay directly,
or, if the Manager makes payment, reimburse the Manager for, (i) custodial
fees for the Managed Assets, (ii) brokerage commissions, issue and transfer
taxes and other costs of securities transactions to which the Fund is a party,
including any portion of such commissions attributable to research and
brokerage services, and (iii) taxes, if any, payable by the Fund. In
addition, the Fund shall pay directly, or, if the Manager makes payment,
reimburse the Manager for, such non-recurring special out-of-pocket costs and
expenses as may be authorized in advance by the Fund.
7. Non-Exclusivity of Services
The Manager is free to act for its own account and to provide
investment management services to others. The Fund acknowledges that the
Manager and its officers and employees, and the Manager's other advisory
clients may at any time have, acquire, increase, decrease or dispose of
positions in the same investments which are at the same time being held,
acquired for or disposed of under this Agreement for the Fund. Neither the
Manager nor any of its officers or employees shall have any obligation to
effect a transaction under this Agreement simply because such a transaction is
effected for his or its own account or for the account of another advisory
client. The Fund agrees that the Manager may refrain from providing any
advice or services concerning securities of companies for which any officers,
directors, partners or employees of the Manager or any of the Manager's
affiliates act as financial adviser, investment manager or in any capacity
that the Manager deems confidential, unless the Manager determines in its sole
discretion that it may appropriately do so. The Fund appreciates that, for
good commercial and legal reasons, material nonpublic information which
becomes available to affiliates of the Manager through these relationships
cannot be passed on to the Fund.
8. Liability
Manager shall not be liable to Client for any error of judgment, acts,
omission, or mistake of law or any loss arising out of its obligations and
duties in providing services under this Agreement, except that Manager shall
be liable to the Client for any loss resulting from Manager's willful
misfeasance, bad faith, gross negligence or reckless disregard by Manager of
its obligations and duties in providing services under this Agreement.
Manager shall not be held liable for any acts or omission of the Client's
Custodian or Administrator or any other third party, unless such liability
resulted from acts or omissions of the Manager or information from the
Manager. Nothing in this Agreement shall constitute a waiver or limitation of
any rights which the Fund, TIP, or FAI may have under applicable state or
federal laws, including the Investment Advisers Act of 1940.
Client understands that the Manager, in the performance of its
obligations and duties under this Agreement, is entitled to rely in good
faith upon the accuracy of the information furnished by, or on behalf
of, Client, without further investigation.
9. Representations
(a) The Manager represents to the Fund that the Manager is registered
as an investment adviser under the Investment Advisers Act of 1940, that it
has full power and authority to enter into and perform fully the terms of this
Agreement, and that the execution of this Agreement on behalf of the Manager
has been duly authorized and, upon execution and delivery, this Agreement will
be binding upon the Manager in accordance with its terms.
(b) TIP represents to the Manager that it has full power and authority
to enter into this Agreement, its execution and delivery of this Agreement on
behalf of the Fund have been duly authorized and this Agreement represents the
legal, valid and binding obligation of TIP, enforceable in accordance with its
terms.
(c) TIP acknowledges receipt of copies of the Manager's Form ADV and
CTA Disclosure Document (if applicable).
(d) TIP hereby represents that TIP and the Fund are in full compliance
with all applicable state and federal securities laws and regulations.
10. Term
This Agreement shall continue in effect for a period of two (2) years
from the date hereof and shall thereafter be automatically renewed for
successive periods of one (1) year each, provided such renewals are
specifically approved at least annually in conformity with the requirements of
the 1940 Act; provided however, that this Agreement may be terminated without
the payment of any penalty by (a) the Fund, if a decision to terminate is made
by the Board of Directors of the Fund or by a vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of the Fund, or (b)
the Manager, and in either case with at least 30 days' written notice from the
terminating party and on the date specified in the notice of termination.
The rights and obligations that are provided in section (f) of Paragraph
2 shall survive the cancellation, expiration or termination of this Agreement.
This Agreement shall terminate automatically in the event of its
assignment (as defined in the 1940 Act).
11. Amendment
Except as otherwise provided in this Agreement, this Agreement may be
amended by mutual consent, but the consent of the Fund must be approved in
conformity with the requirements of the 1940 Act and any order of the
Securities and Exchange Commission that may address the applicability of such
requirements in the case of the Fund.
12. Notices
Notices or other communications required to be given pursuant to this
Agreement shall be deemed duly given when delivered in writing or sent by
telecopy or three days after mailing registered mail postage prepaid as
follows:
To TIP, TIFF Investment Program, Inc.
the Fund, c/o Foundation Advisers, Inc.
or both: P.O. Box 5165
Charlottesville, Virginia 22905
Telecopy: 804-977-4479
The Emerging Markets Management
Manager: 1001 Nineteenth Street North, 16th Floor
Arlington, VA 22209-1722
Attention: Yvonne Wise
Telecopy: 703-243-2266
Each party may change its address by giving notice as herein required.
13. Sole Instrument
This instrument constitutes the sole and only agreement of the parties
to it relating to its object and correctly sets forth the rights, duties and
obligations of each party to the other as of its date. Any prior agreements,
promises, negotiations or representations not expressly set forth in this
Agreement are of no force or effect.
14. Counterparts
This Agreement may be executed in counterparts; each of which shall be
deemed to be an original and all of which, taken together, shall be deemed to
constitute one and the same instrument.
15. Applicable Law
This Agreement shall be governed by, and the rights of the parties
arising hereunder construed in accordance with, the laws of the Commonwealth
of Virginia without reference to principles of conflict of laws. Nothing
herein shall be construed to require either party to do anything in violation
of any applicable law or regulation.
16. Change in Management or Control of Manager
The Manager agrees to notify TIP and the Fund in writing of any
changes in the membership of the Manager within a reasonable time period
after such change.
IN WITNESS WHEREOF, the parties hereto execute this Agreement on and make it
effective on the effective date specified in the first paragraph of this
Agreement.
TIFF Investment Program, Inc. Emerging Markets Management
By: By: _
Title: Treasurer Title:
Schedule I
Performance Fee Calculation
Compensation
As compensation for the services performed and the facilities and
personnel provided by the Manager pursuant to this Agreement, the Client
will pay to the Manager a fee according to the following formula:
Fee = 105 + [ 0.394 x (Excess Return - 205)]; subject to Floor of
40 b.p., Cap of 300 b.p.
and computed in accordance with the following provisions.
Certain Defined Terms
"Beginning Date" shall mean the date that the Manager begins (or
resumes after a hiatus) to render services under this Agreement.
"Excess Return" shall mean the amount by which the performance of
the Managed Assets exceeds the performance of the MSCI Emerging Markets
Free Index during the performance measurement period.
"Managed Assets" is hereby defined as that portion of Client's
assets allocated to Manager.
"Minimum Fee" shall mean, with respect to any full calendar month,
the result obtained by multiplying the average daily value of the net
assets (gross of expenses) of Managed Assets during such month by 1/12th
of the "floor rate" set forth in this Agreement.
"Performance Adjusted Fee," shall mean the result obtained by
multiplying the average daily value of the net assets of the Managed
Assets during the performance measurement period (trailing 12 months
performance) by 1/12th of the Performance Fee Rate determined in
accordance with the formula above.
"Performance Fee Rate" shall mean the rate of fee produced by
application of the formula set forth above. Under such formula, the
rate of fee varies directly with the time-weighted rate of return
achieved for the Client by the Manager over the applicable performance
measurement period, but is never greater than the "cap" rate nor less
than the "floor" rate specified in the formula. The rate of fee varies
above and below the "fulcrum" fee rate, i.e., the rate that is midway
between the cap rate and the floor rate, depending on the amount by
which the Manager's return exceeds, or is less than, the return of the
"benchmark" specified in the formula. (The rate of return at which the
Performance Fee Rate will equal the fulcrum fee rate is equal to the
benchmark return plus the "hurdle" rate incorporated in the formula.)
The rate at which the Performance Fee Rate changes in response to a
specified increment of change in the Manager's performance relative to
the performance of the benchmark is constant. The Performance Fee Rate
will change as the Manager's performance varies from the performance of
the benchmark in increments of one basis point.
Fee For Services
(a) Fee. For services rendered by the Manager hereunder during
consecutive full calendar months subsequent, the Manager shall be
entitled to a fee equal to the Performance Adjusted Fee, payable by the
Client on or about the tenth day of the month following the month in
which such fees are earned.
(b) Early Termination. If the Manager ceases to render services
hereunder at any time during, and before the end of, any such subsequent
month, the Manager shall be entitled to a fee for services rendered
hereunder during such month equal to 150% of the Minimum Fee (prorated
based on the number of days during such calendar month that the Manager
provided services hereunder) payable by the Client on or about the tenth
day of the month following the month in which the Manager ceased to
render services hereunder.
Miscellaneous
(a) Valuation. For purposes of calculating the Manager's fee
hereunder, the securities in the Fund's portfolio shall be valued in the
manner described in the Fund's prospectus.
Money Manager Agreement
This Agreement is between the TIFF Investment Program, Inc. ("TIP"), a
Maryland Corporation, for its TIFF Multi-Asset Fund and such other of its
Funds as TIP may from time to time allot assets for management under this
agreement (hereafter, the "Fund"), and Grantham, Mayo, Van Otterloo & Co. LLC
(hereafter, the "Manager") and is effective as of January 7, 1997 (the
"Effective Date").
Recitals
TIP is a non-diversified open-end management investment company
registered under the Investment Company Act of 1940 (the "1940 Act"); and
The Fund wishes to retain the Manager to render advisory services to the
Fund, and the Manager is willing to render those services.
Now, therefore, the parties agree as follows:
1. Managed Assets
The Manager will provide investment management services with respect to
assets placed with the Manager on behalf of the Fund from time to time. Such
assets, as changed by investment, reinvestment, additions, disbursements of
expenses, and withdrawals, are referred to in this Agreement as the "Managed
Assets." The Fund may make additions to or withdraw all or any portion of the
Managed Assets from this management arrangement at any time.
2. Appointment and Powers of Manager; Investment Approach
(a) Appointment. TIP, acting on behalf of the Fund, hereby appoints
the Manager to manage the Managed Assets for the period and on the terms set
forth in this Agreement. The Manager hereby accepts this appointment and
agrees to render the services herein described in accordance with the Manager
Profile (appended to this Agreement as Schedule II) and Investment Guidelines
(appended to this Agreement as Schedule III, (together, the "Investment
Approach") as such approach may be elaborated, amended, and refined with the
mutual consent of Foundation Advisers, Inc. ("FAI"), acting on behalf of the
Fund, and the Manager.
(b) Powers. Subject to the supervision of the Board of Directors of
TIP and subject to the supervision of FAI, the Manager shall direct investment
of the Managed Assets in accordance with the Manager's Investment Approach.
The Fund grants the Manager authority to:
(i) Acquire (by purchase, exchange, subscription, or otherwise),
hold and dispose (by sale, exchange or otherwise)
investments and other securities;
(ii) Determine what portion of the Managed Assets will be held
uninvested; and
(iii) Enter into such agreements and make such representations
(including representations regarding the purchase of
securities for investment) as may be necessary or proper in
connection with the performance by the Manager of its duties
hereunder.
(c) Power of Attorney. To enable the Manager to exercise fully
discretion granted hereunder, TIP appoints the Manager as its attorney-in-fact
to invest, sell, and reinvest the Managed Assets as fully as TIP itself could
do. The Manager hereby accepts this appointment.
(d) Voting. The Manager shall be authorized to vote on behalf of the
Fund any proxies relating to the Managed Assets, provided, however, that the
Manager shall comply with any instructions received from the Fund as to the
voting of securities and handling of proxies.
(e) Independent Contractor. Except as expressly authorized herein,
the Manager shall for all purposes be deemed to be an independent contractor
and shall have no authority to act for or to represent TIP, the Fund or FAI in
any way or otherwise to be an agent of any of them.
(f) Reporting. The Manager shall furnish to TIP such information as
TIP reasonably may require to complete and submit any filing required by any
applicable state or federal securities law or regulation.
3. Requirements; Duties
(a) Requirements. In performing services for the Fund and otherwise
discharging its obligations under this Agreement, the Manager shall conform
its actions to the provisions in the following documents (referred to
collectively in this Agreement as the "Requirements"):
(i) The Articles of Incorporation and By-Laws of TIP;
(ii) TIP's Registration Statement, on Form N-1A, as amended from
time to time ("the "Registration Statement"), including the
Investment Approach set forth therein;
(iii) The 1940 Act, the Internal Revenue Code of 1986, as amended,
and all other applicable federal and state laws and
regulations which apply to the Manager in conjunction with
performing services for the Fund, if any;
(iv) Written instructions and directions of the Board of
Directors of TIP;
(v) Written instructions and directions of FAI; and
(vi) The Manager's Investment Guidelines, which shall be amended
from time to time through mutual agreement by the Manager
and FAI.
The Manager only shall be responsible for complying with those requirements
specified in this Paragraph 3 to the extent it has received from TIP or FAI
written instructions or directions or the document that contains or states
such requirements, other than the 1940 Act or the Internal Revenue Code of
1986. Further, to the extent that the Managed Assets are invested in
investment companies for which the Manager is the investment adviser ("GMO
Mutual Funds"), the Manager shall only be responsible for complying with the
requirements of this Paragraph 3 with respect to investments made by the
Manager of Managed Assets in such GMO Mutual Funds, but not be responsible for
such requirements with respect to investments made by the GMO Mutual Funds, it
being understood that the investment policies of the GMO Mutual Funds are
governed exclusively by the prospectus in effect from time to time relating to
the GMO Mutual Funds.
(b) Responsibility with Respect to Actions of Others. TIP places the
investment portfolio of each of its Funds, including the Fund, with one or
more investment managers. To the extent the applicability of, or conformity
with, Requirements depends upon investments made by, or activity of, managers
other than the Manager, the Manager agrees to comply with such Requirements:
(i) to the extent that such compliance is within the Manager's Investment
Guidelines and (ii) to the extent that the Manager is provided with
information sufficient to ascertain the applicability of such Requirements.
If it appears to the Fund at any time that the Fund may not be in compliance
with any Requirement and the Fund so notifies the Manager, the Manager shall
promptly take such actions not inconsistent with applicable law as the Fund
may reasonably specify to effect compliance.
(c) Responsibility with Respect to Performance of Duties. Except as
permitted by Paragraph 7 of this Agreement, in performing its duties under
this Agreement, the Manager will act solely in the interests of the Fund and
shall use reasonable care and its best judgment in matters relating to the
Fund. The Manager will not deal with the Managed Assets in its own interest
or for its own account, except that the Manager may invest the Managed Assets
in registered investment companies to which it serves as investment adviser,
and it may receive an investment advisory fee for such services.
4. Recordkeeping and Reporting
(a) Records. The Manager shall maintain proper and complete records
relating to the furnishing of investment management services under this
Agreement, including records with respect to the securities transactions for
the Managed Assets required by Rule 31a-1 under the 1940 Act. All records
maintained pursuant to this Agreement shall be subject to examination by the
Fund and by persons authorized by it during reasonable business hours upon
reasonable notice. Records required by Rule 31a-1 maintained as specified
above shall be the property of the Fund; the Manager will preserve such
records for the periods prescribed by Rule 31a-2 under the 1940 Act and shall
surrender such records promptly at the Fund's request. Upon termination of
this Agreement, the Manager shall promptly return records that are the Fund's
property and, upon demand, shall make and deliver to the Fund true and
complete and legible copies of such other records maintained as required by
this Section 4(a) as the Fund may request. The Manager may retain copies of
records furnished to the Fund.
(b) Reports to Custodian. The Manager shall provide to the Fund's
custodian and to the Fund on each business day information relating to all
transactions concerning the Managed Assets.
(c) Other Reports. The Manager shall render to the Board of
Directors of TIP and to FAI such periodic and special reports as the Board or
FAI may reasonably request.
5. Purchase and Sale of Securities
(a) Selection of Brokers. The Manager shall place all orders for the
purchase and sale of securities on behalf of the Fund with brokers or dealers
selected by the Manager in conformity with the policy respecting brokerage set
forth in the Registration Statement. Neither the Manager nor any of its
officers, employees, or any of its "affiliated persons", as defined in the
1940 Act, will act as principal or receive any compensation in connection with
the purchase or sale of investments by the Fund other than those fees provided
for in Section 6 hereof. The Manager will not be liable to Client for any
acts or omissions made by the Administrator, Custodian or other service
provider to the Fund, unless such liability resulted from acts or omissions of
the Manager or from information from the Manager.
(b) Aggregating Orders. On occasions when the Manager deems the
purchase or sale of a security to be in the best interest of the Fund as well
as other advisory clients of the Manager, the Manager, to the extent permitted
by applicable laws and regulations, may, but shall be under no obligation to,
aggregate the securities to be so sold or purchased in order to obtain the
most favorable price or lower brokerage commissions and efficient execution.
In such event, allocation of securities so purchased or sold, as well as the
expense incurred in the transaction, will be made by the Manager in the manner
it considers to be most equitable and consistent with its fiduciary
obligations to the Fund and its other advisory clients.
6. Management; Expenses
(a) Management. The Manager agrees that it shall perform all of its
duties and obligations as set forth under this Agreement without compensation.
The Fund understands that the Manager will invest the Managed Assets in
registered investment companies to which it serves as investment adviser and
receive investment advisory fees for such services.
(b) Expenses. The Manager shall furnish at its own expense all office
facilities, equipment and supplies, and shall perform at its own expense all
routine and recurring functions necessary to render the services required
under this Agreement, including administrative, bookkeeping and accounting,
clerical, statistical and correspondence functions. The Manager shall not
have responsibility for calculating the net asset value of the Fund's
portfolio or for conducting a daily reconciliation of the Fund's portfolio;
however, the Manager will daily review the pricing of the Managed Assets with
such information as is available to the Manager. The Fund shall pay directly,
or, if the Manager makes payment, reimburse the Manager for, (i) custodial
fees for the Managed Assets, (ii) brokerage commissions, issue and transfer
taxes and other costs of securities transactions to which the Fund is a party,
including any portion of such commissions attributable to research and
brokerage services, and (iii) taxes, if any, payable by the Fund. In
addition, the Fund shall pay directly, or, if the Manager makes payment,
reimburse the Manager for, such non-recurring special out-of-pocket costs and
expenses as may be authorized in advance by the Fund.
7. Non-Exclusivity of Services
The Manager is free to act for its own account and to provide
investment management services to others. The Fund acknowledges that the
Manager and its officers and employees, and the Manager's other advisory
clients may at any time have, acquire, increase, decrease or dispose of
positions in the same investments which are at the same time being held,
acquired for or disposed of under this Agreement for the Fund. Neither the
Manager nor any of its officers or employees shall have any obligation to
effect a transaction under this Agreement simply because such a transaction is
effected for his or its own account or for the account of another advisory
client. The Fund agrees that the Manager may refrain from providing any
advice or services concerning securities of companies for which any officers,
directors, partners or employees of the Manager or any of the Manager's
affiliates act as financial adviser, investment manager or in any capacity
that the Manager deems confidential, unless the Manager determines in its sole
discretion that it may appropriately do so. The Fund appreciates that, for
good commercial and legal reasons, material nonpublic information which
becomes available to affiliates of the Manager through these relationships
cannot be passed on to the Fund.
8. Liability
Manager shall not be liable to the Fund for any error of judgment, acts,
omission, or mistake of law or any loss arising out of its obligations and
duties in providing services under this Agreement, except that Manager shall
be liable to the Fund for any loss resulting from Manager's willful
misfeasance, bad faith, gross negligence or reckless disregard by Manager of
its obligations and duties in providing services under this Agreement.
Manager shall not be held liable for any acts or omission of the Fund's
Custodian or Administrator or any other third party, unless such liability
resulted from acts or omissions of the Manager or information from the
Manager. Nothing in this Agreement shall constitute a waiver or limitation of
any rights which the Fund, TIP, or FAI may have under applicable state or
federal laws, including the Investment Advisers Act of 1940.
The Fund understands that the Manager, in the performance of its obligations
and duties under this Agreement, is entitled to rely in good faith upon the
accuracy of the information furnished by, or on behalf of, the Fund, without
further investigation.
9. Representations
(a) The Manager represents to the Fund that the Manager is registered
as an investment adviser under the Investment Advisers Act of 1940, that it
has full power and authority to enter into and perform fully the terms of this
Agreement, and that the execution of this Agreement on behalf of the Manager
has been duly authorized and, upon execution and delivery, this Agreement will
be binding upon the Manager in accordance with its terms.
(b) TIP represents to the Manager that it has full power and authority
to enter into this Agreement, its execution and delivery of this Agreement on
behalf of the Fund have been duly authorized and this Agreement represents the
legal, valid and binding obligation of TIP, enforceable in accordance with its
terms.
(c) TIP acknowledges receipt of copies of the Manager's Form ADV and
CTA Disclosure Document (if applicable).
(d) TIP hereby represents that TIP and the Fund are in full compliance
with all applicable state and federal securities laws and regulations.
10. Term
This Agreement shall continue in effect for a period of two (2) years
from the date hereof and shall thereafter be automatically renewed for
successive periods of one (1) year each, provided such renewals are
specifically approved at least annually in conformity with the requirements of
the 1940 Act; provided however, that this Agreement may be terminated without
the payment of any penalty by (a) the Fund, if a decision to terminate is made
by the Board of Directors of the Fund or by a vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of the Fund, or (b)
the Manager, and in either case with at least 30 days' written notice from the
terminating party and on the date specified in the notice of termination.
The rights and obligations that are provided in section (f) of Paragraph
2 shall survive the cancellation, expiration or termination of this Agreement.
This Agreement shall terminate automatically in the event of its
assignment (as defined in the 1940 Act).
11. Amendment
Except as otherwise provided in this Agreement, this Agreement may be
amended by mutual consent, but the consent of the Fund must be approved in
conformity with the requirements of the 1940 Act and any order of the
Securities and Exchange Commission that may address the applicability of such
requirements in the case of the Fund.
12. Notices
Notices or other communications required to be given pursuant to this
Agreement shall be deemed duly given when delivered in writing or sent by
telecopy or three days after mailing registered mail postage prepaid as
follows:
To TIP, TIFF Investment Program, Inc.
the Fund, c/o Foundation Advisers, Inc.
or both: P.O. Box 5165
Charlottesville, Virginia 22905
Telecopy: 804-977-4479
The Grantham, Mayo, Van Otterloo & Co. LLC
Manager: 40 Rowes Wharf
Boston, Massachusetts 02110
Attention: Mason Smith
Telecopy: 617-261-0134
Each party may change its address by giving notice as herein required.
13. Sole Instrument
This instrument constitutes the sole and only agreement of the parties
to it relating to its object and correctly sets forth the rights, duties and
obligations of each party to the other as of its date. Any prior agreements,
promises, negotiations or representations not expressly set forth in this
Agreement are of no force or effect.
14. Counterparts
This Agreement may be executed in counterparts; each of which shall be
deemed to be an original and all of which, taken together, shall be deemed to
constitute one and the same instrument.
15. Applicable Law
This Agreement shall be governed by, and the rights of the parties
arising hereunder construed in accordance with, the laws of the Commonwealth
of Virginia without reference to principles of conflict of laws. Nothing
herein shall be construed to require either party to do anything in violation
of any applicable law or regulation.
16. Change in Management or Control of Manager
The Manager agrees to notify TIP and the Fund in writing of any
changes in the membership of the Manager within a reasonable time period
after such change.
IN WITNESS WHEREOF, the parties hereto execute this Agreement on and make it
effective on the effective date specified in the first paragraph of this
Agreement.
TIFF Investment Program, Inc. Grantham, Mayo, Van Otterloo & Co. LLC
By: By: _
Title: Asst. Treasurer Title:
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
and Statement of Additional Information constituting parts of this Post-
Effective Amendment No. 6 to the Registration Statement on Form N-1A
(the "Registration Statement") of our report dated February 29, 1997,
relating to the financial statements and financial highlights appearing
in the December 31, 1996 Annual Report to Shareholders of TIFF
Investment Program, Inc., which is also incorporated by reference into
the Registration Statement. We also consent to the reference to us
under the heading "Independent Accountants" in the Statement of
Additional Information.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
April 29, 1997
Performance Information Schedule
30 Day Yield Calculation
YIELD = 2[( a - b + 1)6 - 1]
cd
WHERE: a = dividends and interest earned during the period.
b = expenses accrued for the period.
c = average daily number of shares outstanding during the period.
d = maximum offering price per share on the last day of the period.
U.S. Equity Fund:
a= 315,605
b= 88,789
c= 12,546,347
d= 14.64
Yield= 1.49%
Bond Fund:
a= 675,488
b= 46,858
c= 11,686,528
d= 10.12
Yield= 6.46%
Short-Term Fund:
a= 360,795
b= 21,618
c= 7,605,966
d= 9.99
Yield= 5.42%
Performance Information Schedule
Total Return
Date of Net Cap. Shares Returns
Distribution Income Gains. Reinvested NAV Inception 5 Years 1 Year
U.S. Equity Fund:
May-94 10.00 1,000.00
Jun-94 0.00000 0.00000 0.000 9.78 978.00
Jul-94 0.00000 0.00000 0.000 10.09 1,009.00
Aug-94 0.00000 0.00000 0.000 10.47 1,047.00
Sep-94 0.00000 0.00000 0.000 10.30 1,030.00
Oct-94 0.10000 0.00000 0.963 10.38 1,048.00
Nov-94 0.00000 0.00000 0.000 10.01 1,010.64
Dec-94 0.05525 0.16535 2.221 10.02 1,033.90
Jan-95 0.00000 0.00000 0.000 10.21 1,053.51
Feb-95 0.00000 0.00000 0.000 10.63 1,096.85
Mar-95 0.00000 0.00000 0.000 10.88 1,122.64
Apr-95 0.07000 0.00000 0.655 11.07 1,149.50
May-95 0.00000 0.00000 0.000 11.39 1,182.73
Jun-95 0.00000 0.00000 0.000 11.82 1,227.38
Jul-95 0.07000 0.00000 0.596 12.29 1,283.51
Aug-95 0.00000 0.00000 0.000 12.48 1,303.35
Sep-95 0.00000 0.00000 0.000 12.89 1,346.17
Oct-95 0.02774 0.00000 0.228 12.69 1,328.17
Nov-95 0.00000 0.11502 0.935 13.13 1,386.51
Dec-95 0.05003 0.89732 8.087 12.37 1,406.29
Jan-96 0.00000 0.00000 0.000 12.74 1,448.35
Feb-96 0.00000 0.00000 0.000 12.99 1,476.78
Mar-96 0.00000 0.00000 0.000 13.23 1,504.06
Apr-96 0.03500 0.00000 0.296 13.56 1,545.59
May-96 0.00000 0.00000 0.000 13.84 1,577.50
Jun-96 0.00000 0.00000 0.000 13.72 1,563.82
Jul-96 0.04000 0.00000 0.356 13.00 1,486.38
Aug-96 0.00000 0.00000 0.000 13.38 1,529.83
Sep-96 0.00000 0.00000 0.000 13.87 1,585.86
Oct-96 0.05000 0.00000 0.403 14.17 1,625.86
Nov-96 0.04840 0.32477 2.990 14.63 1,722.39
Dec-96 0.09113 0.74136 7.138 13.73 1,714.44
Performance Information Schedule
Total Return
Date of Net Cap. Shares Returns
Distribution Income Gains. Reinvested NAV Inception 5 Years 1 Year
International Equity Fund:
May-94 10.00 1,000.00
Jun-94 0.00000 0.00000 0.000 10.06 1,006.00
Jul-94 0.00000 0.00000 0.000 10.26 1,026.00
Aug-94 0.00000 0.00000 0.000 10.66 1,066.00
Sep-94 0.00000 0.00000 0.000 10.47 1,047.00
Oct-94 0.00000 0.00000 0.000 10.75 1,075.00
Nov-94 0.00000 0.00000 0.000 10.08 1,008.00
Dec-94 0.04989 0.07802 1.285 9.98 1,010.82
Jan-95 0.00000 0.00000 0.000 9.45 957.14
Feb-95 0.00000 0.00000 0.000 9.43 955.12
Mar-95 0.00000 0.00000 0.000 9.74 986.51
Apr-95 0.00000 0.00000 0.000 10.14 1,027.03
May-95 0.00000 0.00000 0.000 10.35 1,048.30
Jun-95 0.00000 0.00000 0.000 10.25 1,038.17
Jul-95 0.09000 0.00000 0.862 10.66 1,088.89
Aug-95 0.00000 0.00000 0.000 10.50 1,072.55
Sep-95 0.00000 0.00000 0.000 10.59 1,081.74
Oct-95 0.00000 0.00000 0.000 10.36 1,058.24
Nov-95 0.00000 0.00000 0.000 10.48 1,070.50
Dec-95 0.04993 0.00000 0.471 10.82 1,110.33
Jan-96 0.00000 0.00000 0.000 11.13 1,142.15
Feb-96 0.00000 0.00000 0.000 11.26 1,155.49
Mar-96 0.00000 0.00000 0.000 11.45 1,174.98
Apr-96 0.00000 0.00000 0.000 11.86 1,217.06
May-96 0.00000 0.00000 0.000 11.92 1,223.21
Jun-96 0.00000 0.00000 0.000 12.01 1,232.45
Jul-96 0.07000 0.00000 0.621 11.58 1,195.51
Aug-96 0.00000 0.00000 0.000 11.74 1,212.03
Sep-96 0.00000 0.00000 0.000 11.90 1,228.55
Oct-96 0.00000 0.00000 0.000 11.88 1,226.49
Nov-96 0.02086 0.00115 0.185 12.37 1,279.36
Dec-96 0.00000 0.25689 2.180 12.19 1,287.31
Performance Information Schedule
Total Return
Date of Net Cap. Shares Returns
Distribution Income Gains. Reinvested NAV Inception 5 Years 1 Year
Emerging Markets:
May-94 10.00 1,000.00
Jun-94 0.00000 0.00000 0.000 9.71 971.00
Jul-94 0.00000 0.00000 0.000 10.10 1,010.00
Aug-94 0.00000 0.00000 0.000 10.79 1,079.00
Sep-94 0.00000 0.00000 0.000 10.90 1,090.00
Oct-94 0.00000 0.00000 0.000 10.65 1,065.00
Nov-94 0.00000 0.00000 0.000 10.21 1,021.00
Dec-94 0.00773 0.05544 0.684 9.24 930.32
Jan-95 0.00000 0.00000 0.000 8.18 823.59
Feb-95 0.00000 0.00000 0.000 7.90 795.40
Mar-95 0.00000 0.00000 0.000 7.89 794.39
Apr-95 0.00000 0.00000 0.000 8.22 827.62
May-95 0.00000 0.00000 0.000 8.57 862.86
Jun-95 0.00000 0.00000 0.000 8.73 878.97
Jul-95 0.00000 0.00000 0.000 8.97 903.13
Aug-95 0.00000 0.00000 0.000 8.84 890.04
Sep-95 0.00462 0.00046 0.057 8.83 889.54
Oct-95 0.00000 0.00000 0.000 8.46 852.27
Nov-95 0.00000 0.00000 0.000 8.23 829.10
Dec-95 0.00000 0.00000 0.000 8.46 852.27
Jan-96 0.00000 0.00000 0.000 9.04 910.70
Feb-96 0.00000 0.00000 0.000 8.99 905.66
Mar-96 0.00000 0.00000 0.000 8.99 905.66
Apr-96 0.00000 0.00000 0.000 9.18 924.80
May-96 0.00000 0.00000 0.000 9.14 920.77
Jun-96 0.00000 0.00000 0.000 9.10 916.74
Jul-96 0.00000 0.00000 0.000 8.66 872.41
Aug-96 0.00000 0.00000 0.000 8.72 878.46
Sep-96 0.00000 0.00000 0.000 8.72 878.46
Oct-96 0.00000 0.00000 0.000 8.50 856.30
Nov-96 0.00000 0.00000 0.000 8.57 863.35
Dec-96 0.04272 0.00000 0.499 8.63 873.70
Performance Information Schedule
Total Return
Date of Net Cap. Shares Returns
Distribution Income Gains. Reinvested NAV Inception 5 Years 1 Year
Bond Fund:
May-94 10.00 1,000.00
Jun-94 0.04583 0.00000 0.462 9.93 997.58
Jul-94 0.05107 0.00000 0.512 10.03 1,012.76
Aug-94 0.05200 0.00000 0.525 10.00 1,014.98
Sep-94 0.05274 0.00000 0.545 9.82 1,002.07
Oct-94 0.05638 0.00000 0.590 9.75 1,000.68
Nov-94 0.05426 0.00000 0.575 9.68 999.06
Dec-94 0.05387 0.00000 0.574 9.68 1,004.62
Jan-95 0.06158 0.00000 0.652 9.80 1,023.46
Feb-95 0.05737 0.00000 0.602 9.95 1,045.12
Mar-95 0.06061 0.00000 0.639 9.97 1,053.59
Apr-95 0.05901 0.00000 0.620 10.06 1,069.33
May-95 0.05962 0.00000 0.609 10.40 1,111.81
Jun-95 0.05800 0.00000 0.596 10.40 1,118.01
Jul-95 0.05419 0.00000 0.564 10.32 1,115.24
Aug-95 0.05179 0.00000 0.539 10.39 1,128.40
Sep-95 0.05143 0.00000 0.536 10.44 1,139.42
Oct-95 0.05247 0.00000 0.544 10.52 1,153.88
Nov-95 0.04860 0.00000 0.502 10.61 1,169.08
Dec-95 0.05196 0.36255 4.413 10.35 1,186.11
Jan-96 0.04870 0.00000 0.540 10.34 1,190.54
Feb-96 0.04832 0.00000 0.550 10.12 1,170.77
Mar-96 0.05545 0.00000 0.642 10.00 1,163.31
Apr-96 0.05268 0.00000 0.620 9.89 1,156.64
May-96 0.04933 0.00000 0.588 9.82 1,154.22
Jun-96 0.04671 0.00000 0.554 9.91 1,170.29
Jul-96 0.05493 0.00000 0.657 9.88 1,173.23
Aug-96 0.05635 0.00000 0.682 9.82 1,172.80
Sep-96 0.06422 0.00000 0.772 9.93 1,193.61
Oct-96 0.06144 0.00000 0.733 10.08 1,219.02
Nov-96 0.06221 0.00000 0.738 10.20 1,241.06
Dec-96 0.06383 0.00000 0.773 10.05 1,230.57
Performance Information Schedule
Total Return
Date of Net Cap. Shares Returns
Distribution Income Gains. Reinvested NAV Inception 5 Years 1 Year
Short-Term Fund
May-94 10.00 1,000.00
Jun-94 0.03535 0.00000 0.354 10.00 1,003.54
Jul-94 0.03630 0.00000 0.364 10.02 1,009.19
Aug-94 0.03896 0.00000 0.391 10.03 1,014.12
Sep-94 0.03848 0.00000 0.388 10.02 1,016.99
Oct-94 0.04285 0.00000 0.433 10.04 1,023.37
Nov-94 0.04475 0.00000 0.455 10.02 1,025.90
Dec-94 0.04812 0.01690 0.666 10.00 1,030.51
Jan-95 0.05141 0.00000 0.529 10.01 1,036.83
Feb-95 0.04612 0.00000 0.476 10.03 1,043.68
Mar-95 0.05067 0.00000 0.526 10.02 1,047.92
Apr-95 0.04800 0.00000 0.501 10.03 1,053.98
May-95 0.04935 0.00000 0.516 10.05 1,061.27
Jun-95 0.03974 0.00000 0.417 10.06 1,066.52
Jul-95 0.04877 0.00000 0.514 10.06 1,071.69
Aug-95 0.04760 0.00000 0.504 10.06 1,076.76
Sep-95 0.04694 0.00000 0.499 10.07 1,082.86
Oct-95 0.04831 0.00000 0.517 10.05 1,085.90
Nov-95 0.04819 0.00000 0.518 10.05 1,091.11
Dec-95 0.05026 0.04194 1.000 10.01 1,096.78
Jan-96 0.04776 0.00000 0.522 10.02 1,103.11
Feb-96 0.04656 0.00000 0.513 10.00 1,106.03
Mar-96 0.04643 0.00000 0.515 9.98 1,108.95
Apr-96 0.04043 0.00000 0.451 9.97 1,112.33
May-96 0.04123 0.00000 0.461 9.97 1,116.93
Jun-96 0.04038 0.00000 0.453 9.98 1,122.58
Jul-96 0.03765 0.00000 0.424 9.98 1,126.81
Aug-96 0.04497 0.00000 0.508 9.99 1,133.02
Sep-96 0.04623 0.00000 0.525 9.99 1,138.26
Oct-96 0.04745 0.00000 0.541 10.00 1,144.81
Nov-96 0.04734 0.00000 0.542 10.00 1,150.23
Dec-96 0.04854 0.00000 0.559 9.99 1,154.66
Performance Information Schedule
Total Return
Date of Net Cap. Shares Returns
Distribution Income Gains. Reinvested NAV Inception 5 Years 1 Year
Multi-Asset Fund:
Mar-95 10.00 1,000.00
Apr-95 0.00000 0.00000 0.000 10.15 1,015.00
Jun-95 0.00000 0.00000 0.000 10.37 1,037.00
Jul-95 0.06500 0.00000 0.614 10.62 1,068.52
Aug-95 0.00000 0.00000 0.000 10.66 1,072.55
Sep-95 0.00000 0.00000 0.000 10.84 1,090.66
Oct-95 0.00000 0.00000 0.000 10.79 1,085.63
Nov-95 0.00000 0.00000 0.000 10.99 1,105.75
Dec-95 0.17496 0.03283 1.882 11.11 1,138.73
Jan-96 0.00000 0.00000 0.000 11.29 1,157.18
Feb-96 0.00000 0.00000 0.000 11.41 1,169.48
Mar-96 0.00000 0.00000 0.000 11.62 1,191.01
Apr-96 0.00000 0.00000 0.000 11.95 1,224.83
May-96 0.00000 0.00000 0.000 12.12 1,242.25
Jun-96 0.00000 0.00000 0.000 11.99 1,228.93
Jul-96 0.05000 0.00000 0.445 11.54 1,187.94
Aug-96 0.00000 0.00000 0.000 11.76 1,210.59
Sep-96 0.00000 0.00000 0.000 12.06 1,241.47
Oct-96 0.00000 0.00000 0.000 12.22 1,257.94
Nov-96 0.07984 0.27949 3.049 12.23 1,296.27
Dec-96 0.18210 0.08267 2.327 12.06 1,306.31
ANNUAL REPORT TIFF
December 31, 1996 INVESTMENT Investment Management
PROGRAM for foundations
February 28, 1997
Dear TIP Member:
We are pleased to present the Annual Report to Members of the TIFF
Investment Program, Inc. (TIP).
As you know, TIP is a family of multi-manager, commingled funds open
exclusively to 501(c)(3) organizations. TIP administers six Funds at present:
Multi-Asset, International Equity, Emerging Markets, U.S. Equity, Bond, and
Short-Term. All of TIP's Funds enable member foundations to delegate to TIP
responsibility for the time-intensive tasks of selecting money managers and
other vendors. The Multi-Asset Fund goes beyond this by providing Members
with an opportunity to also delegate to TIP responsibility for the all-
important task of asset allocation.
We are very gratified by the favorable reception that TIP has received
from the not-for-profit community. We are engaged in active discussions with
numerous organizations throughout the United States that have expressed
interest in learning more about TIP, and would welcome the opportunity to
discuss this exciting initiative with other eligible investors.
For further information about the TIFF Investment Program, please call
us at 800-984-0084.
Sincerely,
/s/David A. Salem
David A. Salem
President
- --------------------------------------------------------------------------------
CONTENTS
- --------------------------------------------------------------------------------
TIFF MULTI-ASSET FUND
PERFORMANCE GRAPH............................................... 1
SCHEDULE OF INVESTMENTS......................................... 2
TIFF INTERNATIONAL EQUITY FUND
PERFORMANCE GRAPH............................................... 8
SCHEDULE OF INVESTMENTS......................................... 9
TIFF EMERGING MARKETS FUND
PERFORMANCE GRAPH.............................................. 14
SCHEDULE OF INVESTMENTS........................................ 15
TIFF U.S. EQUITY FUND
PERFORMANCE GRAPH.............................................. 20
SCHEDULE OF INVESTMENTS........................................ 21
TIFF BOND FUND
PERFORMANCE GRAPH.............................................. 26
SCHEDULE OF INVESTMENTS....................................... 27
TIFF SHORT-TERM FUND
PERFORMANCE GRAPH.............................................. 30
SCHEDULE OF INVESTMENTS........................................ 31
STATEMENTS OF ASSETS AND LIABILITIES............................... 32
STATEMENTS OF OPERATIONS........................................... 38
STATEMENTS OF CHANGES IN NET ASSETS................................ 40
FINANCIAL HIGHLIGHTS............................................... 43
NOTES TO FINANCIAL STATEMENTS...................................... 49
- ------------------------------------------------------------------------------
- --
TIFF Multi-Asset Fund December 31, 1996
- ------------------------------------------------------------------------------
- --
GRAPH:
Policy Considerations: The Multi-Asset Fund provides Members with an
opportunity to delegate responsibility for asset allocation as well as manager
selection. Its return objective is to produce a five percent inflation-
adjusted return with sufficient consistency to induce its holders to "stay the
course": to adhere to investment policies that comport better with their goal
of preserving endowment purchasing power than do policies that place more
emphasis on controlling short-term volatility. The Fund seeks to outperform
its benchmark through three means: (1) active security selection within asset
class segments; (2) periodic shifting of assets among these segments; and (3)
judicious use of other commingled investment vehicles. The first and second
tools are wielded not by TIP's directors but rather by outside money managers
that they select.
Performance Evaluation: The Fund has generated a 30.6% return net of fees
since inception, a pace considerably in excess of its benchmark. The Fund has
also achieved its goal of generating an annualized return at least 5% above
CPI inflation, but this is unsurprising given the strong upward trend of
financial assets since the Fund commenced operations. The Fund has
outperformed its benchmark despite a material underweighting in U.S. stocks,
which have been the best performing asset class of those in which the Fund
primarily invests. This tilt away from U.S. stocks is the product of
strategic decisions by the Fund's managers, as distinct from a policy tilt by
the cooperative's directors. Happily, the performance drag caused by the
underweighting in U.S. stocks has been more than offset since the Fund's
inception by: (1) favorable security selection within asset classes; and (2)
relative gains produced by a policy tilt approved by the cooperative's
directors at year-end 1995 toward the Fund's "Specialized Equities" segment,
which comprises primarily energy-related shares. This tilt, which has
declined in recent months through the allocation of the Fund's large cash
inflows toward other segments, has proven especially profitable due to superb
performance by the Fund's "Specialized Equities" manager (Wellington). The
Fund has also profited greatly from its "Equity Substitutes" segment, which
employs absolute return-oriented strategies not readily available via
conventional mutual funds. The Fund's use of numerous managers in this
segment reflects the directors' interest in limiting manager-specific risk.
Investment Performance (For Periods Ended December 31, 1996)
Total Return (net of fees)
-----------------------------------------------------------
Year Ended Cumulative Since Annualized Since
Ended 12/31/96 Inception (3/31/95) Inception (3/31/95)
-----------------------------------------------------------
TIFF Multi-Asset Fund 14.7% 30.6% 16.4%
Multi-Asset Constructed
Index* 11.2 26.3 14.2
Average Global Flexible
Fund** 13.5 29.2 15.8
* 25% Wilshire 5000; 30% MSCI All Country World ex US Index; 15% Merrill
Lynch Treasury Bill Index + 5% per annum; 10% MSCI Global Resource-Related
Index; 15% Lehman Aggregate Bond Index; and 5% Lehman Majors ex US Bond
Index
** Comparative mutual fund averages provided by Lipper Analytical Services.
- --------------------------------------------------------------------------------
TIFF Multi-Asset Fund / Schedule of Investments December 31, 1996
- --------------------------------------------------------------------------------
Long - Term Investments [90.2%] Shares Value +
Common Stock [52.8%]
U.S. Common Stock [20.5%]
Aerospace [0.5%]
Boeing Co. 3,900 $414,863
Gulfstream Aerospace Corp. * 9,740 236,195
United Technologies Corp. 5,800 382,800
Total 1,033,858
Airlines [0.5%]
AMR Corp. * 3,100 273,188
Continental Airlines - Class B * 8,764 247,583
Delta Air Lines, Inc. 4,000 283,500
UAL Corp. * 3,200 200,000
Total 1,004,271
Automobile Parts & Equipment [0.1%]
Miller Industries (Tennesse), Inc. * 9,750 195,000
Broadcasting [0.2%]
Clear Channel Communication Inc. * 6,200 223,975
Infinity Broadcasting Corp. * 4,900 164,763
Westwood One, Inc. * 4,800 79,800
Total 468,538
Chemicals [0.2%]
Carbide/Graphite Group, Inc (The) * 17,100 335,588
General Chemical Group, Inc 5,414 127,906
Total 463,494
Computer Software [1.3%]
Computer Sciences Corp. * 3,900 320,288
HMT Technology Corp. * 10,711 160,832
I2 Technologies, Inc. * 100 3,825
Inso Corp. * 1,400 55,650
Medic Computer Systems, Inc * 4,200 169,313
Micros Systems, Inc. * 3,723 114,482
Microsoft Corp. * 4,800 396,600
Netscape Communications Cor 2,700 153,563
Peoplesoft, Inc. * 4,000 191,750
Planar Systems, Inc. * 7,303 85,810
Platinum Technology, Inc. * 19,432 264,761
Rational Software Corp. * 1,900 75,169
Remedy Corp. * 6,000 322,500
Security Dynamics Technologies, Inc. * 5,300 166,950
Siebel Systems, Inc. * 3,400 91,800
Trident Microsystems, Inc. * 6,157 103,899
Xylan Corp. * 3,000 84,750
Total 2,761,942
Computers [0.5%]
Cisco Systems, Inc. * 6,900 439,013
Compaq Computer Corp. * 1,692 125,631
Electronic Data Systems Corp. * 3,800 164,350
Proxima Corp. * 4,667 60,088
Storage Technology Corp. * 5,300 252,413
Total 1,041,495
Construction [0.6%]
American Buildings Co. * 4,091 97,673
Caterpillar, Inc. 3,500 263,375
J. Ray McDermott, SA * 40,000 880,000
USG Corp. * 4,760 161,245
Total 1,402,293
Containers [0.1%]
Stone Container Corp. 10,515 $156,411
Drugs [0.4%]
Amgen, Inc. * 3,300 179,438
Biogen, Inc. * 3,200 124,000
Dura Pharmaceuticals, Inc. * 3,300 157,575
Johnson & Johnson 2,900 144,275
Matrix Pharmaceutical, Inc. * 6,398 39,188
Warner-Lambert Co. 2,400 180,000
Total 824,476
Electronics [2.9%]
Burr - Brown Corp. * 2,921 75,946
Catalina Lighting, Inc. * 157,650 768,544
Charter Power Systems, Inc. 974 29,707
Cypress Semiconductor Corp. * 4,868 68,761
Etec Systems, Inc. * 1,947 74,473
Exar Corp. * 4,868 75,454
Hewlett-Packard Co. 3,400 170,850
Hologic, Inc. * 10,546 261,014
Honeywell, Inc. 3,200 210,400
Innovex, Inc. 12,489 337,203
Intel Corp. 5,900 772,531
Maxim Intergrated Products, Inc. * 5,600 242,200
Tencor Instruments * 77,900 2,054,613
UCAR International, Inc. * 23,614 888,477
Vishay Intertechnology, Inc * 11,439 267,387
Total 6,297,560
Financial [0.9%]
ACE Cash Express, Inc. * 32,370 364,163
Associates First Capital Corp. * 4,900 216,213
ATC Environmental, Inc. * 513 4,745
Bay View Capital Corp. 9,411 398,791
Citicorp 3,500 360,500
Credit Acceptance Corp. * 1,600 37,600
CUC International, Inc. * 4,350 103,313
Green Tree Financial Corp. 6,700 258,788
Merrill Lynch & Company, Inc. 2,400 195,600
Washington Mutual, Inc. 2,434 105,423
Total 2,045,136
Foods [0.0%] +++
Chiquita Brands International 4,032 51,408
Health Care [0.4%]
Columbia/HCA Healthcare Corp. 7,650 311,738
Health Management Associates, Inc. Class A * 3,850 86,625
MedPartners, Inc. * 9,475 198,975
Omnicare, Inc. 2,700 86,738
Oxford Health Plans, Inc. * 1,500 87,844
PhyCor, Inc. * 5,200 147,550
Total 919,470
Insurance [0.7%]
CMAC Investment Corp. 8,792 323,106
Conseco, Inc. 9,686 617,483
Marsh & McLennan Companies, 1,400 145,600
PMI Group, Inc. (The) 2,707 149,900
Vesta Insurance Group, Inc. 7,868 246,859
Total 1,482,948
Leisure [0.2%]
Mirage Resorts, Inc. * 7,900 170,838
Regal Cinemas, Inc. * 2,500 76,875
YES! Entertainment Corp. * 28,858 185,773
Total 433,486
Machines [0.4%]
American Standard Companies, Inc. * 6,700 $256,275
Applied Magnetics Corp. * 7,303 218,177
BW/IP, Inc. 21,809 359,849
Total 834,301
Manufacturing [0.4%]
Lear Corp. * 7,000 238,875
Procter & Gamble Co. 3,100 333,250
Safeskin Corp. * 1,800 87,750
Xerox Corp. 2,400 126,300
Total 786,175
Medical Supplies [0.0%] +++
Physician Sales & Service, Inc. * 3,600 51,750
Metals [1.9%]
Algoma Steel, Inc. * 106,000 551,529
Alumax, Inc. * 7,000 233,625
Aluminum Company of America 5,700 363,375
Century Aluminum Company * 7,200 124,200
Easco, Inc. 56,000 427,000
Phelps Dodge Corp. 14,400 972,000
Santa Fe Energy Resources, Inc. * 80,000 1,110,000
Titanium Metals Corp. * 10,000 328,750
Total 4,110,479
Mining [0.6%]
Amax Gold, Inc. * 35,000 223,125
Freeport-McMoRan Copper & Gold, Inc - Class A 10,200 286,875
Newmont Mining Corp. 7,000 313,250
Santa Fe Pacific Gold Corp. 25,000 384,375
Total 1,207,625
Motor Vehicles [0.2%]
Chrysler Corp. 9,100 300,300
Ford Motor Co. 4,200 133,875
Total 434,175
Office Supplies [0.1%]
Harland (John H.) Co. 7,529 248,457
Oil Services [1.9%]
Anadarko Petroleum Corp. 5,000 323,750
Baker Hughes, Inc. 20,000 690,000
Camco International, Inc. 9,500 438,188
McMoRan Oil & Gas Co. * 60,000 131,250
Pride Petroleum Services 20,000 460,000
Snyder Oil Corp. 8,273 143,743
Tom Brown, Inc. * 15,000 313,125
Tuboscope Vetco International Corp. * 60,000 930,000
Union Texas Petroleum Holdings, Inc. 20,000 447,500
World Fuel Services Corp. 11,585 257,766
Total 4,135,322
Oil/Gas Exploration [1.0%]
Clayton Williams Energy, Inc. * 14,001 243,267
Devon Energy Corp. 4,378 152,136
Forcenergy Gas Exploration, Inc. * 2,921 105,886
Oryx Energy Co. * 44,591 1,103,627
Pogo Producing Co. 12,500 590,625
Total 2,195,541
Publishing [0.1%]
Westvaco Corp. 10,000 287,500
Railroads [0.2%]
Burlington Northern Santa Fe, Inc. 3,500 $302,313
MK Rail Corp. * 7,716 60,281
Total 362,594
Retail [0.8%]
Bed Bath & Beyond, Inc. * 7,100 172,175
Boston Chicken, Inc. * 8,200 294,175
Buffets, Inc. * 1 4
Cash America International, Inc. 12,469 105,987
Home Depot, Inc. 4,100 205,513
Just For Feet, Inc. * 3,600 94,500
99 Cents Only Stores * 3,542 58,000
PC Service Source, Inc. * 6,600 51,150
PetSmart, Inc. * 7,600 166,250
Starbucks Corp. * 2,700 77,288
Tandycrafts, Inc. * 1,100 6,600
TJX Companies, Inc. 5,500 260,563
Value City Dept Stores, Inc. * 13,978 146,769
Viking Office Products, Inc. * 3,300 88,069
Total 1,727,043
Services [1.6%]
AccuStaff, Inc. * 3,900 82,388
Apollo Group, Inc. - Class A * 3,200 107,000
Computer Learning Centers, Inc. * 16,180 461,130
Corporate Express, Inc. * 10,000 294,375
Corrections Corporation of America * 10,900 333,813
EmCare Holdings, Inc. * 5,843 135,850
First Data Corp. 5,400 197,100
Gartner Group, Inc. - Class A * 8,100 315,394
Global DirectMail Corp. * 1,700 74,163
HFS, Inc. * 4,500 268,875
Insurance Auto Auctions, Inc. * 2,888 27,436
Kimberly-Clark Corp. 2,100 200,025
MDL Information Systems, Inc. * 15,524 289,135
Mossimo, Inc. * 100 1,238
National TechTeam, Inc. * 5,200 104,000
Outdoor Systems, Inc. * 4,050 113,906
Paychex, Inc. 3,700 190,319
Robert Half International, Inc. * 3,000 103,125
Romac International, Inc. * 5,000 110,000
Snyder Communications, Inc. * 2,600 70,200
TeleTech Holdings, Inc. * 2,000 52,000
Total 3,531,472
Steel [0.3%]
Lukens, Inc. 30,000 603,750
Maverick Tube Corp. * 1,846 23,537
Quanex Corp. 2,826 77,362
Total 704,649
Telecommunications [0.9%]
Advanced Fibre Communications * 1,400 77,875
Ascend Communications, Inc. * 9,300 577,763
Cascade Communications Corp. * 6,200 341,775
Gilat Satellite Networks, Inc. * 5,400 132,975
LCI International, Inc. * 3,200 68,800
Lucent Technologies, Inc. * 2,300 106,375
Premisys Communications, Inc. * 3,400 114,750
USCI, Inc. * 122,000 655,750
Xpedite Systems, Inc. * 974 20,454
Total 2,096,517
Textiles [0.3%]
Authentic Fitness Corp. 21,401 256,812
Guess ?, Inc. * 36,508 524,803
Total 781,615
Tobacco [0.1%]
Philip Morris Companies, Inc. 1,600 $180,200
Transportation [0.2%]
USFreightways Corp. 14,919 409,340
Werner Enterprises, Inc. 1 9
Total 409,349
Total U.S. Common Stock
(Cost $39,951,398) 44,666,550
Foreign Common Stock [32.3%]
Australia [0.4%]
Australian National Industries Ltd. 145,000 144,076
CSR Ltd. 21,000 73,449
Goodman Fielder Ltd. 115,000 142,605
Petroleum Securities Australia-ADR * 16,270 370,143
Placer Pacific Ltd. 58,000 85,754
Total 816,027
Austria [0.8%]
Boehler - Uddeholm AG 2,460 175,909
VA Technologie AG 718 112,589
Vogel & Noot Waermetechnik AG * 15,850 339,288
Wolford AG * 8,502 1,027,499
Total 1,655,285
Belgium [0.1%]
Credit Communal Holding/Dexia * 1,740 158,620
Canada [5.0%]
Abacan Resource Corp. * 31,434 273,083
Agnico-Eagle Mines Ltd. 20,000 280,000
Alberta Energy Co. Ltd. * 50,000 1,200,000
Anderson Exploration Ltd. * 34,904 450,684
Barrick Gold Corp. 10,000 287,500
Cambior, Inc. 21,500 314,438
Canadian Natural Resources Ltd. * 30,278 830,557
Canadian Occidental Petroleum Ltd. 35,000 560,000
Chauvco Resources Ltd. - Class A * 70,000 720,090
Elan Energy, Inc. * 40,000 350,160
Euro-Nevada Mining Corp. 13,200 393,884
Franco-Nevada Mining Ltd. * 6,000 274,686
Gulf Canada Resources Ltd. * 92,282 680,580
Imperial Oil Ltd. 16,000 752,000
Livent, Inc. * 19,246 233,358
Magna International, Inc. - Class A 4,000 223,000
Memotec Communications, Inc * 70,000 367,669
Newport Petroleum Corp. * 21,667 143,834
PanCanadian Petroleum Ltd. 25,000 986,755
Placer Dome, Inc. 11,000 239,250
Royal Oak Mines, Inc. * 64,000 208,000
Talisman Energy, Inc. * 17,000 565,568
TVX Gold, Inc. (a) * 57,300 444,075
Upper Canada Brewing Co. Ltd * 695 2,028
Westmin Resources Ltd. * 26,289 127,531
Total 10,908,730
Denmark [1.1%]
InWear Group AS * 55,000 2,398,934
Finland [0.4%]
Benefon OY * 43,450 755,307
KCI Konecranes International * 4,874 153,567
Total 908,874
France [3.0%]
Accor SA Ordinary Shares 555 $70,237
AXA Co. 4,002 254,389
Business Objects SA - ADR * 6,780 91,530
Compagnie Financiere de Paribas - Class A 3,770 254,819
Compagnie Generale des Eaux 1,271 157,421
Credit National 15,645 900,458
Elf Gabon SA 920 234,807
Equipements et Composants pour
l'Industrie Automobile 13,550 2,093,249
Groupe Zannier SA 2,789 62,963
Le Carbone-Lorraine 2,687 508,260
Michelin (CGDE) - Class B 1,937 104,508
Scor SA 12,874 452,568
Societe Generale (Ord Shares) 870 94,013
Total Compagnie Francaise des Petroles SA - ADR 18,521 745,470
Total SA - Series B 1,200 97,544
Usinor Sacilor * 17,000 247,231
Valeo SA 2,170 133,757
Total 6,503,224
Germany [0.9%]
Bayer AG 4,320 176,166
Bayerische Motoren Werke (BMW) AG 159 110,784
Commerzbank AG 8,410 213,527
Deutsche Lufthansa AG 6,560 89,455
Metro AG * 1,037 81,479
SAP AG 384 52,239
Siemens AG 1,792 84,364
Sto AG - O.S. Vorzugs 1,925 895,000
VEBA AG 1,792 103,564
Volkswagen AG 232 96,416
Total 1,902,994
Hong Kong [2.1%]
Hung Hing Printing Group 4,769,052 1,726,465
Joyce Boutique Holdings 6,482,000 1,642,604
Sinocan Holdings Ltd. 2,225,000 1,093,154
Union Bank of Hong Kong Ltd. 98,470 124,130
Total 4,586,353
Indonesia [0.2%]
PT Bank Danamon 82,258 77,520
PT Bank Tiara Asia 35,500 38,342
PT Kedaung Indah Can 925,000 215,481
PT Steady Safe 47,970 61,461
Total 392,804
Ireland [0.3%]
Avonmore Foods plc - Class A 20,135 59,743
Bank of Ireland * 49,506 451,951
Bank of Ireland - Ord. Shares 21,613 197,149
CBT Group plc - ADR * 200 10,850
Total 719,693
Israel [0.2%]
ECI Telecommunications Ltd. 16,302 346,417
Orbotech Ltd. * 9,738 139,984
Total 486,401
Italy [2.4%]
Banca Popolare Commercio e Industria 5,799 76,021
Banco Popolare di Milano (BPM) 83,848 425,537
Ente Nazionale Idrocarburi SpA (ENI) 29,493 151,603
Industria Macchine Automatic * 70,000 274,374
Instrumentation Laboratory SpA - ADR * 225,000 2,278,127
Parmalat Finanziaria SpA 103,263 157,820
Shares Value+
Pirelli SpA 329,320 $608,092
Safilo SpA 60,000 1,033,399
Telecom Italia Mobile SpA 77,496 196,293
Total 5,201,266
Japan [1.5%]
Ajinomoto Co., Inc. 10,000 101,856
Casio Computer Co. Ltd. 12,000 92,810
Cleanup Corp. * 8,000 69,055
Dai-Ichi Kangyo Bank Ltd. 10,000 144,152
Fujisawa Pharmaceutical 14,000 125,680
Gunze Ltd. 24,000 124,506
Heiwa 7,000 109,970
Hitachi Ltd. 18,000 167,803
Japan Tobacco, Inc. 23 155,848
Kokusai Den (KDD) 600 41,329
Kokusai Electric 7,000 102,115
Kyokuto Kaihatsu Kogyo 5,000 66,897
Kyushu Matsushita Electric Co. 6,000 77,687
Matsushita Electric Works 19,000 163,513
Meiji Seika 23,000 119,318
Nippon Oil Co. Ltd. 23,000 118,127
Nippon Sheet Glass 25,000 88,692
Nippon Shinpan Co. 16,000 89,771
Nippon Telegraph and Telephone Corp. 24 181,890
S.T. Chemical Co. 10,000 70,781
Sakura Bank Ltd. 16,000 114,355
Seikagaku 8,000 84,937
Sekisui House Ltd. 12,000 122,227
Senshukai 6,000 61,631
Shochiku 8,000 69,055
Suntelephone Co., Ltd. 15,000 85,455
Tasaki Shinju Co. 12,000 93,845
Tochigi Fuji Industrial 15,000 86,232
Tokyo Electric Power 9,000 197,324
Yakult Honsha 7,000 72,508
Total 3,199,369
Netherlands [1.4%]
Baan Company NV 3,300 114,675
ING Groep NV 4,500 161,960
New Holland NV * 17,224 359,551
Philips Electronics NV 1,825 73,921
Polygram NV 1,320 67,214
Van Melle NV * 25,500 2,095,244
Wolters Kluwer NV 752 99,863
Total 2,972,428
Norway [0.7%]
Kverneland Gruppen AS 39,600 1,092,722
NetCom ASA * 47,412 453,440
Selmer AS 2,168 77,499
Total 1,623,661
Peru [0.1%]
CPT Telefonica del Peru SA - ADR * 11,647 219,837
Philippines [0.1%]
Bankard, Inc. * 400,000 143,184
Primetown Property Group * 109,619 22,959
Total 166,143
Portugal [0.0%] +++
Portugal Telecom SA - ADR * 3,091 87,321
Singapore [1.1%]
Electronic Resources Ltd. 2,100,000 2,477,123
Shares Value+
Spain [1.2%]
Azkoyen SA 19,402 $2,385,321
Iberdrola SA 9,503 134,525
Telefonica de Espana (Ordinary Shares) 5,135 119,111
Total 2,638,957
Sweden [2.9%]
ABB AB - Class B 1,297 146,870
Astra AB - Series B 2,158 104,141
Investment AB Bure 215,000 2,554,455
IRO AB * 100,000 1,217,455
Medical Invest Svenska AB * 2,243 60,208
Nobel Biocare AB 91,600 1,612,321
NordicTel Holdings AB * 18,535 405,092
Swedish Match AB * 50,000 176,018
Total 6,276,560
Switzerland [2.0%]
Adecco SA 409 102,479
Logitech International SA - Registered Shares * 10,050 1,427,685
Nestle SA 78 83,584
Novartis AG * 130 148,322
Osaka Stdium-wt '00 250 13,236
Roche Holding AG - Genusshein 18 139,799
Stratec Holding AG * 1,950 2,522,931
Total 4,438,036
Thailand [0.6%]
Siam City Bank Public Co. Ltd. 907,500 814,378
Thai Theparos Food Products * 170,000 610,222
Total 1,424,600
United Kingdom [3.8%]
Abbey National plc 14,812 194,080
British Petroleum Company plc - ADR 2,220 313,853
British Steel plc - ADR 15,000 412,500
BTR plc 11,495 55,916
Dixons Group plc 11,291 105,012
Eidos plc * 22,067 274,024
General Electric plc 19,580 128,445
JBA Holdings plc 183,190 1,678,635
Kingfisher plc 11,736 127,443
London & Scotland Marine Oil plc 100,000 409,359
McBride plc 141,414 331,833
National Westminster Bank plc 12,796 150,351
PizzaExpress plc 5,980 54,029
Powerscreen International plc 90,000 870,959
Premier Oil plc * 606,535 368,470
Reckitt & Colman plc 7,913 97,991
SmithKline Beecham plc 9,125 126,519
EMI Group plc 6,062 143,804
Victrex plc * 555,000 2,566,631
Wetherspoon (J.D.) plc 17 344
Total 8,410,198
Total Foreign Common Stock
(Cost $63,245,167) 70,573,438
Total Common Stock (Cost - $103,196,565) 115,239,988
Fixed Income Securities - [8.1%]
Face
Corporate Obligations [1.4%] Amount
Anheuser Busch Cos., 6.900% due 10/1/02 $100,000 100,245
Caterpillar, Inc., 9.000% due 4/15/06 225,000 256,241
Citicorp, 6.375% due 1/15/06 250,000 238,852
Enron Corp., 7.000% due 8/15/23 200,000 185,374
Ford Motor Co., 7.250% due 10/1/08 350,000 352,983
Face
Amount Value+
General Motors, 8.100% due 6/15/24 $145,000 $149,890
International Lease Finance, 5.750% due 12/15/99 150,000 147,505
Lockheed Martin, 7.250% due 5/15/06 250,000 253,938
Merrill Lynch & Co., Inc., 6.000% due 1/15/01 150,000 146,749
Merrill Lynch & Co., Inc., 6.500% due 4/1/01 100,000 99,468
NationsBank Corp., 7.500% due 9/15/06 250,000 256,617
Southwest Air, 9.250% due 2/15/98 150,000 154,929
Union Electric Co., 6.750% due 5/1/08 200,000 197,294
Wells Fargo & Co., 6.875% due 4/1/06 210,000 206,668
Willamette Industries, Inc., 7.850% due 7/1/26 250,000 259,721
Total Corporate Obligations
(Cost $2,959,356) 3,006,474
Mortgage- Backed Securities [2.1%]
Federal Home Loan Mortgage Corp.
(TBA), 8.000% due 6/1/26 306,533 312,587
7.000% due 3/1/26 431,165 423,080
7.000% due 7/1/26 793,031 778,375
7.500% due 5/1/11 637,264 646,873
7.500% due 6/1/11 376,875 382,293
Government National Mortgage Assn.
(TBA), 8.000% due 10/15/26 490,477 500,776
7.000% due 2/15/26 909,576 889,646
8.000% due 8/15/26 583,965 596,228
Total Mortgage- Backed Securities
(Cost $4,472,081) 4,529,858
U.S. Treasury Securities [4.6%]
U.S. Treasury Note
5.000% due 1/31/98 555,000 549,450
5.000% due 2/15/99 2,100,000 2,061,280
5.125% due 3/31/98 415,000 411,109
5.125% due 4/30/98 250,000 247,422
5.625% due 2/28/01 225,000 220,570
5.875% due 11/15/05 940,000 906,806
6.250% due 8/31/00 900,000 903,375
6.500% due 8/31/01 1,100,000 1,112,031
7.500% due 11/15/24 2,005,000 2,192,341
7.500% due 5/15/02 1,350,000 1,427,625
Total U.S. Treasury Securities
(Cost $9,915,528) 10,032,009
Total Fixed Income (Cost - $17,346,965) 17,568,341
Warrants [0.1%] Units
Electronic Resources Ltd. Expiring 7/17/07 * 274,200 163,681
Goto Co. Ltd. Expiring 6/13/00 (Japan) * 300 22,371
Tasaki Shinju Expiring 9/10/99 (Switzerland) * 150 5,705
Total Warrants (Cost - $68,982) 191,757
Investment Companies [20.3%] Shares
Euro-Partners Arbitrage Fund 2,738 4,800,169
GMO Currency Hedged Int'l Bond Fund 799,142 9,453,852
GMO Emerging Markets Stock Fund 194,066 2,105,617
GMO Global Bond Fund 115,877 1,202,800
GMO Japan Fund 276,243 2,085,637
GMO REIT Fund 110,152 1,385,716
GMO Short-Term Income Fund 981,405 9,500,000
GMO Small Cap Value III 64,443 995,000
Highbridge Capital Corp. 2,417 4,344,135
Innkeepers USA Trust 41,557 576,603
Shares Value+
S & P 500 Depositary Receipt 3,706 $273,665
TCW Galileo Asia Pacific Fund 83,900 897,726
TCW Galileo Latin America Fund 8,644 89,553
TCW Galileo High Yield Fund 517,865 5,132,046
Vega Offshore Fund 11,545 1,475,248
Total Investment Companies
(Cost $42,503,979) 44,317,767
Units
Limited Partnerships [8.9%]
Concentric Capital LP 2,755 $2,876,876
Farallon Capital Partners LP 5,133 6,726,144
Pomboy Capital LP 3,100 3,076,944
Value Realization Fund LP, The 596,710 6,841,338
Total Limited Partnerships
(Cost $17,498,000) 19,521,302
Total Long- Term Investments
(Cost $180,614,491) 196,839,155
Short- Term Investments [9.7%]
U.S. Treasury Securities [0.1%] # ++ Face
U.S. Treasury Bill Amount
4.990% due 6/5/97 $90,000 88,048
5.130% due 2/20/97 20,000 19,864
5.170% due 6/12/97 140,000 136,826
5.260% due 5/29/97 105,000 102,822
Total U.S. Treasury Securities
(Cost $344,886) 347,560
Long Options [0.2%]
Mar. '97 Japanese Yen $94 Call Expiring 3/17/97 503 75,450
Phila Gold & Silver Index $120 Call Expiring 3/22/97 500 287,500
Total Long Options (Cost $563,274) 362,950
Other Short- Term Investments [9.4%]
First National Bank of Boston (Time Deposit)
7.100% due 1/2/97 (a) 1,035,661 1,035,661
Investors Bank & Trust Company Repurchase
Agreement, 5.910% due 1/2/97; Issued
12/31/96; Proceeds $19,445,153
(Collateralized by $16,000,000 FHLMC
Fltr, 6.488% due 12/15/23 with a
market value of $16,267,910; #3,976,414
FNMA ARM, 7.740% due 2/1/24 with a market
value of $4,413,016) 19,438,770 19,438,770
Total Other Short- Term Investments
(Cost $20,474,431) 20,474,431
Total Short- Term Investments
(Cost $21,382,591) 21,184,941
Total Investments [99.9%]
(Cost $201,997,082) (b) 218,024,096
Other assets and liabilities, net [0.1%] 220,105
Net Assets - 100.0% $218,244,201
Short Portfolio [(0.8%)] Shares Value+
Common Stock
Aerospace [(0.0%)] +++
AlliedSignal, Inc. 1,383 $92,661
Electronics [(0.1%)]
Avnet, Inc. 4,000 233,000
Retail [(0.1%)]
Toys "R" Us, Inc. * 9,320 279,600
Retail- Restaurants [(0.1%)]
McDonald's Corp. 5,030 227,607
Canada [(0.0%)] +++
Upper Canada Brewing Co. Ltd. 695 2,028
Sweden [(0.1%)]
WM-Data AB 3,583 310,080
Switzerland [(0.1%)]
ESEC Holding AG * 52 189,426
United Kingdom [(0.2%)]
Reuters Holdings plc - ADR 4,350 332,775
Total Short Portfolio
(Proceeds - $1,588,650) $1,667,177
* Non-Income producing security
+ See Note 2 to the Financial Statements
++ Assets currently held in a segregated account as collateral for
financial futures contracts.
+++ Rounds to less than 0.0%
# Interest rate represents the yield to maturity at the time of purchase.
TBA Security is subject to delayed delivery.
ADR American Depository Receipt
(a) Collateral received for securities on loan at December 31, 1996
reinvested in cash equivalents.
(b) Investment cost as determined for Federal income tax purposes is
substantially the same.
See Notes to the Financial Statements
- --------------------------------------------------------------------------------
TIFF International Equity Fund December 31, 1996
- --------------------------------------------------------------------------------
GRAPH:
Policy Considerations: The Fund is designed as a core vehicle for that
portion of a Member's assets committed to foreign stocks. Its benchmark
comprises virtually all non-U.S. stock markets, thereby permitting governing
boards to delegate to the Fund's managers responsibility for determining how
monies earmarked for foreign bourses should be allocated between developed
markets on the one hand and emerging markets on the other. (The Fund's
emerging markets exposure is normally 15% but may range as low as zero or as
high as 30%.) The Fund's vast selection universe translates into potentially
higher long-term returns than can be generated using a strictly domestic
approach, reinforcing the case for a material commitment by long-term
investors to non-U.S. stocks. The Fund is well diversified across countries
and currencies, an unsurprising fact in light of the diversity of managers and
investment approaches that the Fund employs. In an effort to limit currency
losses should the dollar continue strengthening, the Fund's managers continue
to hedge a portion of the Fund's foreign currency exposure.
Performance Evaluation: The Fund continued to produce strong returns during 4Q
1996, outperforming its benchmark (the MSCI All Country World ex US Index) by
330 basis points and boosting its cumulative edge over the Index since
inception to 1170 basis points net of fees (28.7% vs. 17.0%). The Fund has
also outperformed the average international equity fund by 900 basis points
since its inception. This is pleasing because, in theory, diversification
reduces rather than enhances returns, and the IEF's use of multiple managers
causes the Fund to be much more diversified than the average foreign stock
fund. Happily - and perhaps unsustainably - all of the Fund's managers have
outperformed their benchmarks during the time they have managed money for the
Fund. As was true during the two preceding quarters, the Fund benefited in the
fourth quarter from favorable country and stock selection in Europe; from a
material underweighting in Japan (~9%); and from the currency hedges -
especially vs. the yen - that its managers have maintained since the spring
of 1995. As always, the cooperative's staff used cash inflows to rebalance
Fund assets across managers, causing manager allocations at the start of 1997
to resemble closely what they had been three months earlier, the primary
exception being the allocation at year-end of 3% of Fund assets to a new
manager specializing in emerging markets (Everest Capital).
Investment Performance (For Periods Ended December 31, 1996)
Total Return (net of fees)
----------------------------------------------------------
Year Ended Cumulative Since Annualized Since
Ended 12/31/96 Inception (5/31/94) Inception (5/31/94)
----------------------------------------------------------
TIFF International
Equity Fund 15.9% 28.7% 10.2%
MSCI All Country
World ex US Stock
Index 6.7 17.0 6.3
Average International
Fund * 11.8 19.7 7.2
* Comparative mutual fund averages provided by Lipper Analytical Services.
- -------------------------------------------------------------------------------
TIFF International Equity Fund / Schedule of Investments December 31, 1996
- -------------------------------------------------------------------------------
Long-Term Investments [91.1%] Shares Value +
Common Stock [83.7%]
Europe [49.6%]
Austria [0.1%]
Mayr-Melnhof Karton AG 2,500 $ 122,255
Belgium [0.3%]
Electrabel SA 3,000 709,450
Denmark [0.5%]
Bang & Olufsen Holding AS - Series B 10,540 511,598
Coloplast - Class B 2,500 284,274
DSV, De Sammensluttede Vognmano AS 150 81,464
Falck A/S 750 224,025
Total 1,101,361
Finland [2.2%]
Benefon OY * 55,000 956,085
KCI Konecranes International * 6,700 211,099
Nokia AB 4,400 255,275
Outokumpo OY 18,800 320,680
OY Hartwall AB 52,600 2,308,772
UPM-Kymmeme OY * 18,000 377,436
Valmet Corp. OY - Class A 15,000 262,054
Total 4,691,401
France [5.4%]
ADA 3,000 236,926
Alcatel Alsthom 5,540 444,779
Arkopharma * 1,422 90,116
AXA Co. 3,301 209,830
Banque National de Paris 7,188 278,022
Boiron SA 725 84,908
But SA 1,000 58,750
Canal Plus 1,100 242,820
Cardif SA 500 68,863
Carrefour Supermarche 498 323,846
Cipe France SA 2,825 336,290
Clarins 1,492 218,761
Compagnie de Saint-Gobain 2,765 390,929
Compagnie Generale des Eaux 2,600 322,026
Dassault Systemes SA * 3,593 165,618
Dollfus-Mieg & Cie 1,500 36,348
Elf Aquitaine 7,427 675,676
Emin-Leydier 846 58,828
Financiere et Industrielle Gaz et Eaux 2,613 1,066,038
Grand Optical Photoservice 2,000 323,991
Group Axime (Ex Segin) * 12,750 1,473,562
Lectra Systemes * 130,000 383,126
Michelin (CGDE) - Class B 22,395 1,208,290
NRJ SA 2,000 253,491
Pechiney SA - A Shares * 12,073 505,571
Primagaz Cie 2,410 283,639
Schneider SA 10,000 462,102
Scor SA 7,000 246,075
Societe Television Francaise 1 2,700 257,960
Sodexho SA 452 251,619
Ste. Guilbert SA 2,040 398,844
Union Financiere de France Banque SA 1,600 172,590
Usinor Sacilor * 25,400 369,392
Total 11,899,626
Germany [6.1%]
Adidas AG 3,000 259,091
Bayer AG 57,300 2,336,650
Bayerische Mototen Werke (BMW) AG 500 240,260
Buderus AG 800 394,805
Daimler-Benz AG * 18,000 1,234,286
Deutsche Bank AG 29,700 1,386,643
Fresenius USA, Inc. * 15,000 389,610
Hoechst AG 7,000 330,455
Hornbach Baumarkt AG 11,000 348,571
Kiekert AG * 5,000 143,831
Mannesmann AG 600 259,870
Marschollek, Lautenschlaeger Und Partner 2,310 361,500
Muenchener Rueckversicherung AG 272 679,117
Pfeiffer Vacuum Technology AG - ADR * 105,600 1,900,800
Rhoen-Klinikum AG 1,620 169,364
Rhoen-Klinikum AG - Vorzugsakt 720 71,532
RWE AG 11,500 486,883
SGL Carbon AG * 3,000 377,922
Siemens AG 7,500 353,084
Sto AG - O.S. Vorzugs 2,800 1,301,818
VEBA AG 5,000 288,961
Total 13,315,053
Ireland [0.4%]
Independent Newspapers plc * 50,000 258,564
Irish Continental Group plc 20,116 143,248
Unidare plc 50,000 156,834
Waterford Wedgewood Units 251,435 323,995
Total 882,641
Italy [1.3%]
Banca Fideuram SpA 100,000 219,499
Banca Popolare Commercio e Industria 14,000 183,531
Brembo SpA * 10,000 140,646
Bulgari SpA * 14,700 298,261
Editoriale la Repubblica SpA * 35,000 48,534
Ente Nazionale Idrocarburi SpA (ENI) 60,000 308,419
Fila Holding SpA - ADR 2,000 116,250
Gabetti Holding SpA * 2,000 1,186
Gewiss SpA 9,000 118,577
Gucci Group NV - NY Regular Shares * 800 51,100
Industrie Natuzzi SpA - ADR 23,600 542,800
La Giovanni Crespi SpA 41,410 149,218
Olivetti Group * 684,250 239,983
Stet D Risp Non-Convertible 110,300 372,172
Total 2,790,176
Netherlands [4.5%]
Aalberts Industries NV 17,590 433,592
Draka Holding NV 7,156 238,920
Elsevier NV 33,000 557,574
IHC Caland NV 22,955 1,310,993
ING Groep NV 17,559 631,952
Internatio-Muller NV 10,320 259,164
Koninklijke Boskalis Westminster NV 7,606 154,039
Koninklijke Nedlloyd Groep NV 15,600 427,867
Philips Electronics NV 2,900 117,463
Polygram NV 5,400 274,968
Royal Dutch Petroleum Co. (Ordinary Share 4,100 718,603
Royal Dutch Petroleum Co. - NY Shares 14,400 2,458,800
Van Melle NV * 6,500 534,082
Wegener NV 4,067 377,001
Wolters Kluwer NV 10,900 1,447,489
Total 9,942,507
Norway [1.6%]
A/S Veidekke 5,000 160,704
Dolphin Interconn 8,333 99,996
Nera AS 3,300 142,799
Norman Data Defense * 5,000 98,774
Norsk Hydro AS - ADR 22,900 1,228,013
Olav Thon Eiendomsselskap AS 16,200 393,685
Schibsted Gruppen AS 24,700 455,027
Sensonor AS * 47,800 449,657
System Etikettering AS 10,000 153,648
Tomra Systems AS - Ordinary Shares 11,603 181,007
UNI Storebrand AS * 36,000 208,836
Total 3,572,146
Spain [3.7%]
Acerinox SA 2,200 317,526
Azkoyen SA 17,000 2,090,014
Banco Central Hispano SA 9,200 236,052
Banco de Santander SA 4,400 281,305
Banco Intercontinental Espanol (Bankinter 14,300 2,214,641
Centros Comerciales Pryca SA 15,900 336,398
Compania Espanola de Petroleos SA 3,500 106,632
Hidroelectrica del Cantabrico SA - Class 1,565 59,660
Iberdrola SA 47,400 670,996
Prosegur, CIA de Seguridad SA 30,000 276,966
Tabacalera SA 9,900 425,765
Telefonica de Espana (Ordinary Shares) 40,400 937,113
Viscofan Industria Navarra de Envolturas 17,500 255,809
Total 8,208,877
Sweden [4.9%]
Allgon AB - Class B 13,000 313,678
Assa Abloy AB - Class B 8,620 156,785
Astra AB - Series B 37,650 1,816,920
Autoliv AB - Ordinary Shares 6,000 263,146
Avesta - Sheffield * 21,000 226,403
BT Industries AB * 20,000 372,571
Diligentia AB * 9,990 157,525
Elekta Instrument AB 7,500 266,777
Hennes & Mauritz AB * 1,900 263,088
Hoganas B - Class B 9,000 315,512
Investment AB Bure 162,525 1,930,990
IRO AB * 105,000 1,278,328
Kinnevik AB 9,900 273,003
Munksjo AB 30,000 303,630
Nobelpharma AB (144A) (d) 79,000 1,390,539
OM Gruppen AB 12,500 375,871
Securitas AB - Class B 3,650 106,274
Skandinaviska Enskilda Banken 12,900 132,453
SSAB Svenskt Stal AB - Class A 14,800 246,395
Telefonaktiebolaget LM Ericsson AB Class 11,720 362,731
Trelleborg AB - Class B 21,400 284,078
Total 10,836,697
Switzerland [5.6%]
BBC Brown Boveri AG 8,050 1,944,966
Georg Fischer AG 200 207,308
Keramik Holding AG Laufen * 150 75,951
Logitech International SA Registered Shar 11,750 1,669,183
Nestle SA - ADR 28,600 1,530,403
Novartis AG * 1,227 1,399,933
Phoenix Mecano AG 300 156,600
Sarna Kunststoff Holding AG 150 141,499
SGS Societe Generale de Surveillance Hold 720 1,766,443
SGS Societe Generale de Surveillance Hold 1,250 548,098
SMH AG (Societe Suisse pour la Microelect 1,600 227,890
Stratec Holding AG * 1,825 2,361,204
TEGE SA * 1,430 111,969
Zehnder Holding AG - Class B 250 85,757
Total 12,227,204
United Kingdom [12.5%]
Airtours plc 40,000 558,373
Associated British Foods plc 80,000 663,881
Associated British Ports Holdings plc 92,400 452,631
Barclays plc 23,600 405,029
Bass plc 56,000 787,477
Bemrose Corp. plc 24,000 174,706
Berisford plc 225,000 547,240
Blue Circle Industries plc 98,000 595,883
Boots Co. plc 63,600 656,328
British Aerospace plc 17,000 372,705
British Airways plc 81,000 842,132
British Gas plc 92,000 354,550
Capita Group plc 30,000 249,212
Chubb Security plc 65,000 363,499
Cowie Group plc 64,882 450,076
Devro International plc 60,000 276,446
Domestic & General Group plc 5,000 162,716
EMI Group plc 17,000 403,279
Expro International Group plc 10,000 81,358
F.I. Group plc * 35,000 341,704
First Leisure Corp. plc 64,700 373,457
GKN plc 43,000 737,241
Goode Durrant plc 50,000 335,709
Granada Group plc 31,900 471,529
Grand Metropolitan plc 66,000 520,006
Great Universal Stores plc 47,000 492,670
Halma plc 60,000 194,139
Hanson Trust plc 115,600 162,360
Hyder plc 30,165 384,141
Imperial Tobacco plc * 11,560 74,844
Invesco plc * 180,480 800,637
Jarvis Porter Group plc 45,217 157,219
JBA Holdings plc 165,000 1,511,974
Ladbroke Group plc 115,000 455,005
LucasVariety plc * 100,000 381,098
Mackie International Group plc 9,375 23,283
Mentmore Abbey plc * 57,500 90,607
Nan E D & F Group plc 80,000 239,792
Oxford Molecular Group plc * 20,000 122,294
Provident Financial plc 52,000 449,781
Psion plc 22,500 170,338
Racal Electronic plc 80,000 352,837
Railtrack Group plc 88,000 584,818
Rentokil Group plc 217,000 1,639,098
RTZ Corp. * 96,400 1,548,768
Select Appointments Holdings plc 30,000 179,844
Serco Group plc 40,000 461,086
Seton Healthcare Group plc 48,000 374,076
Stagecoach Holdings plc 43,333 520,102
Taylor Woodrow plc 376,700 993,626
Thorn plc * 17,000 73,231
Toad plc * 110,000 160,147
Toad Rights 61,111 5,234
Trinity Holdings plc 65,800 317,820
Unigate plc 85,000 604,918
Vendome Luxury Group Units plc 37,100 337,423
Victrex plc * 345,000 1,595,473
Vodafone Group plc 81,700 345,641
WPP Group plc 119,100 516,106
Total 27,497,597
General Europe [0.5%]
Central European Media Enterprises Ltd. * 10,000 317,500
PartnerRe Ltd. 20,000 680,000
Total 997,500
Total Europe
(Cost $81,730,341) 108,794,491
Pacific [24.1%]
Australia [3.6%]
Amcor Ltd. 58,500 376,198
Australia and New Zealand Banking Group Ltd. 195,469 1,232,150
Australian National Industries Ltd. 352,080 349,835
Boral Ltd. 42,271 120,292
CSR Ltd. 165,191 577,765
Eastern Aluminum Ltd. 116,000 113,416
Elders Australia Ltd. 247,716 413,510
Gio Australian Holdings Ltd. 281,021 719,295
National Australia Bank Ltd. * 67,147 789,952
Pacific Dunlop Ltd. 178,020 452,826
Pasminco Ltd. * 320,000 503,649
QNI Ltd. * 178,000 357,975
Renison Goldfields Consolidated Ltd. 120,605 535,905
Santos Ltd. 200,000 810,798
Wesfarmers Ltd. 71,918 503,075
Total 7,856,641
Hong Kong [3.9%]
Cathay Pacific Airways Ltd. 115,000 181,395
Hong Kong & China Gas Co., Ltd. * 950,000 1,836,253
Hong Kong Electric Holdings Ltd. 240,000 797,466
Hutchison Whampoa Ltd. 230,000 1,806,516
Jardine Strategic Holdings Ltd. 230,812 835,539
Johnson Electric Holdings Ltd. 375,000 1,037,559
Joyce Boutique Holdings 3,770,000 955,356
Mandarin Oriental International Ltd. 311,806 439,646
Television Broadcasts Ltd. 150,000 599,263
Total 8,488,993
Japan [12.9%]
Amano Corp. 23,000 246,180
Atlantis Japan Growth Fund * 100,000 731,000
Brother Industries Ltd. 100,000 431,593
Canon Sales Co., Inc. 43,065 959,065
Canon, Inc. 80,000 1,767,803
Chiyoda Fire & Marine Insurance Co. 60,000 271,385
Daishinku 26,000 204,230
Eisai Co. Ltd 29,400 578,610
Fijitsu Denso 6,420 224,991
Fuji Oil 44,000 313,716
Fujikura Ltd. 60,000 480,621
Furkukawa Electric 126,000 597,100
Futaba Corp. 10,000 414,329
Gakken * 66,000 373,155
Heiwa 16,000 251,360
Hitachi Ltd. 127,000 1,183,944
Honda Motor Co. Ltd. 52,000 1,485,714
Intec 20,000 281,398
Ishikawajima-Harima Heavy Industries 194,000 862,408
Japan Air Lines * 30,000 159,258
Kao Corp. 54,000 629,262
Kawasho * 74,000 260,613
Kirin Beverage Corp. 20,000 269,314
Koito Manufacturing Co., Ltd. 23,000 153,863
Kubota Corp. 108,000 521,122
Kyokuto Boeki 28,000 174,018
Kyowa Hakko Kogyo 28,000 213,656
Matsushita Electric Industries Co. 30,000 489,426
Mitsubishi Corp. 34,000 352,180
Mitsubishi Heavy Industries Ltd. 179,000 1,421,493
Mitsui & Co. 132,000 1,071,040
Namco 24,000 735,434
Nichimo (Builder) 50,000 181,269
Nippon Oil Co. Ltd. 30,000 154,079
Nippon Suisan Kaisha Ltd. * 114,000 403,453
Nippondenso Co. Ltd. 62,000 1,493,138
Nomura Securities Co. Ltd. 34,000 510,660
Sankyo Seiko 36,000 198,878
Shiseido Co. Ltd. * 44,000 508,934
Showa Aircraft Industry 11,000 87,354
Showa Shell Sekiyu K.K. 20,000 166,595
Sintokogio 50,000 365,127
Sony Corp. 18,000 1,179,284
Stanley Electric Co., Ltd. 74,000 434,355
Sumitomo Corp. * 24,000 189,141
Sumitomo Electric Industries 16,000 223,738
Sumitomo Metal Industries * 300,000 738,023
Sumitomo Realty & Development 75,000 472,594
Sumitomo Rubber Industries 64,000 476,754
Sumitomo Trust & Banking 46,000 460,596
Toho Co. 20 2,900
Tokyo Broadcasting System 34,000 519,465
West Japan Railway Co. 135 436,987
Yamaha Motor Co. Ltd. 52,000 466,811
Yasuda Fire & Marine Insurance 88,000 457,281
Yushiro Chemical Industry 20,000 177,816
Total 28,414,513
New Zealand [0.7%]
Carter Holt Harvey Ltd. 127,000 288,671
Telecom Corp. of New Zealand Ltd. 143,000 731,085
Wrightson Ltd. * 527,400 459,346
Total 1,479,102
Singapore [3.0%]
Acer Computer International Ltd. * 240,000 412,800
Courts (Singapore) Ltd. 300,000 373,177
Development Bank of Singapore 128,500 1,736,238
Electronic Resources Ltd. 1,300,000 1,533,457
Jardine Matheson Holdings Ltd. 35,191 232,261
Keppel Corp. Ltd. 190,000 1,480,555
Singapore Land Ltd. 53,000 293,645
Singapore Press Holdings Ltd. 31,000 611,667
Total 6,673,800
Total Pacific
(Cost $51,600,304) 52,913,049
North America [3.4%]
Canada [2.6%]
British Columbia Telecom, Inc. 20,287 438,798
Canadian General Investments 165,200 1,723,340
Canadian Pacific Ltd. 26,000 689,000
Hudson's Bay Co. 26,218 436,074
Imperial Oil Ltd. 35,500 1,668,500
Noranda, Inc. 16,700 372,790
Rogers Communications, Inc. - Class B * 46,000 335,570
Total 5,664,072
United States [0.8%]
Seiler Pollution Control Systems * 15,000 55,313
Tencor Instruments * 65,500 1,727,563
Total 1,782,876
Total North America
(Cost $6,157,432) 7,446,948
Emerging Markets [6.6%]
Argentina [0.2%]
Quilmes Industrial SA - ADR * 18,500 168,813
Quilmes Industrial SA 37,000 296,000
Total 464,813
China [0.2%]
The Guangshen Railway Co. Ltd. * 1,352,000 585,584
India [0.0%] +++
Shiriram Industries - GDR * 6,000 900
Indonesia [1.1%]
Indonesian Development Fund, Ltd. 25,400 193,040
PT Bank International Indonesia 458,666 451,673
PT Citra Marga Nusaphala Persada 700,000 548,496
PT Gudang Garam - Foreign Shares 120,000 518,424
PT Steady Safe - Foreign Shares * 198,338 254,118
PT Wicaksana Overseas International * 380,000 434,562
Total 2,400,313
Korea [0.4%]
Cho Hung Bank Co. Ltd. - GDR * 36,930 276,975
Shinhan Bank - Ordinary Shares * 2,740 37,401
The First Korea Smaller Companies Fund * 40,000 490,800
Total 805,176
Malaysia [2.0%]
Carsberg AS 46,000 340,673
Nestle (Malaysia) Berhad 88,000 707,485
Nylex (Malaysia) Berhad 130,000 293,465
Resorts World Berhad 40,000 182,178
Rothmans of Pall Mall Berhad 35,000 367,327
Sime Darby Berhad* 615,800 2,426,618
Total 4,317,746
Mexico [0.7%]
Grupo Financiero Banamex Accival SA 168,000 351,406
Grupo Financiero Banamex Accival SA 5,040 9,582
Grupo Televisa SA - GDR * 20,700 530,438
Telefonos de Mexico SA - Class L ADR 15,200 501,600
Vitro Sociedad Aninima - ADR 26,000 143,000
Total 1,536,026
Peru [0.5%]
Banco Wiese - Sponsored ADR 170,250 1,000,219
Philippines [0.1%]
Philippine Long Distance Telephone Co. AD 2,900 147,900
Portugal [0.0%] +++
Somague - Sociedade Gestora de Participacoes SA 4,250 44,143
South Africa [0.8%]
De Beers Consolidated Mines Ltd. - ADR 8,800 248,600
Free State Consolidated Gold - ADR 26,700 191,906
LibLife Strategic Investments Ltd. 306,089 916,630
SA Iron & Steel Industrial Corp. Ltd. 170,286 121,659
Safmarine and Rennies Holdings Ltd. * 39,500 88,717
South African Breweries Ltd. 2,757 69,883
South African Breweries Ltd. - ADR 6,945 175,944
Vaal Reefs Exploration & Mining Co. Ltd. 100 619
Total 1,813,958
Thailand [0.6%]
Siam Cement Co., Ltd., The 28,000 878,346
Siam City Bank Public Co. Ltd. 637,500 572,084
Total 1,450,430
Total Emerging Markets
(Cost $15,034,092) 14,567,208
Total Common Stock
(Cost $154,522,169) 183,721,696
Preferred Stock [0.4%]
Baumax AG (Austria) 1,000 28,142
Krones AG Hermann Kronesder (Germany) 550 199,286
Porsche AG (Germany) * 700 618,182
Total Preferred Stock (Cost $656,341) 845,610
Warrants [0.0%] +++ Units
Acer Computer Int'l Ltd. Expiring 7/31/01
(Singapore)* 48,000 16,128
Atlantis Japan Growth Fund Expiring 4/30/10
(Japan)* 20,000 21,076
Hong Kong & China Gas Expiring 9/30/97
(Hong Kong)* 23,000 12,787
Jardine Strategic Holdings Expiring 5/2/98
(Hong Kong) 6,812 2,725
Primagaz Cie Expiring 6/30/98 (France) * 400 9,939
TEGE SA Expiring 6/20/01 (Switzerland) * 2,680 18,186
Total Warrants (Cost $18,720) 80,841
Face
Convertible Bonds [0.9%] Amount (a)
Bangkok Bank Public Co. CVT, 3.250% due
3/3/04 (Thailand) $1,340,000 1,311,525
Guilbert SA CVT, 3.500% due 1/1/04 (France) 25,000 54,320
Far East Levingston Ship CVT., 1.500% due
5/02/01 (Singapore) 500,000 469,375
Total Convertible Bonds
(Cost $1,804,584) 1,835,220
Commingled Investment Vehicles [6.1%] Units
Lazard Freres Emerging World Investors LP 3,000 3,043,758
Investable Emerging Markets Country Fund 897,680 10,413,083
Total Commingled Investment Vehicles
(Cost $13,600,000) 13,456,841
Total Long-Term Investments
(Cost $170,601,814) 199,940,208
Short-Term Investments [13.5%]
Long Option [0.1%] Contracts
Mar. '97 Japanese Yen $94 Call Expiring 3/8/97 760 114,000
(Cost $220,719)
Face
U.S. Treasury Securities [0.9%] # ++ Amount
U.S. Treasury Bill, 5.260% due 5/29/97 $1,595,000 1,561,913
U.S. Treasury Bill, 5.170% due 6/12/97 575,000 561,962
Total U.S. Treasury Securities
(Cost $2,123,596) 2,123,875
Other Short-Term Investments [12.5%]
Harris Trust & Savings (Time Deposit),
6.500% due 1/2/97 (b) 2,000,000 2,000,000
First National Bank of Boston (Time Deposit)
due 7.100% due 1/2/97 9,797,825 9,797,825
Investors Bank & Trust Company Repurchase
Agreement, 5.190% due 1/2/97; issued
12/31/96; Proceeds $15,673,698
(Collateralized by $12,531,826) FHLMC
ARM, 7.542% due 10/1/24 with a market
value of $12,925,942; $3,399,902
FHLMC ARM, 7.803% due 5/1/24 with a
market value of $3,526,665) 15,668,554 15,668,554
Total Other Short-Term Investments
(Cost $27,466,379) 27,466,379
Total Short-Term Investments
(Cost $29,810,694) $29,704,254
Total Investments [104.6%] (c)
(Cost $200,412,508) 229,644,462
Other assets and liabilities, net (4.6%) (10,186,355)
Net Assets - 100.0% $219,458,107
* Non-income producing security
+ See Note 2 to the Financial Statements
++ Assets currently held in a segregated account as collateral for financial
futures contracts.
+++ Rounds to less than 0.0%
# Interest rate represents the yield to maturity at the time of purchase.
ADR American Depository Receipt
GDR Global Depository Receipt
(a) Principal amounts in U.S. dollars unless otherwise noted.
(b) Collateral received for securities on loan at December 31, 1996 and
reinvested as cash equivalents.
(c) Investment cost as determined for Federal income tax purposes is
substantially the same.
(d) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified investors. At December 31, 1996,
these securities were valued at $1,390,539 of net assets.
See Notes to the Financial Statements
- -------------------------------------------------------------------------------
TIFF Emerging Markets Fund December 31, 1996
- -------------------------------------------------------------------------------
GRAPH:
Policy Considerations: Investor perceptions of emerging markets did an about-
face between the fall of 1993 and early 1995: what was seen as a no-lose
proposition in late 1993 was seen as a no-win proposition by most investors a
year later - and is still regarded warily by many. Panic selling by
investors belatedly discovering that their time horizons are shorter than
they'd earlier supposed has spawned legitimate opportunities in emerging
markets - opportunities that persist despite emerging markets' modest rebound
since their lows in early 1995 (MSCI Emerging Markets Free Index up 11% in
U.S. dollar terms). But the fact that the opportunities being spawned derive
from shrinking investor time horizons as well as improving fundamentals makes
the short-term risks of investing in emerging markets substantial. For
foundations that have not invested in such markets previously, the wisest
course might be to eschew "pure plays" in favor of more diversified funds
whose managers are permitted but not compelled to invest in emerging markets
(e.g., the TIFF International Equity or Multi-Asset Funds; these two Funds'
normal allocations to emerging markets are 15% and 5%, respectively).
Performance Evaluation: Emerging markets as a group declined modestly during
4Q 1996, with the MSCI Emerging Markets Free Index falling 0.9%. The
securities held by the Fund outperformed the Index by almost 1% this quarter,
but expenses caused the Fund to outperform the Index by just 0.4%. Despite an
expense ratio that is lower than the average displayed by its peer group, the
Fund has underperformed the average emerging markets fund since its inception.
In a nutshell, the Fund's poor relative performance is attributable primarily
to two factors: first, given a lack of derivatives that would have enabled its
managers to transmute the Fund's initial capital from cash into equity
exposure pending the purchase of individual stocks, the Fund did not
participate fully in a huge rally in emerging markets that took place shortly
after its launch in the summer of 1994; second, the Fund's lead manager
(Emerging Markets Management) employs a value approach that has worked
extremely well over the long term but has been out of sync with prevailing
trends in emerging markets over the preceding year. EMM recently agreed to a
new performance-based fee arrangement.
Investment Performance (For Periods Ended December 31, 1996)
Total Return (net of fees)
-------------------------------------------------------
Year Ended Cumulative Since Annualized Since
Ended 12/31/96 Inception (5/31/94) Inception (5/31/94)
-------------------------------------------------------
TIFF Emerging Markets
Fund 2.5% (12.6)% (5.1)%
MSCI Emerging Markets
Free Index 3.9 (3.5) (1.4)
Average Emerging Markets
Fund * 11.2 2.1 0.8
* Comparative mutual fund averages provided by Lipper Analytical Services.
- ------------------------------------------------------------------------------
TIFF Emerging Markets Fund / Schedule of Investments December 31, 1996
- ------------------------------------------------------------------------------
Long-Term Investments [94.0%] Shares Value +
Common Stock [88.9%]
Latin America [19.9%]
Argentina [1.4%]
Argentina Fund, Inc. 36,000 $427,500
Argentinian Investment Co. * 13,099 183,386
Astra Cia Argentina de Petro 50,205 95,907
Compania International Bebidas y Alimentos 16,580 33,664
Compania Naviera Perez Companc 5,562 39,109
Compania Naviera Perez Companc - ADR 9,082 127,714
Dragados y Construcciones Argentina
Series B 8,472 31,353
Inversiones y Representacion - GDR * 874 27,859
IRSA, Inversiones y Representaciones SA
(144A) (a)* 23,189 74,451
Quilmes Industrial SA - ADR * 3,170 28,926
Siderar SAIC * 6,420 18,493
YPF-Sociedad Anonima ADR 6,900 174,225
Total 1,262,587
Brazil [4.1%]
Avipal SA - Avicultura e Agropecuaria 25,240,000 68,148
Brazil Fund, Inc. 80,100 1,782,225
Brazil Realty SA (144A) - GDR (a) * 5,700 108,300
Cemig Cia Energy SA - ADR 1,043 35,533
Cemig SA Energy - ADR 2,279 77,641
CESP-Compania Energetic de Soa Paulo * 3,100,000 134,873
Companhia Cimento Portland Itau 560,000 196,730
Companhia Vale Do Rio Doce - ADR 7,400 142,431
Eletricidade Sao Paulo 680,000 100,472
Light Participacoes SA * 133,000 32,261
Makro Atacadista SA * 59,000 40,321
Makro Atacadista SA - ADR * 4,100 27,675
Metalurgica Gerdau SA 7,097,591 160,548
Nakata SA - Industria e Comercio 150,000 34,652
Santista Alimentos SA * 33,000 76,550
Telecommunicacoes de Sao Paulo SA 10,156 2,195
Telecomunicacoes Brasileiras SA - Telebras 900,000 64,539
Telecomunicacoes Brasileiras SA Restricted - ADR 20 2,366
Telecomunicacoes Brasileiras Telebras SA ADR 7,550 577,575
Total 3,665,035
Chile [2.7%]
A.F.P. Provida SA - Sponsored ADR 6,200 116,250
Chile Fund, Inc. 29,300 611,638
Chilectra SA - ADR * 7,000 361,258
Chilgener SA - ADR 3,400 70,975
Compania de Telecomunicaciones de Chile ADR 2,250 227,531
Enersis SA - ADR 16,800 466,200
Genesis Chile Fund 10,500 388,500
Santa Isabel SA - ADR 2,800 63,350
Vina Concha Y Toro SA - Sponsored ADR 7,500 176,250
Total 2,481,952
Colombia [0.7%]
Banco de Bogota 1 6
Banco Industrial Colombiano 41,500 144,574
Carulla y Compania SA - ADR 3,582 18,626
Cemento Argos SA (144A) (a) * 16,300 84,247
Cementos Paz del Rio - ADR * 7,700 97,579
Compania Colombiana de Tabaco SA 25,289 75,432
Computec SA 38,063 8,716
Exito 22,290 68,681
Pisos Asfalto y Vinilos Colo 11,000 8,211
Suramericana de Seguros SA 4,367 79,866
Total 585,938
Mexico [5.9%]
Acer Computec Latino America (144A) (a) * 14,300 250,822
Cemex SA de CV 137,380 493,194
Cemex SA de CV - Series B 20,000 77,772
Cifra SA de CV - Series A 20,000 25,060
Cifra SA de CV - Series C 54,000 65,464
Corporacion Industrial Sanluis SA de CV 33,000 204,650
Cydsa SA 28,600 51,972
Desc SA de CV - Series C * 645 3,299
Desc SA de CV - Sponsored ADR * 1,100 24,200
Desc Sociedad de Fomento Industrial SA * 35,000 191,254
Empaques Ponderosa SA 412,000 251,315
Empresas ICA Sociedad Controladora SA * 20,600 301,275
Far-Ben SA de CV 71,000 111,882
Fomento Economico Mexicano SA de CV 81,000 275,862
Grupo Corvi (144A) SA (a) 100,000 69,895
Grupo Financiero Banorte - Series B * 354,845 351,733
Grupo Financiero Inbursa SA de CV Class B 21,000 71,788
Grupo Industrial Saltillo SA de CV - Class A 60,000 185,284
Grupo Mexico SA - Series B 64,340 206,042
Grupo Posadas SA - GDR * 6,100 62,766
Grupo Posadas SA - Series A * 306,428 157,688
Grupo Televisa SA - GDR * 5,100 130,688
Grupo Televisa SA - Series CPO * 6,000 77,087
Industrias CH SA - Series B * 28,000 86,644
Ingenieros Civiles Asociados * 13,000 190,482
Mexico Fund 67,000 1,005,000
Sistema Argos SA - Series B 90,000 87,610
Telefonos de Mexico SA - Class L ADR 3,550 117,150
Transportacion Maritima Mexicana SA - Ser. A 30,000 145,824
Total 5,273,702
Peru [0.6%]
Banco de Credito del Peru - Series C * 4,623 82,636
Cementos Norte Pacasmayo * 19,317 26,088
Cervecer Backus & Johnston - "T" Shares 65,561 56,756
Compania de Minas Buenaventura * 3,155 23,065
Compania de Minas Buenaventura SA 24,823 181,469
Compania Goodyear del Peru 2,300 6,637
CPT Telefonica del Peru SA * 26,812 50,136
CPT Telefonica del Peru SA - ADR 3,000 56,625
Enrique Ferreyros SA 14,801 14,237
Minsur SA - Trabajo 10,198 35,509
Southern Peru Copper Corp. * 2,001 6,979
Total 540,137
Venezuela [1.1%]
Ceramicas Carabobo - ADR 44,900 49,017
Compania Anonima Nacional Telefonos de Venezuela 10,100 284,063
Electricidad de Caracas * 374,523 380,223
Mavesa SA 91,610 30,703
Mavesa, SA (144A) - ADR (a) 11,891 78,834
Siderurgica Venazolana Sivensa Class B (144A) - 927 3,317
Sudamtex de Venezuela - Class B 213,150 17,921
Venepal - GDR * 10,400 27,120
Venezolana de Cementos S.A.C.A. 24,700 67,492
Venezolana Pulpa y Papel - B Shares 80,000 23,205
Venprecar - GDS * 14,000 56,000
Total 1,017,895
Latin American Region [3.4%]
Ceteco Holding (144A) NV - ADR (a) 1,010 58,098
Latin America Investment Trust Fund * 500,000 845,000
Latin American Equity Fund 47,300 662,200
Shares Value+
Morgan Grenfell Latin American Trust plc 1,250,000 $ 1,498,700
Total 3,063,998
Total Latin America
(Cost $17,266,001) 17,891,244
Asia [34.2%]
China [2.7%]
China Fund, Inc. 35,000 459,375
China Yuchai International Ltd. * 10,700 48,150
Greater China Fund, Inc. 92,500 1,445,313
Qingling Motors Co. Ltd. (144A) (a) * 650,000 359,267
Yizheng Chemical Fibre Co. Ltd.-Class A * 224,000 54,447
Total 2,366,552
Hong Kong [3.6%]
C.P. Pokphand Co. Ltd. 1,712,000 669,571
Champion Technology Holdings * 910,056 172,963
Chen Hsong Holdings 96,000 58,336
Dong Fang Electrical Machinery Co. Ltd.
Class H* 162,000 56,552
Giordano International Ltd. 236,000 201,383
Goldlion Holdings Ltd. 330,000 270,929
Guangdong Investments 260,000 250,436
Guangshen Railway - Sponsored ADR * 3,400 70,125
Henderson China Holdings Ltd. * 22,000 50,061
Johnson Electric Holdings Ltd. 98,000 271,149
Kingboard Chemicals Holdings Ltd. 230,000 50,553
Lamex Holdings Ltd. 324,000 117,293
Lung Kee (Bermuda) Holdings Ltd. 317,500 94,415
M.C. Packaging Ltd. 240,000 83,005
New World Infrastructure Ltd. * 88,800 259,471
Singamas Container Holdings * 612,000 45,102
Sinocan Holdings Ltd. 442,000 217,157
Tian An China Investments * 205,000 29,420
Varitronix International Ltd. 163,000 295,042
Total 3,262,963
Indonesia [3.1%]
Indonesian Capital Fund, Inc. * 91,100 1,029,430
PT Astra Graphia 73,250 85,319
PT Astra International, Inc. 32,000 88,098
PT Bakrie & Brothers 388,000 160,229
PT Bank International Indonesia 168,177 165,613
PT Charoen Pokphand Indonesia 41,000 46,453
PT Dharmala Sakti Sejahtera 123,000 161,499
PT Indorama Synthetics 245,880 239,527
PT Jakarta International Hotels & Development 119,250 85,864
PT Mulia Industrino 126,610 131,383
PT Pakuwon Jati 241,500 94,616
PT Petrosea 36,000 35,832
PT Steady Safe * 117,030 149,943
PT Telekomunikasi Indonesia 143,500 247,676
PT Ultrajaya Milk Industry and Trading Co. * 35,250 16,423
Total 2,737,905
Korea [7.1%]
Han Wah Corp. * 13,550 147,964
Hyundai Engineering & Construction Co. 659 15,329
Hyundai Motor Co. Ltd. * 5,750 136,499
Hyundai Motor Co. Ltd. - GDR * 4,200 38,850
Hyundai Motor Co. Ltd. - GDR * 5,000 37,250
Keumkang Ltd. 400 18,279
Kookmin Bank * 11,940 165,814
Kookmin Bank - GDR 2,700 50,423
Korea Electric Power Corp. 29,090 849,393
Korea Exchange Bank 18,870 171,342
Korea Fund, Inc. 21,000 315,000
Korea Housing Bank * 1,000 14,006
Korea Mobile Telecommunications (144A) ADR (a) * 13,596 175,049
Korea Mobile Telecommunications Corp. 230 124,487
Namhae Chemical Corp. 1,860 65,128
New Korea Trust * 116,000 1,334,000
Pohang Iron & Steel Company Ltd. - ADR 28,240 571,860
Pusan Steel Pipe Corp. * 6,953 165,056
Samsung Display Devices Ltd. * 84 4,776
Samsung Electron Devices Co. Ltd. * 3,122 178,982
Samsung Electronics (144A) - GDR (a) 3,730 68,819
Samsung Electronics Co. * 8,880 479,573
Samsung Electronics Co. - New Shares * 1,350 72,908
Samsung Fire & Marine Insurance * 510 187,656
Seah Steel Corp. - New Shares * 22,530 534,837
Shinhan Bank - Ordinary Shares * 22,769 310,793
Sungmi Telecom Electronics 820 122,635
Taegu Department. Store Co. * 5 82
Total 6,356,790
Malaysia [2.5%]
Arab Malaysia Corp. Berhad * 1 5
Arab Malaysian Finance Berhad 1,000 5,584
Commerce Asset Holding Berhad 10,000 75,248
Genesis Malaysia Maju * 13,600 453,900
Genting Berhad 11,400 78,558
Guinness Anchor Berhad 49,000 120,317
IJM Corp. Berhad 105,000 247,426
Malakoff Berhad 28,000 137,505
Malaysian Pacific Industries Berhad 22,000 85,386
Pelangi Berhad 66,000 71,097
Perlis Plantations Berhad 46,250 143,787
Public Bank Berhad - Foreign Market 88,000 186,455
Road Builder (M) Holdings Berhad 26,000 147,248
Sime UEP Properties Berhad * 30,000 77,228
Star Publications 28,000 110,337
Sungei Way Holdings Berhad 58,000 172,277
United Engineers Ltd. 16,000 144,475
Total 2,256,833
Philippines [1.7%]
Ayala Land, Inc. - Series B 86,437 98,748
Benpres Holdings Corp. - GDR * 6,700 50,250
Crown Equities, Inc. * 271,800 18,631
First Philippine Fund, Inc. 61,100 916,500
First Philippine Holdings Corp. 27,168 62,075
Fortune Cement Corp. * 95,000 47,934
Manila Electric Co. 4,030 32,995
Metropolitan Bank & Trust Co. 2,715 67,203
Philex Mining Corp. - Class B * 1,006,200 114,950
Philippine Long Distance Telephone Co. ADR 2,450 124,950
PICOP Resources, Inc. 179,000 30,333
Total 1,564,569
Singapore [0.9%]
Datacraft Asia Ltd. 80,000 133,600
GP Batteries International Ltd. 47,000 156,040
IPCO International Ltd. 29,000 67,280
Roly International Holdings 225,000 164,250
San Teh Ltd. 196,240 119,248
Venture Manufacturing (Singapore) Ltd. * 77,500 192,808
Total 833,226
Taiwan [5.9%]
Acer, Inc. - GDR * 8,540 79,422
China Steel Corp. - ADR 12,600 250,425
China Steel Corp. - GDR 17,113 340,967
Evergreen Marine Corp (144A) - Sponsored GDR (a)* 25,000 496,875
Formosa Growth Fund Ltd. * 113,000 1,709,125
GVC Corp. - GDR * 3,819 29,629
GVC Corp. - Sponsored GDR 1,667 14,370
Hocheng Group Corp. - GDR 9,427 80,553
ROC Taiwan Fund * 63,600 651,900
Siliconware Precision - GDR - 5,760 63,936
Siliconware Precision Industries Co. - GDR * 33,340 370,074
Taipei Fund, The - Class B * 76 687,800
Taiwan Equity Fund, Inc. 10,000 101,250
Taiwan Index Fund 35,000 450,660
Total 5,326,986
Thailand [2.8%]
Alucon Public Co. Ltd. 15,000 73,156
Bangkok Bank Co. Ltd. 22,900 221,584
Bank of Asia, The 117,800 174,655
Bank of Ayudhya Ltd. 31,650 74,710
First Pacific Land, Ltd. * 255,858 66,884
Hana Microelectronics Public Co., Ltd. 30,600 157,597
Industrial Finance Corp. of Thailand (The) 63,734 170,339
MDX Co. Ltd. 117,900 85,101
Precious Shipping Ltd. 56,600 94,407
Raimon Land Co. Ltd. 76,000 28,467
Ramkamhaeng Hospital Co. Ltd. 17,400 26,816
Ruam Pattana Fund II * 1,916,000 784,940
Saha-Union Corp. Ltd. 61,000 52,361
Siam City Bank Co. Ltd. - Foreign Shrs. 133,950 125,431
Siam Syntech Construction Public Co. Ltd. 36,300 35,054
TelecomAsia Corp. * 51,800 108,127
Thai-German Ceramic Industry Co., Ltd. 22,300 26,102
The Siam Cement Co., Ltd. 5,500 172,532
The Thai Farmers Bank, Ltd. 9,800 61,178
Total 2,539,441
Asian Region [3.9%]
Asia Tigers Fund, Inc., The 152,800 1,661,700
Edinburgh New Tiger Trust 2,275,000 876,740
Govett Asian Smaller Companies Fund 240,000 937,224
Niugini Mining Ltd. * 10 25
Total 3,475,689
Total Asia (Cost $34,085,987) 30,720,954
Indian Sub-Continent [4.7%]
India [4.4%]
Arvind Mills Ltd. - GDR * 31,500 126,000
BSES, Ltd. (144A) - GDR (a) * 7,600 155,800
BSES, Ltd. (144A) - Sponsored GDR (a) * 16,400 344,400
East India Hotels Ltd. - GDR * 6,500 153,563
Grasim Industries Ltd. - GDR * 13,400 197,650
Gujarat Ambuja Cements - GDR * 44,140 380,708
Hindalco Industries Ltd. - Sponsored GDR * 16,920 336,200
India Cements Ltd. (144A) - GDR (a) * 12,600 31,500
India Cements Ltd. - GDR 7,600 19,000
India Fund, The - Class B 625,000 925,983
Industrial Credit & Investment Corp. of India -
(GDR)* 1,900 18,050
Industrial Credit & Investment Corp. of India
Ltd. (144A) - GDR (a)* 18,000 147,591
Larsen & Toubro Ltd. (144A) - GDR (a) * 2,600 31,751
Larsen & Toubro Ltd. - GDR * 18,520 268,540
Steel Authority of India, Ltd. - GDR * 16,000 123,934
Steel Authority of India, Ltd. - GDR
(S Shares) * 11,400 88,303
Tata Engineering & Locomotion - GDR 58,336 502,856
Shares Value+
Tata Hydro-Electric Power Supply Co. GDR 378 $117,180
Total 3,969,009
Pakistan [0.3%]
Bank of Punjab Ltd. * 7,800 3,133
Engro Chemicals Pakistan Ltd. * 13,196 44,283
Hub Power Co. Ltd. * 40,000 31,238
Nishat Textile Mills * 49,450 19,741
Packages Ltd. * 17,920 21,908
Pakistan State Oil Co. Ltd. * 12,822 82,856
Hub Power Co. Ltd. - Sponsored GDR 400 8,300
Pakistan Telecommunications - GDR * 440 29,700
Pakistan Telecommunications Corp. * 100 6,262
Total 247,421
Sri Lanka [0.0%] #
Aitken Spence Hotels Ltd. * 3,520 5,556
National Development Bank * 10,021 34,464
Total 40,020
Total Indian Sub-Continent
(Cost $5,371,309) 4,256,450
Europe and Middle East [12.9%]
Czech Republic [1.1%]
Czech Power Company AS, The * 2,600 93,557
Czeske Energeticke Zavody - GDR * 1,980 73,660
Deza Valasske Mezirici AS * 1,695 132,886
FAB AS * 210 25,857
Fatra Napajedla AS * 980 24,566
Kablo Kladno * 1,440 32,339
Komercni Banka I.F. * 6,882 174,029
SPT Telekom AS * 2,060 256,374
Zavody Presneho Strojiren ZL 120 7,057
Zivnobanka - Investicni Fond * 7,042 120,097
Zivnobanka - Podilovy Fond * 4,330 55,543
Total 995,965
Egypt [0.1%]
Suez Cement Co. (144A) - GDR (a) * 3,800 59,280
Greece [1.0%]
Alfa Beta Vassilopoulos SA 5,850 73,582
Alpha Credit Bank 2,927 186,433
Attica Enterprises SA 10,950 75,529
GEKAT (General Construction) SA 9,230 49,434
Hellenic Bottling Co., SA 5,080 162,937
Hellenic Technodomiki 5,820 70,607
Hellenic Telecommunications Organization SA * 5,360 91,668
Michaniki SA 12,340 95,632
Sarantis SA 4,900 52,686
Total 858,508
Hungary [0.9%]
Borsodchem - GDR * 2,300 57,615
Julius Meinl International AG 13,490 385,855
Mol Magyar Olay - Es Gazi * 100 1,250
Mol Magyar Olay - Es Gazi - GDR * 8,200 103,730
Mol Magyar Olay - Es Gazi - Spons. GDR * 5,100 64,515
OTP Rt. * 2,700 48,453
Pannonplast Plastic Industries * 1,949 92,772
Soproni Sorgyar Brewery Ltd. * 710 17,360
Total 771,550
Israel [0.6%]
ECI Telecommunications Ltd. 3,530 75,013
First Israel Fund, Inc. * 38,700 459,563
Tadiran Ltd. - Sponsored ADR 1,400 39,375
Total 573,951
Poland [0.7%]
Bank Inicjatyw Gospodarczych SA 201,873 282,439
Bank Przemyslowo - Handlowy 276 17,851
Exbud SA * 20,486 189,883
Fabryka Kotlow Rafako SA * 14,600 83,239
Krosno 252 4,845
Pierwszy Polsko-Amerykanski Bank SA * 11,660 66,885
Polifarb Cieszyn 555 3,067
Total 648,209
Portugal [1.4%]
Banco Commercial Portugues 9,784 128,919
Banco Espirito Santo e Comercial de Lisboa 4,760 83,668
Corticeira Amorim SA 5,500 60,422
Engil - Sgps * 4,783 54,918
Estabelecimentos Jeronimo Martins & Filho 2,180 112,329
Investec Consultadoria International * 1,275 39,433
Mundicenter-Sociedade Imobiliaria, SA 2,500 62,822
Portugal Fund, Inc. 37,000 508,750
Portugal Telecom SA * 2,220 63,224
Sociedade Financeira de Turismo, SA * 3,600 55,670
Sonae Investimentos Sociedade Gestora de Partici 3,290 104,084
Total 1,274,239
Russia [3.2%]
Fleming Russia Securities Fund * 150,000 1,650,000
Gazprom (144A) - ADR (a) * 16,700 296,425
Lukoil Oil Co. - ADR * 2,900 134,850
Mosenergo - RDC (144A) - ADR (a) * 5,400 166,050
Mosenergo - Sponsored ADR 1,700 51,702
San Francisco/Moscow Teleport * 9,000 180,000
Tatneft (144A) - ADR (a) * 7,900 363,400
Total 2,842,427
Slovakia [0.3%]
Inzinierske Stavby Kosice 426 14,405
Nafta Gbely AS * 1,730 97,051
Plastika Nitra * 508 21,092
Vychodoslovenske Zeleziarne * 6,912 144,681
Total 277,229
Turkey [0.4%]
Akbank T.A.S. 1,056,500 155,834
Aksigorta 984,000 31,488
Alarko Holding AS 756,120 130,431
Enka Holding Yatirim AS 238,000 49,980
Total 367,733
United Kingdom [0.2%]
Lonrho plc 83,000 176,992
European Region [3.0%]
Baring Chrysalis Fund * 166,630 1,249,725
Baring Emerging Europe Trust * 1,270,000 1,485,900
Total 2,735,625
Total Europe and Middle East
(Cost $10,567,601) 11,581,708
Africa [3.3%]
Botswana [0.0%] #
Sechaba Investment Trust Ltd. * 39,000 25,637
Shares Value+
Ghana [0.2%]
Ashanti Goldfields Co. Ltd. - GDR 11,000 $137,500
Morocco [0.3%]
Omnium Nord Africain * 5,200 310,023
South Africa [2.6%]
AGA Holdings Ltd. 33,000 148,941
Anglo American Corp. of South Africa Ltd. 2,600 143,209
Anglovaal Ltd. 4,800 141,690
Barlow Ltd. 9,620 85,397
Bonnita Holdings Ltd. 24,256 18,678
De Beers Centenary AG 9,560 274,019
Driefontein Consolidated Ltd. 3,200 33,711
Gencor Ltd. 65,590 238,509
Gencor Ltd. - ADR 6,800 23,800
New South Africa Fund, Inc. 35,500 452,625
Old Mutual South Africa Trust 250,000 369,300
Sasol Ltd. 22,942 272,360
South African Breweries Ltd. 4,951 125,496
Total 2,327,735
Zimbabwe [0.2%]
Delta Corp. Ltd. * 11,409 40,124
Trans Zambezi Industries Ltd. - GDR * 40,000 95,000
Total 135,124
Total Africa 2,936,019
(Cost $3,126,741)
North America [0.1%]
Canada [0.1%]
Nelson Gold Corp. Ltd. * 81,175 53,296
(Cost $123,643)
General Emerging Markets [13.8%]
G.T. Global Developing Markets Fund 153,500 1,784,438
Investable Emerging Markets Country
Fund LP 764,632 8,869,731
TCW/DW Emerging Markets Opportunities Trust 153,500 1,707,688
Total General Emerging Markets
(Cost $12,410,830) 12,361,857
Total Common Stock
(Cost $82,952,112) 79,801,528
Preferred Stock [2.6%]
Banco Bradesco SA (Brazil) * 4,171,383 30,034
Banco Nacional SA (Brazil) 4,900,000 0
CESP-Compania Energetica de Sao
Paulo (Brazil)* 1,100,000 42,892
Cia Energetica de Minas Gerais (Brazil) 6,856,500 233,632
Cia Tecidos Norte de Mina (Brazil) 410,000 130,869
Compania Vale Do Rio Doce (Brazil) 9,177 176,667
Cosigua-Siderur Guanabara (Brazil) 37,413,103 310,529
Dixie Toga SA (Brazil) * 110,839 84,284
Globex Utilidades SA (Brazil) * 3,000 48,802
IAP SA (Brazil) * 1,215,000 9,720
Industries Bebidas Antarctica da Paraiba
(Brazil)* 389,000 44,535
Iven SA (Brazil) 474,000 227,662
Marcopolo SA (Brazil) * 708,000 118,579
Michaniki SA (Greece) 8,470 56,189
Patroleo Brasileiro SA - Petrobras (Brazil) 2,496,000 397,613
Pettenati SA - Industria Text (Brazil) * 400,000 4,720
Sadia Concordia SA Industria e Comercio
(Brazil) 233,000 179,421
Uniao de Bancos Brasileir (Brazil) 6,090,000 198,534
Total Preferred Stock 2,294,682
(Cost $2,289,118)
Rights [0.0%] #
Sungei Way Holdings Rights * 5,800 13,782
(Cost $0)
Warrants [0.0%] #
Champion Technology Holdings
Expiring 6/30/98 (Hong Kong) * 230,011 8,624
GP Batteries International
Expiring 11/15/00 (Singapore) * 10,000 12,700
San Teh Ltd. Expiring 8/3/00 (Singapore) * 15,120 4,216
Singamas Containers
Expiring 6/30/97 (Hong Kong) * 36,800 167
Total Warrants (Cost $5,000) 25,707
Face
Convertible Bonds [2.5%] Amount (b)
Bangkok Bank Public Co., 3.250% due 3/3/04
(Thailand) $40,000 39,150
Compal Electronics (144A) CVT, 1.000% due
11/21/03 (Taiwan) (a) 190,000 190,950
Henderson Capital International CVT, 5.000%
due 10/27/96 (Europe) 140,000 119,700
Metropolitan Bank CVT, 2.750% due 9/10/00
(Europe) 23,000 30,130
Nan Ya Plastics Corp., 1.750% due 7/19/01
(Taiwan) 572,000 652,080
New World Infrastructure Ltd. (144A), 5.000%
due 7/15/01 (Hong Kong) (a) 51,000 60,308
Pacific Construction Co. Cvt., 2.125% due
10/1/98 (Taiwan) 200,000 181,208
Philippine Long Distance CVT., 5.750% due
12/31/49 (Philippines) 1,000 308
Teco Electric & Machine Cvt. (144A),
2.750% due 4/15/04 (Taiwan) (a) 50,000 36,750
Teco Electric & Machine, 2.750% due
4/15/04 (Taiwan) 520,000 388,050
U-Ming Marine Transport, 1.500% due
2/7/01 (Taiwan) 344,000 302,720
United Micro Electronics, 1.250% due
6/8/04 (Taiwan) 156,000 218,985
Total Convertible Bonds
(Cost $2,336,924) 2,220,339
Total Long-Term Investments
(Cost - $87,583,154) 84,356,038
Short-Term Investments [7.5%]
Harris Trust & Savings Bank
(Time Deposit), 6.500% due 1/2/97 (c) 3,000,000 3,000,000
First National Bank of Boston
(Time Deposit), 7.100% due 1/2/97 (c) 1,424,396 1,424,396
Investors Bank & Trust Company
Repurchase Agreement, 5.910% due 1/2/97
Proceeds $2,321,783; Issued 12/31/96
(Collateralized by $2,380,792 FHLMC ARM,
7.066% due 6/1/22 with a market value of
$2,437,221) $2,2,321,020 2,321,020
Total Short-Term Investments 6,745,416
(Cost $6,745,416)
Total Investments [101.5%] (d)
(Cost $94,328,570) 91,101,454
Other assets and liabilities, net [(1.5%)] $(1,365,653)
Net Assets - 100.0% $89,735,801
* Non-income producing security
# Rounds to less than 0.0%
+ See Note 2 to the Financial Statements
ADR American Depository Receipt
GDR Global Depository Receipt
GDS Global Depository Share
(a) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified buyers. At December 31, 1996, these
securities were valued at $3,712,179 or 4.1% of net assets
(b) Face amount shown in U.S. dollars unless otherwise noted.
(c) Collateral received for securities on loan at December 31, 1996
reinvested in cash equivalents.
(d) Investment cost as determined for Federal income tax purposes is
substantially the same.
See Notes to the Financial Statements
- -------------------------------------------------------------------------------
TIFF U.S. Equity Fund December 31, 1996
- -------------------------------------------------------------------------------
GRAPH:
Policy Considerations: The Fund is designed as a core vehicle for that
portion of a Member's assets committed to U.S. stocks. Accordingly, it employs
a combination of managers that, collectively, provide exposure to all market
sectors (growth, value, large cap, small cap, etc.). The Fund's distinctive
structure reflects the belief that governing boards are ill-equipped to win
the difficult game of style rotation. Indeed, although most of the
cooperative's directors are full-time investment professionals, the board
prefers to delegate to the Fund's managers responsibility for making any
"style" tilts that it displays. The Fund's structure is distinctive not
because it entails broad diversification across sectors, but because it does
so by combining active strategies with a low cost "completeness" portfolio.
This structure was discussed at length in TIP's Quarterly Report dated June
30, 1995 (available on request). One final consideration: even though the
Fund is defensively positioned (see below), if the U.S. stock market falls
hard, the Fund will tumble too. Caveat emptor.
Performance Evaluation: The Fund has returned 71.4% since inception - 300
basis points better than its primary benchmark (the Wilshire 5000, +68.4%) and
1300 bp better than the average domestic stock fund (+58.4%). The Fund
outperformed the rapidly rising W5000 during 4Q despite: (1) an average
invested position of 90%; and (2) an underweighting in the very large stocks
that propelled broad market averages to new highs in December. Fortunately,
the Fund's small cap specialists have performed very well, as has Highbridge
Capital, an opportunistic hedge fund that emphasizes risk arbitrage. At year-
end, the Fund's invested position was 92%, and it remained underweighted in
the large stocks whose soaring capitalizations have boosted valuations on cap-
weighted indexes, such as the S&P 500, to unprecedented highs. The Fund
remains diversified across size sectors, but its managers are underweighting
the leviathans (e.g., GE, Coca Cola, Microsoft) whose relentless appreciation
has transformed S&P 500 index funds from a vaguely un-American curiosity into
a self-fulfilling sensation.
Investment Performance (For Periods Ended December 31, 1996)
Total Return (net of fees)
--------------------------------------------------------
Year Ended Cumulative Since Annualized Since
Ended 12/31/96 Inception (5/31/94) Inception (5/31/94)
--------------------------------------------------------
TIFF U.S. Equity Fund 21.9% 71.4% 23.1%
Wilshire 5000 Index 21.2 68.4 22.3
Average General [U.S.]
Equity Fund * 19.5 58.4 19.5
* Comparative mutual fund averages provided by Lipper Analytical Services.
- ------------------------------------------------------------------------------
TIFF U.S. Equity Fund / Schedule of Investments December 31, 1996
- ------------------------------------------------------------------------------
Long-Term Investments [86.5%] Shares Value +
Common Stock [77.6%]
Aerospace [1.0%]
AAR Corp. 41,000 $1,240,250
Fairchild Corp. (The) - Class A * 1,300 19,175
Litton Industries, Inc. * 4,200 200,025
Northrop Grumman Corp. 1,600 132,400
Precision Castparts Corp. 2,800 138,950
Total 1,730,800
Agriculture [1.3%]
Archer-Daniels-Midland Co. 17,100 376,200
Eastern Equities Corp. Ltd. (a) 450,000 286,781
Embrex, Inc. (a) * 68,700 446,550
Eskimo Pie Corp. 15,000 166,875
IBP, Inc. 34,700 841,475
Wrightson Ltd. (a) * 147,000 128,032
Total 2,245,913
Airlines [0.3%]
Atlantic Southeast Airlines, Inc. 8,200 179,375
Mesa Air Group, Inc. * 6,800 45,900
Midwest Express Holdings, Inc. * 1,100 39,600
SkyWest, Inc. 2,400 33,300
UAL Corp. * 3,000 187,500
Total 485,675
Banks [6.0%]
Banc One Corp. 10,500 451,500
Bank of Boston Corp. 4,700 301,975
Bankamerica Corp. 10,800 1,077,300
Bankers Trust New York Corp. 1,700 146,625
Chase Manhattan Corp. 18,600 1,660,050
Comerica, Inc. 7,900 413,763
First Bank System, Inc. 3,700 252,525
First Chicago NBD Corp. 17,900 962,125
First Colorado Bancorp, Inc. 1,900 32,300
First Union Corp. (NC) 19,218 1,422,132
HUBCO, Inc. 40,275 986,738
Mercantile Bancorporation 4,400 226,050
National City Corp. 6,600 296,175
NationsBank Corp. 14,700 1,436,925
Republic New York Corp. 1,600 130,600
Signet Banking Corp. 7,400 227,550
Wells Fargo & Co. 2,200 593,450
Total 10,617,783
Beverages [1.3%]
Anheuser-Busch Companies, Inc. 4,410 176,400
Canandaigua Wine Co., Inc. - Class A * 8,700 247,950
Coca-Cola Co. 35,900 1,889,238
Total 2,313,588
Business Machines [0.4%]
International Business Machines Corp. 5,100 770,100
Chemicals [3.2%]
Cabot Corp. 18,400 462,300
ChemFirst, Inc. (WI) * 27,500 635,938
Dow Chemical 15,800 1,238,326
EcoScience Corp. (a) * 440,300 454,037
EnSys Environmental Products, Inc. (a) * 295,500 591,000
FMC Corp. * 9,300 652,163
Lubrizol Corp. 8,500 263,500
Mississippi Chemical Corp. 14,403 345,674
Rogers Corp. * 30,000 813,750
Sealed Air Corp. * 3,200 133,200
Union Carbide Corp. 2,800 $114,450
Total 5,704,338
Commercial Services [0.1%]
Caliber System, Inc. 6,200 119,350
Employee Solutions, Inc. * 3,000 61,500
Roadway Express, Inc. 3,300 63,938
Total 244,788
Computer Software [2.8%]
Allegro New Media, Inc. (a) 59,882 232,044
Applied Magnetics Corp. * 18,300 546,713
Broderbund Software, Inc. * 3,500 104,125
Clarify, Inc. * 1,300 62,400
Computer Associates International, Inc. 5,100 253,725
Fractal Design Corp. (a) * 36,500 383,250
Franklin Quest Co. * 2,600 54,600
Hutchinson Technology, Inc. * 1,000 76,000
Jack Henry & Associates 1,000 35,750
Measurex Corp. 2,400 57,600
Meridian Data, Inc. * 5,000 34,063
Metrowerks, Inc. (a) * 121,200 1,136,250
Micrografx, Inc. (a) * 60,400 324,650
Microsoft Corp. * 14,200 1,173,275
NETCOM On-Line Communication Services, Inc. * 5,500 71,500
Pixar, Inc. * 3,300 42,900
Project Software & Development, Inc. * 2,000 84,750
Proxima Corp. * 3,400 43,775
RadiSys Corp. * 1,500 73,125
StorMedia, Inc. - Class A * 4,000 64,500
Vantive Corp. * 2,800 87,500
Total 4,942,495
Computers [1.6%]
Apple Computer, Inc. 15,900 331,913
Compaq Computer Corp. * 11,200 831,600
Dell Computer Corp. * 8,600 456,875
Gateway 2000, Inc. * 5,300 283,881
Seagate Technology, Inc. * 9,000 355,500
Tandem Computers, Inc. * 23,300 320,375
Western Digital Corp. * 4,300 244,563
Total 2,824,707
Construction [0.4%]
ABT Building Products Corp. * 4,700 117,500
Champion Enterprises, Inc. * 2,700 52,650
Fibreboard Corp. * 1,500 50,625
Lone Star Industries, Inc. 2,400 88,500
Medusa Corp. 2,700 92,813
Schuller Corp. 17,500 185,938
U.S. Home Corp. * 3,400 88,400
Zurn Industries, Inc. 1,900 49,638
Total 726,064
Containers [0.6%]
Premark International, Inc. 13,000 289,250
Owens-Illinois, Inc. * 34,500 784,875
Total 1,074,125
Cosmetics [0.4%]
Johnson & Johnson 3,700 184,075
NBTY, Inc. * 3,100 58,900
Procter & Gamble Co. 4,100 440,750
Total 683,725
Electrical Utilities [2.5%]
Baltimore Gas and Electric Co. 11,100 296,925
Central Vermont Public Service 12,600 151,200
Consolidated Edison Company of New York, Inc. 20,700 605,475
Dominion Resources, Inc. Virginia 7,700 $296,450
Entergy Corp. 36,400 1,010,100
Long Island Lighting Co. 25,900 573,038
MDU Resources Group, Inc. 150 3,450
Nevada Power Company 4,500 92,250
New York State Electric & Gas Corp. 14,000 302,750
Pinnacle West Capital Corp. 10,500 333,375
Public Service Enterprise Group, Inc. 10,000 272,500
TNP Enterprises, Inc. 1,300 35,588
Unicom Corp. 11,200 303,800
United Illuminating Co. 1,700 53,338
Utilicorp United, Inc. 4,700 126,900
Total 4,457,139
Electronics [6.2%]
American Power Conversion Corp. * 12,200 332,450
Atmel Corp. * 4,300 142,438
Belden, Inc. 6,000 222,000
Charter Power Systems, Inc. 25,000 762,500
Chips & Technologies, Inc. * 13,100 239,075
Etec Systems, Inc. * 2,500 95,625
FSI International, Inc. * 5,700 85,500
Genus, Inc. * 3,000 16,500
GPU, Inc. 11,300 379,963
HADCO Corp. * 1,700 83,300
Hubbell Inc. - Class B 2,100 90,825
II-VI, Inc. * 1,100 28,875
Innovex, Inc. 9,200 248,400
Intel Corp. 18,200 2,383,063
Jabil Circuit, Inc. * 5,600 224,000
Johnson Controls, Inc. 2,000 165,750
Kemet Corp. * 8,200 190,650
Kulicke & Soffa Industries * 5,100 96,900
Logicon, Inc. 2,100 76,650
MEMC Electronic Materials, Inc. * 9,000 202,500
Micrion Corp. * 2,400 52,200
Micron Technology, Inc. 8,300 241,738
Motorola, Inc. 9,200 564,650
Park Electrochemical Corp. 1,900 43,225
Perceptron, Inc. * 2,850 97,613
Philips Electronics NV - ADR 13,200 528,000
SBS Technologies, Inc. * 3,600 133,200
SCI Systems, Inc. * 11,400 508,725
Sensormatic Electronics Corp. 64,100 1,073,675
Silicon Valley Group, Inc. * 3,000 60,375
Speedfam International, Inc. 5,200 148,200
Texas Industries, Inc. 10,100 511,313
Thermo Instrument Systems, Inc. * 3,525 116,766
Veeco Intruments, Inc. * 2,200 48,400
Watkins-Johnson Company 4,300 105,350
Wyle Electronics 10,000 395,000
Xilinx, Inc. * 7,800 287,138
Zytec Corp. * 1,300 13,813
Total 10,996,345
Financial [3.9%]
Aames Financial Corp. 2,000 71,750
Bear Stearns Companies, Inc. 15,780 439,868
Capital One Financial Corp. 6,700 241,200
Cityscape Financial Corp. * 5,200 136,500
Community Bank System, Inc. 100 3,925
Corporate Investments Ltd. (a) * 880,000 411,264
Imperial Credit Industries, Inc. * 2,000 42,000
Inter-Regional Financial Group, Inc. 1,100 38,775
Merrill Lynch & Company, Inc. 7,400 603,100
Morgan Stanley Group, Inc. 3,800 217,075
North American Mortgage Co. 4,000 79,000
Olympic Financial Ltd. * 9,200 132,250
PHH Corp. 22,200 954,600
RAC Financial Group, Inc. * 8,400 177,450
Salomon, Inc. 19,300 909,513
San Juan Basin Royalty Trust (a) 130,300 $1,074,975
St. Paul Companies, Inc. 5,800 340,025
Travelers Group, Inc. 20,800 943,804
Total 6,817,074
Foods [0.4%]
Quaker Oats Co. 4,100 156,313
Smithfield Foods, Inc. * 11,100 421,800
Supervalu, Inc. 5,100 144,713
Total 722,826
Health Care [2.5%]
Apria Healthcare Group, Inc. * 6,900 129,375
CNS, Inc. * 4,200 60,375
Columbia/HCA Healthcare Corp. 5,000 203,750
Health Management Assoc., Inc. Class A * 75 1,688
MedCath, Inc. * 3,100 49,600
Morrison Health Care, Inc. * 33,766 498,049
Pediatrix Medical Group, Inc. * 2,300 85,100
Pharmchem Laboratories (a) * 237,200 1,274,950
Protocol Systems, Inc. * 53,500 695,500
Transitional Hospitals Corp. * 11,500 110,688
Universal Health Services, Inc. Class B * 30,000 858,750
US Bioscience, Inc. * 5,900 74,488
Value Health, Inc. * 9,600 187,200
Vivra, Inc. * 6,750 186,469
Total 4,415,982
Hotels/Restaurants [0.7%]
Promus Hotel Corp. * 5,300 157,013
Ruby Tuesday, Inc. 47,300 875,050
Ryan's Family Steak House, Inc. * 39,200 269,500
Total 1,301,563
Housewares [0.9%]
Gillette Co. 5,700 443,175
Lancaster Colony Corp. 11,800 542,800
McKesson Corp. 3,900 218,400
O'Sullivan Industries Holdings, Inc. * 6,600 92,400
Singer Company N.V. (The) 16,500 369,188
Total 1,665,963
Insurance (Life) [0.1%]
Jefferson-Pilot Corp. 3,700 209,513
Insurance (Other) [3.2%]
Allmerica Property & Casualty Companies, Inc. 1,100 33,413
Allstate Corp. 3,200 185,200
American Bankers Insurance Group 3,200 163,600
Cigna Corp. 11,000 1,502,876
CNA Financial Corp. * 4,600 492,200
Commerce Group, Inc. 1,200 30,300
Delphi Financial Group, Inc. * 2,300 67,850
First American Financial Corp. 1,200 49,350
Fremont General Corp. 3,700 114,700
HCC Insurance Holdings, Inc. * 1,900 45,600
Lincoln National Corp. 8,900 467,250
Loews Corp. 13,600 1,281,800
Marsh & McLennan Companies, Inc. 1,700 176,800
Orion Capital Corp. 6,400 391,201
Pioneer Financial Services, Inc. 1,400 35,000
Safeco Corp. 2,000 78,875
Stanhome, Inc. 15,100 400,150
Washington National Corp. 2,000 55,000
Total 5,571,165
Leisure [0.7%]
Anchor Gaming * 1,200 48,300
Brunswick Corp. 400 9,600
Callaway Golf Co. 5,900 $169,625
Coachmen Industries, Inc. 2,000 56,750
Coastcast Corp. * 6,400 92,800
Grand Casinos, Inc. * 4,600 62,100
Harrah's Entertainment, Inc. * 19,300 383,588
Oakley, Inc. * 26,100 283,838
Seattle Filmworks, Inc. * 1,700 34,638
Speedway Motorsports, Inc. * 4,000 84,000
Station Casinos, Inc. * 8,300 84,038
Total 1,309,277
Machines [1.5%]
Blount International, Inc. - Class A 4,600 176,525
Caterpillar, Inc. 15,700 1,181,425
Cincinnati Milacron, Inc. 6,700 146,563
Cooper Industries, Inc. 3,800 160,075
Deere & Co. 6,600 268,125
Dover Corp. 3,100 155,775
Giddings & Lewis, Inc. 11,800 151,925
Gleason Corp. 1,200 39,750
Global Industrial Technologies, Inc. * 2,300 50,888
Graco, Inc. 1,200 29,400
Manitowoc Co., Inc. 2,000 81,000
Novellus Systems, Inc. * 3,500 189,656
Total 2,631,107
Metals [1.2%]
Cleveland-Cliffs, Inc. 2,500 113,438
Coeur D'Alene Mines Corp. 7,300 110,413
Hecla Mining Co. * 16,500 92,813
Mueller Industries, Inc. * 2,300 88,550
Oregon Metallurgical Corp. * 25,800 832,050
RMI Titanium Co. * 3,200 90,000
Timken Co. 6,600 302,775
Trinity Industries, Inc. 9,800 367,500
Wolverine Tube, Inc. * 2,700 95,175
Total 2,092,714
Motor Vehicles [1.2%]
Chrysler Corp. 39,100 1,290,300
Ford Motor Co. 21,400 682,125
Polaris Industries, Inc. 3,500 83,125
Total 2,055,550
Oil Services [0.2%]
Camco International, Inc. 1,900 87,638
Global Industries Ltd. * 4,800 89,400
Seacor Holdings, Inc. * 3,600 226,800
Total 403,838
Oil/Gas (Domestic) [1.5%]
Consolidated Natural Gas Co. 5,800 320,450
Enron Global Power & Pipelines L.L.C. 2,300 62,100
Helmerich & Payne, Inc. 4,300 224,138
National Fuel Gas Co. 22,100 911,625
Phillips Petroleum Co. 14,400 637,200
Tesoro Petroleum Corp. * 18,500 259,000
Unocal Corp. 7,000 284,375
Total 2,698,888
Oil/Gas (International) [2.3%]
Amoco Corp. 7,700 619,850
Chevron Corp. 11,700 760,500
Exxon Corp. 10,400 1,019,200
Mobil Corp. 6,300 770,175
Newfield Exploration Company * 2,200 57,200
Texaco, Inc. 9,300 912,563
Total 4,139,488
Paper/Forest Products [0.9%]
Champion International Corp. 3,700 $160,025
Consolidated Papers, Inc. 2,500 122,813
International Paper Co. 12,100 488,538
Kimberly-Clark Corp. 9,300 885,825
Total 1,657,201
Pharmaceutical [5.0%]
Abbott Laboratories 24,800 1,258,600
American Home Products Corp. 11,300 662,463
Bristol-Myers Squibb Co. 14,200 1,544,250
Eli Lilly & Co. 6,300 459,900
Genentech, Inc. (Special Common) * 2,700 144,788
ICN Pharmaceuticals, Inc. 4,800 94,200
Medicis Pharmaceutical Corp. Class A * 1,200 52,800
Merck & Company, Inc. 20,600 1,632,550
Owens & Minor, Inc. Holding Company 50,800 520,700
Pfizer, Inc. 12,800 1,060,800
Schering-Plough Corp. 21,200 1,372,700
Total 8,803,751
Producer Goods [2.3%]
American Brands, Inc. 4,400 218,350
Applied Materials, Inc. * 12,100 434,844
Bush Industries, Inc. - Class A 2,700 51,975
Case Corp. 6,900 376,050
Cummins Engine 6,400 294,400
Esterline Technologies Corp. * 1,400 36,575
Freeport McMoRan, Inc. 5,200 167,050
General Electric Co. 12,500 1,235,938
Griffon Corp. * 2,600 31,850
Harsco Corp. 1,500 102,750
Miller Herman, Inc. 2,200 124,575
National Service Industries 2,700 100,913
NCI Building Systems, Inc. * 2,300 79,350
PPG Industries, Inc. 2,000 112,250
Volt Information Sciences, Inc. * 10,000 437,500
Vulcan Materials Co. 2,900 176,538
Total 3,980,908
Publishing [1.6%]
American Greetings Corp. Class A 11,100 314,963
Bowne & Co., Inc. 2,800 68,950
Media General, Inc. - Class A 5,100 154,275
National Education Corp. * 107,200 1,634,800
Pulitzer Publishing Co. 1,066 49,436
Steck-Vaughn Publishing Corp. * 37,000 425,500
Washington Post Company Class B 500 167,563
Total 2,815,487
Railroad [1.0%]
CSX Corp. 26,900 1,136,525
Illinois Central Corp. 7,500 240,000
Norfolk Southern Corp. 5,400 472,500
Total 1,849,025
Retail (Foods) [0.3%]
Earthgrains Company * 1,600 83,600
Safeway, Inc. * 8,600 367,650
Total 451,250
Retail (Other) [3.3%]
Brown Group, Inc. 5,100 93,713
Consolidated Stores Corp. * 22,500 725,625
Dayton-Hudson Corp. 22,400 879,200
Duckwall-ALCO Stores, Inc. (a) * 45,190 643,958
Fingerhut Companies, Inc. 19,400 237,650
Gadzooks, Inc. * 3,000 54,750
Geerlings & Wade, Inc. (a) 1,400 6,125
Genesco, Inc. * 7,200 66,600
Handleman Co. 4,200 $35,700
K-Mart Corp. 31,700 328,888
Kenneth Cole Productions, Inc. Series A * 2,000 31,000
Lands' End, Inc. * 2,400 63,600
Mac Frugals Bargains Close-Outs, Inc. * 50,000 1,306,250
MicroAge, Inc. * 5,700 114,000
Paul Harris Stores, Inc. * 4,800 85,200
Renters Choice, Inc. * 1,500 21,750
Sears, Roebuck and Company 11,300 521,213
Toys "R" Us, Inc. * 14,500 435,000
Value City Dept Stores, Inc. * 2,800 29,400
Waban, Inc. * 4,700 122,200
Total 5,801,822
Services [4.0%]
Browning-Ferris Industries, Inc. 11,600 304,500
Ceridian Corp. * 4,700 190,350
Comdisco, Inc. 30,900 981,075
Computer Language Research (a) 50,600 543,950
Computer Task Group, Inc. (a) 2,500 107,813
DB Group Ltd. (a) 1,145,000 794,559
DeVRY, Inc. * 2,000 47,000
Failure Group, Inc. (a) * 159,700 978,163
Hilb, Rogal & Hamilton Co. 36,500 483,625
Interpublic Group of Companies, Inc. 6,400 304,000
ITT Educational Services, Inc. * 37,950 877,594
Kelly Services, Inc. - Class A 1,200 32,400
Kinder Care Learning Centers * 43,100 808,125
Norrell Corp. 2,000 54,500
Pittston Services Group * 10,000 270,000
Standard Register Co. 1,000 32,500
Student Loan Marketing Assn. 2,400 223,500
Total 7,033,654
Steel [0.8%]
Bethlehem Steel Corp. * 24,800 223,200
Birmingham Steel Corp. 4,300 81,700
Inland Steel Industries, Inc. 15,300 306,000
J & L Specialty Steel, Inc. 3,600 40,950
LTV Corp. * 27,000 320,625
Oregon Steel Mills, Inc. 6,300 105,525
USX-US Steel Group, Inc. 12,700 398,463
Total 1,476,463
Telecommunications [2.2%]
360 Communications Co. * 9,300 215,063
Citizens Utilities Co. - Class A * 13,541 147,255
Coherent Communications Systems Corp. * 2,600 50,700
DSC Communications Corp. * 12,500 223,438
Emmis Broadcasting Corp. Class A * 1,000 32,750
Jacor Communications, Inc. * 8,500 232,688
Mastec, Inc. * 3,800 201,400
MCI Communications Corp. 6,300 205,931
Nextel Communications, Inc. Class A * 22,600 295,213
Periphonics Corp. * 2,600 76,050
SBC Communications, Inc. 4,700 243,225
Southern New England Telecommunications Corp. 2,500 97,188
U.S. West, Inc. 16,700 538,575
Viacom, Inc. - Class B * 13,100 456,863
VTEL Corp. (a) * 79,500 795,000
Total 3,811,339
Telephone [2.0%]
AT & T Corp. 36,100 1,570,346
Century Telephone Enterprise 6,400 197,600
GTE Corp. 14,750 671,125
Sprint Corp. 27,000 1,076,625
Total 3,515,696
Textiles [0.3%]
St. John Knits, Inc. 6,200 $269,700
VF Corp. 3,700 249,750
Total 519,450
Thrifts [2.1%]
Ahmanson (H. F.) & Co. 5,000 162,500
Albank Financial Corp. 720 22,590
American Federal Bank - FSB 22,000 415,250
Astoria Financial Corp. * 2,800 103,250
Charter One Financial, Inc. 25,200 1,058,400
Commercial Federal Corp. 1,300 62,400
First Savings Bank of Washington Bancorp, Inc. 10,000 183,750
Peoples Bank of Bridgeport, Connecticut 28,000 808,500
Roosevelt Financial Group, Inc. 30,000 630,000
Security Capital Corp. 1,000 73,750
TR Financial Corp. 2,200 78,100
Washington Mutual, Inc. 1,000 43,313
Total 3,641,803
Tobacco [0.8%]
Philip Morris Companies, Inc. 11,100 1,250,138
Universal Corp. 3,100 99,588
Total 1,349,726
Transportation [1.9%]
Airborne Freight Corp. 30,000 701,250
Fritz Companies, Inc. * 56,900 725,475
Goodyear Tire & Rubber Co. 8,800 452,100
Harper Group, Inc. 26,800 636,500
Offshore Logistics, Inc. * 5,300 102,688
Pittston Burlington Group, Inc. 40,000 800,000
Total 3,418,013
Trucks [0.7%]
Air Express International Corp. 11,500 370,839
Consolidated Freightways, Inc. 40,000 890,000
Total 1,260,839
Total Common Stock
(Cost $116,235,152) 137,238,960
Preferred Stock [0.1%]
Norian Corp. (144A) (b) (d) 295,000 206,500
(Cost $206,500)
Units Value +
Commingled Investment Vehicles [8.8%]
Concentric Capital LP * 7,090 7,403,813
GMO REIT Fund 223,164 2,807,401
Highbridge Capital Corp. * 2,935 5,274,545
Total Commingled Investment Vehicles
(Cost $14,029,472) 15,485,759
Total Long-Term Investments
(Cost $130,471,124) 152,931,219
Short-Term Investments [16.1%] Face
Amount
U.S. Treasury Security [0.5%] ++
U.S. Treasury Bill, 5.270% due 3/20/97 # $ 875,000 865,941
(Cost $864,727)
Other Short-Term Investments [15.6%]
First National Bank of Boston (Time Deposit),
7.100% due 1/2/97 (c) 4,213,800 4,213,800
Investors Bank & Trust Company Repurchase
Agreement, 5.910% due 1/2/97; Proceeds
$23,354.761; Issued 12/31/96 (Collateralized
by $9,777,423 GNMA ARM, 7.000% due 6/20/26
with a market value of $10,051,419, $9,353,195
GNMA ARM, 6.500% due 11/20/25 with a market
value of $9,630,393; $4,698,180 GNMA ARM,
7.000% due 2/20/26 with a market value
of $4,833,503) $23,347,095 $23,347,095
Total Other Short-Term Investments
(Cost $27,560,895) 27,560,895
Total Short-Term Investments
(Cost $28,425,622) 28,426,836
Total Investments [102.6%] (e)
(Cost $158,896,746) 181,358,055
Other assets and liabilities, net [(2.6%)] (4,561,542)
Net Assets - 100.0% $176,796,513
Short Portfolio [(0.9%)] Shares
Common Stock [(0.9%)]
Computer Software [(0.4%)]
Broadway & Seymour, Inc. * 40,700 427,350
Cambridge Technology Partners, Inc. * 7,000 234,938
JDA Software 3,000 83,625
Total 745,913
Electronics [(0.2%)]
Itron, Inc. * 20,000 355,000
Energy [(0.1%)]
Molten Metal Technology, Inc. * 8,400 98,700
Services [(0.1%)]
Renaissance Solutions, Inc. * 3,700 165,575
Telecommunications [(0.1%)]
Compression Labs * 42,100 160,506
VideoLan technologies, Inc. * 20,000 31,250
Total 191,756
Total Short Portoflio
(Proceeds - $2,547,356) $1,556,944
* Non-income producing security
# Interest rate represents the yield to maturity at the time of purchase.
+ See Note 2 to the Financial Statements
++ Assets currently held in a segregated account as collateral for futures
contracts.
ADR American Depository Receipt
(a) This security or a portion of this security is held in a segregated
account as collateral for the short portfolio.
(b) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified buyers. At December 31, 1996, these
securities were valued at $206,500 or 0.1% of net assets.
(c) Collateral received for securities on loan at December 31, 1996 reinvested
in cash equivalents.
(d) Security is fair valued. See Note 2.
(e) Investment cost as determined for Federal income tax purposes is
substantially the same.
See Notes to the Financial Statements
- -------------------------------------------------------------------------------
TIFF Bond Fund December 31, 1996
- -------------------------------------------------------------------------------
GRAPH:
Policy Considerations: The Fund's chief aim is to help foundations weather
deflationary times without being forced to liquidate their equity holdings at
depressed prices. As a form of deflation "insurance", bonds emphasized by the
Fund (intermediate or longer-term, high quality, non-callable) tend to perform
well when inflation concerns ease, as they did in 1995, and they tend to
perform poorly when investors are spooked by unexpected strength in the
economy, as they were during the first eight months of 1996. The last month
of 3Q 1996 and the first two months of 4Q 1996 produced a smart rally in bond
prices, but a sharp sell-off in bonds in the final weeks of 1996 transformed a
distinctly unattractive environment for bond investing into a more hospitable
one for foundations seeking to increase their deflation "insurance."
Importantly, the current environment is very unattractive for investors
seeking to boost yields through the purchase of low quality bonds: quality
spreads are abnormally tight in the U.S. bond market, causing the yield gap
normally evident between the average bond fund and the higher quality (hence
lower yielding) TIFF Bond Fund to narrow.
Performance Evaluation: The Fund has produced strong absolute returns since
inception (23.1% net of fees) and, despite stricter quality standards, has
outperformed its peer group of taxable bond funds, but has underperformed
slightly the Lehman Aggregate Bond Index (annualized deficit of 0.3%). The
reason it has lagged the latter Index is straightforward: the Fund's managers
have performed solidly since the Fund's inception -all three have
outperformed their respective benchmarks - but by margins insufficient to
offset expenses. The Fund's expense ratio is 34% lower than the industry norm
for active bond funds, and this edge coupled with two hoped-for but not
assured factors - a growing asset base and continued good performance by the
managers - should enable the Fund to continue gaining ground against the
Index. The Fund has gained 28 bp against the Index over the last nine months
(net of all costs), and continues to attract new Members as well as additional
capital from existing holders.
Investment Performance (For Periods Ended December 31, 1996)
Total Return (net of fees)
------------------------------------------------------
Year Ended Cumulative Since Annualized Since
Ended 12/31/96 Inception (5/31/94) Inception (5/31/94)
------------------------------------------------------
TIFF Bond Fund 3.7% 23.1% 8.3%
Lehman Aggregate
Bond Index 3.6 23.7 8.6
Average Int. Inv-Grade
Debt Fund * 3.1 20.7 7.6
* Comparative mutual fund averages provided by Lipper Analytical Services.
- --------------------------------------------------------------------------------
TIFF Bond Fund / Schedule of Investments December 31, 1996
- --------------------------------------------------------------------------------
Long-Term Investments [96.5%]
Bonds [96.1%] Face
Amount Value +
Asset-Backed Securities [6.8%]
American Trans Air 96, 7.370% due 12/26/12 $890,000 $882,815
Amresco Mortgage Loan Trust, Ser. 1996-1,
Class A5, 7.050% due 4/25/27 650,000 621,069
Amresco Residential Mortgage Loan, Ser.
1996-3, Class A7, 8.075% due 4/25/26 925,000 956,051
Amresco Residential Mortgage, Ser. 1996-4,
Class A5, 7.600% due 10/25/27 328,000 328,426
Chase Credit Card Master Trust,
Ser. 1996-3, Class A, 7.040% due 2/15/04 750,000 768,720
EQCC Home Equity Loan Trust, Ser. 1994-4,
Class A4, 8.950% due 1/15/15 200,000 216,363
Ford Credit Auto Owner Trust, Ser. 1996-A,
Class A3, 6.500% due 11/15/99 900,000 907,731
GMAC Grantor Trust, Series 1993-A, Class A,
4.150% due 3/16/98 11,790 11,781
GMAC Grantor Trust, Series 1994-A, Class A,
6.300% due 6/15/99 135,513 136,227
Merrill Lynch Mortgage Investors, Ser.
1995-C2, Class A1, 7.452% due 6/15/21 189,916 193,077
Olympic Auto Receivable Trust, Ser. 1996-C,
Class A4, 6.800% due 3/15/02 700,000 710,472
Premier Auto Trust, Ser. 1996-3, Class A3,
6.500% due 3/6/00 800,000 807,760
UCFC Home Equity Loan, Ser. 1996-B1,
Class A5, 7.650% due 6/15/20 775,000 794,980
UCFC Home Equity Loan, Ser. 1996-C1,
Class A6, 7.825% due 1/15/28 400,000 408,500
Union Acceptance Corp. IO Strip, Ser.
1996-C, Class I, 2.750% due 10/8/03 20,534,628 640,103
Union Acceptance Corp. IO, Ser. 1996-D,
Class I, 3.000% due 1/8/04 1,840,000 72,876
Union Acceptance Corp., Ser. 1996-A,
Class I, IO due 5/7/99 6,827,378 202,261
Total Asset-Backed Securities
(Cost $8,717,179) 8,659,212
Corporate Obligations [24.8%]
Aetna Services, Inc., 7.125% due 8/15/06 500,000 502,830
AK Steel (144A), 9.125% due 12/15/06 (a) 1,000,000 1,011,407
California Petroleum Transport, 8.520%
due 4/1/15 325,000 358,683
Celulosa Aruaco Constitution, 7.000%
due 12/15/07 (Chile) 645,000 620,242
Commonwealth Edison Co., 8.375% due 10/15/06 810,000 869,603
Conseco Finance Trust II, 8.700% due 11/15/26 650,000 656,125
Continental Airlines, 9.500% due 10/15/13 820,000 924,704
Corp. Andina de Formento, 7.100% due 2/1/03
(Latin America) 575,000 577,480
Discover Credit MTN, 9.000% due 10/1/01 445,000 485,589
Edison Mission Energy (144A), 7.330%
due 9/15/08 (a) 410,000 411,679
El Paso Natural Gas Co., 6.750% due 11/15/03 700,000 691,657
Empresa Electric del Norte (144A), 7.750%
due 3/15/06 (Chile) (a) 300,000 302,492
Endesa-Chile Overseas SA, 7.200% due
4/1/06 (Chile) 950,000 942,289
Freeport-McMoRan C&G, 7.200% due 11/15/26 770,000 760,109
Grace & Co., (W.R.), 8.000% due 8/15/04 1,100,000 1,161,313
Hero Asia BVI Co. Ltd. (144A), 9.110% due
10/15/01 (China) (a) 970,000 1,010,979
IBM Corp., 7.125% due 12/1/2096 910,000 863,858
Imexsa Export Trust 96-1 (144A), 10.125%
due 5/31/03 (Mexico) (a) 770,000 802,725
Israel Electric (144A), 7.875% due 12/15/26
(Israel) (a) $690,000 $688,769
JPM Capital Trust, 7.540% due 1/15/27 815,000 796,993
Kern River Funding Corp. (144A),
6.720% due 9/30/01 (a) 415,000 415,940
Lannar Central Partners, 8.120%
due 9/15/02 190,000 190,515
Lehman Brothers Holdings, 8.500%
due 5/1/07 585,000 627,308
Lockheed Martin, 6.850% due 5/15/01 800,000 807,460
MacSaver Financial Services, 7.875%
due 8/1/03 690,000 693,014
Mexico FRN (144A), 7.563% due 8/6/01
(Mexico) (a) 400,000 400,500
Mutual Life Insurance Co. - NY (144A),
0.000% due 8/15/24 (a) 800,000 817,051
Nabisco Inc., 7.550% due 6/15/15 850,000 831,564
Occidental Petroleum Corp., 9.250%
due 8/1/19 500,000 581,707
Peoples Bank of Bridgeport, 7.200%
due 12/1/06 645,000 630,699
Poland Non U.S. Global, 3.750%
due 10/27/14 (Poland) 955,000 798,953
Ras Laffan Liquid Natural Gas (144A),
8.294% due 9/15/14 (a) 860,000 871,487
Rodamco NV, 7.300% due 5/15/05
(Netherlands) 600,000 605,969
Rollins Truck, 7.000% due 3/15/01 600,000 606,091
Salomon, Inc., 6.750% due 2/15/03 745,000 727,489
Southern CA Public Power Authority,
5.000% due 7/1/22 745,000 680,483
Southtrust Bank Birmingham, 7.690%
due 5/15/25 500,000 530,898
Tarkett International, 9.000% due 3/1/02 430,000 440,750
Taubman Realty Group, 7.500% due 6/15/02 620,000 617,195
Tektronix, Inc., 7.500% due 8/1/03 500,000 509,357
Tenneco Corp., 10.200% due 3/15/08 750,000 900,122
Times Mirror Co., 7.250% due 11/15/2096 730,000 707,942
Union Pacific Resources, 7.000% due 10/15/06 800,000 802,522
USF&G Capital, Inc. (144A), 8.500% due
12/15/45 (a) 840,000 848,818
Usinor Sacilor, 7.250% due 8/1/06 760,000 762,016
YPF Sociedad Anonima, 7.500% due 10/26/02
(Argentina) 702,645 710,550
Total Corporate Obligations
(Cost $31,370,746) 31,555,926
Mortgage-Backed Securities [38.1%]
Federal Home Loan Mortgage Corp.
TBA, 7.500% due 1/14/97 1,500,000 1,498,594
TBA Gold, 7.000% due 2/13/97 3,568,130 3,488,962
Gold, 7.000% due 11/1/11 24,829 25,843
Gold, 7.500% due 9/1/11 2,985,002 3,030,972
Gold, 7.500% due 11/1/26 4,573,905 4,579,169
PO, Ser. 1689, Class NA due 3/15/24 88,762 84,423
6.500% due 4/1/26 450,214 430,552
7.000% due 1/1/11 828,603 828,708
7.500% due 4/1/24 1,166,353 1,170,611
7.500% due 8/1/24 1,438,891 1,444,144
7.500% due 12/1/24 395,607 397,051
8.500% due 9/1/24 890,406 924,856
8.500% due 3/1/25 549,111 570,013
Ser. 1576, Class PH, 6.000% due 1/15/08 1,900,000 1,818,300
Ser. 1577, Class PH, 6.300% due 3/15/23 1,875,000 1,805,644
Federal National Mortgage Assn.
TBA, 7.500% due 1/14/97 5,000,000 4,995,313
PO, Ser. 1992-153, Class B, due 9/25/97 9,663 43,816
6.080% due 9/3/03 200,000 193,397
6.150% due 12/14/01 800,000 785,208
6.500% due 1/1/24 (b) 450,074 431,823
7.000% due 3/1/24 (b) 1,585,818 1,555,801
7.500% due 6/1/26 (b) $1,485,104 $1,484,480
7.500% due 7/1/26 (b) 308,598 308,469
8.000% due 5/1/24 803,342 819,862
8.000% due 1/1/25 537,595 548,650
9.000% due 3/1/25 1,227,700 1,296,970
8.000% due 5/1/25 873,767 891,736
Government National Mortgage Assn.
ARM, 7.125% due 4/20/24 77,092 78,620
TBA ARM, 5.000% due 1/23/97 1,000,000 974,688
TBA ARM, 6.000% due 1/23/97 990,000 990,000
TBA ARM, 6.000% due 2/24/97 5,000,000 4,996,875
5.500% due 11/20/25 1,582,909 1,601,673
6.500% due 1/20/08 176,175 180,022
7.000% due 7/15/23 (b) 519,105 510,424
7.000% due 5/15/24 (b) 1,309,062 1,285,943
7.125% due 8/20/17 83,081 84,973
8.000% due 8/15/26 993,624 1,014,580
8.000% due 10/15/26 695,560 710,229
9.500% due 10/15/24 (b) 683,671 744,516
Total Mortgage-Backed Securities
(Cost $48,123,175) 48,625,910
U.S. Gov't Agency Obligations [1.7%]
Federal National Mortgage Assn.
MTN, 5.200% due 7/10/98 450,000 445,819
MTN, 5.720% due 3/8/01 600,000 586,734
MTN, 5.800% due 2/22/06 725,000 680,326
MTN, 6.290% due 10/04/00 475,000 475,158
Total U.S. Government Agency Obligations
(Cost $2,194,026) 2,188,037
U.S. Treasury Securities [24.7%]
U.S. Treasury Note 4.750% due 10/31/98 2,770,000 2,714,600
5.000% due 1/31/99 155,000 152,288
5.375% due 5/31/98 555,000 550,838
5.500% due 11/15/98 4,200,000 4,168,500
5.875% due 11/30/11 2,910,000 2,867,258
6.250% due 2/15/03 355,000 354,667
6.500% due 10/15/06 910,000 915,119
6.500% due 8/15/97 1,835,000 1,843,028
6.625% due 6/30/01 4,040,000 4,104,385
6.750% due 4/30/00 2,395,000 2,440,650
7.500% due 10/31/99 1,125,000 1,166,835
7.750% due 12/31/99 1,435,000 1,500,472
8.500% due 5/15/97 915,000 924,150
U.S. Treasury Bond
6.750% due 8/15/26 1,195,000 1,203,216
7.750% due 1/31/00 1,825,000 1,909,976
8.000% due 11/15/21 2,770,000 3,175,113
U.S. Treasury Strip #
5.148% due 11/15/21 3,850,000 705,778
5.222% due 2/15/20 4,070,000 834,956
Total U.S. Treasury Securities
(Cost $31,527,755) 31,531,829
Total Bonds
(Cost $121,932,881) 122,560,914
Preferred Stock [0.4%] Shares
Indosuez Holdings S.C.A. Preferred
(144A) 10.375% Series (a) 17,312 485,908
(Cost $476,080)
Total Long-Term Investments
(Cost $122,408,961) 123,046,822
Short-Term Investments [14.8%]
Bank Obligation [1.7%] Face Amount Value +
First National Bank of Boston
(Time Deposit), 7.100% due 1/2/97 (c) $2,150,000 $2,150,000
(Cost - $2,150,000)
Long Options [0.0%] +++ Contracts
U.S. Treasury Note
10 Yr. $110 Call expiring 2/22/97 5 3,359
10 Yr. $113 Call expiring 2/22/97 5 469
10 Yr. $107 Put expiring 2/22/97 5 1,797
Total Long Options (Cost $8,828) 5,625
Face
U.S. Treasury Securities [0.1%] ++ # Amount
U.S. Treasury Bill, 5.260% due 5/29/97 $100,000 97,926
U.S. Treasury Bill, 5.170% due 6/12/97 10,000 9,773
Total U.S. Treasury Securities
(Cost $104,952) 107,699
Repurchase Agreements [13.0%]
Investors Bank & Trust Company
Repurchase Agreement, 5.910% due
1/2/97; Issued 12/31/96; Proceeds
$7,564,653; (Collateralized by
$7,836,238 FHLMC FRN, 6.700%
due 3/15/24 with a market value
of $7,953,047) 7,562,170 7,562,170
Bear Stearns Repurchase Agreement,
5.450% due 1/6/97; Proceeds
$7,014,836; Issued 12/31/96
(Collateralized by $7,213,005
FNCL 7.500% due 6/1/26 with a
market value of $7,254,024) 7,000,000 7,000,000
Morgan Stanley Repurchase Agreement,
6.000% due 1/2/97; Proceeds $2,000,667;
Issued 12/31/96 (Collateralized by
$2,055,000 US Treasury Note, 5.125% due
3/31/98 with a market value of $2,069,771 2,000,000 2,000,000
Total Repurchase Agreements
(Cost $16,562,170) 16,562,170
Total Short-Term Investments
(Cost $18,825,950) 18,825,494
Total Investments [111.3%] (d)
(Cost $141,234,911) 141,872,316
Other assets and liabilities, net [(11.3%)] (14,381,216)
Net Assets - 100.0% $127,491,100
+ See Note 2 to the Financial Statements
++ Assets currently held in a segregated account as
collateral for financial futures contracts.
+++ Rounds to less than 0.0%.
# Interest rate represents the yield to maturity at the time of
purchase.
(a) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified investors. At December 31, 1996,
these securities were valued at $8,067,755 or 6.3% of net assets.
(b) Assets currently held (or a portion) in a segregated account as
collateral
for TBAs.
(c) Collateral received for securities on loan at December 31, 1996 reinvested
in cash equivalents.
(d) Investment cost as determined for Federal income tax purposes is
substantially the same.
ARM Adjustable Rate Mortgage
FRN Floating Rate Note - Rate shown is the coupon rate at December 31, 1996.
IO Interest-Only Obligation
MTN Medium Term Note
PO Principal-Only Obligation
TBA To-Be-Announced Security - Security is subject to delayed delivery.
See Notes to the Financial Statements
- -------------------------------------------------------------------------------
TIFF Short-Term Fund December 31, 1996
- -------------------------------------------------------------------------------
GRAPHS:
Policy Considerations: As experienced foundation fiduciaries, the
cooperative's directors recognize that many foundations seek to control
downward fluctuations in the monetary value of assets earmarked for spending
within twelve months by investing them exclusively in cash equivalents, either
directly or via money market funds. However, TIFF studies of the risk and
return characteristics of alternate short-term investment strategies suggest
that a short-term income fund whose average maturity ranges between the one to
three months typical of regulated money market funds and the six months
inherent in the TIFF Short-Term Fund's performance benchmark arguably comports
better with foundations' short-term investment goals than money market funds
per se. Although the market value of six-month Treasury Bills can decline
when short-term interest rates are rising sharply, there is a high probability
that such instruments will produce positive total returns in any given month.
To ensure that the Fund's managers do not take undue risks in their efforts to
outperform their 6-month Treasury Bill benchmark, TIP imposes on them a number
of restrictions (codified in the Prospectus), including maturity limits which
ensure that the average duration of the Fund's holdings does not exceed 6
months. Also, while the Fund may own debt securities of all grades, not more
than 5% of its total assets may be invested in securities rated below
investment grade (i.e., rated below BBB by S&P or Baa by Moody's).
Performance Evaluation: The Fund is performing as planned in the following
sense: its aim (admittedly modest) is to outperform its 6-month Treasury Bill
benchmark net of all costs. In its first 31 months of operations, the Fund
has outperformed this benchmark by 0.2% net of expenses (+15.5% vs. 15.3%).
This margin would have been larger if the Fund itself were larger: increased
assets would permit fixed costs to be spread over a larger asset base. TIP's
directors remain hopeful that an increasing number of TIP Members will look to
the Fund as a cost-efficient alternative to other cash management vehicles or
instruments they may be using. Prospective investors should note that the
Fund has outperformed the average money market fund tracked by Lipper by 80
basis points (annualized) since the Fund's inception. Until the Fund's assets
grow, the vendors it employs have agreed to waive fees as needed to keep the
Fund's expense ratio within the bounds specified in the Prospectus.
Investment Performance (For Periods Ended December 31, 1996)
Total Return (net of fees)
Year Ended Cumulative Since Annualized Since
Ended 12/31/96 Inception (5/31/94) Inception (5/31/94)
TIFF Short-Term
Fund 5.3% 15.5% 5.7%
Merrill Lynch 182-Day
T-Bill 5.3 15.3 5.6
Average Money Market
Fund * 4.8 13.1 4.9
Comparative averages provided by Lipper Analytical Services
- --------------------------------------------------------------------------------
TIFF Short-Term Fund / Schedule of Investments December 31, 1996
- --------------------------------------------------------------------------------
Asset-Backed Securities [26.0%] Face
Amount Value +
American Express Master Trust Ser. 1-A,
6.050% due 6/15/98 $2,000,000 $2,005,200
Case Equipment Loan Trust, Ser. 1993-B,
Class A, 4.300% due 5/15/99 863,586 850,770
Chase Manhattan Grantor Trust,
Ser. 1993-A, Class A, 4.200% due 4/15 693,937 691,118
Discover Card Trust, Ser. 1991-F,
Class A, 7.850% due 11/21/00 2,000,000 2,053,780
Ford Credit Auto Loan Master Trust,
Ser. 1992-1, Class A, 6.875% due 2,225,000 2,225,697
MBNA Master Card Trust, Ser. 1991-1,
Class A, 7.750% due 10/15/98 1,000,000 1,000,940
MBNA Master Credit Card Trust, Ser. 1992-1,
Class A, 7.250% due 6/15/ 1,000,000 1,005,630
Navistar Financial, Ser. 1994-C,
Class A1, 7.650% due 12/22/97 242,647 243,178
Norwest Auto Trust, Ser. 1996-A,
Class A1, 5.465% due 12/5/97 1,708,176 1,709,798
Premier Auto Trust, Ser. 1995-1,
Class A5, 7.900% due 5/4/99 2,000,000 2,039,320
Private Label Cr. Card Master Trust II,
Ser. 1994-1, Class A, 7.150% 666,667 668,813
Signet Cr. Card Trust, Ser. 1994-4,
Class A, 6.800% due 12/15/00 2,000,000 2,015,600
Total Asset-Backed Securities
(Cost - $16,563,723) 16,509,844
Bank Obligations [28.9%]
ABN Amro Bank Yankee CD, 6.120%
due 7/14/97 2,000,000 2,005,455
Bank of Boston (Nassau) Time Deposit,
5.250% due 5.250% 3,313,000 3,313,000
Bankers Trust Company CD, 5.420%
due 5/23/97 2,000,000 2,000,000
Commerzbank AG Yankee CD, 5.590%
due 2/26/97 2,000,000 1,999,983
Mellon Bank CD, 5.750% due 1/28/97 2,000,000 2,000,000
Rabo Bank Yankee CD, 5.400% due 5/20/97 1,000,000 999,882
Republic National Bank New York
Time Deposit, 6.875% due 1/2/97 2,000,000 2,000,000
Royal Bank of Canada Yankee CD,
5.400% due 1/15/97 2,000,000 2,000,253
Toronto Dominion Euro CD, 5.700%
due 1/23/97 2,000,000 2,000,000
Total Bank Obligations
(Cost - $18,318,573) 18,318,573
Commercial Paper [12.3%] #
Caisse D'amort Dette Sociale CP, 5.763%
due 1/15/97 2,000,000 1,943,378
Canadian Government CP, 5.383% due 5/7/97 2,000,000 1,952,413
General Electric Capital Corp. CP, 5.741%
due 3/10/97 2,000,000 1,943,890
Kingdom of Sweden CP, 5.516% due 2/3/97 2,000,000 1,946,897
Total Commercial Paper (Cost - $7,786,578) 7,786,578
Corporate Obligation [11.5%]
Federal National Mortgage Assn. DN,
6.502% due 1/2/97 7,000,000 6,997,472
General Electric Capital Corp. FRN,
5.420% due 5/12/97 280,000 279,764
Total Corporate Obligation (Cost - $7,277,472) 7,277,236
U.S. Treasury Obligations [62.9%] #
Face
Amount Value +
U.S. Treasury Bill, 5.230% due 2/6/97 ++ $500,000 $497,555
U.S. Treasury Bill, 5.219% due 7/3/97 40,500,000 39,455,748
Total U.S. Treasury Obligations
(Cost $39,956,294) 39,953,303
Investment Company [19.5%] Shares
FFTW U.S. Short-Term Fund 1,256,88 12,380,304
Total Investment Company
(Cost $12,367,796)
Total Investments [161.1%] (a)
(Cost $102,270,436) 102,225,838
Other assets and liabilities, net [(61.1%)] -38,755,588
Net Assets - 100.0% $63,470,250
+ See Note 2 to the Financial Statements
++ Portion of assets currently held in a
segregated account as collateralfor financial
futures contracts.
# Interest rate represents yield to maturity at the time of purchase.
CD Certificate of Deposit
CP Commercial Paper
DN Discount Note
FRN Floating Rate Note. Rate shown is the coupon rate at December 31, 1996
(a) Investment cost as determined for Federal income
tax purposes is substantially the same.
See Notes to the Financial Statements
- ------------------------------------------------------------------------------
TIFF Multi-Asset Fund / Statement of Assets and Liabilities December 31, 1996
- ------------------------------------------------------------------------------
Assets
Investments in securities, at value (Cost - $201,997,082) $218,024,096
Cash 2,997,275
Foreign currency (Cost - $270,430) 451,847
Receivable for securities sold 1,374,637
Receivable for fund shares sold 2,749,055
Interest receivable 239,009
Dividends receivable 109,845
Variation margin receivable 14,331
Receivable for forward currency contracts 23,685,341
Deposit with broker for short sales 1,533,367
Deferred organizational costs 6,299
Other assets 37,889
Total assets 251,222,991
Liabilities
Payable for securities purchased 1,531,319
Payable for fund shares repurchased 4,166,273
Payable for forward currency contracts 23,782,108
Payable for collateral on securities on loan 1,035,661
Market value of securities sold short (Proceeds - $1,588,650) 1,667,177
Dividends payable from net investment income 628,350
Distributions payable from capital gains 69,747
Accrued custody fees 63,212
Accrued expenses and other liabilities 34,943
Total liabilities 32,978,790
Net Assets $218,244,201
Shares Outstanding (par value $.001) 18,072,631
Net asset value, maximum offering price and
redemption price per share $12.08
Components of Net Assets as of December 31,
1996 were as follows:
Capital stock at par value ($.001) $18,073
Capital stock in excess of par value 204,192,425
Overdistribution of net investment income -2,103,517
Accumulated net realized gain on investments,
short sales, financial futures and written options
contracts and foreign-currency related transactions 359,043
Net unrealized appreciation on investments,
short sales, financial futures contracts and
foreign-currency transactions 15,778,177
$218,244,201
See Notes to Financial Statements
TIFF International Equity Fund / Statement of Assets and Liabilities
December 31, 1996
Assets
Investments in securities, at value (Cost - $200,412,508) $229,644,462
Cash 61,937
Foreign currency (Cost - $851,636) 845,704
Receivable for securities sold 399,999
Interest receivable 45,576
Dividends receivable 346,271
Receivable for forward currency contracts 12,153,416
Deferred organizational costs 11,163
Other assets 167,916
Total assets 243,676,444
Liabilities
Payable for securities purchased 247,125
Payable for fund shares repurchased 406,020
Payable for forward currency contracts 11,633,123
Payable for collateral on securities on loan 11,797,825
Distributions payable from capital gains 16,186
Variation margin payable 22,563
Accrued custody fees 39,175
Accrued expenses and other liabilities 56,320
Total liabilities 24,218,337
Net Assets $219,458,107
Shares Outstanding (par value $.001) 18,001,517
Net asset value, maximum offering price
and redemption price per share $12.19
Components of Net Assets as of December 31,
1996 were as follows:
Capital stock at par value ($.001) $18,002
Capital stock in excess of par value 188,835,873
Overdistribution of net investment income -76,141
Accumulated net realized gain on investments,
financial futures contracts and foreign-currency
related transactions 1,862,973
Net unrealized appreciation on investments,
financial futures contracts and foreign
currency related transactions 28,817,400
$219,458,107
See Notes to Financial Statements
TIFF Emerging Markets Fund / Statement of Assets and Liabilities
December 31, 1996
Assets
Investments in securities, at value (Cost - $94,328,570) $91,101,454
Cash 49,541
Foreign currency (Cost - $497,721) 430,352
Receivable for securities sold 5,274,599
Receivable for fund shares sold 888,251
Interest receivable 29,630
Dividends receivable 182,867
Receivable for forward currency contracts 3,479,288
Deferred organizational costs 4,091
Other assets 10,752
Total assets 101,450,825
Liabilities
Payable for securities purchased 348,706
Payable for fund shares repurchased 3,206,265
Payable for forward currency contracts 3,481,844
Payable for collateral on securities on loan 4,424,396
Dividends payable from net investment income 178,570
Accrued custody fees 32,249
Accrued expenses and other liabilities 42,994
Total liabilities 11,715,024
Net Assets $89,735,801
Shares Outstanding (par value $.001) 10,394,654
Net asset value, maximum offering price
and redemption price per share $8.63
Components of Net Assets as of December 31,
1996 were as follows:
Capital stock at par value ($.001) $10,395
Capital stock in excess of par value 101,373,782
Overdistribution of net investment income -735,421
Accumulated net realized (loss) on investments,
and foreign-currency related transactions -7,597,820
Net unrealized (depreciation) on investments
and foreign currency related transactions -3,315,135
$89,735,801
See Notes to Financial Statements
TIFF U.S. Equity Fund / Statement of Assets and Liabilities
December 31, 1996
Assets
Investments in securities, at value (Cost - $158,896,746) $181,358,055
Cash 2,637,936
Receivable for securities sold 339,544
Interest receivable 9,776
Dividends receivable 209,778
Deposit with broker for short sales 1,382,604
Deferred organization costs 8,052
Other assets 12,337
Total assets 185,958,082
Liabilities
Payable for securities purchased 2,404,808
Payable for collateral on securities on loan 4,213,800
Market value of securities sold short (Proceeds - $2,547,356) 1,556,944
Dividends payable from net investment income 433,956
Distributions payable from capital gains 85,654
Variation margin payable 425,133
Accrued custody fees 13,500
Accrued expenses and other liabilities 27,774
Total liabilities 9,161,569
Net Assets $176,796,513
Shares Outstanding (par value $.001) 12,870,555
Net asset value, maximum offering price
and redemption price per share $13.74
Components of Net Assets as of December 31,
1996 were as follows:
Capital stock at par value ($.001) $12,871
Capital stock in excess of par value 149,452,732
Overdistribution of net investment income -1,123,603
Accumulated net realized gain on investments,
financial futures contracts and short sales 4,887,403
Net unrealized appreciation on investments,
financial futures contracts and short sales 23,567,110
$176,796,513
See Notes to Financial Statements
TIFF Bond Fund / Statement of Assets and Liabilities
December 31, 1996
Assets
Investments in securities, at value (Cost - $141,234,911) $141,872,316
Cash 58,961
Receivable for securities sold 7,211,558
Receivable for fund shares sold 60,000
Interest receivable 1,176,608
Dividends receivable 11,225
Variation margin receivable 12,737
Deferred organizational costs 6,706
Other assets 5,151
Total assets 150,415,262
Liabilities
Payable for securities purchased 20,311,945
Payable for collateral on securities on loan 2,150,000
Dividends payable from net investment income 400,155
Accrued custody fees 17,236
Accrued expenses and other liabilities 44,826
Total liabilities 22,924,162
Net Assets $127,491,100
Shares Outstanding (par value $.001) 12,677,652
Net asset value, maximum offering price
and redemption price per share $10.06
Components of Net Assets as of December 31,
1996 were as follows:
Capital stock at par value ($.001) $12,678
Capital stock in excess of par value 127,198,147
Undistributed net investment income 38,756
Accumulated net realized (loss) on investments
and on financial futures contract -412,220
Net unrealized appreciation on investments
and on financial futures contracts 653,739
$127,491,100
See Notes to Financial Statements
TIFF Short-Term Fund / Statement of Assets and Liabilities
December 31, 1996
Assets
Investments in securities, at value (Cost - $102,270,436) $102,225,838
Cash 2,341
Receivable for securities sold 6,332,737
Receivable for fund shares sold 71,021
Interest receivable 611,911
Dividends receivable 55,141
Variation margin receivable 2,098
Deferred organizational costs 7,874
Other assets 30,069
Total assets 109,339,030
Liabilities
Payable for securities purchased 45,791,748
Dividends payable from net investment income 61,742
Accrued expenses and other liabilities 15,290
Total liabilities 45,868,780
Net Assets $63,470,250
Shares Outstanding (par value $.001) 6,354,660
Net asset value, maximum offering price and
redemption price per share $9.99
Components of Net Assets as of December 31,
1996 were as follows:
Capital stock at par value ($.001) $6,355
Capital stock in excess of par value 63,690,462
Overdistribution of net investment income -36,365
Accumulated net realized (loss) on investments
and on financial futures and written options contracts -150,784
Net unrealized depreciation on investments and
on financial futures contracts -39,418
$63,470,250
See Notes to Financial Statements
Statement of Operations
Year Ended December 31, 1996
TIFF Multi- TIFF Int'l TIFF Emerging
Asset Fund Equity Fund Markets Fund
Investment income
Interest $1,567,975 $934,254 $321,595
Dividends (net of withholding
taxes of $72,972 for Multi-Asset,
$370,228 for Int'l Equity Fund, and
$128,556 For Emerging Markets) 2,335,008 2,994,809 1,088,913
Total investment income 3,902,983 3,929,063 1,410,508
Operating expenses
Investment advisory fees 258,763 291,635 125,930
Money Manager fees 591,511 1,177,469 686,582
Custodian fees 286,194 447,773 428,830
Administration fees 73,692 108,505 47,704
Shareholder recordkeeping fees 16,819 20,362 10,620
Audit fees 21,028 27,160 24,110
Legal fees 2,796 4,065 1,758
Insurance expense 7,682 13,439 6,073
Amortization of organizational costs 3,075 4,680 2,012
Registration filing fees 43,269 47,877 26,044
Taxes 22,768 - -
Miscellaneous fees and expenses 5,696 8,620 2,312
Total operating expenses 1,333,293 2,151,585 1,361,975
Investment income, net 2,569,690 1,777,478 48,533
Net realized and unrealized
gain (loss) on investments,
financial futures and written
options contracts, short sales
and foreign currency-related
transactions
Net realized gain on investments 5,034,957 7,353,081 484,257
Net realized (loss) on short sales -405,984 - -
Net realized (loss) on financial
futures and written option
contracts -149,042 -1,146,488 -
Net realized gain (loss) from
foreign currency-related
transations -83,350 697,022 -199,975
Net unrealized appreciation
(depreciation) on invest 11,344,129 19,590,065 -560,742
Net unrealized (depreciation) on
short sales -164,405 - -
Net unrealized (depreciation) on
financial futures contracts -367,804 -912,909 -
Net unrealized appreciation
(depreciation) on translation of
assets and liabilities in foreign
currencies 111,415 418,668 -78,530
Net realized and unrealized
gain (loss) on investments,
financial futures and written
options contracts, short sales
and foreign currency-related
transactions 15,319,916 25,999,439 -354,990
Net increase (decrease) in
net assets resulting from $17,889,606 $27,776,917 -$306,457
See Notes to Financial Statements
Statement of Operations (continued)
Year Ended December 31, 1996
TIFF U.S. TIFF TIFF
Equity Fund Bond Fund Short-Term
Investment income
Interest $820,603 $7,562,050 $4,287,668
Dividends (net of withholding
taxes of $4,570 for U.S. Equity) 2,328,286 132,330 434,850
Total investment income 3,148,889 7,694,380 4,722,518
Operating expenses
Investment advisory fees 211,929 106,495 24,814
Money Manager fees 593,613 134,708 165,404
Custodian fees 167,453 238,895 75,592
Administration fees 80,400 60,665 42,995
Shareholder recordkeeping fees 21,098 16,147 13,652
Audit fees 21,590 24,760 21,836
Legal fees 2,980 2,063 1,023
Insurance expense 9,633 7,150 5,220
Amortization of organizational
costs 3,397 2,568 2,025
Registration filing fees 33,406 19,590 49,151
Miscellaneous fees and expenses 6,385 4,858 3,687
Total operating expenses 1,151,884 617,899 405,399
Waiver of Investment advisory
and a portion of Money Manager
fees - - -104,626
Net expenses 1,151,884 617,899 300,773
Investment income, net 1,997,005 7,076,481 4,421,745
Net realized and unrealized gain
(loss) on investments, financial
futures and written options contracts,
short sales and foreign currency-
related transactions
Net realized gain (loss) on
investments 15,161,401 -537,879 -172,882
Net realized (loss) on short sales -179,920 - -
Net realized gain on financial
futures and written options 1,196,391 201,978 30,503
Net realized gain (loss) from
foreign currency-related transactions -147 134,506 -
Net unrealized appreciation
(depreciation) on investments 9,083,353 -2,658,215 -24,754
Net unrealized appreciation on
short sales 641,909 - -
Net unrealized appreciation
(depreciation) on financial futures
contracts -54,650 115,762 2,567
Net unrealized appreciation on
translation of assets and liabilities
in foreign currencies -111 26,966 -
Net realized and unrealized gain
(loss) on investments, financial
futures and written options contracts,
short sales and foreign currency-
related transactions 25,848,226 -2,716,882 -164,566
Net increase in net assets
resulting from operations $27,845,231 $4,359,599 $4,257,179
See Notes to Financial Statements
Statement of Changes in Net Assets
<TABLE>
<S> <C> <C> <C> <C>
TIFF Multi- TIFF Multi- TIFF Int'l. TIFF Int'l.
Asset Fund Asset Fund Equity Fund Equity Fund
Fiscal Year for the Period Fiscal Year Fiscal Year
Ended from 3/31/95* Ended Ended
12/31/96 to 12/31/95 12/31/96 12/31/95
Increase in net
assets from operations:
Investment income,
net $2,569,690 $1,985,927 $1,777,478 $1,825,563
Net realized gain from
investments, financial
futures and written
options contracts, short
sales and foreign
currency-related
transactions 4,396,581 1,572,945 6,903,615 503,521
Net unrealized
appreciation on
investments, financial
futures contracts,
short sales and on
translation of
assets and
liabilities in
foreign currencies 10,923,335 4,854,842 19,095,824 10,329,048
Net increase in net
assets resulting
from operations 17,889,606 8,413,714 27,776,917 12,658,132
Distributions from:
Investment income,
net -2,730,948 -1,824,669 -1,558,276 -1,823,997
Amounts in excess of
investment income,
net -1,993,303 - - -
Net realized gain on
investments, financial
futures and written
options contracts,
short sales and foreign
currency-related
transactions -5,472,828 -267,895 -4,556,393 -
Total distributions -10,197,079 -2,092,564 -6,114,669 -1,823,997
Capital share
transactions,
net: 117,921,971 86,308,543 42,374,081 55,278,876
Total increase in
net assets 125,614,498 92,629,693 64,036,329 66,113,011
Net assets
Beginning of
period 92,629,703 10 155,421,778 89,308,767
End of period $218,244,201 $92,629,703 $219,458,107 $155,421,778
(Over)/undistributed
net investment
income ($2,103,517) $161,258 ($76,141) $133,197
</TABLE>
See Notes to Financial Statements
Commencement of Operations
Statement of Changes in Net Assets (continued)
<TABLE>
<S> <C> <C> <C> <C>
TIFF Emerging TIFF Emerging TIFF U.S. TIFF U.S.
Markets Fund Markets Fund Equity Fund Equity Fund
Fiscal Year Fiscal Year Fiscal Year Fiscal Year
Ended Ended Ended Ended
12/31/96 12/31/95 12/31/96 12/31/95
Increase (decrease)
in net assets from
operations:
Investment income
(loss), net $48,533 ($80,644) $1,997,005 $1,390,715
Net realized gain
(loss) from investments,
financial futures contracts,
short sales and foreign
currency-related
transactions 284,282 -7,822,954 16,177,725 10,560,653
Net unrealized appreciation
(depreciation) on investments,
financial futures contracts,
short sales and on
translation of assets and
liabilities in foreign
currencies -639,272 3,241,963 9,670,501 12,901,867
Net increase (decrease)
in net assets resulting
from operations -306,457 -4,661,635 27,845,231 24,853,235
Distributions from:
Investment income, net -48,533 - -1,833,750 -1,568,391
Amounts in excess of
investment income, net -405,752 -30,221 -1,124,568 -
Net realized gain on
investments, financial
futures contracts, short
sales and foreign currency-
related transactions - - -12,595,655 -8,397,640
Distributions required for
excise tax purposes in excess
of net realized gain on
investments,financial futures
contracts, short sales and
foreign currency-related
transactions - -3,005 - -
Total distributions -454,285 -33,226 15,553,973 -9,966,031
Capital share
transactions, net: 31,010,927 14,148,260 54,604,505 36,840,480
Total increase in
net assets 30,250,185 9,453,399 66,895,763 51,727,684
Net assets
Beginning of period 59,485,616 50,032,217 109,900,750 58,173,066
End of period $89,735,801 $59,485,616 $176,796,513 $109,900,750
Overdistributed net
investment income ($735,421) $ - ($1,123,603) ($163,255)
</TABLE>
See Notes to the Financial Statements
Statement of Changes in Net Assets (continued)
<TABLE>
<S> <C> <C> <C> <C>
TIFF Bond TIFF Bond TIFF Short- TIFF Short-
Fund Fund Term Fund Term Fund
Fiscal Year Fiscal Year Fiscal Year Fiscal Year
Ended Ended Ended Ended
12/31/96 12/31/95 12/31/96 12/31/95
Increase (decrease) in
net assets from
operationsInvestment
income, net $7,076,481 $4,865,499 $4,421,745 $4,834,479
Net realized gain
(loss) from investments,
financial futures and
written options contracts
and foreign currency-
related transactions -201,395 3,522,563 -142,379 404,088
Net unrealized appreciation
(depreciation) on
investments, financial
futures contracts,
and on translation of assets
and liabilities in foreign
currencies -2,515,487 4,184,859 -22,187 -7,262
Net increase (decrease)
in net assets resulting
from operations 4,359,599 12,572,921 4,257,179 5,231,305
Distributions from:
Investment income, net -7,076,481 -4,956,518 -4,397,643 -4,863,987
Amounts in excess of
investment income, net -46,711 -39,178 -39,033 -15,940
Net realized gain on
investments, financial
futures and written options
contracts and foreign
currency-related
transactions - -3,085,563 - -398,719
Distributions required for
excise tax purposes in
excess of net realized
gain on investments,
financial futures and
written options contracts
and foreign currency-related
transactions - - - -2,363
Total distributions -7,123,192 -8,081,259 -4,436,676 -5,281,009
Capital share
transactions, net 39,183,037 6,908,741 -32,930,172 62,346,199
Total increase (decrease)
in net assets 36,419,444 11,400,403 -33,109,669 62,296,495
Net assets
Beginning of period 91,071,656 79,671,253 96,579,919 34,283,424
End of period $127,491,100 $91,071,656 $63,470,250 $96,579,919
(Over)/undistributed net
investment income $38,756 $ - ($36,365) ($24,102)
</TABLE>
See Notes to the Financial Statements
TIFF Multi-Asset Fund / Financial Highlights
Fiscal Year Period
For a share outstanding Ended from 3/31/95*
throughout each period 12/31/96 to 12/31/95
Net asset value, beginning of period $11.13 $10.00
Income from investment operations
Investment income, net 0.17 0.26
Net realized and unrealized gain on
investments, financial futures and
written options contracts, short
sales and foreign currency-related
transactions 1.45 1.14
Total from investment operations 1.62 1.4
Less distributions from:
Investment income, net -0.18 -0.24
Amounts in excess of investment income, net -0.13 -
Net realized gain on investments, financial
futures and written options contracts, short
sales and foreign currency-related transactions -0.36 -0.03
Total distributions -0.67 -0.27
Net asset value, end of period $12.08 $11.13
Total return 14.72% 13.87%(b)
Ratios/supplemental data
Net assets, end of period $218,244,201 $92,629,703
Ratio of expenses to average net assets 1.03% 0.80%(a)
Ratio of net investment income to
average net assets 1.99% 4.00%(a)
Portfolio turnover 100.66% 97.35%(b)
Average commission rate per share (c) $0.01 n/a
(a) Annualized
(b) Not annualized
(c) Represents total commissions paid on portfolio securities divided by the
total number of shares purchased or sold on which commissions were
charged. This disclosure is required by the SEC beginning in 1996.
n/a Not applicable
* Commencement of Operations
See Notes to the Financial Statements
TIFF International Equity Fund / Financial Highlights
Fiscal Year Fiscal Year Period
For a share outstanding Ended Ended from 5/31/94 *
throughout each period 12/31/96 12/31/95 to 12/31/94
Net asset value, beginning of period $10.82 $9.98 $10.00
Income from investment operations
Investment income, net + 0.1 0.15 0.05
Net realized and unrealized gain
on investments, financial futures
and foreign currency-related
transactions 1.62 0.83 0.06
Total from investment operations 1.72 0.98 0.11
Less distributions from:
Investment income, net -0.09 -0.14 -0.04
Amounts in excess of investment
income, net - - -0.01
Net realized gain on investments,
financial futures contracts and
foreign currency-related transactions -0.26 - -
Amounts in excess of net gain on
investments, financial futures
contracts and foreign currency-
related transactions - - -0.08
Total distributions -0.35 -0.14 -0.13
Net asset value, end of period $12.19 $10.82 $9.98
Total return 15.94% 9.85% 0.98%(b)(c)
Ratios/supplemental data
Net assets, end of period $219,458,107 $155,421,778 $89,308,767
Ratio of expenses to average
net assets 1.11% 1.05% 1.08%(a)
Ratio of expenses to average
net assets before expense waivers 1.11% 1.05% 1.27%(a)
Ratio of net investment income
to average net assets 0.91% 1.48% 0.95%(a)
Portfolio turnover 32.40% 32.91% 14.71%(b)
+ Net of waivers which amounted to: n/a n/a $0.01
Average commission rate per share (d) $0.01 n/a n/a
(a) Annualized
(b) Not annualized
(c) Total return would have been lower had certain expenses not been waived
or reimbursed.
(d) Represents total commissions paid on portfolio securities divided by the
total number of shares purchased or sold on which commissions were
charged. This disclosure is required by the SEC beginning in 1996.
* Commencement of Operations
See Notes to the Financial Statements
TIFF Emerging Markets Fund / Financial Highlights
Fiscal Year Fiscal Year Period
For a share outstanding Ended Ended from 5/31/94 *
throughout each period 12/31/96 12/31/95 to 12/31/94
Net asset value, beginning
of period $8.45 $9.24 $10.00
Income from investment operations
Investment income, net + 0.01 - 0.01
Net realized and unrealized
gain (loss) on investments, and
foreign-currency related
transactions 0.21 -0.79 -0.71
Total from investment
operations 0.22 -0.79 -0.7
Less distributions from:
Investment income, net -0.04 0# -0.01
Amounts in excess of investment
income, net 0# 0# -
Net realized gain on investments,
and foreign currency-related
transactions 0# - -
Amounts in excess of net gain
on investments, and foreign
currency-related transactions - 0# -0.5
Total distributions -0.04 0# -0.06
Net asset value, end of period $8.63 $8.45 $9.24
Total return 2.51% -8.39% -6.97%(b)(c)
Ratios/supplemental data
Net assets, end of period $89,735,801 $59,485,616 $50,032,217
Ratio of expenses to
average net assets 1.62% 2.35% 1.83%(a)
Ratio of expenses to
average net assets before
expense waivers 1.62% 2.35% 2.25%(a)
Ratio of net investment
income to average net assets 0.06% -0.15% 0.40%(a)
Portfolio turnover 79.96% 104.30% 26.37%(b)
Net of waivers which amounted to: n/a n/a $0.01
Average commission rate
per share (d) $0.01 n/a n/a
(a) Annualized
(b) Not annualized
(c) Total return would have been lower had certain expenses not been waived
or reimbursed
(d) Represents total commissions paid on portfolio securities divided by the
total number of shares purchased or sold on which commissions were
charged. This disclosure is required by the SEC beginning in 1996.
n/a Not applicable
# Rounds to less than $0.01
* Commencement of Operations
See Notes to the Financial Statements
TIFF U.S. Equity Fund / Financial Highlights
Fiscal Year Fiscal Year Period
For a share outstanding Ended Ended from 5/31/94 *
throughout each period 12/31/96 12/31/95 to 12/31/94
Net asset value, beginning
of period $12.36 $10.02 $10.00
Income from investment operations
Investment income, net + 0.2 0.2 0.15
Net realized and unrealized
gain on investments, financial
futures contracts, short sales
and foreign currency-related
transactions 2.52 3.37 0.19
Total from investment operations 2.72 3.57 0.34
Less distributions from:
Investment income, net -0.17 -0.22 -0.15
Amounts in excess of investment
income, net -0.1 - 0#
Net realized gain on investments,
financial futures contracts, short
sales and foreign currency-related
transactions -1.07 -1.01 -0.01
Amounts in excess of net gain
on investments, financial futures
contracts, short sales
and foreign currency-related
transactions - - -0.16
Total distributions -1.34 -1.23 -0.32
Net asset value, end of period $13.74 $12.36 $10.02
Total return 21.91% 36.02% 3.49%(b)(c)
Ratios/supplemental data
Net assets, end of period $176,796,513 $109,900,750 $58,173,066
Ratio of expenses to average
net assets 0.82% 0.93% 0.85%(a)
Ratio of expenses to average
net assets before expense waivers 0.82% 0.93% 1.06%(a)
Ratio of net investment income
to average net assets 1.41% 1.67% 2.52%(a)
Portfolio turnover 105.18% 109.89% 44.59%(b)
Net of waivers which amounted to: n/a n/a $0.01
Average commission rate per
share (d) $0.02 n/a n/a
(a) Annualized
(b) Not annualized
(c) Total return would have been lower had certain expenses not been waived
or reimbursed.
(d) Represents total commissions paid on portfolio securities divided by the
total number of shares purchased or sold on which commissions were
charged. This disclosure is required by the SEC beginning in 1996.
n/a Not applicable
# Rounds to less than $0.01
Commencement of Operations
See Notes to the Financial Statements
TIFF Bond Fund / Financial Highlights
Fiscal Year Fiscal Year Period
For a share outstanding Ended Ended from 5/31/94 *
throughout each period 12/31/96 12/31/95 to 12/31/94
Net asset value, beginning
of period $10.33 $9.68 $10.00
Income from investment operations
Investment income, net + 0.67 0.67 0.36
Net realized and unrealized gain
(loss) on investments, financial
futures contracts and foreign
currency-related transactions -0.27 1.01 -0.32
Total from investment operations 0.4 1.68 0.04
Less distributions from:
Investment income, net -0.67 -0.66 -0.36
Amounts in excess of investment
income, net 0# -0.01 0#
Net realized gain on investments,
financial futures contracts and
foreign currency-related transactions - -0.36 -
Amounts in excess of net gain on
investments, financial futures
contracts and foreign
currency-related transactions - - -
Total distributions -0.67 -1.03 -0.36
Net asset value, end of period $10.06 $10.33 $9.68
Total return 3.75% 18.07% 0.46%(b)(c)
Ratios/supplemental data
Net assets, end of period $127,491,100 $91,071,656 $79,671,253
Ratio of expenses to average
net assets 0.58% 0.96% 0.62%(a)
Ratio of expenses to average
net assets before expense waivers 0.58% 0.96% 0.94%(a)
Ratio of net investment income
to average net assets 6.64% 6.34% 6.37%(a)
Portfolio turnover 332.21% 406.24% 162.06%(b)
Net of waivers which amounted to: n/a n/a $0.02
(a) Annualized
(b) Not annualized
(c) Total return would have been lower had certain expenses not been waived
or reimbursed.
n/a Not applicable
# Rounds to less than $0.01
Commencement of Operations
See Notes to the Financial Statements
TIFF Short-Term Fund / Financial Highlights
Fiscal year Fiscal Year Period
For a share outstanding Ended Ended from 5/31/94 *
throughout each period 12/31/96 12/31/95 to 12/31/94
Net asset value,
beginning of period $10.01 $10.00 $10.00
Income from investment
operations
Investment income, net + 0.54 0.58 0.28
Net realized and unrealized
gain (loss) on investments,
and financial futures and
written options contracts -0.02 0.05 0.02
Total from investment
operations 0.52 0.63 0.3
Less distributions from:
Investment income, net -0.54 -0.58 -0.28
Amounts in excess of investment
income, net 0# 0# 0#
Net realized gain on investments,
and financial futures and written
options contracts - -0.04 -0.01
Amounts in excess of net gain on
investments, and financial futures
and written options contracts - 0# -0.01
Total distributions -0.54 -0.62 -0.3
Net asset value, end of period $9.99 $10.01 $10.00
Total return (c) 5.28% 6.43% 3.10%(b)
Ratios/supplemental data
Net assets, end of period $63,470,250 $96,579,919 $34,283,424
Ratio of expenses to
average net assets 0.36% 0.42% 0.40%(a)
Ratio of expenses to
average net assets before
expense waivers 0.47% 0.54% 1.72%(a)
Ratio of net investment
income to average net assets 5.35% 5.67% 4.98%(a)
Net of waivers which
amounted to: $0.02 $0.01 $0.08
(a) Annualized
(b) Not annualized
(c) Total return would have been lower had certain expenses not been waived
or reimbursed
n/a Not applicable
# Rounds to less than $0.01
Commencement of Operations
See Notes to the Financial Statements
Notes to Financial Statements
December 31, 1996
1. Organization
TIFF Investment Program, Inc. ("TIP") was organized as a Maryland corporation
on December 23, 1993 and is registered under the Investment Company Act of
1940, as amended, as an open-end, management investment company. TIP
currently has six active Funds: TIFF Multi-Asset Fund ("Multi-Asset"), TIFF
International Equity Fund ("International Equity"), TIFF Emerging Markets Fund
("Emerging Markets"), TIFF U.S. Equity Fund ("U.S. Equity"), TIFF Bond Fund
("Bond"), and TIFF Short-Term Fund ("Short-Term"). The costs incurred by TIP
in connection with the organization and initial registration of shares are
being amortized on a straight-line basis over a sixty-month period.
Investment Objectives
Fund Investment Objective
Multi-Asset Provide a growing stream of current income and
appreciation of principal that at least offsets inflation.
International Equity Provide a growing stream of current income and
appreciation of principal that at least offsets inflation by investing in
common stocks of companies domiciled in at least ten different countries.
Emerging Markets Provide appreciation of principal that at least
offsets inflation by investing in common stocks of companies domiciled in
emerging market countries.
U.S. Equity Provide a growing stream of current income and
appreciation of principal that at least offsets inflation by investing in
common stocks of U.S. domiciled companies.
Bond Provide: (1) a hedge against deflation; and (2) a
high rate of current income, subject to restrictions designed to ensure
liquidity and control exposure to interest rate and credit risk.
Short-Term Provide a high rate of current income, subject to
restrictions designed to control share price volatility.
2. Summary of Significant Accounting Policies
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reported period.
Actual results could differ from those estimates.
Securities
Securities transactions are recorded on a trade date basis. Interest income
and expenses are recorded on an accrual basis. The Funds amortize discount or
premium using the yield-to-maturity method on a daily basis. Dividend income
is recorded on the ex-dividend date, except certain dividends from foreign
securities which are recorded as soon as the Funds are notified. The Funds use
the specific identification method for determining gain or loss on sales of
securities.
Income Tax
There is no provision for Federal income or excise tax since each Fund has
elected to be taxed as a regulated investment company ("RIC") and intends to
comply with the requirements of Subchapter M of the Internal Revenue Code
applicable to RICs and to distribute all of its taxable income. Net realized
losses attributable to security transactions after October 31 are treated as
arising on the first day of a Fund's next fiscal year if so elected by the
Fund. The Funds may be subject to foreign taxes on income, gains on
investments or currency repatriation. The Funds accrue such taxes as
applicable.
Valuation
Securities traded on an exchange are valued at their last sales price on that
exchange. Securities for which over-the-counter market quotations are
available are valued at the latest bid price. Time deposits, repurchase
agreements and reverse repurchase agreements are generally valued at their
cost plus accrued interest. Securities purchased with sixty days or less
remaining to maturity are valued at amortized cost which approximates fair
value.
Securities for which market quotations are not readily available are valued at
their fair value as determined in good faith under consistently applied
procedures established by TIP's Board of Directors. Such procedures use
fundamental valuation methods which include, but are not limited to, the
analysis of: the effect of any restrictions on the resale of the security,
industry analysis and trends, significant changes in the issuer's financial
position, and any other event which could have a significant impact on the
value of the security. Determination of fair value involves subjective
judgment, as the actual market value of a particular security can be
established only by negotiations between the parties in a sales transaction.
At December 31, 1996, 23% of the investments in securities held by Multi-Asset
were valued based on prices provided by the principal market maker. Such
prices may differ from the value that would have been used had a broader
market for the securities existed.
Expenses
Expenses directly attributed to each Fund are charged to that Fund's
operations; expenses which are applicable to all Funds are allocated among
them based on their respective average daily net assets. In the Short-Term
Fund, the adviser waived $24,814, and the Fund's Money Manager waived $79,812
in fees during the 12-month period ended December 31, 1996.
Dividends to Shareholders
It is the policy of all Funds to declare dividends according to the following
schedule:
Fund Dividends from Net
Investment Income
Capital Gains Distributions
Multi-Asset Semi-annually Annually
International Equity Semi-annually Annually
Emerging Markets Annually Annually
U.S. Equity Quarterly Annually
Bond Daily Annually
Short-Term Daily Annually
Dividends from net short-term capital gains and net long-term capital gains of
each Fund, if any, are normally declared and paid annually, but each Fund may
make distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code. To the extent that a net realized
capital gain can be reduced by a capital loss carryover, such gain will not be
distributed.
The classification of income and capital gains distributions is determined in
accordance with income tax regulations. Permanent book and tax differences
relating to shareholder distributions will result in reclassifications to
paid-in capital and may affect net investment income per share. Undistributed
net investment income, accumulated net investment loss, or distributions in
excess of net investment income may include temporary book and tax differences
which will reverse in a subsequent period.
Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked prices of such currencies against the U.S.
dollar.
Purchases and sales of portfolio securities are translated at the rates of
exchange prevailing when such securities were acquired or sold.
Income and withholding taxes are translated at exchange rates prevailing when
accrued. Unrealized net currency gains and losses from valuing foreign
currency-denominated assets and liabilities at period-end exchange rates are
reflected as a component of net unrealized appreciation (depreciation) on
translation of assets and liabilities in foreign currencies.
The accounting records of the Funds are maintained in U.S. dollars. Net
realized gains and losses on foreign currency-related transactions represent
net gains and losses from sales and maturities of forward currency contracts,
disposition of foreign currencies, currency gains and losses realized between
the trade and settlement dates on securities transactions and the difference
between the amount of net investment income accrued and the U.S. dollar amount
actually received.
3. Investment Advisory Agreement and Money Manager Agreements
TIP's Board of Directors has approved investment advisory agreements with
Foundation Advisers, Inc. ("FAI"). Each Fund pays FAI a maximum monthly fee
calculated by applying the following annual basis point ("bp") rates to such
Fund's average daily net assets for the month (100 bp equals 1.00%):
Multi- Int'l Emerging U.S. Short-
Assets Asset Equity Markets Equity Bond Term
On the first $500
million 20 bp 15 bp 15 bp 15 bp 10 bp 3 bp
On the next $500
million 18 bp 13 bp 13 bp 13 bp 8 bp 3 bp
On the next $500
million 15 bp 11 bp 11 bp 11 bp 6 bp 2 bp
On the next $500
million 13 bp 9 bp 9 bp 9 bp 5 bp 2 bp
On the next $500
million 11 bp 7 bp 7 bp 7 bp 4 bp 1 bp
On the remainder
(<$2.5 billion) 9 bp 5 bp 5 bp 5 bp 3 bp 1 bp
TIP's Board of Directors has approved Money Manager agreements with each of
the Money Managers. Money Managers will receive annual management fees equal
to a stated percentage of the value of Fund assets under management that is
adjusted upwards or downwards, proportionately, to reflect actual investment
performance over the applicable time period relative to a chosen benchmark
rate of return. Certain Money Managers, however, will receive management fees
equal to a flat percentage per annum of assets under management with a single
rate or on a descending scale.
Appendix A to the Notes to the Financial Statements identifies Money Managers
who provide services to the Funds and the minimum and maximum fee rate. Unless
otherwise indicated, the management fee received by a Money Manager varies
based on the Money Manager's investment performance.
Pursuant to its Administration Agreement, AMT Capital Services, two employees
of which serve as officers of TIP, earn a fee for providing fund
administration services to TIP according to the following schedule: 0.07% of
the average daily net assets of TIP for the first $300 million, 0.05% for the
next $2.7 billion, 0.04% for the next $2.0 billion, and 0.03% for the average
daily net assets over $5.0 billion under management. In addition, TIP has
agreed to pay AMT Capital an incentive fee not to exceed 0.02% for reducing
the expense ratio of one or more Funds of TIP below certain levels specified
for each Fund.
4. Investment Transactions
Purchase cost and proceeds from sales of investment securities, other than
short-term investments, for the period from January 1, 1996 to December 31,
1996 were as follows:
Purchases Purchases Sales Sales
Fund U.S. Government Other Securities U.S. Govern- Other
ment Securities
Multi-Asset $ 29,954,734 $ 187,536,835 $ 23,601,820 $ 105,502,345
International
Equity - 91,974,478 - 57,095,519
Emerging
Markets - 92,978,443 - 61,751,639
U.S. Equity - 165,525,549 - 131,290,893
Bond 285,695,953 115,765,647 249,185,853 114,391,119
Short-Term 291,832,425 54,629,051 264,696,333 52,622,034
Appendix E to the Notes to the Financial Statements details each Fund's
investment transactions with affiliates.
Forward Currency Contracts
The Funds may enter into forward currency contracts in connection with
settling planned purchases or sales of securities or to hedge the currency
exposure associated with some or all of the Fund's portfolio securities. A
forward currency contract is an agreement between two parties to buy or sell a
currency at a set price on a future date. The market value of a forward
currency contract fluctuates with changes in forward currency exchange rates.
Forward currency contracts are marked to market daily and the change in value
is recorded by the Fund as an unrealized gain or loss. When a forward
currency contract is extinguished through delivery, the Fund records a
realized gain or loss on foreign currency related transactions equal to the
difference between the value of the contract at the time it was opened and the
value of the contract at the time it was extinguished. These contracts may
involve market risk in excess of the unrealized gain or loss reflected in the
Fund's Statement of Assets and Liabilities. In addition, the Fund could be
exposed to risk if the counterparties are unable to meet the terms of the
contracts or if the value of the currency changes unfavorably to the U.S.
dollar.
Appendix B to the Notes to the Financial Statements details each Fund's
outstanding forward currency contracts at December 31, 1996.
Financial Futures Contracts
The Funds are engaged in trading financial futures contracts. The Funds are
exposed to market risk as a result of changes in the value of the underlying
financial instruments. Investments in financial futures require a Fund to
"mark to market" on a daily basis, which reflects the change in the market
value of the contract at the close of each day's trading. Accordingly,
variation margin payments are made or received to reflect daily unrealized
gains or losses. When the contracts are closed,
the Fund recognizes a realized gain or loss. These investments require
initial margin deposits which consist of cash or cash equivalents, equal to
approximately 5-10% of the contract amount.
Each Fund may use futures contracts to manage its exposure to the stock and
bond markets and to fluctuations in currency values. Futures contracts tend
to increase or decrease the Funds' exposure to the underlying instrument or
hedge other
Fund investments. Futures contracts involve, to varying degrees, risk of loss
in excess of the variation margin disclosed in the Statement of Assets and
Liabilities. Losses may arise from the changes in the value of the underlying
instrument, if there is an illiquid secondary market for the contracts, or if
counterparties do not perform under the contract terms. Futures contracts are
valued at the settlement price established each day by the board of trade or
exchange on which they are traded.
At December 31, 1996, the Funds segregated investments with the following
values in connection with their financial futures:
Segregated
Fund Assets
Multi-Asset $ 347,560
International Equity 2,123,875
Emerging Markets -
U.S. Equity 865,941
Bond 107,699
Short-Term 24,877
Appendix C of the Notes to the Financial Statements details each Fund's open
futures contracts at December 31, 1996.
Short Selling
The Funds may sell securities they do not own in anticipation of a decline in
the market price of such securities or in order to hedge portfolio positions.
The Fund will generally borrow the security sold in order to make delivery to
the buyer. Upon entering into a short position, the Fund records the proceeds
as a Deposit with Broker in its Statement of Assets and Liabilities and
establishes an offsetting liability for the securities sold under the short
sale agreement. The cash is retained by the Fund's broker as collateral for
the short position. The liability is marked to market while it remains open
to reflect the current settlement obligation. Until the security is replaced,
the Fund is required to pay the lender any dividend or interest earned. Such
payments are recorded as expenses to the Fund. When a closing purchase is
entered into by the Fund, a gain or loss equal to the difference between the
proceeds originally received and the purchase cost is realized.
The Fund, in "short selling", sells borrowed securities which must at some
date be repurchased and returned to the lender. If the market value of
securities sold short increases, the Fund may realize losses upon repurchase
in amounts which may exceed the liability on the Statement of Assets and
Liabilities. Further, in unusual circumstances, the Fund may be unable to
repurchase securities to close its short position except at prices above those
previously quoted in the market.
Options
When a Fund purchases an option, an amount equal to the premium paid by the
Fund is included in the Fund's Statement of Assets and Liabilities as an
investment and subsequently marked to market to reflect the current market
value of the option purchased. The current market value of a purchased option
is the last sale price on the market on which it is principally traded. If
the purchased option expires, the Fund realizes a loss in the amount of the
premium originally paid. If the Fund enters into a closing sale transaction,
it realizes a gain or loss, depending on whether the proceeds from the sale
are greater or less than the cost of the option.
If the Fund exercises a call option, the cost of the securities acquired by
exercising the call is increased by the premium paid to buy the call. If the
Fund exercises a put option, it realizes a gain or loss from the sale of the
underlying security and the proceeds from such sale are decreased by the
premium originally paid. The risk associated with purchasing options is
limited to the premium originally paid.
When a Fund writes an option, an amount equal to the premium received by the
Fund is included in the Fund's Statement of Assets and Liabilities as a
liability and subsequently marked to market to reflect the current value of
the option written. The current market value of a written option is the last
sale price on the market on which it is principally traded. If the written
option expires, the Fund realizes a gain in the amount of the premium
received. If the Fund enters into a closing transaction, it recognizes a gain
or loss, depending on whether the cost of the purchase is less than or greater
than the premium received.
If a written call option is exercised, the proceeds from the security sold are
increased by the premium received. If a put option is exercised, the cost
basis of the security purchased by the Fund is reduced by the premium
received. The Fund as a writer of an option has no control over whether the
underlying securities may be sold (call) or purchased (put) and as a
result bears the market risk of an unfavorable change in the price of the
security underlying the written option. Written options present risk of loss
in excess of amounts shown on the Statement of Assets and Liabilities. See
Note 10 for detail of all option contracts written during the year.
Each Fund may use options contracts to manage its exposure to the stock and
bond markets and to fluctuations in interest rates and currency values.
Options contracts tend to increase or decrease the Fund's exposure to the
underlying instrument, or hedge other Fund investments.
5. Repurchase and Reverse Repurchase Agreements
Each Fund may enter into repurchase agreements under which a bank or
securities firm that is a primary or reporting dealer in U.S. Government
securities agrees, upon entering into a contract, to sell U.S. Government
securities to a Fund and repurchase such securities from such Fund at a
mutually agreed upon price and date.
Each Fund is also permitted to enter into reverse repurchase agreements under
which a primary or reporting dealer in U.S. Government securities purchases
U.S. Government securities from a Fund and such Fund agrees to repurchase the
securities at an agreed upon price and date. Each Fund will engage in
repurchase and reverse repurchase transactions with parties selected on the
basis of such party's creditworthiness. The collateral on repurchase
agreements must have an aggregate market value greater than or equal to the
repurchase price plus accrued interest at all times. If the value of the
underlying
securities falls below the value of the repurchase price plus accrued
interest, the Fund will require the seller to deposit additional collateral by
the next business day. If the request for additional collateral is not met,
or the seller defaults on its repurchase obligation, such Fund maintains the
right to sell the underlying securities at market value and may claim any
resulting loss against the seller. However, in the event of default or
bankruptcy by the counterparty to the agreement, realization and/or retention
of the collateral may be subject to legal proceedings.
6. Capital Share Transactions
As of December 31, 1996, each Fund has 500,000,000 shares of $0.001 par value
capital stock authorized. The Funds may charge entrance or exit fees on
subscriptions or redemptions in an amount not to exceed 1.00% of the
transaction amount. Such fees are retained by the Funds and included in
proceeds from shares sold or deducted from distributions for redemptions.
Transactions in capital stock are listed in Appendix D to the Notes to the
Financial Statements.
7. Security Lending
The Funds receive securities issued or guaranteed by the U.S. Government or
its agencies or cash as collateral against the loaned securities, in an amount
at least equal to 100% of the current market value of the loaned securities.
At December 31, 1996, all collateral received was cash and was subsequently
invested in cash equivalents.
As of December 31, 1996, the value of the loaned securities outstanding and
the related collateral was as follows:
Value of Loaned
Securities Collateral
Multi-Asset $ 982,603 $ 1,035,661
International Equity 10,694,901 11,797,825
Emerging Markets 3,946,939 4,424,396
U.S. Equity 4,111,950 4,213,800
Bond 2,117,572 2,150,000
Short-Term - -
8. Delayed Delivery Transactions
The Funds may purchase or sell securities on a when-issued or forward
commitment basis. Payment and delivery may take place a month or more after
the date of the transaction. The price of the underlying securities and the
date when the securities will be delivered and paid for are fixed at the time
the transaction is negotiated. The Funds identify securities as segregated in
its custodial records with a value at least equal to the amount of the
purchase commitment.
Bond enters into "TBA" (to be announced) purchase commitments to purchase
securities for a fixed unit price at a future date beyond customary settlement
time. Although the unit price has been established, the principal value has
not been finalized. However, the amount of the commitment will not fluctuate
more than 2.0% from the principal amount. TBA purchase commitments may be
considered securities in themselves, and involve a risk of loss if the value
of the security to be purchased declines prior to the settlement date, which
risk is in addition to the risk of decline in the value of the Fund's other
assets. Unsettled TBA purchase commitments are valued at the current market
value of the underlying securities, generally according to the procedures
described under "Valuation" above. Risks may arise upon entering into these
contracts from the potential inability of counterparties to meet the terms of
their contracts.
Although the Fund will generally enter into TBA purchase commitments with the
intention of acquiring securities for its portfolio, the Fund may dispose of a
commitment prior to settlement if the Fund's Money Manager deems it
appropriate to do so.
Bond enters into TBA sale commitments to hedge its portfolio or to sell
mortgage-backed securities it owns under delayed delivery arrangements.
Proceeds of TBA sale commitments are not received until the contractual
settlement date. During the time a TBA sale commitment is outstanding,
equivalent deliverable securities, or an offsetting TBA purchase commitment
(deliverable on or before the sale commitment date), are held as "cover" for
the transaction.
Unsettled TBA sale commitments are valued at the current market value of the
underlying securities, generally according to the procedures described under
"Valuation" above. The contract is marked to market daily and the change in
market value is recorded by the Fund as an unrealized gain or loss. If the
TBA sale commitment is closed through the acquisition of an offsetting
purchase commitment, the Fund realizes a gain or loss on the commitment
without regard to any unrealized gain or loss on the underlying security. If
the Fund delivers securities under the commitment, the Fund realizes a gain or
loss from the sale of the securities upon the unit price established at the
date the commitment was entered into.
9. Credit Risk in the Emerging Markets
Emerging Markets' relatively large investment in countries with limited or
developing capital markets may involve greater risks than investments in more
developed markets and the prices of such investments may be volatile. While
the Fund's investment in emerging markets debt is limited, the yields of these
obligations reflect perceived credit risk. The consequences of political,
social, or economic changes in these markets may have disruptive effects on
the market prices of the Fund's investment and the income they generate, as
well as the Fund's ability to repatriate such amounts.
10. Options
During the period ended December 31, 1996, the following option contracts were
written:
Multi-Asset Fund Short-Term Fun
# of Premium # of Premium
Contracts Contracts
Balance as of
December, 31, 1995 0 $ 0 0 $ 0
Written 336 75,600 48 6,150
Closed (336) (75,600) (48) (6,150)
Balance as of
December 31, 1996 0 $ 0 0 $ 0
11. Principal Members
The schedule below shows the number of Members each owning 10% or more of a
Fund and the total percentage of the Fund held by such Members.
Number % of Fund Held
Multi-Asset Fund 2 27
International Equity Fund 2 41
Emerging Markets Fund 3 54
U.S. Equity Fund 2 32
Bond Fund 1 20
Short-Term Fund 3 72
Appendix A
Money Manager Fee as Percent of Assets Managed
Minimum Maximum
TIFF Multi-Asset Fund
Bee & Associates, Inc. 0.15 2.00
A. Gary Shilling & Co., Inc. 0.15 2.00
Standard Pacific Capital LLC 0.15 2.00
TCW Funds Management, Inc. 0.50* 0.75
Wellington Management Company 0.35* 0.45
TIFF International Equity Fund
Bee & Associates, Inc. 0.15 2.00
Delaware International Advisers, Ltd. 0.30* 0.50
Harding, Loevner Management, L.P. 0.10 1.50
Marathon Asset Management, Ltd. 0.15 1.60
Mercury Asset Management International, Ltd. 0.50** 0.50
TIFF Emerging Markets Fund
Blairlogie Capital Management 0.60* 0.95
Emerging Markets Management 1.00* 1.25
Lazard Freres Asset Management 0.50** 0.50
TIFF U.S. Equity Fund
Jacobs Levy Equity Management 0.15 1.25
Martingale Asset Management, L.P. 0.05* 0.10
Palo Alto Investors 0.10 2.00
Westport Asset Management, Inc. 0.15 2.00
TIFF Bond Fund
Atlantic Asset Management Partners, Inc. 0.10 0.60
Fischer Francis Trees & Watts, Inc. 0.10 0.80
Seix Investment Advisors, Inc. 0.10 0.80
Smith Breeden Associates, Inc. 0.10 0.85
TIFF Short-Term Fund
Fischer Francis Trees & Watts, Inc. 0.15* 0.20
* Money Manager receives a fee that does
not include performance component.
** Money Manager receives a straight asset-based fee regardless of
the amount of assets managed for TIP (i.e., there are neither
"breakpoints" in the fee agreement nor a performance component).
Appendix B
Open Forward Currency Contracts as of December 31, 1996
Unrealized
Contract Cost/ Current Appreciation
Amount Proceeds Value (Depreciation)
Multi-Asset Fund
Buy Contracts
8,530,107 Belgian Franc expiring
2/20/97 $ 270,951 $ 269,601 $(1,350)
15,781 Finnish Markka expiring
1/22/97 3,424 3,435 11
21,270,352 French Franc expiring
1/22/97 4,105,138 4,103,148 (1,990)
98,067 German Deutsche Mark
expiring 2/18/97 63,983 63,884 (99)
73,378 Great British Pound
expiring 2/7/97 121,642 125,599 3,957
399,173 Irish Punt expiring
1/2/97 665,192 676,779 11,587
467,721,726 Italian Lira expiring
2/20/97 304,993 307,273 2,280
5,265,430 Norwegian Krone expiring
1/17/97 818,306 826,130 7,824
Sell Contracts
1,224,192 Austrian Schilling expiring
3/14/97 111,452 113,474 (2,022)
13,081,574 Austrian Schilling expiring
3/19/97 1,205,675 1,212,930 (7,255)
13,547,114 Belgian Franc expiring
2/20/97 436,524 428,168 8,356
698,895 Finnish Markka expiring
1/22/97 152,713 152,114 599
21,270,351 French Franc expiring
1/22/97 4,109,987 4,103,148 6,839
13,146,112 French Franc expiring
3/27/97 2,549,524 2,544,839 4,685
98,067 German Deutsche Mark
expiring 2/18/97 64,165 63,884 281
88,581 Great British Pound
expiring 1/2/97 147,948 151,717 (3,769)
642,965 Great British Pound
expiring 2/7/97 1,056,060 1,100,536 (44,476)
4,936,525 Hong Kong Dollar
expiring 3/19/97 637,794 638,247 (453)
399,172 Irish Punt expiring
1/2/97 645,192 676,778 (31,586)
412,142 Irish Punt expiring
4/2/97 686,188 697,541 (11,353)
2,363,171,249 Italian Lira
expiring 2/20/97 1,539,764 1,552,503 (12,739)
8,949,508 Norwegian Krone
expiring 1/17/97 1,386,531 1,404,151 (17,620)
12,594,237 Portuguese Escudo
expiring 1/8/97 80,930 80,725 205
12,713,500 Swedish Krona expiring
1/19/97 1,863,111 1,870,562 (7,451)
4,330,713 Swedish Krona expiring
3/18/97 635,934 637,162 (1,228)
Total $ (96,767)
International Equity Fund
Buy Contracts
22,892,797 Japanese Yen expiring
1/7/97 $ 197,199 $ 197,822 $ 623
Sell Contracts
14,069,250 Belgian Franc expiring
2/28/97 450,000 444,904 5,096
4,623,570 French Franc expiring
2/28/97 900,000 893,759 6,241
1,666,667 French Franc expiring
3/19/97 320,667 322,499 (1,832)
1,364,400 German Deutsche Mark
expiring 2/28/97 900,000 889,340 10,660
1,436,304 Hong Kong Dollar
expiring 3/19/97 185,569 185,679 (110)
43,603,262 Japanese Yen expiring
1/7/97 375,437 376,786 (1,349)
252,800,000 Japanese Yen expiring
1/21/97 2,500,000 2,189,262 310,738
154,050,000 Japanese Yen expiring
2/3/97 1,500,000 1,336,687 163,313
125,328,000 Japanese Yen expiring
2/28/97 1,120,000 1,091,214 28,786
1,531,080 Netherlands Guilder
expiring 2/28/97 900,000 889,691 10,309
1,030,560 Netherlands Guilder
expiring 3/19/97 597,080 599,553 (2,473)
958,750 Swedish Krona expiring
1/2/97 139,201 140,642 (1,441)
14,109,160 Swedish Krona
expiring 3/19/97 2,067,640 2,075,908 (8,268)
Total $ 520,293
Emerging Markets Fund
Buy Contracts
65,258 Polish Zloty expiring 1/2/97 $ 22,814 $ 22,826 $ 12
Sell Contracts
10,936,807 Greek Drachma expiring
1/2/97 44,168 44,376 (208)
581,183 Hong Kong Dollar expiring
1/2/97 75,127 75,142 (15)
295,706 Hong Kong Dollar expiring
1/3/97 38,234 38,232 2
25,533,750 Hong Kong Dollar expiring
3/19/97 3,298,933 3,301,280 (2,347)
Total $ (2,556)
Appendix C
Open Futures Contracts as of December 31, 1996
Aggregate Aggregate Unrealized
Contract Face Value Current Appreciation
Amount When Opened Face Value (Depreciation)
Multi-Asset Fund
Long Futures Contracts
17 Mar `97 10 yr. U.S. Treasury
Notes $ 1,888,063 $ 1,855,125 $ (32,938)
48 Mar `97 5 Yr. U.S. Treasury
Notes 5,145,063 5,116,500 (28,563)
20 Mar '97 German Mark 1,634,500 1,632,750 (1,750)
22 Mar `97 Japanese Yen 2,467,850 2,396,075 (71,775)
24 Mar '97 SMX Nikkei 2,148,295 2,003,798 (144,497)
16 Mar '97 All Ords (Australia) 767,647 778,697 11,050
Short Futures Contracts
15 Mar `97 Swiss Franc (1,444,875) (1,410,000) 34,875
5 Mar '97 S&P 500 (1,844,875) (1,861,250) (16,375)
Total $ 249,973)
International Equity Fund
Long Futures Contracts
115 Mar '97 Japanese Yen $ 12,900,127 $ 12,524,938 $ (375,189)
415 Mar '97 OSK Nikkei Index 10,724,713 10,030,211 (694,502)
Short Futures Contracts
60 Mar '97 Swiss Franc (5,784,002) (5,640,000) 144,002
Total $ (925,689)
U.S. Equity Fund
Long Futures Contracts
64 Mar '97 S&P 500 $ 23,708,500 $ 23,824,000 $ 115,500
Bond Fund
Long Futures Contracts
26 Mar '97 5 Year U.S. Treasury
Notes $ 2,790,268 $ 2,771,439 $ (18,829)
Short Futures Contracts
28 Mar '97 10 Yr Treasury Notes (3,086,688) (3,055,500) 31,188
4 Mar '97 Euro Dollars (943,800) (944,400) (600)
4 Jun '97 Euro Dollars (944,075) (942,800) 1,275
3 Sept '97 Euro Dollars (706,425) (705,975) 450
3 Dec '97 Euro Dollars (707,625) (704,625) 3,000
3 Mar '98 Euro Dollars (703,875) (704,025) (150)
Total $ 16,334
Short-Term Fund
Short Futures Contracts
1 Sept '97 Euro Dollars $ (235,867) $ (235,325) $ 542
2 Dec '97 Euro Dollars (470,982) (469,750) 1,232
2 Mar '98 Euro Dollars (470,682) (469,350) 1,332
2 Jun '98 Euro Dollars (470,182) (468,800) 1,382
1 Sept '98 Euro Dollars (234,892) (234,200) 692
Total $ 5,180
Appendix D
Capital Share Transactions
Year Ended 12/31/96 Period from 3/31/95 *
to December 31, 1995
Multi-Asset Fund Shares Amount Shares Amount
Shares Sold 12,414,168 $ 148,942,630 8,225,630 $ 84,836,448
Shares Reinvested 741,729 8,952,996 156,105 1,716,666
Exit/Entrance Fee - 854,784 - 368,847
Subtotal 13,155,897 158,750,410 8,381,735 86,921,961
Shares Redeemed (3,407,420) (40,828,439) (57,581) (613,418)
Net Increase 9,748,477 $ 117,921,971 8,324,154 $ 86,308,543
* Commencement of Operations
Year Ended 12/31/96 Year Ended 12/31/95
International
Equity Fund Shares Amount Shares Amount
Shares Sold 7,045,139 $ 80,119,170 6,412,082 $ 64,757,197
Shares Reinvested 485,076 5,862,190 144,840 1,544,842
Exit/Entrance Fees - 424,816 - 442,854
Subtotal 7,530,215 86,406,176 6,556,922 66,744,893
Shares Redeemed (3,898,610) (44,032,095) (1,136,430) (11,466,017)
Net Increase 3,631,605 $ 42,374,081 5,420,492 $ 55,278,876
Year Ended 12/31/96 Year Ended 12/31/95
Emerging Markets
Fund Shares Amount Shares Amount
Shares Sold 6,273,660 $ 56,965,180 1,865,202 $ 16,108,997
Shares Reinvested 31,948 275,715 1,336 16,905
Exit/Entrance Fees - 331,463 - 150,876
Subtotal 6,305,608 57,572,358 1,866,538 16,276,778
Shares Redeemed (2,946,642) (26,561,431) (244,472) (2,128,518)
Net Increase 3,358,966 $ 31,010,927 1,622,066 $ 14,148,260
Year Ended 12/31/96 Year Ended 12/31/95
U.S. Equity Fund Shares Amount Shares Amount
Shares Sold 4,368,046 $ 59,674,611 3,321,437 $ 38,880,399
Shares Reinvested 1,019,746 14,143,456 680,636 8,414,015
Exit/Entrance Fees - 76,112 - 87,663
Subtotal 5,387,792 73,894,179 4,002,073 47,382,077
Shares Redeemed (1,408,508) (19,289,674) (918,330) (10,541,597)
Net Increase 3,979,284 $54,604,505 3,083,743 $ 36,840,480
Year Ended 12/31/96 Year Ended 12/31/95
Bond Fund Shares Amount Shares Amount
Shares Sold 4,110,390 $ 41,685,035 8,398,526 $ 83,517,759
Shares Reinvested 364,890 3,645,717 461,277 4,741,699
Subtotal 4,475,280 45,330,752 8,859,803 88,259,458
Shares Redeemed (610,475) (6,147,715) (8,277,360) (81,350,717)
Net Increase 3,864,805 $ 39,183,037 582,443 $ 6,908,741
Year Ended 12/31/96 Year Ended 12/31/95
Short-Term Fund Shares Amount Shares Amount
Shares Sold 10,421,535 $ 104,066,028 9,712,800 $ 97,319,382
Shares
Reinvested 398,510 3,981,140 491,240 4,949,767
Subtotal 10,820,045 108,047,168 10,204,040 102,269,149
Shares Redeemed (14,116,543) (140,977,340) (3,981,798) (39,922,950)
Net Increase/
(Decrease) (3,296,498) $ (32,930,172) 6,222,242 $ 62,346,199
Appendix E
Summary of Transactions with Affiliated Companies
Purchase Sales Realized Dividend Value
Affiliate Cost Cost Gain/(Loss) Income at 12/31/96
Multi-Asset
Grantham, Mayo,
and Van Otterloo
and Co. $ 26,758,961 $ 5,318,384 $ 372,857 $ 1,258,597 $ 26,728,622
A. Gary Shilling
& Co. - 1,000,000 (10,861) - -
TCW Funds
Management, Inc 1,589,243 14,141,475 634,271 19,243 6,119,325
Total $ 28,348,204 $ 20,459,859 $ 996,267 $1,277,840 $ 32,847,947
International Equity
Blairlogie Capital
Management $ 7,855 $ 2,464,545 $ 175,484 $ 7,855 $ -
Lazard Freres Asset
Management - - - - 3,043,758
Total $ 7,855 $ 2,464,545 $ 175,484 $ 7,855 $ 3,043,758
Emerging Markets
TCW Funds
Management, Inc. $ 1,694,200 $ - $ - 6,654 $ 1,707,688
U.S. Equity
Grantham, Mayo,
and Van Otterloo
and Co. $ 2,548,222 $ - $ - $ 48,222 $ 2,807,401
Short-Term
Fischer Francis
Trees & Watts,
Inc. $ 34,637,401 $ 22,211,912 $ (11,912) $ 379,709 $ 12,380,304
These transactions represent investments in pooled investment vehicles
affiliated with the indicated Money Managers. No sales commission was
incurred by the Funds in connection with these transactions.
Report of Independent Accountants
February 28, 1997
To the Board of Directors and Shareholders of
TIFF Investment Program
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of TIFF Multi-Asset
Fund, TIFF International Equity Fund, and TIFF Short-Term Fund (constituting
the TIFF Investment Program (TIP), hereafter referred to as the "Funds"), at
December 31, 1996, and the results of each of their operations, the changes in
each of their net assets, and the financial highlights for each of the periods
indicated, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities owned at December 31, 1996 by correspondence with
the custodian and brokers and the application of alternative auditing
procedures where confirmations from brokers were not received, provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
ADVISER MONEY MANAGERS
Foundation Advisers, Inc.
2405 Ivy Road TIFF Multi-Asset Fund
Charlottesville, VA 22903 Bee & Associates, Inc.
phone (804) 984-0084 Grantham, Mayo, and Van Otterloo
and Co.
fax (804) 977-4479 Standard Pacific Capital LLC
TCW Funds Management, Inc.
Wellington Management Company
CUSTODIAN
FUND ACCOUNTING AGENT TIFF International Equity Fund
TRANSFER AGENT Bee & Associates, Inc.
DIVIDEND DISBURSING AGENT Delaware International Advisers,
Ltd.
Investors Bank & Trust Company Harding, Loevner Management, L.P.
P.O. Box 1537 Marathon Asset Management, Ltd.
Boston, MA 02205 Mercury Asset Management
International, Ltd.
TIFF Emerging Markets Fund
FUND ADMINISTRATOR Emerging Markets Management
AND DISTRIBUTOR Lazard Freres Asset Management
AMT Capital Services, Inc.
600 Fifth Avenue TIFF U.S. Equity Fund
New York, NY 10020 Jacobs Levy Equity Management
Martingale Asset Management, L.P.
Palo Alto Investors
LEGAL COUNSEL Westport Asset Management, Inc.
Dechert Price & Rhoads
1500 K Street, N.W. TIFF Bond Fund
Washington, DC 20005 Atlantic Asset Management
Partners, Inc.
Seix Investment Advisors, Inc.
Smith Breeden Associates, Inc.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP TIFF Short-Term Fund
1177 Avenue of the Americas Fischer Francis Trees & Watts,
Inc.
New York, NY 10036
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<TABLE> <S> <C>
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</TABLE>
AMENDMENT NO. 1
to the
AMENDED AND RESTATED CUSTODIAN AGREEMENT
between
TIFF INVESTMENT PROGRAM, INC.
and
INVESTORS BANK & TRUST COMPANY
AMENDMENT, dated as of March 14, 1997, by and between TIFF
Investment Program, Inc., a Maryland corporation (the "Fund") and
Investors Bank & Trust Company, a Massachusetts trust company (the
"Bank").
WHEREAS, the Fund and the Bank entered into an Amended and
Restated Custodian Agreement dated April 1, 1995 (the "Custodian
Agreement"); and
WHEREAS, the Fund and the Bank desire to amend the Custodian
Agreement as set forth below.
NOW, THEREFORE, in consideration of the premises and of the mutual
convenants and agreements herein set forth, the parties hereto agree as
follow:
1. Amendment. The second sentence of Section 13.4 of the Custodian
Agreement is hereby to read in its entirety as follows:
For the services rendered by the Bank hereunder, the Bank will be
entitled to receive from the Fund 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 and set forth in a schedule or schedules to this Agreement,
and such amount may be deducted from the accounts of the Fund maintained
by the Bank on the fifth day following each month-end without any
further instruction from the Fund, notwithstanding any provision of
Section 5 hereof to the contrary.
2. Fee Schedule. The Fee Schedule attached to this Amendment shall
replace and supersede the Fee Schedule originally attached to the
Custodian Agreement in all respects, shall be effective as of the
date of this Amendment, and shall remain in effect for the full term
of the Custodian Agreement.
3. Miscellaneous.
(a) Except as amended hereby, the Custodian Agreement shall remain
in full force and effect.
(b) This amendment may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, each party hereto has caused this Agreement to
be executed by its duly authorized officer, as the case may be, as of
the date and year first above written.
INVESTORS BANK & TRUST COMPANY TIFF INVESTMENT PROGRAM, INC.
By: /s/ Robert D. Mancuso By: /s/ David A. Salem
Managing Director President
