As filed with the Securities and Exchange Commission on April 30,1999.
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
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Pre-Effective Amendment No.
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Post-Effective Amendment No. 9
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
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Amendment No. 13
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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:
Eric P. Nachimovsky, Esq.
Investors Capital Services, Inc.
600 Fifth Avenue, 26th Floor
New York, NY 10020
Approximate Date of Proposed Public Offering: As soon as
practicable after this Registration Statement becomes
effective.
It is proposed that this filing will become effective: /x/ immediately upon
filing pursuant to paragraph (b) / / On _____________, pursuant to paragraph (b)
/ / 60 days after filing, pursuant to paragraph (a)(1) / / On May 1, 1999,
pursuant to paragraph (a) (1) / / 75 days after filing, pursuant to paragraph
(a) (2) / / On _______________, pursuant to paragraph (a) (2)
of Rule 485.
Registrant has registered an indefinite number of shares pursuant to Rule 24f-2
under the Investment Company Act of 1940.
<PAGE>
<TABLE>
<S> <C>
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1. Front and Back Cover Pages Cover Page and Back Cover Page
of Prospectus
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2. Risk/Return Summary: Investments, Risk/Return Summary: Investments Risks,
and Performance Risks, and Performance (in Prospectus)
3. Risk/Return Summary: Fee Table Risk/Return Summary: Fee Table
(in Prospectus)
4. Investment Objectives, Principal Investment Objectives, Principal
Investment Strategies, and Related Risks Investment Strategies, and Related Risks
(in Prospectus)
5. Management's Discussion of Fund Performance Management's Discussion of
Fund Performance (in Annual Report)
6. Management, Organization, and Capital Structure Management, Organization, and Capital
Structure (in Prospectus)
7. Shareholder Information Shareholder Information (in Prospectus)
8. Distribution Arrangements Distribution Arrangements
(in Prospectus)
9. Financial Highlights Information Financial Highlights Information
(in Prospectus)
10. Cover Page and Table of Contents Cover Page and Table of Contents
(in Statement of Additional Information)
11. Fund History Fund History (in Statement
of Additional Information)
12. Description of the Fund and Its Investments and Risks Description of the Fund and
Its Investments and Risks (in Statement
of Additional Information)
13. Management of the Fund Management of the Fund (in
Statement of Additional Information)
14. Control Persons and Principal Holder of Securities Control Persons and Principal
Holders of Securities (in Statement
of Additional Information)
15. Investment Advisory and Other Services Investment Advisory and
Other Services (in Statement of
Additional Information)
16. Brokerage Allocation and Other Practices Brokerage Allocation and
Other Practices (in Statement of
Additional Information)
17. Capital Stock and Other Securities Capital Stock and Other Securities
(in Statement of Additional Information)
18. Purchase, Redemption and Pricing of Shares Purchase, Redemption and Pricing
of Shares (in Prospectus)
19. Taxation of the Fund Taxation of the Fund (in Statement
of Additional Information)
20. Underwriters Distribution of Fund Shares
(in Prospectus)
21. Calculation of Performance Data Performance Information
(in Prospectus); Calculation of Performance
Data (in Statement of Additional Information)
22. Financial Statements Financial Highlights (in Prospectus);
Financial Statements (in Statement of Additional Information)
</TABLE>
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TIFF Prospectus
Investment
Program April 30, 1999
TIFF Multi-Asset Fund Available through:
TIFF International Equity Fund Foundation Advisers, Inc.
TIFF Emerging Markets Fund 2405 Ivy Road
TIFF U.S. Equity Fund Charlottesville, VA 22903
TIFF Bond Fund phone: 804-817-8200
TIFF Short-Term Fund fax: 804-817-8231
TIFF Investment Program, Inc. is a no-load, open-end management investment
company that seeks to improve the net investment returns of its shareholders by
making available to them a series of investment vehicles, each with its own
investment objective and policies. The Funds are available exclusively to
foundations and other 501(c)(3) organizations except educational endowments.
===============================================================================
The Securities and Exchange Commission has not approved any Fund's shares as an
investment or determined whether this Prospectus is accurate or complete. Anyone
who states otherwise is committing a crime.
===============================================================================
<PAGE>
Contents
<TABLE>
<S> <C>
Risk Return Analysis
Fund Descriptions............................................................................................3
General Risks................................................................................................9
Performance Charts..........................................................................................11
Performance Table...........................................................................................12
Fees and Annual Operating Expenses...............................................................................13
Eligible Investors...............................................................................................14
Management and Administration of the Funds.......................................................................14
Money Managers...................................................................................................16
Investment Objectives, Policies, and Restrictions................................................................21
Purchases and Redemptions........................................................................................22
Dividends and Distributions......................................................................................25
Tax Considerations...............................................................................................26
Financial Highlights.............................................................................................27
Money Manager Profiles...................................................................................Appendix A
Service Provider Profiles................................................................................Appendix B
</TABLE>
<PAGE>
Risk Return Analysis -- Fund Descriptions
TIFF Multi-Asset Fund
Investment Objective: The Fund's investment objective is to attain a growing
stream of current income and appreciation of principal that at least offsets
inflation as measured by the US Consumer Price Index.
Investment Strategies: The Fund seeks to outperform its Constructed MAF
Benchmark (defined on page 12) primarily through active security selection
within asset class segments. The Fund retains Money Managers it believes can
select securities that will outperform the securities comprising each segment of
the Constructed MAF Benchmark. The Money Managers use an array of investment
philosophies, which range from investing in US and international securities
(both large and small cap) to managing active duration to investing in special
situations or distressed securities.
Performance Benchmark. The Fund seeks to attain a total return
exceeding inflation plus 5% per annum over the long term. To facilitate
assessment of active strategies employed by the Fund, the Fund also measures its
performance relative to a constructed benchmark including stocks, bonds, and
short-term securities (Constructed MAF Benchmark), net of all expenses, on an
annualized basis over a market cycle. TIP's directors believe this Constructed
MAF Benchmark 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 5% of such assets.
Investment Universe. The Fund will invest broadly in the available
universe of securities domiciled in the United States plus at least 10 other
countries. Many of these securities will be denominated in currencies other than
the US dollar. Under normal circumstances, not more than 40% of the Fund's
assets will be invested in emerging markets securities.
Principal Investments. The types of securities the Fund will hold
include US and foreign common stocks (including ADRs, EDRs, and GDRs), debt
securities of all grades such as those listed in the descriptions of the Bond
and Short-Term Funds), securities convertible into common stocks, securities of
commingled investment vehicles, futures contracts, and forward foreign currency
exchange contracts. Ordinarily, the Fund will invest at least 80% of its assets
in these securities.
Risks: A loss of invested assets could occur due to certain risks.
These include:
<TABLE>
<S> <C> <C> <C>
o credit risk o hedging risk o market risk
o currency risk o interest rate risk o non-diversification risk
o foreign risk o liquidity risk o prepayment risk
o futures risk
</TABLE>
A description of these are provided in the section below entitled General Risks.
<PAGE>
Risk Return Analysis -- Fund Descriptions
TIFF International Equity Fund
Investment Objective: The Fund's investment objective is to attain a growing
stream of current income and appreciation of principal that at least offsets
inflation as measured by the US Consumer Price Index.
Investment Strategies: The Fund seeks to outperform its performance
benchmark (defined below) primarily through two key investment strategies:
1 -- Active Security Selection within Countries. The Fund retains Money
Managers it believes can select securities that will outperform the securities
of a given country.
2 -- Country Allocation. The Fund retains Money Managers that can
potentially enhance the Fund's returns by rotating Fund assets among various
countries in a timely manner.
The Money Managers use an array of investment philosophies, including value
investing, small company investing, and bottom-up or top-down approaches.
Performance Benchmark. The Fund seeks to attain a total return that
exceeds the net total return (after withholding taxes) of the Morgan Stanley
Capital International All Country World Free ex US Stock Index by 1.00%, net of
all expenses, on an annualized basis over a market cycle.
Investment Universe. The Fund will invest broadly in the available
universe of common stocks of companies domiciled in at least 10 countries other
than the United States. Most of these securities will be denominated in
currencies other than the US dollar. Under normal circumstances, not more than
30% of the Fund's assets will be invested in emerging markets securities.
Principal Investments. The types of securities the Fund will hold
include non-US common stocks (including ADRs and EDRs), securities convertible
into common stocks, securities of investment companies and other commingled
investment vehicles, securities of US companies that derive a significant
portion of revenues (e.g., greater than 50%)from foreign operations,
subscription rights, warrants, futures contracts, and forward foreign currency
exchange contracts. Ordinarily, the Fund will invest at least 80% of its assets
in these securities but no less than 65% in international securities.
Risks: A loss of invested assets could occur due to
certain risks. These include:
<TABLE>
<S> <C> <C> <C>
o correlation risk o foreign risk o liquidity risk
o currency risk o futures risk o market risk
o emerging markets risk o hedging risk o non-diversification risk
</TABLE>
A description of these are provided in the section below entitled General Risks.
<PAGE>
Risk Return Analysis -- Fund Descriptions
TIFF Emerging Markets Fund
Investment Objective: The Fund's investment objective is to attain a growing
stream of current income and appreciation of principal that at least offsets
inflation as measured by the US Consumer Price Index.
Investment Strategies: The Fund seeks to outperform its performance
benchmark (defined below) primarily through two key investment strategies:
1 -- Active Security Selection within Countries. The Fund retains Money
Managers it believes can select securities that will outperform the securities
of a given country.
2 -- Country Allocation. The Fund retains Money Managers that can
potentially enhance the Fund's returns by rotating Fund assets among various
countries in a timely manner.
The Money Managers use an array of investment philosophies, ranging from
bottom-up to top-down approaches, value orientation, and investing in discounted
closed-end funds.
Performance Benchmark. The Fund seeks to attain a total return that
exceeds the net total return (after withholding taxes) of the Morgan Stanley
Capital International Emerging Markets Free Stock Index by 1.00%, net of all
expenses, on an annualized basis over a market cycle.
Investment Universe. Emerging markets include any countries having an
"emerging stock market" as defined by Morgan Stanley Capital International, with
low- to middle-income economies according to the World Bank, or listed in World
Bank publications as developing. In order to exploit circumstances in which the
Fund's Money Managers believe that securities traded primarily in developed
markets 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 US companies which derive, or are expected to
derive, a significant portion of their revenues from their foreign operations.
Under normal circumstances, not more than 30% of the Fund's assets will be
invested in developed market securities and not more than 15% of the Fund's
assets will be invested in securities issued by US companies.
Principal Investments. The types of securities the Fund will hold
include non-US common stocks (including ADRs and EDRs), securities convertible
into common stocks, securities of investment companies and other commingled
investment vehicles, securities of US companies that derive a significant
portion of revenues from foreign operations, subscription rights, warrants,
futures contracts, and forward foreign currency exchange contracts. Ordinarily,
the Fund will invest at least 80% of its assets in these securities but no less
than 65% in emerging market securities.
Risks: A loss of invested assets could occur due to certain risks.
These include:
<TABLE>
<S> <C> <C> <C>
o correlation risk o foreign risk o liquidity risk
o currency risk o futures risk o market risk
o emerging markets risk o hedging risk o non-diversification risk
</TABLE>
A description of these are provided in the section below entitled General Risks.
<PAGE>
Risk Return Analysis -- Fund Descriptions
TIFF U.S. Equity Fund
Investment Objective: The Fund's investment objective is to attain a growing
stream of current income and appreciation of principal that at least offsets
inflation as measured by the US Consumer Price Index.
Investment Strategies: The Fund seeks to outperform its performance
benchmark (defined below) primarily through two key investment strategies:
1 -- Active Security Selection. The Fund retains Money Managers it
believes can select securities that will outperform the securities of a given
sector.
2 -- Sector Allocation. The Fund retains Money Managers that can
potentially enhance the Fund's returns by rotating Fund assets among various
industry and economic sectors in a timely manner.
The Money Managers use an array of investment philosophies, which include
managing active benchmark risk, investing in special situations, trading in
small publicly traded stocks, and investing in value-oriented securities.
Performance Benchmark. The Fund seeks to attain a total return
exceeding the total return of the Wilshire 5000 Stock Index by 0.75%, net of all
expenses, on an annualized basis over a market cycle.
Investment Universe. The Fund will invest broadly in the available
universe of common stocks of companies domiciled in the United States. Under
normal circumstances, not more than 15% of the Fund's assets will be invested in
common stocks of foreign issuers.
Principal Investments. The types of securities the Fund will hold
include US and foreign common stocks (including ADRs and EDRs), securities
convertible into common stocks, securities of investment companies and other
commingled investment vehicles, subscription rights, warrants, and futures
contracts. Ordinarily, the Fund will invest at least 80% of its assets in these
securities but no less than 65% in US securities.
Risks: A loss of invested assets could occur due to certain risks.These include:
<TABLE>
<S> <C> <C> <C>
o correlation risk o hedging risk o market risk
o credit risk o liquidity risk o non-diversification risk
o futures risk
</TABLE>
A description of these are provided in the section below entitled General Risks.
<PAGE>
Risk Return Analysis -- Fund Descriptions
TIFF Bond Fund
Investment Objective: The Fund's investment objective is to attain a high rate
of current income, subject to restrictions designed to ensure liquidity and
manage exposure to interest rate and credit risk and to provide a hedge against
deflation-induced declines in common stock prices and dividend streams.
Investment Strategies: The Fund seeks to outperform its performance benchmark
(the Lehman Brothers Aggregate Bond Index) through the use of duration, quality,
and interest rate management, dollar roll transactions, hedging, repurchase and
reverse repurchase agreements, and short sales. The Fund's maturity and duration
will typically range between 80% and 120% of that of its performance benchmark.
The Money Managers use an array of investment philosophies, invluding duration
exposure, maturity selection, sector allocation, and credit analysis.
(Duration measures the expected life of a debt security on a present value
basis.)
Performance Benchmark. The Fund seeks to outperform the Lehman Brothers
Aggregate Bond Index by 0.50%, net of all expenses, on an annualized basis over
a market cycle.
Investment Universe. The Fund will invest broadly in the available
universe of debt securities. 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).
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 or Baa by Moody's Investors Service, Inc.). (See
the Statement of Additional Information for quality rating descriptions.)
Principal Investments. The Fund will invest
primarily in US debt securities, including:
o securities issued or guaranteed by the US Government
and its agencies or instrumentalities;
o obligations of domestic or foreign corporations or
other entities;
o obligations of domestic or foreign banks; o mortgage- and asset-backed
securities; and o 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.
Ordinarily, the Fund will invest at least 80% of its assets in these securities.
Risks: A loss of invested assets could occur due to
certain risks. These include:
<TABLE>
<S> <C> <C> <C>
o correlation risk o hedging risk o market risk
o credit risk o interest rate risk o non-diversification risk
o futures risk o liquidity risk o prepayment risk
</TABLE>
A description of these are provided in the section below entitled General Risks.
<PAGE>
Risk Return Analysis -- Fund Descriptions
TIFF Short-Term Fund
Investment Objective: The Fund's investment objective is to attain 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 US Treasury securities on a constant maturity
basis.
Investment Strategies: The Fund seeks to outperform its performance benchmark
(defined below) through the use of duration, quality, and interest rate
management, dollar roll transactions, hedging, repurchase and reverse repurchase
agreements. The Money Managers use various investment philosophies, such as
duration exposure, maturity selection, sector allocation, and credit analysis.
(Duration measures the expected life of a debt security on a present value
basis).
Performance Benchmark: The Fund seeks to
outperform the Merrill Lynch 182-Day Treasury Bill Index,
net of all expenses.
Principal Investments: The Fund will invest
primarily in short-term (i.e., maturity of one year or
less) US and non-US debt securities, including:
o securities issued or guaranteed by the US Government
and its agencies or instrumentalities;
o obligations issued or guaranteed by a foreign government,
or any of its political subdivisions, authorities,
agencies, or instrumentalities or by supranational
organizations;
o obligations of domestic or foreign corporations or other entities;
o obligations of domestic or foreign banks;
o mortgage- and asset-backed securities; and
o 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.
Ordinarily, the Fund will invest at least 80% of its assets in investment-grade
securities.
Risks: A loss of invested assets could occur due to
certain risks. These include:
o correlation risk o hedging
risk o market risk
o credit risk o interest
rate risk o non-diversification risk
o futures risk o
liquidity risk o
prepayment risk
A description of these are provided in the section below entitled General Risks.
<PAGE>
Risk Return Analysis -- General Risks
Risks. Investment in any mutual fund has inherent risks. There can be no
assurance that the investment objectives of a fund will be realized or that a
fund's portfolio will not decline in value. Economic conditions change and stock
markets are volatile. If the investment adviser to a fund judges market
conditions incorrectly, the fund's portfolio may decline in value and an
investor could lose money. Prospective Members should consider their own risk
tolerance, investment goals, and investment timeframe before committing assets
to the TIFF Funds. General risks associated with the Funds' investment policies
and investment strategies are as follows:
Correlation Risk. The value of a particular derivative
instrument may not move in the same magnitude or direction
as its related security.
Credit Risk. A security issuer or counterparty to a
contract may default or otherwise become less likely to
honor a financial obligation.
Currency Risk. Fluctuations in exchange rates between the US dollar and foreign
currencies may negatively affect an investment. When hedges are used, the net
exposure of a Fund to a currency may be different from that of its total assets
denominated in such currency.
Emerging Markets Risk. Emerging market countries can have relatively unstable
governments, may be highly vulnerable to changes in local or global trade
conditions, or may suffer from volatile debt burdens or inflation rates. As a
result, such securities can be especially volatile and unpredictable.
Foreign Risk. Historically, non-US developed markets are not as unpredictable as
emerging markets, but they can still pose significant risks, including
inadequate financial information and regulation, excessive taxation, and
political instability.
Futures Risk. The primary risks of using futures are related to the Money
Managers' ability to anticipate correctly the direction of movements in interest
rates, securities prices, and foreign currency exchange rates, and the imperfect
correlation between the price of futures contracts and movements in the prices
of the securities being hedged.
Hedging Risk. Hedging involves risks of imperfect correlation in price movements
of the hedge and movements in the price of the hedged security. If interest or
currency exchange rates do not move in the direction of the hedge, the Fund will
be in a worse position than if hedging had not been employed. The variable
degree of correlation between price movements of futures contracts and price
movements of the related security creates the possibility that losses could be
greater than gains.
Interest Rate Risk. Bond prices typically fluctuate due to changing interest
rates. As a rule, bond prices vary inversely with market interest rates. For a
given change in interest rates, longer duration bonds usually fluctuate more in
price than shorter duration bonds.
Liquidity Risk. Certain securities may be difficult or
impossible to purchase, sell, or convert to cash quickly
at favorable prices.
<PAGE>
Risk Return Analysis -- General Risks continued
Market Risk. The market value of a security may increase or decrease over time.
Such fluctuations can cause a security to be worth less than the price
originally paid for it or less than it was worth at an earlier time. Market risk
may affect a single issue, an entire industry, or the market as a whole.
Non-Diversification Risk. A portfolio is diversified when it spreads investment
risk by placing assets in several investment categories. A Fund may invest in a
smaller number of individual issuers than a diversified investment company.
Accordingly, its risk may be higher if a particular investment category suffers
from adverse market conditions.
Non-Diversified Status. Each Fund is classified as a "non-diversified"
investment company under the Investment Company Act of 1940, as to the
proportion of its assets that may be invested in the securities of a single
issuer. Because it may invest in a smaller number of individual issuers than a
diversified company, a Fund may be riskier than a diversified investment
company. However, each Fund intends to abide by certain diversification
requirements of the Internal Revenue Code in order to qualify as a regulated
investment company. See the section entitled Tax Considerations in the Statement
of Additional Information.
Prepayment Risk. Mortgage-backed, asset-backed, and certain other fixed income
securities bear the risk of faster or slower than expected prepayment of
principal, which affects the duration and return of the security and
reinvestment opportunities.
Year 2000 Risk. Many computer systems and applications in use today process
transactions using two-digit date fields for the year of the transaction rather
than the full four digits. If these systems are not modified or replaced,
transactions occurring after 1999 could be processed as year "1900," which could
result in processing inaccuracies and computer system failures. This is commonly
known as the Year 2000 problem. Should any of the computer systems employed by
the Funds' major service providers fail to process Year 2000, that could have a
significant negative impact on the Funds' operations and the services that are
provided to the Funds' Members. In addition, to the extent that the operations
of issuers of securities held by the Funds are impaired by the Year 2000 problem
or prices of securities held by the Funds decline as a result of real or
perceived problems related to the Year 2000, the value of the Funds' shares may
be materially affected. Foreign companies may have greater exposure to Year 2000
problems than US companies due to less sophisticated testing procedures.
Funds' Status. The Funds have been advised that the Adviser, the
Distributor, the Administrator, the Custodian, and the Transfer Agent
(collectively, the "Service Providers") began to address the Year 2000 issue
several years ago in connection with the replacement or upgrading of certain
computer systems and applications. During 1997, the Service Providers began a
formal Year 2000 initiative, which established a structured and coordinated
process to deal with the Year 2000 issue. The Service Providers report that they
have completed their assessment of the Year 2000 issues related to its domestic
and international computer systems and applications. Currently, TIP's board of
directors expects that the full integration testing of these systems and testing
of interfaces with third-party suppliers will continue through 1999. At this
time, the board of directors thinks that the costs associated with resolving
this issue will not have a material adverse effect on the Funds' operations.
<PAGE>
Risk Return Analysis -- Performance Charts
These charts are intended to show the risk that a Member's returns may vary from
year to year. Total return includes the effects of entry and exit fees received
by the Funds; however, net asset value per share at the beginning and end of
each period used for calculating total return excludes such entry and exit fees.
The Funds' past performance does not necessarily indicate how the Funds will
perform in the future.
<PAGE>
TIFF Multi-Asset Fund
During the 3-year period shown in the bar chart at right, the highest quarterly
return was 7.21% (quarter ended 6/30/1997) and the lowest quarterly return was
- -11.56% (quarter ended 9/30/1998).
TIFF International Equity Fund
During the 4-year period shown in the bar chart at right, the highest quarterly
return was 15.88% (quarter ended 12/31/1998) and the lowest quarterly return was
- -18.82% (quarter ended 9/30/1998).
TIFF Emerging Markets Fund
During the 4-year period shown in the bar chart at right, the highest quarterly
return was 18.49% (quarter ended 12/31/1998) and the lowest quarterly return was
- -28.93% (quarter ended 9/30/1998).
TIFF U.S. Equity Fund
During the 4-year period shown in the bar chart at right, the highest quarterly
return was 20.77% (quarter ended 12/31/1998) and the lowest quarterly return was
- -17.68% (quarter ended 9/30/1998).
TIFF Bond Fund
During the 4-year period shown in the bar chart at right, the highest quarterly
return was 6.12% (quarter ended 6/30/1995) and the lowest quarterly return was
- -1.92% (quarter ended 3/31/1996).
TIFF Short-Term Fund
During the 4-year period shown in the bar chart at right, the highest quarterly
return was 1.78% (quarter ended 6/30/1995) and the lowest quarterly return was
1.09% (quarter ended 12/31/1998).
<PAGE>
Risk Return Analysis --Performance Table
The table below illustrates the changes in each of the TIFF Funds' yearly
performance and shows how each Fund's average returns for 1 year, 5 years, and
since Fund inception compare with selected benchmarks. Note that past
performance is not necessarily an indication of how the Funds will perform in
the future.
<TABLE>
<S> <C> <C> <C> <C>
Average Annual Total Return
through 12/31/1998
1 5 Since Fund
Year Years Inception Inception
TIFF Multi-Asset Fund 0.2% NA 9.0% 3/31/1995
CPI + 5% per annum 6.6% 7.3%
Constructed MAF Benchmark* 14.8% 13.5%
MSCI All Country World Index
TIFF International Equity Fund 3.0% NA 6.7% 5/31/1994
MSCI All Country World Free ex US Index 14.5% 7.0%
TIFF Emerging Markets Fund -33.4% NA -11.2% 5/31/1994
MSCI Emerging Markets Free Index -27.5% -10.4%
TIFF U.S. Equity Fund 11.9% NA 22.6% 5/31/1994
Wilshire 5000 Stock Index 23.4% 24.5%
TIFF Bond Fund 7.2% NA 8.4% 5/31/1994
Lehman Aggregate Bond Index 8.7% 8.8%
TIFF Short-Term Fund 5.6% NA 5.6% 5/31/1994
Merrill Lynch 182-Day Treasury Bill Index 5.6% 5.6%
</TABLE>
* The Constructed MAF Benchmark consists of the following indices in the
indicated weights:
Weight in
Constructed
Asset Class Benchmark Benchmark
<TABLE>
<S> <C> <C>
US Stocks 25% Wilshire 5000 Stock Index
Foreign Stocks 25% MSCI All Country World Free ex US Index
Absolute Return Strategies 20% 3-month Treasury bills plus 5% per annum
Resource-Related Stocks 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
US Bonds 15% Lehman Aggregate Bond Index
Foreign Bonds 5% JP Morgan Non-US Government Bond Index
</TABLE>
<PAGE>
Fees and Annual Operating Expenses
This table describes the fees and expenses that a Member pays when buying or
holding shares of a Fund.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------- ------------ ----------------- ------------- ----------- ---------- -----------
Shareholder Fees
(paid directly from the Multi-Asset International Emerging U.S. Short-Term
shareholder's investment) Equity Markets Equity Bond
- -------------------------------------- ------------ ----------------- ------------- ----------- ---------- -----------
- -------------------------------------- ------------ ----------------- ------------- ----------- ---------- -----------
Sales Loads None None None None None None
- -------------------------------------- ------------ ----------------- ------------- ----------- ---------- -----------
Transaction Charges Paid to Funds
(as percentage of purchase or redemption
amount)
o Entry Fees on Purchases [a] 0.75% 0.75% 1.00% 0.25% None None
o Exit Fees on Redemptions [a] 0.75% 0.75% 1.00% 0.25% None None
o Exchange Fees [a] 0.75% 0.75% 1.00% 0.25% None None
- -------------------------------------- ------------ ----------------- ------------- ----------- ---------- -----------
Annual Operating Expenses
(deducted from Fund assets,
expressed as percentage of average
net assets)
o Management Fees [b] 0.38% 0.44% 2.81% 0.49% 0.19% 0.18%
o Other Expenses [c] 0.27% 0.37% 0.28% 0.23% 0.27% 0.17%
- -------------------------------------- ------------ ----------------- ------------- ----------- ---------- -----------
- -------------------------------------- ------------ ----------------- ------------- ----------- ---------- -----------
Total Annual Operating Expenses 0.65% 0.81% 3.09% 0.72% 0.46% 0.35%
- -------------------------------------- ------------ ----------------- ------------- ----------- ---------- -----------
</TABLE>
[a] Entry and Exit Fees of Equity Funds. While the Funds are no load and do not
charge sales commissions, all Funds except the Bond and Short-Term Funds assess
entry and exit fees as set forth in the above table. The reasons for these fees
are described in detail in the section entitled Purchases and Redemptions.
[b] Management Fees. The Management Fees listed above include Adviser fees and
Money Manager fees. Many of the Money Managers are on performance-based fee
schedules and therefore these fees will vary over time depending on the
performance of the Funds. For further discussion of Money Manager fees, please
see the section of the Statement of Additional Information entitled
Performance-Based Fees for Money Managers.
[c] Other Expenses. This category includes
administration fees, custody fees, legal, audit, and other
miscellaneous Fund expenses.
Example. This example is intended to help Members compare the cost of investing
in a TIFF Fund with the cost of investing in other mutual funds. The example
assumes that one invests $10,000 in a Fund for the time periods indicated. The
example also assumes that the investment has a 5% return each year and that the
Fund's operating expenses remain the same. Entry fees are reflected in both
scenarios and exit fees are reflected in the rows labeled "With redemption at
end of period." Actual costs may be higher or lower.
Expenses per $10,000 Investment
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------- ------------ -------------- ------------- ------------ ----------- -----------
Multi- International Emerging U.S. Short-Term
Asset Equity Markets Equity Bond
- ------------------------------------- ------------ -------------- ------------- ------------ ----------- -----------
1 Year
With redemption at end of period $219 $235 $510 $124 $47 $36
No redemption at end of period $141 $157 $409 $98 $47 $36
- ------------------------------------- ------------ -------------- ------------- ------------ ----------- -----------
3 Years
With redemption at end of period $366 $416 $1149 $283 $148 $113
No redemption at end of period $281 $332 $1044 $255 $148 $113
- ------------------------------------- ------------ -------------- ------------- ------------ ----------- -----------
5 Years
With redemption at end of period $527 $613 $1813 $455 $258 $197
No redemption at end of period $435 $521 $1704 $425 $258 $197
- ------------------------------------- ------------ -------------- ------------- ------------ ----------- -----------
10 Years
With redemption at end of period $993 $1181 $3587 $955 $579 $443
No redemption at end of period $879 $1069 $3468 $917 $579 $443
- ------------------------------------- ------------ -------------- ------------- ------------ ----------- -----------
</TABLE>
<PAGE>
Eligible Investors
Asset Size. The TIFF Funds are available only to organizations meeting the
eligibility criteria set forth below. 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 organizations that invest at
least $750,000 in TIP or whose endowment assets exceed $1.5 million.
Organizations wishing to confirm their eligibility should contact FAI.
Eligibility Criteria. The TIFF Funds are open to:
o Organizations operated exclusively for charitable purposes, no part of the
net earnings of which inures to the benefit of any private individual or
corporation;
o Organizations that qualify for exemption from federal income taxes under
Section 501(c)(3) of the Internal Revenue Code of 1986, as amended;
o Non-US-based charitable organizations that have received 501(c)(3)
equivalency certificates from the Internal Revenue Service;
o Planned giving or split interest assets of eligible organizations where at
least part of the income or principal of such assets is owned irrevocably
by the eligible organization and the organization has legal control over
the securities or vehicles in which such assets are invested; and
o FAI officers.
Management and Administration of the Funds
TIFF The Investment Fund for Foundations, a
not-for-profit membership organization
dedicated to enhancing foundations'
investment returns
TIP TIFF Investment Program, a family of no-load
mutual funds offered exclusively to 501(c)(3)
organizations
FAI Foundation Advisers, Inc., the investment
adviser of the TIFF Funds, taxable but
operated on a not-for-profit basis
The Cooperative. The TIFF Investment Program, Inc. ("TIP") seeks to improve the
net investment returns of its Members by making available to them a series of
investment Funds. Each Fund has its own investment objective and policies. The
Funds are advised by Foundation Advisers, Inc. ("FAI"). TIP and FAI were
organized by The Investment Fund for Foundations ("TIFF"). TIFF is a tax-exempt,
not-for-profit, member-controlled organization dedicated to enhancing
foundations' investment returns. 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. 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 as amended (the "Investment Company Act of
1940").
Directors and Officers of TIP and FAI. TIP's board of directors manages and
supervises TIP. With the exception of FAI's president, all FAI and TIP directors
serve as unpaid volunteers. Individuals currently serving as directors or
officers of TIP and FAI are identified below.
<PAGE>
Management and Administration of the Funds continued
Selection Process. Initial members of the boards of FAI and TIP were selected by
TIFF's board of trustees. TIP's directors are elected by the Funds' Members (see
Member Voting Rights and Procedures in the Statement of Additional Information).
FAI's directors are elected according to procedures designed to ensure that
FAI's directors, officers, and employees remain responsive to Members' needs.
<TABLE>
<S> <C> <C> <C>
- ------------------------------------- ------------------------------- ------- ------------------------------------
TIP FAI
------------------------------- ------------------------------------
Directors Officers Directors Officers
Unpaid Directors
Sheryl L. Johns Chair
William F. Nichols* Director Director
Fred B. Renwick Director
John E. Craig, Jr. Director
Gregory D. Curtis Director
Alice W. Handy Director
Robert A. Kasdin Director
John G. Mebane, Jr. Chair
Jack R. Meyer Director
Ann B. Sloane Director
David F. Swensen Director
Jeffrey Tarrant Director
Arthur Williams III Director
Officers and Paid Directors
David A. Salem* Director President Director President
Esther L. Cash Vice Pres/Sec Managing Director
Thomas N. Felker Vice President Managing Director
Nina F. Scherago Vice President Managing Director
Meredith A. Shuwall Vice President Managing Director
William E. Vastardis Treasurer
Carla E. Dearing Asst Treasurer
- ------------------------------------- --------------- --------------- ------- ---------------- ------------------- --
</TABLE>
An asterisk (*) has been placed next to the names of the two members of TIP's
board of directors who are "interested persons" by virtue of their affiliations
with FAI as defined by the Investment Company Act of 1940.
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
$500 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 board of the
Greenwall Foundation and the Picker Institute. He is
chair of the board of The Investment Fund for Foundations.
Gregory D. Curtis is president of Greycourt & Co., Inc., 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 Artists & Cities, the
Center for the Study of Community, the Contemporary Arts Stabilization Trust,
and St. John's College. He is also a director of several for-profit
corporations.
Alice W. Handy is president of the University of Virginia Investment Mangement
Co., P.O. Box 9012, Charlottesville, VA, 22906, which has endowment and trust
assets exceeding $1.1 billion. Ms. Handy was formerly treasurer of the
Commonwealth of Virginia. She chairs the Investment Advisory Committee of the
Virginia Retirement System and is a member of the board of First Union Bank of
Virginia.
<PAGE>
Management and Administration of the Funds continued
Sheryl L. Johns is vice president, treasurer, and chief financial officer of
Houston Endowment Inc., 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. She is an officer of the Conference of
Southwest Foundations, a member of the steering committee of the Foundation
Financial Officers Group, a trustee of The Investment Fund for Foundations, and
chair of the TIFF Investment Program, Inc.
Robert A. Kasdin is executive vice president and chief financial officer of The
University of Michigan, 3014 Fleming Administration Building, 503 Thompson
Street, Ann Arbor, MI, 48109. Mr. Kasdin was formerly treasurer and chief
investment officer of The Metropolitan Museum of Art and 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.
John G. Mebane, Jr. is chief investment officer of The Duke Endowment, 100 North
Tryon Street, Suite 3500, Charlotte, NC, 28202, a private foundation with assets
exceeding $1.9 billion. He was formerly vice president and manager of Personal
Trust Portfolio Management at Wachovia Bank in Winston-Salem, NC. He serves as
president of the Christ Episcopal Church Foundation, on the Investment Committee
of the Episcopal Diocese of North Carolina, as a trustee of the Mary Duke Biddle
Foundation, and as chair of the board of Foundations Advisers, Inc.
He is a CFA charterholder.
Jack R. Meyer is president and chief executive officer of Harvard Management
Company, 600 Atlantic Avenue, 15th Floor, Boston, MA, 02110, the endowment
management subsidiary of Harvard University, which has endowment, pension, and
trust assets exceeding $16 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 $1.8
billion. He is also a trustee of Channing House.
Fred B. Renwick is professor of finance at the Leonard M. Stern School of
Business, New York University, 44 West 4th Street, Suite 9-190, New York, NY,
10012. Professor Renwick is chair of the Finance Committee of Morehouse College
and chair of the Investment Committees of the American Bible Society and
Wartburg Home Foundation. He was formerly vice chair of the Board of Pensions of
the Evangelical Lutheran Church of America.
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 20 years of the Investment Committee of its board of
managers.
David F. Swensen is chief investment officer of Yale University, 230 Prospect
Street, New Haven, CT, 06511, which has assets exceeding $6 billion. Mr. Swensen
was formerly an associate at Salomon Brothers and a senior vice president at
Lehman Brothers. He is a lecturer in Yale College, management fellow at Yale's
School of Management, and a trustee of The Carnegie Institution of Washington.
He is a member of the Investment Advisory Committees of the Carnegie
Corporation, Edna McConnell Clark Foundation, and Howard Hughes Medical
Institute.
<PAGE>
Management and Administration of the Funds continued
Jeffrey Tarrant is president of Arista Group, Inc., One Rockefeller Plaza, Suite
1010 New York, NY, 10020, an investment advisory firm advising the Sidney Kimmel
Foundation and the Kimmel family private portfolio. He was formerly president of
Thurn und Taxis of America, Inc. and manager of the Thurn und Taxis family
capital portfolio (Regensburg, Germany).
Arthur Williams III is president of Pine Grove Associates, Inc., 350 Springfield
Avenue, Summit, NJ, 07901, an asset management and consulting 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. 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 managing director of The Investment Fund for Foundations and
Foundation Advisers, Inc., 2405 Ivy Road, Charlottesville, VA, 22903. Prior to
joining TIFF, 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
Investors Capital Services, Inc., 600 Fifth Avenue,
26th Floor, New York, NY, 10020. (For a
description of Investors Capital, see Service
Provider Profiles.) Ms. Dearing was formerly a
vice president of Morgan Stanley & Co., where her
responsibilities included product planning and
development for Morgan Stanley Capital
International.
Thomas N. Felker is managing director of The Investment Fund for Foundations and
Foundation Advisers, Inc., 2405 Ivy Road, Charlottesville, VA, 22903. Prior to
joining TIFF, Mr. Felker was head of pension investments for Fort James
Corporation, where his responsibilities included formulating investment policy
and evaluating money managers. Prior to joining Fort James, Mr. Felker was a tax
manager and auditor at Ernst & Young. He is a Certified Public Accountant and a
CFA charterholder.
David A. Salem is president and chief executive officer of The Investment Fund
for Foundations and Foundation Advisers, Inc., 2405 Ivy Road, Charlottesville,
VA, 22903. Prior to assuming TIFF'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 and the University of Virginia and in the Office of the
Counsel to the President of the United States. Mr. Salem is a trustee of the
Core Knowledge Foundation and is former co-chair of the Cabinet of the Thomas
Jefferson Memorial Foundation (Monticello).
<PAGE>
Management and Administration of the Funds continued
Nina F. Scherago is managing director of The Investment Fund for Foundations and
Foundation Advisers, Inc., 2405 Ivy Road, Charlottesville, VA, 22903. Prior to
joining TIFF, Ms. Scherago was director of private investments of the Howard
Hughes Medical Institute, where she oversaw a private investment portfolio of
approximately $1.2 billion. Prior to joining Howard Hughes, Ms. Scherago was
with the investment banking firm of Alex. Brown & Sons. She is a CFA
charterholder.
Meredith A. Shuwall is managing director of The Investment Fund for Foundations
and Foundation Advisers, Inc., 2405 Ivy Road, Charlottesville, VA, 22903. Prior
to joining TIFF, Ms. Shuwall was a vice president at Vrolyk & Company, where her
responsibilities 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 managing director of fund administration of Investors
Capital Services, Inc., 600 Fifth Avenue, 26th Floor, New York, NY, 10020. Prior
to joining Investors 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 US.
Remuneration of Directors and Officers;
Reimbursement of Expenses. The following
individuals receive remuneration for their services
as directors or officers of TIP or FAI: Ms. Cash,
Ms. Dearing, Mr. Felker, Mr. Salem, Ms. Scherago,
Ms. Shuwall, and Mr. Vastardis. Ms. Cash, Mr.
Felker, Mr. Salem, Ms. Scherago, and Ms. Shuwall
are paid employees of FAI and receive no
compensation directly from TIP. Ms. Dearing and
Mr. Vastardis are paid employees of Investors
Capital 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.
The Adviser. FAI, with principal offices at 2405 Ivy Road, Charlottesville, VA,
22903, is a non-exempt membership corporation that serves as the Adviser to all
Funds. FAI was formed to facilitate investment by private foundations, community
foundations, and other 501(c)(3) organizations in stocks, securities, and other
assets. FAI's affairs are managed by its board of directors. FAI's directors are
members of the corporation and are "controlling persons" (as defined in the
Rules and Regulations of the Securities and Exchange Commission) of FAI. This
limitation does not prevent payment of reasonable compensation for services
rendered in carrying out FAI's activities.
Advisory Agreement. Pursuant to each Fund's
Advisory Agreement with TIP, FAI:
1. develops investment programs, selects Money Managers,
and monitors their investment activities and
results;
2. provides or oversees the provision of all general
management, investment advisory, and portfolio
management services to TIP; and
3. provides TIP with office space, equipment, and personnel.
Other FAI Investment Advisory Duties. FAI also:
1. allocates and reallocates each Fund's assets among
the Money Managers;
2. identifies appropriate commingled investment vehicles in which to
invest Funds' assets; and
3. invests funds held in the form of cash reserves pending allocation to Money
Managers or distribution to Members.
<PAGE>
Management and Administration of the Funds continued
Adviser Compensation. 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%):
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------- ------------ -------------- ------------ ------------ -------------- ---------------
Multi- International Emerging U.S Short-
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.
Money Managers
Multi-Manager Structure. With the exception of the Short-Term Fund, each Fund
employs multiple Money Managers. 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 Money Manager specializes in a
particular market sector and utilizes a particular investment style.
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 written investment objectives, policies, and restrictions. For
separate accounts, these guidelines are developed by TIP's board of directors
and FAI; for commingled investment vehicles, the guidelines are typically
developed by the vehicles' management and reviewed by TIP and FAI. 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 are allocated by FAI among the Money Managers profiled in
Appendix A. The Money Managers' investment approaches are described therein. FAI
is responsible for identifying qualified Money Managers and negotiating the
Agreement terms under which they will provide services to the Funds. These
Agreements are submitted for approval by TIP's board of directors. TIP's board
of directors retains the right to disapprove the hiring of Money Managers and to
terminate Agreements (subject to termination provisions contained therein)
between TIP and all service providers employed by it, including FAI and the
Money Managers.
<PAGE>
Management and Administration of the Funds continued
Manager Selection Criteria. In selecting Money Managers, FAI weighs a number of
relevant factors and makes its selection based on a comparison of all such
factors. FAI reviews the historical investment results of a universe of Money
Managers, evaluates written information about these money managers supplied by
the Money Managers and outside parties, and conducts face-to-face interviews
with the individuals who would actually manage money for TIP should their firms
be employed by it. 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 Funds' current Money Managers and
in considering the selection of other Money Managers include:
Important Attributes
o A well-defined investment philosophy that gives the manager a
discernible competitive advantage in the gathering or processing
of investment data
o A verifiable record that the firm has faithfully executed this
philosophy over time
o A proven capacity to deliver reasonably uniform results to all
clients' assets to which this philosophy is applied
o A reasonable amount of assets under management to which this
philosophy is applied
o Satisfactory returns versus relevant
benchmark indices
o A proven capacity to adapt to changes
in financial markets
o A proven willingness to invest adequately in its own business
(including technological resources) in light of such changes
o Investment professionals who have strong personal incentives (both
financial and psychological) to produce satisfactory results for
their clients
Helpful Attributes
o Money management is the firm's sole
(preferably) or primary line of
business
o The firm's decision makers are seasoned professionals or the
firm's philosophy is unusually innovative (preferably both)
o The firm is willing to use
performance-based fee arrangements as
an expression of confidence in its own
abilities
o The firm complies fully with the Performance Standards promulgated
by the Association for Investment Management and Research
Undesirable Attributes
o A high degree of personnel turnover
o Insufficiently trained administrative
personnel
o Insufficiently robust investment
accounting systems
o Investment decisionmakers who are
unduly burdened with administrative
tasks
o An unwillingness to specify asset size limits for products or
services that require such limits
Disqualifying Attributes
o Investment decisionmakers who are
engaged primarily in brokerage or
financial planning (as distinct from
portfolio management)
o An inability to meet performance
reporting deadlines
o Relevant criminal convictions or sanctions by the Commission or
other federal or state regulatory agencies
<PAGE>
Management and Administration of the Funds continued
Other Considerations. 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 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.
Money Manager Agreements. In order to preserve the flexibility needed to respond
to changes in TIP's operating environment, 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. 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.
Investment Objectives, Policies, and Restrictions
Overview. Each Fund has a fundamental investment objective and certain
fundamental policies and restrictions. These fundamental policies and
restrictions may be changed only with the approval of the Fund's Members holding
a majority of that Fund's outstanding voting securities. Other policies and
restrictions reflect proposed practices of the Funds and may be changed by the
Funds' board of directors without Member approval.
Investment Objectives and Policies. A Fund's fundamental policies include its
Investment Objective and the types of securities in which it will invest.
Ordinarily, each Fund will invest more than 80% of its assets in such
securities. There can be no assurance a Fund will attain its Investment
Objective.
Performance Goals. Performance benchmarks and certain other Fund policies are
not fundamental and may be changed without Member approval upon notice to
Members. A Fund's performance benchmark serves to monitor its success over a
full market cycle (for these purposes, a 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 performance of each Fund, when
compared to its specified benchmark, can be expected to vary from year to year.
The Funds attempt to attain their performance goals 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).
<PAGE>
Purchases and Redemptions
Account Application. An Account Application must be completed and submitted by
each TIP investor. Accompanying the completed application, Members must also
submit a copy of proof of their tax 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 TIFF Funds.
Net Asset Value. The price at which a Member purchases or redeems shares of a
Fund is equal to the net asset value (the "NAV") per share of the Fund as
determined on the effective date of the purchase or redemption. The NAV is
calculated by taking the total value of a Fund's assets, subtracting the Fund's
liabilities, and dividing the result by the number of Fund shares outstanding.
This calculation is performed by the Fund Accounting Agent, Investors Bank &
Trust, at the end of regular trading hours of the New York Stock Exchange
(currently 4:00 p.m. Eastern time) on the days that 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 typically
Monday through Friday, except holidays ("Business Days").
Fees. Purchases and redemptions of shares in the Funds include no sales charges.
However, all Funds except the Bond and Short-Term Funds assess entry and exit
fees as set forth in the section entitled Fees and Annual Operating Expenses.
These fees are paid directly to the Funds themselves and not to FAI or other
Fund Service Providers. 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 Fund shares to Members actually making such transactions, rather than to the
Funds' other Members. These fees are deducted automatically from the amount
invested or redeemed and cannot be paid separately. Entry and exit fees may be
waived at FAI's discretion when the transaction will not result in significant
costs for the affected Fund (e.g., in-kind purchases and redemptions).
Offering Dates, Times, and Prices. The Fund continuously offers Fund shares, and
purchases may be made on any Business Day. Fund shares may be purchased at each
Fund's net asset value, next determined after an order and payment are received
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 US dollars. The Funds reserve the right to reject any
purchase order. Share purchase orders are deemed accepted when Investors Capital
Services 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.
Investment 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 $750,000 in any combination of Funds. Minimums may be waived
for FAI officers. Subsequent purchases and redemptions may be made in any
amount.
Order and Payment Procedures. To purchase shares
on a particular Business Day, the following
procedures apply:
When Allowed Purchases may be made on
any Business Day.
Payment Procedure Federal funds should be
wired to the Funds'
Custodian and Transfer
Agent, Investors Bank &
Trust Company, Boston,
Massachusetts. (See
Wiring Instructions
below.)
<PAGE>
Purchases and Redemptions continued
Procedure A purchaser must call TIP
at 804-817-8200
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
prior to 4 p.m.,the order
will be
effective on that day.
Notification If TIP receives
notification after 4:00
p.m. Eastern time or if
federal funds are not
received by the Transfer
Agent by 4:00 p.m.
Eastern time, such
purchase order shall be
executed as of the date
that federal funds are
received by 4:00 p.m.
Eastern time.
Converted Funds 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. To redeem shares on a
particular Business Day, the following procedures
apply:
Type of Redemption Full and fractional
shares in any amount may
be redeemed upon Members'
request.
Who May Redeem Only an authorized agent as designated on
the Member's Account Application may request a
redemption.
Notification The Member must inform
FAI of the dollar or
share amount to be
redeemed, the account to
which the proceeds should
be wired (as designated
on the Account
Application), and the
Member's name and account
number.
Time of Notice TIP must receive notice of redemption by
4:00 p.m. Eastern time on any Business Day.
Late Notice If the notice is received
on a day that is not a
Business Day, or after
4:00 p.m. Eastern time,
it will be deemed
received as of the next
Business Day.
Redemption Price The redemption will be based on the NAV per
share next determined after receipt by the Transfer
Agent of proper notice.
Payment Payment generally will be
made on the day following
receipt of notice, less
any applicable exit fee,
but TIP reserves the
right to delay payment
for up to seven business
days.
Telephone Redemption Option. A Member may request a redemption by calling FAI.
TIP, FAI, Investors Capital, 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, Investors Capital, 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 and
all changes to a Member's wiring instructions will require a signature guarantee
by a qualified financial institution.
<PAGE>
Purchases and Redemptions continued
Potential In-Kind Redemptions. According to the Securities and Exchange
Commission's procedures, the Funds reserve the right to redeem in-kind, in
readily marketable securities, 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. 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. One Fund's shares may be exchanged for shares of any other
of the Funds based on the respective net asset values of the shares involved in
the exchange. There is no minimum for such an exchange. An exchange order is
treated 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
wishing to make exchange requests should contact FAI. The exchange privilege is
available only in states where the exchange legally may be made.
Wire Transfer Instructions. A Member's bank may impose its own processing fee
for 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 with an appropriate signature guarantee. Further
documentation may be required when deemed appropriate by FAI, Investors Capital,
or the Transfer Agent.
Funds should be wired to:
Investors Bank & Trust Co.
Boston, Massachusetts
ABA#: 011001438
Attention: Transfer Agent
Deposit Account: 433334444
Further Credit: TIFF Investment Program
Member Name: Name of Member Organization
<PAGE>
Dividends and Distributions
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 following table:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
...................................................................................................................
Multi- International Emerging U.S. Short-
...................................................................................................................
Asset Equity Markets Equity Bond Term
...................................................................................................................
Dividends
...................................................................................................................
...................................................................................................................
...................................................................................................................
Declared Semi-Annually Semi-Annually Annually Quarterly Daily Daily
Reinvested July/ July/ December April/July/ Last Business Last Business
December December October/ Day of Month Day of Month
December
Paid July/ July/ December April/July/ First Business First Business
December December October/ Day of Month Day of Month
December
...................................................................................................................
Capital Gains
...................................................................................................................
...................................................................................................................
...................................................................................................................
Declared Annually Annually Annually Annually Annually Annually
Reinvested December December December December December December
Paid December December December December December December
</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
Option 1 - Automatic Reinvestment of Distributions. 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. 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
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).
<PAGE>
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. The Fund generally will not pay US 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 to
receive cash payments for such distributions.
Tax Treatment of Distributions. The Funds intend to make distributions that may
be taxed as ordinary income and capital gains. Dividends paid by a Fund from its
investment company taxable income (including interest and net short-term capital
gains) will be taxable to a US Member as ordinary income. If a portion of a
Fund's income consists of dividends paid by US 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. An exchange of one Fund's shares for shares of another
Fund will be treated as a sale of the first Fund's shares and purchase of the
second Fund's shares. Any gain on the transaction may be subject to federal
income tax.
A distribution will be treated as paid on December 31 of a 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. The U.S. Equity Fund expects that its distributions will represent
primarily capital gains and the Bond and Short-Term Funds expect that their
distributions will represent primarily ordinary income. Each Fund will inform
Members of the amount and tax status of all amounts treated as distributed to
them within 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. Such capital gain or loss will be either long term or short term,
depending upon the Member's holding period for the shares.
Backup Withholding. As with all mutual funds, a Fund may be required to withhold
US federal income tax at the rate of 31% of all taxable distributions payable to
Members who fail to provide the Fund with correct taxpayer identification
numbers or to 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; rather, it is a way in which the IRS ensures it will collect
taxes otherwise due. Any amount withheld may be credited against US federal
income tax liability.
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 US Government and
certain of its agencies, authorities, and instrumentalities may be exempt from
state and local taxes in certain states.
Further information relating to tax consequences is contained in the Statement
of Additional Information.
<PAGE>
Financial Highlights
The financial highlights tables are intended to help Members understand the
Funds' financial performance for the period of each Fund's operations. Certain
information reflects financial results for a single share of a Fund. The total
returns in the tables represent the rate that an investor would have earned (or
lost) on an investment in a given Fund, assuming reinvestment of all dividends
and distributions. This information has been audited by PricewaterhouseCoopers
LLC, whose report is included along with the Funds' financial statements in the
Annual Report (available upon request).
TIFF Multi-Asset Fund
<TABLE>
<S> <C> <C> <C>
- ----------------------------------------------- ---------------- ----------------- ----------------
Year Ended Year Ended Year Ended
For a share outstanding throughout each period 12/31/98 12/31/97 12/31/96
- ----------------------------------------------- ---------------- ----------------- ----------------
Net Asset Value, beginning of period $11.65 $12.08 $11.13
Income from investment operations:
Net investment income 0.20 0.44 0.17
Netrealized and unrealized gain (loss) on investments, financial futures and
options contracts, short sales, forward currency
contracts, and foreign currency-related (0.17) 0.21 1.45
transactions
Total from investment operations 0.03 0.65 1.62
Less distributions from:
Net investment income (0.07) (0.30) (0.18)
Amounts in excess of net investment income (0.19) (0.15) (0.13)
Net realized gains -- (0.63) (0.36)
Total distributions (0.26) (1.08) (0.67)
Net asset value, end of period $11.42 $11.65 $12.08
Total return (a) 0.22% 5.51% 14.72%
- ----------------------------------------------- ---------------- ----------------- ----------------
Ratios/Supplemental Data
Net assets, end of period (000s) $291,847 $382,317 $218,244
Ratio of expenses to average net assets 0.65% 0.72% 1.03%
Ratio of net investment income to average net 1.85% 3.30% 1.99%
assets
Portfolio turnover 196.06% 181.51% 100.66%
- ----------------------------------------------- ---------------- ----------------- ----------------
</TABLE>
TIFF International Equity Fund
<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------------------------- ---------------- ----------------- ---------------- ----------------
Year Ended Year Ended Year Ended Year Ended
For a share outstanding throughout each period 12/31/98 12/31/97 12/31/96 12/31/95
- ----------------------------------------------- ---------------- ----------------- ---------------- ----------------
Net Asset Value, beginning of period $11.77 $12.19 $10.82 $9.98
Income from investment operations:
Net investment income 0.19 0.17 0.10 0.15
Netrealized and unrealized gain (loss) on investments, financial futures and
options contracts, short sales, forward currency
contracts, and foreign currency-related 0.15 (0.06) 1.62 0.83
transactions
Total from investment operations 0.34 0.11 1.72 0.98
Less distributions from:
Net investment income (0.12) (0.16) (0.09) (0.14)
Amounts in excess of net investment income (0.20) (0.09)
Net realized gains (0.62) (0.28) (0.26)
Amounts in excess of net realized gains -- -- -- --
Total distributions (0.94) (0.53) (0.35) (0.14)
Net asset value, end of period $11.17 $11.77 $12.19 $10.82
Total return (a) 3.03% (b) 0.91% 15.94% 9.85%
- ----------------------------------------------- ---------------- ----------------- ---------------- ----------------
Ratios/Supplemental Data
Net assets, end of period (000s) $260,030 $241,072 $219,458 $155,422
Ratio of expenses to average net assets 0.81% (c) 1.21% 1.11% 1.05%
Ratio of expenses to average net assets
before expense waivers 0.84% (c) 1.21% 1.11% 1.05%
Ratio of net investment income to average net 1.47% 0.72% 0.91% 1.48%
assets
Portfolio turnover 30.62% 25.55% 32.40% 32.91%
- ----------------------------------------------- ---------------- ----------------- ---------------- ----------------
</TABLE>
(a) Total return includes the effects of entry/exit fees received by the Fund;
however, net asset value per share at the beginning and end of each period used
for calculating total return excludes such entry/exit fees. (b) Total return
would have been lower had certain expenses not been waived or reimbursed. (c)
Expenses include tax expense for the year ended December 31, 1998. Without the
tax expense, the ratio of expenses to average net assets and the ratio of
expenses to average net assets before expense waivers would have been 0.76% and
0.79%, respectively.
<PAGE>
Financial Highlights continued
TIFF Emerging Markets Fund
<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------------------------- ---------------- ----------------- ---------------- ----------------
Year Ended Year Ended Year Ended Year Ended
For a share outstanding throughout each period 12/31/98 12/31/97 12/31/96 12/31/95
- ----------------------------------------------- ---------------- ----------------- ---------------- ----------------
Net Asset Value, beginning of period $8.09 $8.63 $8.45 $9.24
Income from investment operations:
Net investment income (loss) (0.01) 0.33 0.01 --
Netrealized and unrealized gain (loss) on investments, financial futures and
options contracts, short sales, forward currency
contracts, and foreign currency-related (2.72) (0.36) 0.21 (0.79)
transactions
Total from investment operations (2.73) (0.03) 0.22 (0.79)
Less distributions from:
Net investment income -- (0.24) (0.04) (0.00) #
Amounts in excess of net investment income (0.17) (0.27) (0.00) # (0.00) #
Net realized gains -- -- (0.00) # --
Amounts in excess of net realized gains -- -- -- (0.00) #
Total distributions (0.17) (0.51) (0.04) (0.00) #
Net asset value, end of period $5.19 $8.09 $8.63 $8.45
Total return (a) (33.38%) (b) (0.40%) 2.51% (8.39%)
- ----------------------------------------------- ---------------- ----------------- ---------------- ----------------
Ratios/Supplemental Data
Net assets, end of period (000s) $58,167 $83,836 $89,736 $59,486
Ratio of expenses to average net assets 3.09% (c) 1.56% 1.62% 2.35%
Ratio of expenses to average net assets
before expense waivers/reimbursements 3.14% (c) 1.56% 1.62% 2.35%
Ratio of net investment income (loss) to (0.55%) 0.95% 0.06% (0.15%)
average net assets
Portfolio turnover 47.62% 72.23% 79.96% 104.30%
- ----------------------------------------------- ---------------- ----------------- ---------------- ----------------
</TABLE>
TIFF U.S. Equity Fund
<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------------------------- ---------------- ----------------- ---------------- ----------------
Year Ended Year Ended Year Ended Year Ended
For a share outstanding throughout each period 12/31/98 12/31/97 12/31/96 12/31/95
- ----------------------------------------------- ---------------- ----------------- ---------------- ----------------
Net Asset Value, beginning of period $15.66 $13.74 $12.36 $10.02
Income from investment operations:
Net investment income 0.17 0.50 0.20 0.20
Netrealized and unrealized gain (loss) on investments, financial futures and
options contracts, short sales, forward currency
contracts, and foreign currency-related 1.59 3.94 2.52 3.37
transactions
Total from investment operations 1.76 4.44 2.72 3.57
Less distributions from:
Net investment income (0.07) (0.40) (0.17) (0.22)
Amounts in excess of net investment income (0.07) (0.11) (0.10) --
Net realized gains (1.66) (2.01) (1.07) (1.01)
Amounts in excess of net realized gains -- -- -- --
Total distributions (1.80) (2.52) (1.34) (1.23)
Net asset value, end of period $15.62 $15.66 $13.74 $12.36
Total return (a) 11.85% 33.01% 21.91% 36.02%
- ----------------------------------------------- ---------------- ----------------- ---------------- ----------------
Ratios/Supplemental Data
Net assets, end of period (000s) $312,587 $255,714 $176,797 $109,901
Ratio of expenses to average net assets 0.72% 0.70% 0.82% 0.93%
Ratio of expenses to average net assets
before expense waivers 0.72% 0.70% 0.82% 0.93%
Ratio of net investment income to average net 0.99% 1.34% 1.41% 1.67%
assets
Portfolio turnover 98.30% 108.52% 105.18% 109.89%
- ----------------------------------------------- ---------------- ----------------- ---------------- ----------------
</TABLE>
(a) Total return includes the effects of entry/exit fees received by the Fund;
however, net asset value per share at the beginning and end of each period used
for calculating total return excludes such entry/exit fees. (b) Total return
would have been lower had certain expenses not been waived or reimbursed. (c)
Expenses include tax expense for the year ended December 31, 1998. Without the
tax expense, the ratio of expenses to average net assets and the ratio of
expenses to average net assets before expense waivers would have been 2.98% and
3.03%, respectively. # Rounds to less than $0.01.
<PAGE>
Financial Highlights continued
TIFF Bond Fund
<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------------------------- ---------------- ----------------- ---------------- ----------------
Year Ended Year Ended Year Ended Year Ended
For a share outstanding throughout each period 12/31/98 12/31/97 12/31/96 12/31/95
- ----------------------------------------------- ---------------- ----------------- ---------------- ----------------
Net Asset Value, beginning of period $10.24 $10.06 $10.33 $9.68
Income from investment operations:
Net investment income 0.60 0.64 0.67 0.67
Netrealized and unrealized gain (loss) on investments, financial futures and
options contracts, short sales, forward currency
contracts, and foreign currency-related 0.13 0.27 (0.27) 1.01
transactions
Total from investment operations 0.73 0.91 0.40 1.68
Less distributions from:
Net investment income (0.60) (0.64) (0.67) (0.66)
Amounts in excess of net investment income (0.02) (0.01) (0.00) # (0.01)
Net realized gains (0.06) (0.08) (0.36)
Total distributions (0.68) (0.73) (0.67) (1.03)
Net asset value, end of period $10.29 $10.24 $10.06 $10.33
Total return (a) 7.31% 9.35% 3.75% 18.07%
- ----------------------------------------------- ---------------- ----------------- ---------------- ----------------
Ratios/Supplemental Data
Net assets, end of period (000s) $197,652 $173,352 $127,491 $91,072
Ratio of expenses to average net assets 0.46% 0.56% 0.58% 0.96%
Ratio of expenses to average net assets
before expense waivers 0.46% 0.56% 0.58% 0.96%
Ratio of net investment income to average net 5.82% 6.41% 6. 64% 6.34%
assets
Portfolio turnover 329.49% 398.16% 332.21% 406.24%
- ----------------------------------------------- ---------------- ----------------- ---------------- ----------------
</TABLE>
TIFF Short-Term Fund
<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------------------------- ---------------- ----------------- ---------------- ----------------
Year Ended Year Ended Year Ended Year Ended
For a share outstanding throughout each period 12/31/98 12/31/97 12/31/96 12/31/95
- ----------------------------------------------- ---------------- ----------------- ---------------- ----------------
Net Asset Value, beginning of period $9.95 $9.99 $10.01 $10.00
Income from investment operations:
Net investment income 0.54 0.54 0.54 0.58
Netrealized and unrealized gain (loss) on investments, financial futures and
options contracts, short sales, forward currency
contracts, and foreign currency-related 0.01 (0.02) (0.02) 0.05
transactions
Total from investment operations 0.55 0.52 0.52 0.63
Less distributions from:
Net investment income (0.53) (0.55) (0.54) (0.58)
Amounts in excess of net investment income -- (0.01) (0.00) # (0.00) #
Net realized gains -- (0.04)
Amounts in excess of net realized gains -- (0.00) #
Total distributions (0.53) (0.56) (0.54) (0.62)
Net asset value, end of period $9.97 $9.95 $9.99 $10.01
Total return (b) 5.59% 5.30% 5.28% 6.43%
- ----------------------------------------------- ---------------- ----------------- ---------------- ----------------
Ratios/Supplemental Data
Net assets, end of period (000s) $74,907 $34,431 $63,470 $96,580
Ratio of expenses to average net assets 0.35% 0.47% 0.36% 0.42%
Ratio of expenses to average net assets 0.53% 0.56% 0.47% 0.54%
before expense waivers
Ratio of net investment income to average net 5.41% 5.53% 5.35% 5.67%
assets
- ----------------------------------------------- ---------------- ----------------- ---------------- ----------------
</TABLE>
(a) Total return includes the effects of entry/exit fees received by the Fund;
however, net asset value per share at the beginning and end of each period used
for calculating total return excludes such entry/exit fees. (b) Total return
would have been lower had certain expenses not been waived or reimbursed. #
Rounds to less than $0.01.
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
This Prospectus sets forth concisely the information about the Funds that a
prospective Member should know before investing. This Prospectus should be
read carefully and retained for future reference. Additional information
is contained in the Statement of Additional Information dated April 30,
1999, which has been filed with the Securities and Exchange Commission and
which can be obtained without charge by contacting FAI at the address and
telephone number listed below. The Statement of Additional Information
is incorporated herein by reference. Further information about the Funds'
investments is also available in the TIP Annual and Semi-Annual Reports to
Members. The Funds' Annual Report contains a discussion of the market
conditions and investment strategies that significantly affected the Funds'
performance during the last fiscal year and is available without charge by
contacting FAI.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Information about the Funds (including the Prospectus and SAI) can be
reviewed and copied at the Securities and Exchange Commission's Public
Reference Room in Washington, DC (for information, call 1-800-SEC-0330).
Reports and other information about the Funds are also available on the
Commission's Internet site at http://www.sec.gov,
with copies of this information available upon payment of a duplicating fee by
writing the Public Reference Section of the Commission, Washington, DC
20549-6009.
- -------------------------------------------------------------------------------
SEC File Number 811-8234
Inquiries
Requests for the Prospectus, SAI, and Annual or Semi-Annual Reports as
well as other inquiries concerning TIP may be made by contacting FAI
at:
Foundation Advisers, Inc.
2405 Ivy Road
Charlottesville, VA 22903
Phone: 804-817-8200
Fax: 804-817-8231
E-mail: [email protected]
Website: www.tiff.org
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.
<PAGE>
ARONSON + PARTNERS
================================================================================
ORGANIZATION
================================================================================
230 South Broad Street
Twentieth Floor
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: $2.3 bil (3/31/99)
================================================================================
REPRESENTATIVE CLIENTS
================================================================================
John D. and Catherine T. MacArthur Foundation
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
Kevin M. Johnson, Partner
PhD, North Carolina; BS, Delaware
1993-present: Aronson + Partners
previous experience: DuPont Pension; Vanguard Group
Martha E. Ortiz, CFA, CIC, Partner
MBA, Wharton; BA, Harvard
1987-present: Aronson + Partners
previous experience: Wilshire Associates;
Continental Grain
Money Manager for the TIFF U.S. Equity Fund
===============================================================================
INVESTMENT PHILOSOPHY
===============================================================================
Philosophy: Large Cap Equity
Assets Using This Philosophy: $806 mm (3/31/99)
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 100 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
================================================================================
[OBJECT OMITTED]
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, LLC
================================================================================
ORGANIZATION
================================================================================
Clearwater House
2187 Atlantic Street
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: $4 bil (3/31/99)
================================================================================
REPRESENTATIVE CLIENTS
================================================================================
Catholic Foundation
Local 282
Local 803
Masonic Charity Foundation
National Maritime Union
Omaha School Employees' Retirement System
Samford University
================================================================================
PERSONNEL
================================================================================
Key TIP Account Managers
Ronald W. Sellers, President
MBA, Oklahoma State; MA, College of Holy Names;
AB, California-Berkeley
1992-present: Atlantic Asset Mgmt Partners, L.L.C.
1985-92: Weiss Peck & Greer, Partner,
Co-Director, Fixed Income
Elaine S. Hunt, CFA, Senior Vice President
MBA, Chicago; BA, Beloit College
1992-present: Atlantic Asset Mgmt Partners, L.L.C.
Weiss, Peck & Greer; William M. Mercer
Donald W. Trotter, CFA, Senior Vice President
MBA, Missouri; BS/BA, Kansas
1992-present: Atlantic Asset Mgmt Partners, L.L.C.
DeMarche Associates, Inc.; Phillips Petroleum
Robert F. Bayer, CFA, CPA, Senior Vice President,
Portfolio Strategist
MA, MIT; BS, Wharton
1998-present: Atlantic Asset Mgmt Partners, L.L.C.
1990-1998: Brundage Story and Rose
Money Manager for the TIFF Bond Fund
==============================================================================
INVESTMENT PHILOSOPHY
==============================================================================
Philosophy: Active Duration
Assets Using This Philosophy: $68 mm (3/31/99)
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 varied slightly around an index, 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) resulting in a buy low, sell high discipline.
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
================================================================================
[GRAPHIC OMITTED]
Fee = 15 + [ .200 x ( Excess Return - 65 ) ] subject to Floor of 10 bp; Cap of
60 bp Measurement Period = Trailing 12 Month 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: $450 mm (3/31/99)
================================================================================
REPRESENTATIVE CLIENTS
================================================================================
Brown & Williamson
Dartmouth College
Gates Family Foundation
Hughes Electronics
Pfizer, Inc.
Riverside Church of New York
Rockefeller Family Fund
Scripps College
Strategic Investment Partners
Swarthmore College
University of Notre Dame
Vassar College
================================================================================
PERSONNEL
================================================================================
Key TIP Account Manager
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
Adam D. Schor, Principal, CFA
MS, University of Wisconsin; BS, Northwestern
Harris Associates, Portfolio Manager
Jason P. Yee, Principal
BS, Stanford
Janus Capital Corporation
Money Manager for the TIFF Multi-Asset
and TIFF International Equity Funds
================================================================================
INVESTMENT PHILOSOPHY
================================================================================
Philosophy: International and Global Small Cap
Assets Using This Philosophy: $450 mm (3/31/99)
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
================================================================================
10% Russell 2000 / additional 90% Bee's IEF benchmark (MAF)
The blending of the MSCI World ex US Small Cap with the MSCI Emerging Markets
Free in the same proportions as the developed and emerging markets are
represented in the MSCI All Country World ex US at the beginning of the month
(IEF)
================================================================================
FEE PAID BY TIP TO THIS MANAGER
================================================================================
[GRAPHIC OMITTED]
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, LP
================================================================================
ORGANIZATION
================================================================================
Canyon Capital Advisors, LLC
9665 Wilshire Blvd., Suite 200
Beverly Hills, CA 90212
phone: 310-247-2700
fax: 310-247-2701
Independent Investment Adviser
Controlled by Joshua S. Friedman, Mitchell R. Julis,
R. Christian B. Evensen
Founded in 1990
Total Assets under Management: $603 mm (3/31/99)
================================================================================
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 Advisors, LLC
Drexel Burnham Lambert
Mitchell R. Julis, Managing Partner
JD/MBA, Harvard; BA, Princeton
1990-present: Canyon Capital Advisors, LLC
Drexel Burnham Lambert
R. Christian B. Evensen, Managing Partner
BA, Williams College
1990-present: Canyon Capital Advisors, LLC
Drexel Burnham Lambert
Money Manager for the TIFF Multi-Asset Fund
================================================================================
INVESTMENT PHILOSOPHY
================================================================================
Philosophy: The Value Realization Fund, LP
Assets Using This Philosophy: $603 mm (3/31/99)
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 1LX
phone: 171-711-0771
fax: 171-711-0772
City of London
The Barn
1125 Airport Road
Coatesville, PA 19320
phone: 610-380-2110
fax: 610-380-2116
Independent Investment Adviser
Controlled by FMH Investments NV and Scaleoption
PLC
Founded in 1991
Total Assets under Management: $780 mm (4/22/99)
================================================================================
REPRESENTATIVE CLIENTS
================================================================================
Bush Foundation
Duke University
General Mills
Robert Wood Johnson Foundation
Southern Methodist University
University of Richmond
================================================================================
PERSONNEL
================================================================================
Key TIP Account Managers
Barry Olliff, Chief Portfolio Manager
1991-present: City of London Investment
Management Co., Ltd.
Kier Boley, Portfolio Manager
BA, Portsmouth University
MSc, Southampton University
1995-present: City of London Investment
Management Co., Ltd.
1994-1995: Olliff & Partners
Mark Dwyer, Portfolio Manager
BA, Kingston University
1995-present: City of London Investment
Management Co., Ltd.
Money Manager for the TIFF International Equity
and TIFF Emerging Markets Funds
================================================================================
INVESTMENT PHILOSOPHY
================================================================================
Philosophy: Emerging Markets Closed-End Funds
Assets Using This Philosophy: $134 mm (3/31/99)
Account Type: Commingled Vehicle
================================================================================
INVESTMENT APPROACH
================================================================================
City of London's (CoL) investment philosophy is value oriented. The firm seeks
to provide long-term capital growth via active country allocation and stock
selection in emerging markets. Its key objective is to provide above average,
long-term outperformance versus the appropriate funds' emerging market
benchmark.
The firm aims to provide this outperformance with a significantly lower level of
risk than the benchmark index and its peer group. This is effected by the choice
of closed-end funds as the prime investment medium. Implementation of the
philosophy is by a disciplined investment methodology characterized as a
top-down approach to country asset allocation overlaid with a pure value
approach to stock selection.
================================================================================
MANAGER'S BENCHMARK
================================================================================
MSCI Emerging Markets Free Index
================================================================================
FEE PAID BY TIP TO THIS MANAGER
================================================================================
1.5% of net assets per annum
DAYSTAR PARTNERS
================================================================================
ORGANIZATION
================================================================================
411 Theodore Fremd Avenue
Rye, NY 10580
phone: 914-967-1100
fax: 914-967-1199
Independent Investment Counsel
Controlled by Warren J. Malone, Michael C. Murr, and
John C. Sites, Jr.
Founded in 1995
Total Assets under Management: $330 mm (3/31/99)
================================================================================
REPRESENTATIVE CLIENTS
================================================================================
Clients not disclosed
================================================================================
PERSONNEL
================================================================================
Key TIP Account Managers
Bruce W. Gregory, Principal
BA, Princeton University
1996-present: Daystar Partners
1990-1996: Progressive Partners, Ltd., Managing Director
1987-1990: Chase Manhattan Bank, Analyst
Warren J. Malone, Principal
JD/MBA, Stanford; BS, Boston College
1995-present: Daystar Partners
1989-1995: Progressive Partners, Ltd., Sr Managing
Director
Michael C. Murr, Principal
MBA/BS, Harvard
1995-present: Daystar Partners
1988-1995: Progressive Partners, Ltd., Co-founder
John C. Sites, Jr., Principal
BA, Rhodes College
1995-present: Daystar Partners
1981-1995: The Bear Stearns Companies, Inc.,
Executive Vice President
Money Manager for the TIFF Multi-Asset Fund
================================================================================
INVESTMENT PHILOSOPHY
================================================================================
Philosophy: Daystar Special Situations Fund
Assets Using This Philosophy: $330 mm (3/31/99)
Account Type: Commingled Vehicle
================================================================================
INVESTMENT APPROACH
================================================================================
Daystar invests primarily in the senior portion of the capital structure of
distressed companies. Daystar seeks capital appreciation from these investments
as the capital structures of the distressed companies are restructured through
negotiations among creditors and/or through the bankruptcy process. Daystar
purchases both private and public securities, but focuses primarily on bank
debt.
================================================================================
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 after a hurdle rate of 6%.
DELAWARE INTERNATIONAL ADVISERS LTD.
================================================================================
ORGANIZATION
================================================================================
Portfolio Management:
3rd Floor, 80 Cheapside
London, England EC2V 6EE
phone: 171-477-7000
fax: 171-523-0300
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: $9.6 bil (3/31/98)
================================================================================
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)
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
Jeffrey J. Nick, Chairman
Princeton University; University of Chicago
Lincoln National Investment Companies
Money Manager for the TIFF Multi-Asset
and TIFF International Equity Funds
================================================================================
INVESTMENT PHILOSOPHY
================================================================================
Philosophy: Value-Oriented International Equity Mgmt
Assets Using This Philosophy: $8.7 bil (4/23/99)
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
EMERGING MARKETS MANAGEMENT, LLC
================================================================================
ORGANIZATION
================================================================================
1001 Nineteenth Street North, 16th Floor
Arlington, VA 22209-1722
phone: 703-243-5200
fax: 703-243-2464
Independent Registered Investment Adviser
A Limited Liability Corporation, the managing
shareholder of which is Emerging Markets Investors
Corporation, a Delaware corporation controlled by
Antoine van Agtmael
Founded in 1987
Total Assets under Management: $2.1 bil (3/31/99)
================================================================================
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, L.L.C.
Other Personnel
Michael Duffy, CFA, Managing Director
PhD/MA,Chicago; BA, Michigan
World Bank Pension Plan, Senior Pension Investment
Officer
Felicia Morrow, Managing Director & Portfolio Manager
(Latin America and Southeast Asia)
MBA, Harvard; BA, Stanford
World Bank, Consultant
John Niepold, Portfolio Manager (Africa)
MBA, UNC-Chapel Hill; BA, Davidson
Crosby Securities, Senior Investment Analyst
Dobrinka Cidrof, CFA, Portfolio Manager (Turkey)
MBA, George Washington Univ; BA, Bosphorous Univ
TEB Investment Bank
Arindam Bhattacharjee, CFA, Portfolio Manager (India)
MBA, American University; BA, Davidson University
World 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: $2.1 bil (3/31/99)
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 (probabilistic based
allocation model with the key inputs being expected real returns, volatilty, and
benchmark country weights). Typically, 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., relatively undiscovered)
companies are making up the portfolio. The firm actively monitors a universe of
approximately 1,800 stocks in over 53 countries. Portfolios contain an average
of 250 stocks. About 40% of the issues 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
40%.
================================================================================
MANAGER'S BENCHMARK
================================================================================
MSCI Emerging Markets Free Index
================================================================================
FEE PAID BY TIP TO THIS MANAGER
================================================================================
[OBJECT OMITTED]
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
<PAGE>
EVEREST CAPITAL INC.
================================================================================
ORGANIZATION
================================================================================
Everest Capital Inc.
2601 South Bayshore Drive
Suite 1700
Miami, FL 33133
phone: 305-666-1700
fax: 305-666-1919
Independent Investment Adviser
Controlled by Marko Dimitrijevic
Founded in 1990
Total Assets under Management: $1.7 bil (3/31/99)
================================================================================
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
Timothy P. Mistele, Managing Director
MBA, Stanford; AB, Princeton
1997-present: Everest Capital Limited
Gabelli & Co. (Rye, New York)
Money Manager for the TIFF International Equity
and TIFF Emerging Markets Funds
================================================================================
INVESTMENT PHILOSOPHY
================================================================================
Philosophy: Everest Capital Frontier Fund
Assets Using This Philosophy: $285 mm (3/31/99)
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 macro 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 Index
================================================================================
FEE PAID BY TIP TO THIS MANAGER
================================================================================
1.5% of net assets per annum plus 20% of net profit EXPLORADOR CAPITAL
MANAGEMENT, LLC
================================================================================
ORGANIZATION
================================================================================
One Maritime Plaza, Suite 1300
San Francisco, CA 94111
phone: 415-392-1300
fax: 415-392-1301
Independent Investment Counsel
Controlled by Andrew H. Cummins
Founded in 1995
Total Assets under Management: $ 47 mm (3/31/99)
================================================================================
REPRESENTATIVE CLIENTS
================================================================================
Clients not disclosed
================================================================================
PERSONNEL
================================================================================
Key TIP Account Manager
Andrew H. Cummins, Portfolio Manager
MBA, Harvard; BS, University of California-Berkeley
1995-present: Explorador Capital Management, LLC
1992-1995: Emerging Markets Investors Corporation
Oswaldo Sandoval, Investment Analyst
MBA, Stanford; BS, University of Pennsylvania
1997-present: Explorador Capital Management, LLC
1993-1995: IFC at World Bank
Money Manager for the TIFF Emerging Markets Fund
================================================================================
INVESTMENT PHILOSOPHY
================================================================================
Philosophy: The Explorador Fund, LP
Assets Using This Philosophy: $47 mm (3/31/99)
Account Type: Commingled Vehicle
================================================================================
INVESTMENT APPROACH
================================================================================
Explorador Capital specializes in equity investments in Latin America. The fund
seeks to generate superior risk-adjusted rates of return through investment
opportunities in Latin America. Despite higher political risks and less economic
stability in countries in the region, the premium paid to investors to assume
such risks is occasionally very compelling. In addition to long equity
positions, the fund also seeks to exploit relative value "paired-trades" and
other short-term volatility-driven opportunities. To mitigate the negative
effects of strong market corrections, the fund maintains, from time to time,
short positions in shares of companies that its managers believe to be
overvalued. A typical core position might represent 3-5% of fund capital, but
the fund will commit up to 15% to the securities of a single issuer if the
fundamental outlook is sufficiently attractive.
================================================================================
MANAGER'S BENCHMARK
================================================================================
MSCI Emerging Markets Free Index
================================================================================
FEE PAID BY TIP TO THIS MANAGER
================================================================================
1.5% of net assets per annum
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: $4.4 bil (4/1/99)
================================================================================
REPRESENTATIVE CLIENTS
================================================================================
Clients not disclosed
================================================================================
PERSONNEL
================================================================================
Key TIP Account Manager
Thomas F. Steyer, Senior Managing Member
MBA, Stanford University; BA, Yale University
1990-present: Farallon Capital Management, LLC
Managing Members
Enrique Boilini
David Cohen
Joseph Downes
William Duhamel
Jason Fish
Andrew Fremder
Richard Fried
William Mellin
Stephen Millham
Meridee Moore
Andrew Spokes
Money Manager for the TIFF Multi-Asset Fund
================================================================================
INVESTMENT PHILOSOPHY
================================================================================
Philosophy: Farallon Capital Institutional Partners, LP
Assets Using This Philosophy: $1.25 bil (4/1/99)
Account Type: Limited Partnership
================================================================================
INVESTMENT APPROACH
================================================================================
Farallon's investments are primarily "event-driven," in which a known or
expected event will cause an appreciation in the value of a particular portfolio
position. Holdings include securities and other claims associated with
reorganizations, bankruptcies, liquidations, recapitalizations, mergers, tender
offers, or exchange offers; non-performing and sub-performing mortgages;
securities affected by ongoing or pending litigation; emerging market
securities; and securities held to facilitate 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 that 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. As of March 1999, the portfolio consists of more
than 150 core positions.
================================================================================
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: $31.5 bil (3/31/99)
================================================================================
REPRESENTATIVE CLIENTS
================================================================================
Dow Chemical Company
Fortune Brands
Genentech
Monsanto Company
PG&E
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: $1.9 bil (3/31/99)
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
GOTHAM PARTNERS, LP
================================================================================
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: $467 mm (3/31/99)
================================================================================
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, LP
Assets Using This Philosophy: $467 mm (3/31/99)
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 Index
================================================================================
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).
HARDING, LOEVNER MANAGEMENT, LP
================================================================================
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: $1.3 bil (3/31/99)
================================================================================
REPRESENTATIVE CLIENTS
================================================================================
Carleton College
Columbia Foundation
Gerbode Foundation
Johns Hopkins University
Robert Wood Johnson Foundation
Longwood Gardens
Mercersburg Academy
Public Welfare Foundation
================================================================================
PERSONNEL
================================================================================
Key TIP Account Managers
Simon Hallett, CFA, 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, CFA, 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 (3/31/99)
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. 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 45
stocks. Annual turnover averages 35%.
================================================================================
MANAGER'S BENCHMARK
================================================================================
MSCI All Country World Free Index (MAF) or
MSCI All Country World Free ex US Index (IEF)
================================================================================
FEE PAID BY TIP TO THIS MANAGER
================================================================================
[GRAPHIC OMITTED]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
LAZARD ASSET MANAGEMENT
================================================================================
ORGANIZATION
================================================================================
30 Rockefeller Plaza
New York, NY 10112-6300
phone: 212-632-6000
fax: 212-332-5913
Independent Investment Counsel
Wholly owned by Lazard Freres & Company
Founded in 1848
Total Assets under Management: $64 bil (3/31/99)
Closed-End Funds $919 mm (3/31/99)
================================================================================
REPRESENTATIVE CLIENTS
================================================================================
Howard Hughes Medical Institute
ITT Pension Fund
Marathon Oil
Mayo Foundation
Phoenix Mutual
Swarthmore College
US Steel & Carnegie
================================================================================
PERSONNEL
================================================================================
Key TIP Account Managers
Alexander Zagoreos, Managing Director
MIA/MBA/BA, Columbia University
1977-present: Lazard Asset Management
Kun Geoffrey Deng, Senior Vice President
MIA, Columbia University; MA, Beijing University
1997-present: Lazard Asset Management
1994-97: Newgate Asset Management
Lee Ann Cannon, Vice President
MBA, New York University; BA, University of Delaware
1991-present: Lazard Asset Management
1990-91: Mitsubishi Bank
John K. Chase, Portfolio Analyst
MBA, Rensselaer Polytechnic; BA, St. Anselm College
1997-present: Lazard Asset Management
1995-97: The Recovery Group
Vikram Raju, Portfolio Analyst
MIA, Columbia; MBA/BA, Bombay University
1997-present: Lazard Asset Management
1996-97: Merrill Lynch & Co.
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: $413 mm (3/31/99)
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
LONE PINE CAPITAL LLC
================================================================================
ORGANIZATION
================================================================================
Independent Investment Counsel
Controlled by Stephen F. Mandel, Jr.
Founded in 1997
Total Assets under Management: $950 mm (3/31/99)
================================================================================
REPRESENTATIVE CLIENTS
================================================================================
Clients not disclosed
================================================================================
PERSONNEL
================================================================================
Key TIP Account Managers
Stephen F. Mandel, Jr., Portfolio Manager and
Consumer Analyst
MBA, Harvard; BS, Dartmouth
1997-present: Lone Pine Management LLC
1990-1997: Tiger Management
John B. Sommi, Jr., Managing Director, Trading
BS, University of Virginia
1997-present: Lone Pine Management LLC
1992-1997: Tiger Management
Other Personnel
Kerry A. Tyler, Managing Director, Chief Financial
Officer
BS, University of Arizona
previous experience: SoundView Financial Group, Ernst
& Young LLP; KPMG Peat Marwick LLP
Leslie Dahl, Director of Investor Services
AB, Dartmouth
previous experience: J.P. Morgan & Co., Inc.
Money Manager for the TIFF Multi-Asset Fund
================================================================================
INVESTMENT PHILOSOPHY
================================================================================
Philosophy: Lone Redwood, LP
Assets Using This Philosophy: $490 mm (3/31/99)
Account Type: Commingled Vehicle
================================================================================
INVESTMENT APPROACH
================================================================================
Lone Pine Capital (LPC) invests primarily in equity and equity-related
securities based on a bottom-up, fundamental analysis of stock picking, long and
short. The portfolio typically contains 40 to 60 long positions averaging three
to five percent of equity each and 50 to 80 short positions averaging one to two
percent of equity each. LPC invests primarily in issues within the following
economic sectors: (1) telecom / media; (2) healthcare; (3) consumer / retail;
(4) technology; and (5) financial services. The partnership invests globally,
although the majority of the capital is invested in U.S. stocks. Currency
exposure is not hedged and is minimized through natural hedges - offsetting
longs or shorts - to minimize exposure to any single currency. LPC may invest up
to five percent of the fund's total assets in private placement securities; may
utilize both over-the-counter and exchange traded intruments; may invest in
other investment funds; and may invest in the high yield and convertible fixed
income markets.
================================================================================
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 for the fiscal year in excess
of the hurdle amount. The Hurdle Amount is the amount that a limited partner
would have earned for a fiscal year if it had received an annual rate of return
on its opening capital account equivalent to the one-year U.S. Treasury bill
rate as of the close of business on the last Business Day of the preceding
fiscal year, but in no event will the applicable rate exceed 8%.
MARATHON ASSET MANAGEMENT, LTD.
================================================================================
ORGANIZATION
================================================================================
Orion House
5 Upper St. Martin's Lane
London, England WC2H 9EA
phone: 171-497-2211
fax: 171-497-2399
Independent Investment Counsel
Controlled by William J. Arah, Jeremy J. Hosking, and
Neil M. Ostrer, Investment Directors
Founded in 1986
Total Assets under Management: $9 bil (3/31/99)
================================================================================
REPRESENTATIVE CLIENTS
================================================================================
Asea Brown Boveri Inc.
GTE Corporation
Minnesota Mining & Manufacturing
Pennsylvania Public School Employees' Retirement
System
University of Michigan
================================================================================
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: $9 bil (3/31/99)
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 150 to 200 stocks. Annual turnover averages
less than 50%.
================================================================================
MANAGER'S BENCHMARK
================================================================================
MSCI All Country World Free ex US Index
================================================================================
FEE PAID BY TIP TO THIS MANAGER
================================================================================
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, LP
================================================================================
ORGANIZATION
================================================================================
222 Berkeley Street
Boston, MA 02116
phone: 617-424-4700
fax: 617-424-4747
Independent Investment Counsel
Controlled by Commerzbank AG
Founded in 1987
Total Assets under Management: $1.7 bil (3/31/99)
================================================================================
REPRESENTATIVE CLIENTS
================================================================================
Dartmouth College
General Motors Corporation
Saint-Gobain Corporation
State of Virginia Retirement System
================================================================================
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
Money Manager for the TIFF U.S. Equity Fund
================================================================================
INVESTMENT PHILOSOPHY
================================================================================
Philosophy: Active Completeness Manager
Assets Using This Philosophy: $264 mm (3/31/99)
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 100 to 200 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: 171-280-2800
fax: 171-280-2820
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: $6.2 bil (3/31/99)
================================================================================
REPRESENTATIVE CLIENTS
================================================================================
Asea Brown Boveri Inc.
Federal Express Corporation
General Motors Corporation
Howard Hughes Medical Institute
International Monetary Fund
MacArthur Foundation
Philip Morris
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
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: $2.2 bil (3/31/99)
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 limited
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 20%.
================================================================================
MANAGER'S BENCHMARK
================================================================================
BTAB European Smaller Companies Stock Index
================================================================================
FEE PAID BY TIP TO THIS MANAGER
================================================================================
0.50% straight asset-based fee
PALO ALTO INVESTORS
================================================================================
ORGANIZATION
================================================================================
470 University Avenue
Palo Alto, CA 94301
phone: 650-325-0772
fax: 650-325-5028
Independent Investment Counsel
Controlled by William L. Edwards, President
Founded in 1989
Total Assets under Management: $60 mm (3/31/99)
================================================================================
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
Ted Janus, Analyst
MBA/BA, University of California
1997-present: Palo Alto Investors
1994-1997: Bank of America, Vice President
1985-1992: City of Palo Alto, Project Manager
Paul L. Zweng, Analyst
PhD/BS, Stanford; MS, Queen's University
1995-1999: BHP Copper, Manager New Business
Development
1988-1995: Patagonia Exploration, Inc., Founder &
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: $60 mm (3/31/99)
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 $300 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
================================================================================
[GRAPHIC OMITTED]
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
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: $3.7 bil (3/31/99)
================================================================================
REPRESENTATIVE CLIENTS
================================================================================
Bell Atlantic
City of Hope
Ford Foundation
GTE
Indiana State Teachers
Los Angeles Philharmonic
Shell Oil
The Turrell Foundation
UFCW International
United Methodist Church
================================================================================
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 Multi-Asset
and TIFF Bond Funds
================================================================================
INVESTMENT PHILOSOPHY
================================================================================
Philosophy: Full Market Bond
Assets Using This Philosophy: $1.9 bil (3/31/99)
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 50 to 60
positions. Annual turnover averages 200% to 250%.
================================================================================
MANAGER'S BENCHMARK
================================================================================
Lehman Aggregate Bond Index (MAF) or
Lehman Government/Corporate Bond Index (BF)
================================================================================
FEE PAID BY TIP TO THIS MANAGER
================================================================================
[GRAPHIC OMITTED]
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
SHAPIRO CAPITAL MANAGEMENT COMPANY, INC.
================================================================================
ORGANIZATION
================================================================================
One Buckhead Plaza, Suite 1555
3060 Peachtree Road, N.W.
Atlanta, GA 30305
phone: 404-842-9600
fax: 404-842-9601
Independent Investment Counsel
Controlled by Samuel R. Shapiro
Founded in 1990
Total Assets under Management: $932 mm (3/31/99)
================================================================================
REPRESENTATIVE CLIENTS
================================================================================
Federal Express Corporation
The Joyce Mertz-Gilmore Foundation
Montgomery Securities
New York State Teachers Retirement System
Tredegar Industries, Inc.
University of Richmond
================================================================================
PERSONNEL
================================================================================
Key TIP Account Managers
Samuel R. Shapiro, President and CIO
BBA, University of Georgia
1990-present: Shapiro Capital Management Co., Inc.
1977-1989: Bear Stearns & Co.
Michael McCarthy, CFA, Director of Research
MSIM, Georgia Inst. of Technology; BS, New Jersey
Inst. of Technology
1990-present: Shapiro Capital Management Co., Inc.
Louis Shapiro, Research/Portfolio Manager
ABJ, University of Georgia
1992-present: Shapiro Capital Management
Money Manager for the TIFF U.S. Equity Fund
================================================================================
INVESTMENT PHILOSOPHY
================================================================================
Philosophy: Small Cap Value
Assets Using This Philosophy: $859 mm (3/31/99)
Account Type: Separate Account
================================================================================
INVESTMENT APPROACH
================================================================================
Shapiro Capital Management (SCM) employs a research intensive, value approach
that often entails a contrarian stance versus market consensus. Value is
determined with respect to the economic return available at the operational
level of a company. To qualify as an investment candidate, a company must
compete in an industry that is easily understood and that displays superior
economic characteristics. Common attributes of companies that qualify as
investment candidates include (1) a high return on invested assets; (2) ample
free cash flow; (3) true franchise characteristics; (4) significant barriers to
entry; (5) products with minimal chance of obsolescence; (6) substantial
congruence of financial interests between management and outside shareholders.
Each investment is preceded by a comprehensive analysis performed by SCM's
principals. The research includes an exhaustive analysis of financial statements
including all published material for at least the three most recent fiscal
years. Areas of focus include historical accounting procedures, asset
valuations, and cash flow. Management interviews are conducted both prior to
purchase and throughout each stock's holding period. Company facilities are
visited when doing so can provide additional insight into a firm's operations.
Interviews with suppliers, competitors, and customers are an integral part of
the research process. By assuming a proactive research-based approach, SCM
accepts responsibility for all of its investments rather than being held
accountable for the efforts and opinions of others.
================================================================================
MANAGER'S BENCHMARK
================================================================================
Russell 2000 Index
================================================================================
FEE PAID BY TIP TO THIS MANAGER
================================================================================
[GRAPHIC OMITTED]
Fee = 46 + [ .130 x ( Excess Return - 121 ) ] subject to Floor of 50 bp; Cap of
95 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: $6.3 bil (3/31/99)
================================================================================
REPRESENTATIVE CLIENTS
================================================================================
Amdahl Corporation
Columbia/HCA Healthcare Corporation
Eastman Kodak Company
State of Florida, Division of Treasury
State of Florida, SBA
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 Bond Fund
================================================================================
INVESTMENT PHILOSOPHY
================================================================================
Philosophy: Bond
Assets Using This Philosophy: $4.6 bil (3/31/99)
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 sixteen 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
================================================================================
[GRAPHIC OMITTED]
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
WELLINGTON MANAGEMENT COMPANY, LLP
================================================================================
ORGANIZATION
================================================================================
75 State Street
Boston, Massachusetts 02109
phone: 617-951-5000
fax: 617-263-4022
Independent Investment Counseling Firm
Controlled by Managing Partners: Robert W. Doran,
Duncan M. McFarland and John R. Ryan
Founded in 1928
Total Assets under Management: $215 bil (3/31/99)
================================================================================
REPRESENTATIVE CLIENTS
================================================================================
AT&T Investment Management Company
The Dow Chemical Company
Hartford Life Insurance Company
International Monetary Fund
J. Paul Getty Trust
Massachusetts Institute of Technology
Philip Morris
SunAmerical Inc.
The Vanguard Group
================================================================================
PERSONNEL
================================================================================
Key TIP Account Managers
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
James Bevilacqua, Analyst
MBA, Stanford
1994-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: $1.2 bil (3/31/99)
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: $1.8 bil (3/31/99)
================================================================================
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 Managers
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
Edmund H. Nicklin, Jr.
PhD/MS/BS, Rensselaer Polytechnic Institute
Evergreen Growth & Income Fund, Portfolio Manager
Alex Brown & Sons, Inc., Analyst
Money Manager for the TIFF U.S. Equity Fund
================================================================================
INVESTMENT PHILOSOPHY
================================================================================
Philosophy: Small Cap Value
Assets Using This Philosophy: $1.8 bil (3/31/99)
Account Type: Separate Account
================================================================================
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 $500 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
================================================================================
[GRAPHIC OMITTED]
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
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: $457 mm (12/31/98)
================================================================================
REPRESENTATIVE CLIENTS
================================================================================
Dassault Aviation
Eastman Kodak
McKinsey & Company
University of Rochester
S.G. Warburg
================================================================================
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: $231 mm (12/31/98)
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
INVESTORS CAPITAL SERVICES, INC.
===============================================================================
ORGANIZATION
===============================================================================
600 Fifth Avenue, 26th Floor
New York, NY 10020
phone: 212-332-5211
fax: 212-332-5190
Mutual Fund Administrator
Founded in 1992
===============================================================================
CLIENTS SERVED
===============================================================================
FFTW Funds, Inc.
Sponsored by Fischer Francis Trees & Watts, Inc.
Harding, Loevner Funds, Inc.
Sponsored by Harding, Loevner Management, LP
Holland Balanced Fund
Sponsored by Holland & Co., LLC
Hyperion Funds, Inc.
Sponsored by Hyperion Capital Management
SAMCO Fund, Inc.
Sponsored by Seix Advisors, Inc.
TIFF Investment Program, Inc.
Sponsored by Foundation Advisers, Inc.
===============================================================================
KEY PERSONNEL
===============================================================================
Carla E. Dearing, President
MBA, University of Chicago
BA, University of Michigan
former Vice President, Morgan Stanley & Co.
William E. Vastardis, Managing Director
BS, Villanova University
former Vice President and head of Private Label
Administration Group, The Vanguard Group
Fund Administrator for the
TIFF Investment Program
================================================================================
DESCRIPTION OF SERVICES
================================================================================
Investors Capital Services, Inc. ("Investors Capital"), formerly AMT Capital
Services, Inc. prior to its acquisition by Investors Financial Services, Inc. in
May 1998, is a leading mutual fund administration company which provides
third-party fund administration services to a select group of institutional
investment management firms. Investors Capital and Investors Bank & Trust
Company, TIP's custodian, transfer agent, and fund accounting agent, are
affiliates of each other in that they are both owned by Investors Financial
Services, Inc.
As fund administrator, Investors Capital is responsible for supervising all
elements of the day-to-day operations of TIP, including oversight of TIP's other
service providers with the exception of TIP's investment adviser and money
managers. Investors Capital seeks to lower TIP's administrative cost structure
through its application of technology, experience in managing complex operations
in the mutual fund industry, and economies of scale of working with more than
one fund group.
Investors Capital currently has approximately $8.5 billion in assets under
administration in mutual funds, limited partnerships, and offsore funds.
<PAGE>
INVESTORS BANK & TRUST COMPANY
================================================================================
ORGANIZATION
================================================================================
200 Clarendon Street
Boston, MA 02116
phone: 617-330-6700
fax: 617-330-6033
Providing securities processing services since 1962. Additional offices in
Dublin, Toronto, and the Cayman Islands.
================================================================================
SERVICES
================================================================================
Global Custody Offshore Administration
Master/Feeder Processing Cash Management
Fund Administration Transfer Agency
Hub & Spoke Processing Foreign Exchange
Limited Partnership Securities Lending
Processing Multi-Currency Fund
Accounting
================================================================================
DIMENSIONS
================================================================================
$245 billion in Custody Assets
1,550 Daily Priced Funds
200 Offshore Funds
58 Unit Investment Trusts
Global Network in 81 Countries
1,300 Employees
================================================================================
CUSTODIAL OR
================================================================================
TRANSFER AGENCY CLIENTS
Aetna Retirement Services Harding, Loevner Management
Albion/Alliance Capital Kayne Anderson
Allmerica Financial M Financial Group
Atlas Funds Mass Mutual Life Insurance
Banco Santander/Vega Asset Mgmt Northeast Investors
Bank Julius Baer PaineWebber Incorporated
Barclays Global Investors PIMCO
Brandes Investment Partners Regent Fund Management
The Copeland Companies Republic National Bank
COVA Life of New York
David L. Babson & Co., Inc. Salomon Smith Barney
Dessauer Global Seix Investment Management
Deutsche Bank Shott Capital Management
Diversified Investment Standish Ayer & Wood
Advisers (AEGON) Thomas J. Herzfeld & Co. Inc.
Eaton Vance Corp. Touchstone Family of Funds
Fiduciary Trust Trust Company of the West
Fischer Francis Trees & Watts Unicredito/Europlus
Goldman Sachs & Co. Wells Fargo Bank
Grantham, Mayo, Van Otterloo Western Reserve Life
Guinness Flight Investment Assurance Co.
Management Ltd. William Blair & Co.
John Hancock Funds Wright Investors Services
Custodian and Transfer Agent
for the 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 its
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
former Senior Vice President, Bank of New England
Michael Rogers, Executive Managing Director,
Custody/Fund Accounting
MBA, College of William and Mary
BA, Economics, Boston College
former Manager, Bank of New England
Robert Mancuso, Marketing/Client Management
MBA, Boston College
BA, Finance, Boston College
<PAGE>
AMT CAPITAL SECURITIES, LLC
================================================================================
ORGANIZATION
================================================================================
399 Park Avenue, 37th Floor
New York, NY 10022
phone: 212-418-1100
fax: 212-418-1120
Fund Distributor
Founded in 1998
================================================================================
CLIENTS SERVED
================================================================================
FFTW Funds, Inc.
Sponsored by Fischer Francis Trees & Watts, Inc.
Harding, Loevner Funds, Inc.
Sponsored by Harding, Loevner Management, LP
Holland Balanced Fund
Sponsored by Holland & Co., LLC
Hyperion Funds, Inc.
Sponsored by Hyperion Capital Management
SAMCO Fund, Inc.
Sponsored by Seix Advisors, Inc.
TIFF Investment Program, Inc.
Sponsored by Foundation Advisers, Inc.
================================================================================
KEY PERSONNEL
================================================================================
Alan M. Trager, Chairman
MPA, John F. Kennedy School of Government,
Harvard University
BA, Syracuse University
former Managing Director, Morgan Stanley & Co.
Arthur Goetchius, President
BS BA, Seton Hall University
former Managing Director, EGS Partners, LLC
Fund Distributor for the
TIFF Investment Program
================================================================================
DESCRIPTION OF SERVICES
================================================================================
AMT Capital Securities, LLC is a registered broker dealer which provides mutual
fund distribution services and also conducts a general securities business. AMT
Capital Securities is the successor to AMT Capital Services, Inc., which
previously provided mutual fund administration and distribution services for
these funds. Its affiliate, AMT Capital Management, LLC, provides investment
management services for high net worth individuals.
Appendix D
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.
Statement of
TIFF Additional
Investment Information
Program April 30, 1999
TIFF Multi-Asset Fund Available through:
TIFF International Equity Fund Foundation Advisers, Inc.
TIFF Emerging Markets Fund 2405 Ivy Road
TIFF U.S. Equity Fund Charlottesville, VA 22903
TIFF Bond Fund phone: 804-817-8200
TIFF Short-Term Fund fax: 804-817-8231
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 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.
The Funds and their investment adviser, Foundation Advisers, Inc., have been
organized by a nationwide network of private and community foundations. FAI is
responsible for selecting Money Managers for each Fund and allocating Fund
assets among these Money Managers, subject to the approval of TIP's board of
directors.
This Statement of Additional Information is not a Prospectus and should be read
in conjunction with the TIP Prospectus dated April 30, 1999 (the "Prospectus"),
which has been filed with the Securities and Exchange Commission and which is
incorporated herein by reference. The Prospectus can be obtained without charge
by writing or calling FAI at the address and telephone number provided above.
<PAGE>
Contents
<TABLE>
<S> <C>
Organization of TIP...............................................................................................3
Origin of TIP.....................................................................................................3
Suitability of TIFF Funds.........................................................................................3
Supplemental Discussion of Fund Management and
Administration....................................................................................................7
Performance-Based Fees for Money Managers........................................................................11
Control Persons and Principal Holders of Securities..............................................................15
Distribution of TIFF Funds.......................................................................................16
Supplemental Discussion of Investment Objectives,
Policies, and Restrictions.......................................................................................17
Policy Implementation and Risks..................................................................................17
Fund Transactions................................................................................................38
Tax Considerations...............................................................................................39
Member Information...............................................................................................44
Calculation of Performance Data..................................................................................44
Determination of Net Asset Value.................................................................................45
Additional Service Providers.....................................................................................46
Description of Indices...................................................................................Appendix A
Quality Ratings..........................................................................................Appendix B
</TABLE>
<PAGE>
Organization of TIP
The TIFF Investment Program, Inc. (TIP) was incorporated under Maryland law 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 (500,000,000 unallocated). Shares of each Fund have
equal voting rights. 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 possess non-cumulative voting rights. This 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. In such event, the holders
of the remaining percentage (less than 50%) of shares voting for the election of
directors will not be able to elect any person or persons to the board of
directors.
TIP's Articles of Incorporation permit new series of shares evidencing new Funds
in addition to the six Funds described in the Prospectus.
None of the TIFF Funds shall be liable for the obligations of any other Fund.
Origin of TIP
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:
1. an asset base sufficient to diversify across
asset classes and investment styles in an
economic manner,
2. staff and trustees with the time and expertise needed to select outstanding
Money Managers and monitor and adjust manager and asset class weights, and
3. the bargaining power and skills needed to strike attractive fee
arrangements with money managers, custodians, accountants, lawyers, and
other service providers.
Investing through TIP enables governing boards to delegate responsibility for
time-intensive tasks (e.g., service provider 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 TIFF Funds
Manager Selection. 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. 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 service providers employed by
TIP.
<PAGE>
Suitability of TIFF Funds continued
Changing Existing Investment Management Arrangements. Changing investment
management practices is almost always costly. It can also be painfully
time-consuming, 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 service providers that furnish investment-related services to
foundations are highly dynamic. They are 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 successful organization is itself
committed to the task of continually reviewing and revising its own working
assumptions, strategies, and tactics.
One of the chief reasons TIP was created was to permit foundation trustees, who
often lack the time or expertise to monitor continually 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 US 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 the TIFF Funds enable Members to delegate to TIP responsibility for the
time-intensive tasks of selecting and monitoring money managers and other
service providers. 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 the Fund's Money Managers.
Return Objective that Reflects Foundations' Spending Rates. The Multi-Asset
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. Congress decided, in 1969, to compel private
foundations to distribute annually at least five percent of their assets.
However, studies of capital market history show 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 (inflation-adjusted) returns sufficient to maintain
fund purchasing power in the face of such high withdrawal rates, unless new
gifts flow into the fund.
<PAGE>
Suitability of TIFF Funds continued
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, given the volatile
nature of capital markets, but with sufficient consistency over multi-year time
periods to induce member foundations to "stay the course." That is, foundations
should 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. For these reasons,
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 equities, i.e., deflation or very high rates of
unanticipated inflation. These securities are held primarily in the "volatility
control" segment of the Fund and include resource-related 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 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 outside the resource-related sector produced sharply
negative inflation-adjusted returns. There is no assurance that the
resource-related 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 [e.g., shares of publicly traded real estate
investment trusts ("REITs")] on a permanent basis, the guidelines set forth for
several of the Fund's Money Managers permit them to hold such securities on an
opportunistic basis. TIP's directors rejected a permanent allocation to real
estate-related equities such as REIT shares 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 invests 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's and FAI's boards hold but
which are not necessarily expected to provide high real returns when inflation
is high and accelerating.
Suitability of TIFF Funds continued
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. That is, 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 TIFF 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 Multi-Asset Fund's guidelines
emphasize:
1. foreign (and especially emerging) stock markets to a greater extent than do
the guidelines employed by most US-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 US 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 when investing
in US 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
US-based investors.
Potential Risk Reduction from Investing in Assets with Low Return Correlations.
The chief reason TIP's directors endorse the use of "non-traditional" or
"alternative"assets such as foreign stocks and opportunistic total return
portfolios is their perceived potential for attractive returns through active
management. 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. Occasions
can arise when foreign stocks (whether developed or emerging), 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. However, this unfortunate fact does not undermine
the fundamental soundness of a diversified approach to long-term asset
allocation. As 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. This may be achieved through periodic rebalancing of the
Fund's asset class weights back to more normal percentages. The supposition here
is that market movements will periodically cause such weights 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, including computer simulations
quantifying the damage to long-term returns of forced sales of stocks at
depressed prices under the "disaster" scenarios described above (deflation and
very high rates of unanticipated inflation), as well as 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 recognize that such approaches can and
often do attempt to achieve a false precision. The Fund's asset allocation
guidelines therefore reflect qualitative as well as quantitative judgments about
asset class weights best suited to the long-term needs of foundations.
<PAGE>
Suitability of TIFF Funds continued
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 employs 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 allocated to opportunistic equity strategies, such as
global risk arbitrage, that seek to outperform absolute return benchmarks
(Treasury bills plus five percent).
Third, many governing boards seek TIP's assistance in formulating asset
allocation guidelines precisely because of their concern for lack of time and
expertise. 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. While the Fund has the potential to outperform other asset
mixes, 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). 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.
Prospective investors must not extrapolate past results into the future.
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, and
3. investors willing to own only the highest quality (i.e., "safest") stocks,
such as IBM in 1987 ($175 per share versus less than $50 per share just
five years later) or Philip Morris in 1992 ($86 per share versus $49 per
share less than one year later).
When scrutinized, the investment policies of many so-called "conservative"
investors 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 but rather 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. For this reason,
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.
Supplemental Discussion of Fund Management and Administration
TIP and FAI Boards. There is considerable, though not complete, overlap among
the boards of TIP and FAI for two reasons. First, given the highly dynamic
character of financial markets, it is important that decision-making at all
levels of the cooperative be as streamlined as possible. This imperative is best
fulfilled by keeping the number of individuals responsible for a given task
(e.g., selecting and monitoring 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, FAI board members 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 ("TIFF"), 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). The
following is a list of the directors of TIP and FAI.
- ---------------------------------- ------------------------- ----------------
Directors Birthdate
Sheryl L. Johns TIP Chair 3/15/1956
William F. Nichols* TIP/FAI Director 7/4/1934
Fred B. Renwick TIP Director 2/1/1930
John E. Craig TIP Director 6/3/1944
Gregory D. Curtis FAI Director 1/14/1947
Alice W. Handy FAI Director 4/17/1948
Robert A. Kasdin FAI Director 4/20/1958
John G. Mebane FAI Chair 4/25/1944
Jack R. Meyer FAI Director 10/4/1945
David A. Salem* TIP/FAI 4/27/1956
Director/President
Ann B. Sloane FAI Director 11/1/1938
David F. Swensen FAI Director 1/26/1954
Jeffrey Tarrant FAI Director 4/4/1956
Arthur Williams III FAI Director 5/12/1941
- ---------------------------------- ------------------------- ----------------
Advisory Agreement. Pursuant to its Advisory
Agreement with TIP, FAI provides the following
services to TIP and the TIFF Funds:
1. develops the investment programs, selects the
Money Managers from a broad universe of
investment managers, negotiates agreements with
Money Managers on behalf of the TIP board of
directors (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,
2. provides or oversees the provision of all general management, investment
advisory, and portfolio management services, and
3. provides TIP with office space, equipment, and personnel.
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 continues in force for successive annual periods as 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 may be terminated 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).
For the years ended December 31, 1998, December 31, 1997, and December 31, 1996,
the amount of advisory fees paid by each Fund was as follows:
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------ ----------------------- ---------------------- ----------------------
December 31, 1998 December 31, 1997 December 31, 1996
- ------------------------------------------------ ----------------------- ---------------------- ----------------------
- ------------------------------------------------ ----------------------- ---------------------- ----------------------
TIFF Multi-Asset Fund $1,122,685 $1,423,180 $850.274
- ------------------------------------------------ ----------------------- ---------------------- ----------------------
- ------------------------------------------------ ----------------------- ---------------------- ----------------------
TIFF International Equity Fund $1,147,078 $2,186,201 $1,469,104
- ------------------------------------------------ ----------------------- ---------------------- ----------------------
- ------------------------------------------------ ----------------------- ---------------------- ----------------------
TIFF Emerging Markets Fund $1,636,075 $851,605 $1,115,412
- ------------------------------------------------ ----------------------- ---------------------- ----------------------
- ------------------------------------------------ ----------------------- ---------------------- ----------------------
TIFF U.S. Equity Fund $1,523,645 $1,136,192 $805,542
- ------------------------------------------------ ----------------------- ---------------------- ----------------------
- ------------------------------------------------ ----------------------- ---------------------- ----------------------
TIFF Bond Fund $368.550 $496,344 $241,203
- ------------------------------------------------ ----------------------- ---------------------- ----------------------
- ------------------------------------------------ ----------------------- ---------------------- ----------------------
TIFF Short-Term Fund $138,420 $66,835 $190,218
- ------------------------------------------------ ----------------------- ---------------------- ----------------------
</TABLE>
Supplemental Discussion of Fund Management continued
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 TIP's office rent. 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.
A portion of the costs incurred by TIP in connection with the organization and
initial registration of shares is being amortized on a straight-line basis over
a sixty-month period. The unamortized balance of organizational expenses at
December 31, 1998 was $5,688.
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 service providers 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 service
providers employed by the fund (e.g., its custodian, transfer agent, dividend
disbursing agent, accountant, etc.). Because it specializes in such work,
Investors Capital Services, Inc. ("Investors Capital") can perform these
important functions better and at a lower cost than FAI.
Administration Agreement. As Administrator for the TIFF Funds, Investors 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 Investors Capital for certain costs. In
addition, TIP has agreed to pay Investors Capital an incentive fee not to exceed
0.02% for reducing the expense ratio of one or more Funds below certain levels
specified for such Funds. A profile of Investors Capital is provided in Appendix
B of the Prospectus.
For the years ended December 31, 1998, December 31, 1997, and December 31, 1996,
the amount of administration fees paid by each Fund was as follows:
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------ ----------------------- ---------------------- ----------------------
December 31, 1998 December 31, 1997 December 31, 1996
- ------------------------------------------------ ----------------------- ---------------------- ----------------------
- ------------------------------------------------ ----------------------- ---------------------- ----------------------
TIFF Multi-Asset Fund $332,577 $252,206 $73,692
- ------------------------------------------------ ----------------------- ---------------------- ----------------------
- ------------------------------------------------ ----------------------- ---------------------- ----------------------
TIFF International Equity Fund $194,693 $133,200 $108,505
- ------------------------------------------------ ----------------------- ---------------------- ----------------------
- ------------------------------------------------ ----------------------- ---------------------- ----------------------
TIFF Emerging Markets Fund $38,406 $48,710 $47,704
- ------------------------------------------------ ----------------------- ---------------------- ----------------------
- ------------------------------------------------ ----------------------- ---------------------- ----------------------
TIFF U.S. Equity Fund $161,064 $123,362 $80,400
- ------------------------------------------------ ----------------------- ---------------------- ----------------------
- ------------------------------------------------ ----------------------- ---------------------- ----------------------
TIFF Bond Fund $104,422 $85,660 $60,665
- ------------------------------------------------ ----------------------- ---------------------- ----------------------
- ------------------------------------------------ ----------------------- ---------------------- ----------------------
TIFF Short-Term Fund $33,045 $21,735 $42,995
- ------------------------------------------------ ----------------------- ---------------------- ----------------------
</TABLE>
Money Manager Agreements. The agreements between TIP and the Money Managers (the
"Money Manager Agreements") continue in effect for successive annual periods, as
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.
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 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 Money Manager Agreements 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:
<PAGE>
Supplemental Discussion of Fund Management continued
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.
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, and
5. the impact (if any) that linking a Manager's
compensation to its performance might have on
its decisionmaking process.
Manager Allocation Criteria. In allocating assets among Money Managers, FAI
considers each Fund's Investment and Performance Objectives as well as other
variables. To accommodate fluctuations in the relative sizes of Money Managers'
accounts caused solely by market movements, allocations formulated by FAI take
the form of ranges: minimum, normal, and maximum percentages of Fund assets 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.
Activating Money Managers' Accounts. Not all Money Managers profiled in Appendix
A of the Prospectus are employed at all times. Whether a given Money Manager is
employed at a given time depends on:
1. a Fund's size,
2. its projected growth rate,
3. FAI's perception of the relative attractiveness
of the Money Manager's approach in light of
prevailing market conditions, and
4. the extent to which a given Money Manager's investment style would
complement those of the other Money Managers to which a Fund's assets have
been allocated.
Future market conditions are unforecastable, and TIP cannot predict the amount
to be allocated to each Money Manager over time. As a general rule, however,
given 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
assets to it.
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 may be
terminated 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.
<PAGE>
Supplemental Discussion of Fund Management continued
Target Expense Ratios. The target expense ratios for the TIP Funds are:
Multi-Asset Fund 0.95%
International Equity Fund 1.00%
Emerging Markets Fund 1.50%
U.S. Equity Fund 0.65%
Bond Fund 0.50%
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 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. The Fund's target expense ratio is 0.65%. Accordingly, FAI
seeks to allocate the Fund's assets across the Money Managers employed by it
such that its expense ratio will 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).
Because the fees each Fund pays 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 which considerably exceeds its
target expense ratio. The target expense ratios are based on the assumption that
FAI will allocate assets among Money Managers in a manner that is sensitive to
the objective of keeping each Fund's expense ratio at or below target, except
under circumstances where the Fund outperforms its performance benchmark by a
margin greater than that reflected in its stated Performance Objective. Some
Money Managers have benchmarks different from the overall benchmark for the TIFF
Fund employing them. Thus, 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, the Funds may invest in certain
other commingled investment vehicles, including other registered investment
companies and private investment funds and will bear 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 TIFF 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. 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
0.33% per annum (i.e., its target expense ratio of 0.65% minus the 0.32% in
other expenses) if the Fund surpasses its performance objective. 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 should not exceed 0.65% unless its gross
return 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.
<PAGE>
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 their Money
Managers. These principles are the product of both the combined investment
experience of members of FAI's and TIP's boards and policy choices made by TIP's
board in its formulation of objectives and guidelines for each Fund.
Optimizing versus Minimizing Expenses. Even modest differences in a Fund's
annual investment-related costs can have profound effects on a foundation's
cumulative returns. Therefore, foundation trustees should consider carefully the
costs of alternative investment vehicles. By pooling the investment assets of
numerous foundations, TIP can and does seek to minimize Members' expenses for
investment-related services as custody and portfolio accounting. 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.
Some foundation investors may be uncomfortable by the fact that the exact costs
of investing through each TIFF Fund are unknowable in advance. However, it
should be remembered that the annual standard return deviations of the asset
classes in which the TIFF 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. This is the case even under worst case conditions. Differences between the
minimum and maximum fees payable to Money Managers employed by the Funds are
shown in the following table.
<TABLE>
<S> <C> <C> <C>
- -------------------------------- ---------------------- ----------------------------- -----------------------------
Number of Managers Largest Difference between Average Difference between
Receiving Minimum and Maximum Fees Minimum and Maximum Fees
Performance-Based Payable to Any Money Manager Payable to Any Money Manager
Fees
- -------------------------------- ---------------------- ----------------------------- -----------------------------
- -------------------------------- ---------------------- ----------------------------- -----------------------------
TIFF Multi-Asset Fund 4 1.90% 1.46%
- -------------------------------- ---------------------- ----------------------------- -----------------------------
- -------------------------------- ---------------------- ----------------------------- -----------------------------
TIFF International Equity Fund 3 1.85% 1.57%
- -------------------------------- ---------------------- ----------------------------- -----------------------------
- -------------------------------- ---------------------- ----------------------------- -----------------------------
TIFF Emerging Markets Fund 1 2.60% 2.60%
- -------------------------------- ---------------------- ----------------------------- -----------------------------
- -------------------------------- ---------------------- ----------------------------- -----------------------------
TIFF U.S. Equity Fund 4 1.90% 1.23%
- -------------------------------- ---------------------- ----------------------------- -----------------------------
- -------------------------------- ---------------------- ----------------------------- -----------------------------
TIFF Bond Fund 3 0.70% 0.63%
- -------------------------------- ---------------------- ----------------------------- -----------------------------
- -------------------------------- ---------------------- ----------------------------- -----------------------------
TIFF Short-Term Fund 0 NA NA
- -------------------------------- ---------------------- ----------------------------- -----------------------------
</TABLE>
Note: Reflects separate account manager fees only. Averages assume equal manager
allocations. Based on their considerable investment experience, the directors of
TIP and FAI believe that, over the long term, TIP's Members 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. The Performance Objective of each Fund is to outperform a relevant
market benchmark by a modest increment, net of fees. FAI's 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 is to tie manager compensation as closely
as possible to manager performance.
<PAGE>
Performance-Based Fees for Money Managers continued
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, among other means, in seeking to
optimize Members' investment-related expenses. A Money Manager's proven capacity
to deliver uniform results to all accounts managed in accordance with the
philosophy presented to TIP is one of the important criteria used in choosing
Money Managers. FAI's initial selection criteria are the same used to evaluate
their ongoing performance. Portfolio investment decisions that cause the
performance of TIP's account to differ materially from the performance of
purportedly similar accounts, whether such decisions are motivated by the desire
to earn higher fees from TIP or not, could trigger their dismissal. 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 constitutes grounds for dismissal.
Preferred Performance-Based Fee Structure. FAI is mindful that no fee structure
can possibly prove suitable to all Money Managers, even as a starting point for
discussion. However, in an effort to streamline the negotiation process, FAI has
formulated a preferred performance-based fee model. The graph below illustrates
the application of this model to one particular Money Manager.
Common Characteristics. All Money Manager Agreements entailing performance-based
fees have certain common characteristics. These include (1) minimum fees
("floors"), (2) maximum fees ("caps"), and (3) fee formulas that, in the
judgment of members of TIP's and FAI's boards, produce reasonable fees 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., a fee
midway between the minimum and the maximum. An equation is used under which the
actual fees paid to a Money Manager are always proportionately related to
performance above or below the fulcrum point. The formula is designed to augment
a mutually agreed-upon basic fee if the excess return (i.e., actual gross total
return less benchmark total return) on the Money Manager's portfolio 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 indices over the rolling 12-month
time periods used in computing performance-based bonuses/penalties are,
therefore, the product of compounding each of the monthly returns in the
applicable period.
<PAGE>
Performance-Based Fees for Money Managers continued
Manager-Specific Benchmark Indices. 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
Fund benchmark.
Fee Function Tied to Fund's Overall Objective. The performance-based fee
structure 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 ask a number of questions, including
those discussed below. All answers are 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 U.S. Equity Fund seeks to outperform its benchmark (the
Wilshire 5000 Stock Index) 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 X 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 X: 115 basis
points of excess return equates to 40 basis points of fees.
2. What is a reasonable fee for a Money Manager if it performs as expected?
As a practical matter, most Money Managers screened by FAI expect to outperform
their agreed-upon benchmark by a margin greater than that reflected in the
targeted excess return of the Fund they seek to serve. For example, most US
equity managers screened by FAI seek to outperform a relevant benchmark of US
equities by more than the 75 basis points by which the 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 a Money Manager?
The fulcrum point -- the midpoint between the maximum and minimum fees -- 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 seek agreements in which the Money Manager has as much to lose as to
gain if it 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 point under the Money Manager Agreement, 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 their Agreements.
<PAGE>
Performance-Based Fees for Money Managers continued
4. What is a reasonable fee "floor"?
As with 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"?
Having identified an appropriate floor, FAI then identifies, for each Money
Manager, the 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).
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------- ------------------- --------------------------------
Excess Return over Manager's
Benchmark Required to Receive
Money Manager Fulcrum Fee Fulcrum Fee
- ---------------------------------------------------------------- ------------------- --------------------------------
Aronson + Partners 45 bp 210 bp
Atlantic Asset Management Partners, LLC 35 bp 165 bp
Bee & Associates, Inc. 108 bp 458 bp
Emerging Markets Management 170 bp 370 bp
Harding, Loevner Management, L.P. 80 bp 400 bp
Marathon Asset Management, Ltd. 88 bp 424 bp
Palo Alto Investors 105 bp 524 bp
Seix Investment Advisors, Inc. 45 bp 195 bp
Shapiro Capital Management Co., Inc. 73 bp 325 bp
Smith Breeden Associates, Inc. (Bond Fund) 48 bp 157 bp
Westport Asset Management, Inc. 108 bp 430 bp
- ---------------------------------------------------------------- ------------------- --------------------------------
</TABLE>
Computing and Remitting Fees. The computation and remittance procedures that the
Funds 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 and Remitting Fees. For the first two months following the inception
of their accounts, Money Managers receive a straight asset-based fee equal to
150% of the minimum (floor) rate, regardless of performance. Accrual of
performance-based fees begins in the third calendar month rather than at an
earlier date because the indices with reference to which Money Managers'
performance is computed are typically not available until five or more business
days after month-end. 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.
Performance-Based Fees for Money Managers continued
Thereafter, a Money Manager is compensated according to its performance-based
fee formula with the fee for a given month based on the Money Manager's
performance for the 12 months ending two months prior to that month. A two-month
time lag is employed because, while TIP's directors would prefer that fees paid
by Members in a given month reflect their actual returns, 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 after month-end.
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. This occurs because of the legal requirement that there be a
minimum one-year measurement period for performance-based portfolio management
fees. Specifically, during this 12-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, any fees owed to the Money Manager will be disbursed.
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. However, 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 manager's performance was sufficiently good during
months 36 through 71. This could occur even though the manager's performance is
less 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
manager's performance during prior time periods. The one-year measurement period
that TIP employs does not eliminate these intergenerational inequities among
changing shareholder populations, but it can help to minimize them. Because
TIP's board seeks to tie the portfolio management fees paid by individual
Members as closely as possible to the gross investment returns they actually
realize, 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, 1999, 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, 1999, the
following Members held five percent or more of the outstanding shares of each
Fund as indicated:
<TABLE>
<S> <C>
Multi-Asset Fund
William Caspar Graustein Memorial Fund; 84 Trumbull Street; New Haven, CT 06511 13.8%
Chemical Heritage Foundation; 315 Chestnut Street; Philadelphia, PA 19106 12.1%
Monterey Bay Aquarium Foundation; 886 Cannery Row; Monterey, CA 93940 8.2%
William T. Grant Foundation; 570 Lexington Avenue, 18th Floor; New York, NY 10022 6.0%
Presbyterian Homes and Family Services; 150 Linden Avenue; Lynchburg, VA 24503 5.2%
International Equity Fund
Houston Endowment Inc.; 600 Travis, Suite 6400; Houston, TX 77002 25.2%
The Rockefeller Foundation; 420 Fifth Avenue, 22nd Floor; New York, NY 10018 18.3%
Fan Fox and Leslie R. Samuels Foundation, Inc.; 350 Fifth Avenue, Suite 7300,
New York, NY 10118 5.3%
</TABLE>
<PAGE>
Control Persons and Principal Holders of Securities continued
<TABLE>
<S> <C>
Emerging Markets Fund
Mayo Foundation; 200 First Street, SW; Rochester, MN 55905 17.1%
Carnegie Corporation of New York; 437 Madison Avenue; New York, NY 10022 16.9%
Pew Memorial Trust, c/o Glenmede; 1 Liberty Place, Ste 1200; 1650 Market St;
Philadelphia, PA 19103 13.9%
The Colorado Trust; 1600 Sherman Street; Denver, CO 80203 7.7%
The Commonwealth Fund; One East 75th Street; New York, NY 10021 6.2%
ACF/CRF Joint Fund; 3773 Cherry Creek North Drive #955; Denver, CO 80209 6.1%
Charles Hayden Foundation; One Bankers Trust Plaza; 130 Liberty Street;
New York, NY 10006 5.8%
U.S. Equity Fund
William & Flora Hewlett Foundation; 525 Middlefield Road #200; Menlo Park,
CA 94025 12.4%
BellSouth Foundation, Inc.; 1155 Peachtree Street, Suite 14F05; Atlanta,
GA 30309 10.3%
Denver Foundation; 455 Sherman Street, Suite 550; Denver, CO 80203 8.1%
Jacksonville Community Foundation; 112 W. Adams St., Suite 1414; Jacksonville,
FL 32202 5.4%
UJA Federation of Greater Washington; 6101 Montrose Road; Rockville, MD 20852 5.2%
Bond Fund
The Duke Endowment; 100 North Tryon Street, Suite 3500; Charlotte, NC 28202 13.2%
RosaMary Foundation; 6028 Magazine Street; New Orleans, LA 70118 7.4%
Richard M. Fairbanks Foundation; 9292 North Meridian Street, Suite 304;
Indianapolis, IN 46260 6.6%
Jacksonville Community Foundation; 112 W. Adams St., Suite 1414; Jacksonville,
FL 32202 5.6%
Short-Term Fund
Undisclosed Private Foundation; New York, NY 40.1%
Houston Endowment Inc.; 600 Travis, Suite 6400; Houston, TX 77002 13.0%
Woods Fund of Chicago; 3 First National Plaza, Suite 2010; Chicago, IL 60602 6.3%
</TABLE>
Distribution of TIFF Funds
Distributor. Shares of TIP are distributed by FAI as a registered branch office
of AMT Capital Securities, LLC, ("AMT Capital") pursuant to a Distribution
Agreement (the "Distribution Agreement") dated January 1, 1995, between TIP and
AMT Capital. The Distribution Agreement requires FAI and AMT Capital 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 bear the expense of their distribution activities. TIP, FAI, and AMT
Capital 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.
Potential In-Kind Purchases. Fund shares are
normally issued for cash only. In-kind purchases
are accepted only when the securities being
acquired:
1. are consistent with the investment objectives
and policies of the acquiring 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., are listed on a recognized exchange).
<PAGE>
Distribution of TIFF Funds continued
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. Should conditions exist which make cash payments
undesirable, TIP reserves the right to honor any request for Fund redemption by
making payment in whole or in part in readily marketable securities. These will
be chosen by TIP and 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. This obligates TIP 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. TIP is
permitted to borrow to finance such redemptions without regard to restrictions
that might otherwise apply under the 1940 Act.
Exchanges. One Fund's shares may be exchanged for shares of any other Fund. An
exchange is a redemption out of one Fund and a purchase into another; thus, the
applicable entry and exit fees for purchases and redemptions will apply. Any
such exchange will be based on the respective net asset values of the shares
involved as of the date of the exchange. 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 4:00 p.m. 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 should consult their tax advisers for further information in
this regard. The exchange privilege may be modified or terminated at any time.
Supplemental Discussion of Investment
Objectives, Policies, and Restrictions
Potential Benefits and Costs of Investing in Foreign Securities. 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 foundation governing
boards, which typically meet on a part-time basis, are generally unable to 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. The opportunity to enhance
long-term returns by investing in foreign markets lies in the fact that
international money managers have far more companies (and countries) to choose
from than do managers investing solely in domestic securities. Therefore, the
potential added value from active portfolio management is higher for
international stock portfolios than for purely domestic ones.
<PAGE>
Supplemental Discussion of Investment
Objectives, Policies, and Restrictions continued
The costs of investing in foreign securities 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
investors earn 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) make a substantial allocation to them worthy of serious consideration
by most foundation boards.
Performance Objectives. The Funds seek to
outperform their performance benchmarks by
different margins. These margins differ because:
1. the costs of implementing each Fund's
investment policies differ and
2. the markets in which the Funds primarily invest vary in terms of
efficiency, with the US stock and fixed income markets arguably the most
efficient (in a valuation sense) of all.
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 to produce 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.
Short-Term Fund. As experienced foundation fiduciaries, members of the boards of
TIP and FAI recognize that many foundations seek to control downward
fluctuations in the value of assets earmarked for spending or distribution (in
the form of grants) within 12 months ("current year spending"). This is
generally achieved 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/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. Of course, the higher yields three- to
six-month instruments typically display relative to shorter-term instruments may
be insufficient to offset the larger principal losses longer-term securities
produce in rising interest rate environments. However, the data below indicates
there is a high probability of earning positive total returns in a given month
by investing exclusively in securities included in the Short-Term Fund's
benchmark (i.e., six-month Treasury bills). The data show that, in the more than
23-year period ending March 31, 1998, there were only four calendar months in
which a portfolio invested exclusively in six-month Treasury bills produced a
negative total return. The worst loss was 0.15% (October 1979) and the average
loss (four months, equally weighted) was 0.10%. It is important to note that
this period encompasses several years (e.g., 1979-81) in which short-term
interest rates rose at a speed and to a level that were unprecedented.
Risks of Investing Current Year Spending Monies in the Short-Term Fund. 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 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 rates rise as
quickly as they did in the 1979-1981 time period. However, because the Fund will
not be invested exclusively in instruments backed by the full faith and credit
of the US government, it is possible that downgrades, defaults, and other
elements of credit risk could cause the Fund's net asset value to decline by
more than 0.15% in any given one-month holding period.
Supplemental Discussion of Investment
Objectives, Policies, and Restrictions continued
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
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 this argument, 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.
Fundamental 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 Fund's outstanding voting securities. 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 US 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 US 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. No Fund may 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.
<PAGE>
Supplemental Discussion of Investment
Objectives, Policies, and Restrictions continued
Non-Fundamental Investment Restrictions. 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 US 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, US 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
(typically defined as those which cannot be sold or disposed of in the
ordinary course of business within seven days for approximately the
amount at which the Fund has valued the securities).
7. 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. The above standards and
restrictions are 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
Funds to Be Substantially Fully Invested. Each Fund intends to be substantially
fully invested according to 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 securities in which it primarily invests) in
money market instruments and debt securities that are at least comparable in
quality to the Fund's permitted investments. In lieu of separate, direct
investments in money market instruments, the Fund's cash reserves may be
invested in other regulated investment companies approved by TIP's board of
directors. Alternatively, FAI may exercise investment discretion or select a
Money Manager to exercise investment discretion over a Fund's cash reserves.
<PAGE>
Policy Implementation and Risks continued
Temporary Equity Exposure. 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, 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.
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 decides to
purchase 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; however, circumstances may
warrant that securities 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 may 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 result in 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 excise taxation
purposes.
A Fund may have two or more Money Managers. As such, 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.
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.
TIP's Custodian 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, described
below. By engaging in such transactions, a Fund may, in effect, borrow money.
Securities may be borrowed under repurchase agreements.
Duration Management. The Multi-Asset, Bond, and Short-Term Funds 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.
The longer the 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 five years, a 1% increase in interest rates could
result in approximately a 5% decrease in market value. Money Managers can change
the weighted average duration of their holdings as interest rates move by
replacing portfolio securities or using derivative securities.
Policy Implementation and Risks continued
Primary Risks. 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
Money 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 rise following the manager's duration-lengthening trades.
Multi-Market and Multi-Currency Investing. Subject to certain limitations on
foreign securities and foreign currency exposure defined in each Money Manager's
guidelines, Money Managers may adjust the exposure of the Funds to different
countries' markets and currencies based on their perceptions of their relative
valuations. In doing so, Money Managers will assess:
1. general market and economic conditions,
2. the relative yield and anticipated direction of
interest rates in particular markets, and
3. the relationship among the currencies of
various countries.
In their evaluations, Money Managers will use internal financial, economic, and
credit analysis resources as well as information from external sources.
The ranges permit U.S. Equity Fund Money Managers to respond to circumstances in
which foreign stocks are more attractively priced than US stocks by investing up
to 15% of the Fund's assets in foreign stocks. They permit Money Managers of 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 will 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 relative to allocations that resemble more closely the
country and currency allocations inherent in a Fund's performance
benchmark.
Foreign Currency Exposure. TIP's directors have studied carefully the impact of
exchange rate changes on the US dollar value of foreign securities portfolios
and have concluded that the impact of such changes declines dramatically as the
investment time horizon lengthens. This is especially true because 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 US 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 neutral over the
longer-term time horizons which most global investors properly employ. The logic
of this position can be assessed by considering 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 imbalance created by massive changes (up or down) in
the foreign currency exchange value to persist. Countries whose currencies
plummet in value can suffer enormous hardships, as can holders of shares
denominated in such currencies. However, devaluations ultimately enhance these
countries' competitiveness, 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.
<PAGE>
Policy Implementation and Risks continued
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. The primary objective of such transactions is to protect
(hedge) against a decrease in the US dollar equivalent value of its foreign
securities or the payments thereon that may result from an adverse change in
foreign currency exchange rates. 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. 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. A forward exchange contract is the purchase or sale of
foreign currency at an exchange rate established now but with payment and
delivery at a specified future time. It 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
("position hedges") or proposed transactions ("transaction hedges"). For
example, to establish a position hedge, a forward currency contract 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 depends on the Money
Manager's ability 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 hurt Fund performance. 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 often 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 forward contract positions are likely to be
approximate, not perfect, hedges.
The cost to a Fund of engaging in forward contracts varies with factors
such as the foreign currency involved, the length of the contract
period, and prevailing market conditions, including general market
expectations as to the direction of various foreign currency movements
against the US 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 that case, the correlation between exchange rates and
the portfolio's foreign currency exposure may not be precise. Moreover,
if the forward contract is an over-the-counter transaction, as is
usually the case, the Fund will be exposed to the credit risk of its
counterparty. If, on the other hand, a Fund enters into such contracts
on a foreign exchange, the contract will be subject to the rules of
that foreign exchange, which 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 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 US dollars.
<PAGE>
Policy Implementation and Risks continued
Other Hedging Strategies and Tactics. A Fund may employ other hedging
strategies, such as interest rate, currency and index swaps, and the purchase or
sale of related caps, floors, and collars. 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.
Each Fund may enter into these transactions primarily:
1. to preserve a return or spread on a particular
investment or portion of its portfolio,
2. to protect against currency fluctuations, 3. as a duration management
technique, or 4. to protect against any increase in the price of
securities the Fund anticipates purchasing at a
later date.
The Funds intend 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. 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 US stock
market is highly efficient in terms of valuation and is 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 US 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. It is also why the U.S. Equity Fund employs so-called long/short
investment strategies, which entail the construction of a portfolio comprising
long positions in stocks which the Money Manager perceives as undervalued,
offset by an equivalent dollar amount of short positions in stocks which 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. 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 (i.e., they are undervalued), then
it is also logical to assume that skilled active managers can identify stocks
that are likely to underperform market averages (i.e., they are overvalued
issues). 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 US stock market is that
long/short strategies, while still unconventional, are becoming increasingly
popular among the large institutions that dominate the US stock market.
Outperforming broad market averages without using long/short strategies remains
possible, 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).
Policy Implementation and Risks continued
Primary Risks. Risks of investing in short strategies are markedly
different from those associated with long positions. Given the
restrictions to which managers employing long/short strategies are
subject, however, U.S. Equity Fund Members are not exposed to the risk
of losing all their invested capital as a result of a stratospheric
increase in the value of a single security (or indeed the stock market
generally). Like the other institutions employing long/short strategies
with which TIP and FAI directors are associated, TIP employs several
safeguards to control the risks of such strategies:
1. Any long/short portfolios held by the
Fund 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.
2. The dollar size of a short position in a single stock may not
represent more than 2% of a Fund's net assets.
Securities Lending. Through its custodial bank and subject to strict guidelines
summarized below, TIP may actively lend the securities held in all of its Funds.
The incremental income from such lending activities varies from Fund to Fund,
with US 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
US securities in relation to borrowing demand than exists in non-US markets.
Each Fund is authorized to lend securities from its investment portfolios, with
a value not exceeding 331/3% of its total assets (including collateral received
in connection with any loans) provided, however, that it receives collateral in
cash, US 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 may be terminated at any time
by TIP, and the relevant Fund will then receive the loaned securities within
five days. During the loan period, 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 Commission does not object if an investment company pays
reasonable negotiated fees in connection with loaned securities as 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 occurs affecting a security on loan,
the loan must be called and the securities voted.
Dollar Roll Transactions. Dollar roll transactions consist of the sale to a
counterparty (a bank or broker-dealer) 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 repurchase. 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, US 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 (described below)
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, it foregoes 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.
<PAGE>
Policy Implementation and Risks continued
Primary Risks. Dollar rolls involve 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. In a repurchase agreement, a Fund
buys securities from a counterparty (e.g., a bank or securities firm) with the
agreement that the counterparty will repurchase them 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 counterparty
becomes subject to a proceeding under the US 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.
In a reverse repurchase agreement, a Fund sells US 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,
US 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. If the counterparty 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 counterparty 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
Equity Securities. Equities are ownership
interests possessed by shareholders in a
corporation, commonly referred to as "stocks."
General Risks of Equity Securities. Common stock prices will decline
over short or extended periods. Both the US and foreign stock markets
tend to be cyclical with periods when stock prices generally rise and
periods when prices generally decline.
<PAGE>
Policy Implementation and Risks continued
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.
As 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 Exchanges.
Foreign Equities. Foreign equities include shares denominated in currencies
other than the US dollar, including any single currency or multi-currency units,
as well as ADRs and EDRs. ADRs typically are issued by a US 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.
Foreign financial markets generally have substantially less volume than US
markets, and securities of many foreign companies are less liquid and their
prices more volatile than securities of comparable domestic companies. The
foreign markets also have different clearance and settlement procedures, and in
certain markets settlements have sometimes been unable to keep pace with the
volume of transactions making it difficult to conclude such transactions.
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.
Primary Risks of Foreign Equities Generally. Like domestic stocks,
foreign equities entail stock market risk. In addition, in certain
foreign countries there is the possibility of expropriation of assets,
confiscatory taxation, political or social instability, or diplomatic
developments that could adversely affect investment. There may be less
publicly available information regarding operations and financial
results, 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.
Risks Associated with Currency Exchange Rate Changes. Changes in
foreign currency exchange rates may affect the value of a Fund's
investments. While a Fund may hedge its assets against foreign currency
risk, there can be no assurance that currency values will change as
predicted, and a Fund may suffer losses as a result of such hedging.
Emerging Markets Equities. The Funds define emerging markets as those countries
having an "emerging stock market" as defined by Morgan Stanley Capital
International, low- to middle-income economies according to the World Bank, or
those listed in World Bank publications as developing. Under this definition,
the Funds consider emerging markets to include all markets 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.
Policy Implementation and Risks continued
Primary Risks of Emerging Markets Equities. In addition to the risks of
foreign equities as set forth above, stock prices in emerging markets
can be significantly more volatile than in developed nations,
reflecting the greater uncertainties of investing in less established
economies, in that the countries may:
1. have relatively unstable governments,
raising the risk of sudden adverse
government action and even
nationalization of businesses,
2. place restrictions on foreign
ownership or prohibitions on
repatriation of assets, or
3. provide relatively less protection of
property rights.
In addition, their economies:
1. may be based predominantly on one or a
few industries,
2. may be highly vulnerable to changes in
local or global trade conditions, and
3. 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. Settlement and dividend collection procedures
may be less reliable. These securities may have limited marketability
and may be subject to more abrupt or erratic price movements.
Debt Securities. The characteristics and primary
risks of the debt securities in which the Funds
typically invest are described below.
Primary Risks of Debt Securities
Generally. Debt securities entail
interest rate, prepayment, credit, and
event 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.
Because the Bond Fund's benchmark is the Lehman Aggregate Bond Index
-an index with an intermediate-term average weighted maturity -- the
Fund is subject to a moderate to high level of interest rate risk, as
is that portion of the Multi-Asset Fund normally invested in bonds.
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 rise as much in market value
as other bonds when interest rates fall.
Credit Risk. Credit risk is the risk that an issuer of securities 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.
Event Risk. Event risk is the risk that corporate debt securities 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 is low because of the number of issues held by each Fund.
<PAGE>
Policy Implementation and Risks continued
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.
1. Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate.
2. Certificates of deposit are negotiable short-term obligations issued by
commercial banks or savings and loan associations against funds deposited
in the issuing institution.
3. Variable rate certificates of deposit are certificates of deposit on which
the interest rate is adjusted periodically prior to the stated maturity
based upon a specified market rate.
4. 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).
Foreign Bank Obligations. Obligations of foreign banks involve somewhat
different investment risks than obligations of US banks. Their liquidity could
be impaired because of future political and economic developments; they may be
less marketable than comparable obligations of United States banks; a foreign
jurisdiction might impose withholding taxes on interest income payable on these
obligations; foreign deposits may be seized or nationalized; foreign
governmental restrictions such as exchange controls may be adopted that might
adversely affect the payment of principal and interest on those obligations; and
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, commercial banks located in
some foreign countries combine commercial banking and diversified securities
activities, thus increasing the risks of their operations.
Corporate Debt Securities. Corporate debt securities of domestic and foreign
issuers include corporate bonds, debentures, notes, commercial paper,
medium-term notes, variable rate notes, and other similar corporate debt
instruments. 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 obligations.
Index Notes, Currency Exchange-Related Securities, and Similar Securities. Each
Fund may purchase notes whose principal amount and/or interest payments may vary
in response to the change (if any) in specified exchange rates, commodities
prices, or stock index levels. Currency-indexed obligations are securities whose
purchase price and interest and principal payments are denominated in a foreign
currency. The amount of principal payable by the issuer at maturity varies
according to the change (if any) in the exchange rate between two specified
currencies during the period from the instrument's issuance date to its maturity
date. A Fund may hedge the currency in which the obligation is denominated (or
effect cross-hedges against other currencies) against a decline in the US dollar
value of the investment. Each Fund may also purchase principal exchange
rate-linked securities and performance-indexed commercial paper. Each Fund will
purchase such indexed obligations to generate current income or for hedging
purposes and will not speculate in such obligations.
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.
<PAGE>
Policy Implementation and Risks continued
Primary Risks. Such investments involve credit risks associated with
the issuer and currency risks associated with the currency in which the
obligation is denominated. A Fund's decision to invest in any foreign
currency exchange-related securities is based on the same general
criteria applicable to debt securities, 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.
Foreign Government and International and Supranational Agency Debt Securities.
Obligations of foreign governmental entities include those 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 US
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 associated with the underlying corporate borrower. In
addition, it may be necessary, under the terms of the loan
participation, for a Fund to assert its rights against the underlying
corporate borrower through the issuing bank, in the event that the
underlying corporate borrower should fail to pay principal and interest
when due. Thus, 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 of the borrower. Moreover,
under the terms of the loan participation, the 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.
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. Money Managers of
these Funds will be obligated to liquidate, in a prudent and orderly manner,
debt securities whose ratings fall below investment grade if the result of such
downgrades is that these limitations are exceeded. "Investment grade" means a
rating of:
1. for securities, "BBB" or better by S&P or "Baa" or better by Moody's,
2. for bank obligations, "B" or better by Thomson Bankwatch,
3. for commercial paper, "A-1" or better by S&P or "Prime-1" or better by
Moody's, and
4. for foreign bank obligations, similar ratings by IBCA Ltd.
Policy Implementation and Risks continued
See Appendix B for a description of security ratings.
Primary Risks. In addition to the risk of default, 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 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"). The two most common forms
are:
1. mortgage pass-throughs, which represent ownership interests in the
Underlying Assets. Principal repayments and interest on the underlying
mortgage loans are distributed monthly to holders.
2. collateralized mortgage obligations (CMO's), which represent debt
obligations secured by the Underlying Assets.
Principal repayments and interest payments on the underlying mortgage loans, and
any reinvestment income thereon, provide the funds to pay interest and
principal.
Certain mortgaged-backed securities 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, 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 security to be
retired substantially earlier than their stated maturities or final distribution
dates. Interest is paid or accrues on all or most classes on a periodic basis,
typically monthly or quarterly. The principal of and interest on the Underlying
Assets may be allocated among the several classes 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 in the order of
their respective stated maturities so that no payment of principal will be made
on any class until all other classes having an earlier stated maturity have been
paid in full.
Mortgage-backed securities are typically 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, usually by the entity
administering the Underlying Assets, to ensure that the receipt of payments on
the Underlying Assets 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 are appropriate.
<PAGE>
Policy Implementation and Risks continued
The duration of a mortgage-backed security, for purposes of a Fund's average
duration restrictions, is computed based upon the expected average life of that
security.
Primary Risks. Prepayments on
asset-backed debt securities usually
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, the obligors of the Underlying
Assets may default on their payments,
creating delays or loss of principal.
Non-mortgage asset-backed securities involve certain risks not present
in mortgage-backed securities. Most important, these securities do not
have the benefit of a security interest in Underlying Assets. 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 debt issue, 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. "Private activity" bonds, including industrial development revenue
bonds, are a specific type of revenue bond backed by the credit and security of
a private user. Revenue bonds are typically considered to have more potential
risk than general obligation bonds.
Municipal obligations can have floating, variable, or fixed rates. Floating and
variable rate obligations generally entail less interest rate risk than fixed
rate obligations. 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 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 as well as the quality of the obligation itself.
The interest on private activity bonds is an item of tax preference for purposes
of the federal alternative minimum tax. Fund distributions which are derived
from interest on municipal securities are taxable to Members in the same manner
as distributions derived from interest on taxable debt securities.
Policy Implementation and Risks continued
Securities Denominated in Multi-National Currency Units or More than One
Currency. An illustration of a multi-national currency unit is the Euro, whose
value is based on a "basket" consisting of specified amounts of European
currencies. The specific amounts of currencies comprising the Euro may be
adjusted by the Council of Ministers of the European Union 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 Euro-denominated
obligations or the marketability of such securities. European supranational
entities, in particular, issue Euro-denominated obligations.
US Treasury and US Government Agency Securities. US government securities
include instruments issued by the US Treasury, including bills, notes, and
bonds. These instruments are direct obligations of the US government and, as
such, are backed by the full faith and credit of the United States. They differ
primarily in their interest rates, maturities, and issuance dates. Other US
government securities include securities issued by instrumentalities of the US
government, such as the Government National Mortgage Association ("GNMA"), which
are also backed by the full faith and credit of the United States. US government
Agency Securities are instruments issued by instrumentalities established or
sponsored by the US 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 US 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 a
direct arrangement between a Fund (as lender) and the borrower. These notes are
not transferable, nor are they rated ordinarily by either Moody's or S&P.
Zero Coupon Securities and Custodial Receipts. In addition to securities issued
directly by the US Treasury, zero coupon securities include US Treasury bonds or
notes whose unmatured interest coupons and receipts for their principal have
been separated by their holder, typically a custodian bank or investment
brokerage firm. Once "stripped" or separated, the principal and coupons are sold
separately. The principal, or "corpus," is sold at a deep discount because the
buyer receives only the right to receive a future fixed payment and does not
receive any rights to periodic interest payments. The coupons may be 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.
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 US 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 have issued the opinion that, for
Federal tax and securities law purposes, purchasers of such certificates will
most likely be deemed the beneficial holders of the underlying US Treasury
securities.
Recently, the US 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 purchaser's beneficial ownership of zero coupon securities is
recorded directly in the book-entry recordkeeping system in lieu of holding
certificates or other evidences of ownership of the underlying US Treasury
securities.
<PAGE>
Policy Implementation and Risks continued
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,
US government securities, foreign government securities, or corporate debt
securities. A Fund may enter into futures contracts that are based on debt
securities that are backed by the full faith and credit of the US government,
such as long-term US Treasury bonds, Treasury notes, GNMA-modified pass-through
mortgage-backed securities, and three-month US 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 US
dollar.
US 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.
Futures contracts may be used as both hedging and income-enhancement strategies.
As an example of a hedging transaction, a Money Manager holding a portfolio of
equity securities and anticipating a near-term market decline might sell S&P 500
futures to obtain prompt protection pending an orderly portfolio liquidation. If
the decline occurs, gains on the futures contract will offset at least in part
the loss on the portfolio; if the Money Manager is wrong and the market rises,
the loss on the futures contract will offset gains on the portfolio.
Although futures contracts by their terms call for actual delivery or
acquisition of the underlying asset, in most cases the contractual obligation is
fulfilled before the date of the contract by entering into an offsetting futures
contract with 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 US 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.
It is also possible that initial margin requirements may be increased in the
future by regulators. An outstanding futures contract is valued daily and the
payment in cash of "variation margin" 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 related 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.
<PAGE>
Policy Implementation and Risks continued
If predictions about the general direction of securities market
movements, foreign exchange rates, or interest rates are 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 depends on the existence of
a liquid market. Although a Fund typically 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 future date. If 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. This situation could
potentially persist for several consecutive trading days.
Risks of Foreign Currency Futures Contracts. Buyers and sellers of
foreign currency futures contracts are subject to the same risks that
apply to futures generally. In addition, there are risks associated
with foreign currency futures contracts 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 US or foreign
restrictions or regulations regarding the maintenance of foreign
banking arrangements by US 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 Futures Contracts. The purchase of a put or call on a futures
contract is similar in some respects to the purchase of a put or call on an
individual security or currency. Depending on the option's price compared to
either the price of the futures contract upon which it is based or the price of
the underlying asset, it may or may not be less risky than ownership of the
futures contract or the underlying assets. A Fund may purchase options on
futures contracts for the same purposes as futures contracts themselves, i.e.,
as a hedging or income-enhancement strategy.
Writing a call option on a futures contract constitutes a partial hedge against
declining prices of the underlying asset 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 in the Fund's portfolio
holdings.
Policy Implementation and Risks continued
Writing a put option on a futures contract constitutes a partial hedge against
increasing prices of the underlying asset 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 the 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.
Restrictions on the Use of Futures Contracts and Options on Futures Contracts.
CFTC regulations applicable to the Funds require that all of a Fund's positions
in futures and options on futures 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 does 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 correlation risk, 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 additional
liquidity risk. 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. Therefore, 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 of such options are not greater than the
risks of 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 market
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 a position in options on foreign currency futures
contracts would result in a loss whereas a position in the underlying
futures contract would not, such as when there is no movement in the
price of the underlying currency or futures contract.
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 US
dollar-equivalent value of its portfolio securities or payments due thereon or a
rise in the US 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 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.
Instead of purchasing a put option when it anticipates a decline in the dollar
value of foreign securities due to adverse fluctuations in exchange rates, a
Fund 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 cost of foreign securities to be acquired, a Fund could
write a put option on the relevant currency. If exchange rates move as expected,
the put will expire unexercised, and the Fund will have hedged such increased
costs up to the amount of the premium.
<PAGE>
Policy Implementation and Risks continued
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, a 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.
The writing of a foreign currency option constitutes only a partial
hedge up to the amount of the premium and only if exchange 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 Securities. The Funds may purchase and sell both exchange-traded and
OTC options. Currently, although many options on equity securities and
currencies are exchange-traded, options on debt securities are primarily traded
in the over-the-counter market.
Exchange-traded options in the United States are issued by a clearing
organization affiliated with the exchange on which the option is listed. This
clearing organization, 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.
The writer of an exchange-traded option that wishes to terminate its obligation
may do so by a "closing purchase transaction," i.e., buying an option of the
same series as the option previously written. Options of the same series are
options on the same underlying security or currency with the same expiration
date and exercise price. Likewise, the holder of an option may liquidate a
position by a "closing sale transaction," i.e., selling an option of the same
series as the option previously purchased. In general, an OTC option may be
closed out prior to expiration only by entering into an offsetting transaction
with the same dealer.
A Fund's transactions in options on securities and securities indices are
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 the Fund
owns an offsetting position in the underlying security or maintains cash, US
government securities, or other liquid high-grade debt obligations with a value
sufficient at all times to cover its obligations.
Primary Risks. The value of an option reflects, 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 interest rates. Successful use of options
depends in part on the ability of FAI or the Money Manager to forecast
future market conditions. 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.
The writer of a call option is obligated, upon its exercise, to sell
the underlying securities or currency to the purchaser at the exercise
price, thus losing 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. The writer of a put option is
obligated, upon its exercise, to purchase the underlying 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. Any losses are
partially offset by the premium, which the writer retains regardless of
whether the option is exercised.
Policy Implementation and Risks continued
A Fund's activities in the options markets may result in higher
portfolio turnover rates and additional brokerage costs. However,
commissions and transaction costs of such hedging activities may be
less than those associated with purchases and sales of the underlying
securities or foreign currencies.
Risks of Exchange-Traded Options. A closing purchase or a closing sale
transaction on an exchange-traded option can be made 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, thus making it impossible to effect closing transactions in
particular options the Fund owns. As a result, 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.
Risks of OTC Options. Exchange-traded options generally have a
continuous liquid market, whereas OTC options may not have one. A Fund
usually 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 it out prior to expiration only by entering into
a closing purchase transaction with the same dealer. 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. The
inability to enter into a closing purchase transaction may result in
material losses to the Fund, for example, by limiting 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. In addition, if the counterparty
becomes insolvent, the Fund may be unable to liquidate an OTC option.
Failure by the dealer to take delivery of the underlying securities
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.
Risks of Foreign Currency Options. 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 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 US 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. 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 (usually consisting of transactions of less than
$1 million) for the underlying foreign currencies at prices that are
less favorable than for round lots.
Interest Rate and Currency Swaps. An interest rate swap is an agreement to
exchange the interest generated by a fixed income instrument held by a Fund for
the interest generated by a fixed income instrument held by a counterparty, such
as an exchange of fixed rate payments for floating rate payments. Currency swaps
involve the exchange of respective rights to make or receive payments in
specified currencies. The value of the positions underlying such transactions
may not represent more than 15% of a Fund's assets. The Fund will maintain a
segregated account in the amount of the accrued excess, if any, of its
obligations over its entitlements with respect to each swap.
Policy Implementation and Risks continued
Primary Risks. Swaps are available only from a limited number
of counterparties and involve counterparty credit risk.
When-Issued 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 but no later than 120 days after the trade
date. No income accrues prior to delivery. At the time a Fund enters into such a
transaction, it must establish a segregated account consisting of acceptable
assets equal to the value of the when-issued or forward commitment securities.
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.
Forward commitments, or delayed deliveries, are deemed to be outside the normal
corporate settlement structure.
Primary Risks. The value of the security on the delivery date may be
less than its purchase price, representing a loss for the Fund. These
transactions also involve counterparty risk. If the other party fails
to perform or becomes insolvent, any accrued profits may not be
available to a Fund.
Synthetic Securities. The Bond and Short-Term Funds may create synthetic
securities by combining investments in securities denominated in a given
currency with forward contracts in order to achieve desired credit and currency
exposures. To construct a synthetic security, a Fund enters into a forward
contract for the purchase of a given currency (the "Purchase Currency") at a
future date against payment in another currency (the "Sale Currency").
Simultaneously, the Fund purchases 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 overall effect of these
transactions is similar to the purchase of a security denominated in the
Purchase Currency. The forward contract may increase or decrease the return on
the investment in the security depending on exchange rate movements between the
purchase and maturity dates.
Primary Risks. The primary risks
associated with synthetic securities arise
from:
1. the fluctuation of the exchange rates
between the Purchase and Sale
Currencies between purchase and
maturity dates,
2. the matching of the principal and
interest from the security with the
related forward contract, and
3. 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 currency risk with respect to
the forward contract.
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 into a certain
quantity of the common stock of the same or a different issuer. Through their
conversion feature, these securities provide an opportunity to participate in
advances in the price of the common stock into which the security may be
converted.
Primary Risks. A convertible security entails market risk in that its
market value depends in part on the price of the underlying common
stock. Convertible securities also entail greater credit risk than the
issuer's non-convertible senior debt securities to which they are
usually subordinated.
<PAGE>
Policy Implementation and Risks continued
Illiquid and Restricted Securities. 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 of the decision to sell them. They may include:
1. over-the-counter options,
2. repurchase agreements, time deposits, and
dollar roll transactions maturing in more than
seven days,
3. loan participations,
4. securities without readily available market quotations, including interests
in private commingled investment vehicles in which a Fund might invest, and
5. certain restricted securities.
Primary Risks. Due to the absence of an organized market for such
securities, the market value of illiquid securities used in calculating
Fund net asset values for purchases and redemptions can diverge
substantially from their true value. Illiquid securities are generally
subject to legal or contractual restrictions on resale, and their
forced liquidation to meet redemption requests could produce large
losses.
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's investment policy states that typically it will not
purchase or sell OTC options if, as a result of such transaction, the sum of:
1. the market value of OTC options currently
outstanding held by the Fund,
2. the market value of the underlying securities covered by OTC call options
currently outstanding sold by the Fund, and
3. margin deposits on the Fund's existing OTC options on futures contracts
exceed 15% of the net assets of the 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.
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 Euro, which is a "basket" consisting of specified
amounts of the currencies of certain member states of the European Union. 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.
Commingled Investment Vehicles. The Funds may, subject to limitations, 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. A Fund may invest in the shares of
another registered investment company. The Funds will make such purchases
in the open market and only when 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 having any
duplicative management fees waived.
<PAGE>
Policy Implementation and Risks continued
Closed-End Investment Companies. Investments in closed end funds may
involve the payment of premiums above the net asset value of the issuers'
portfolio securities. These are subject to limitations under the Investment
Company Act of 1940 and are constrained by market availability (e.g., these
investment companies are often "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. For instance, due to restrictions on
direct investment by foreign entities in certain emerging market countries,
purchasing shares of other investment companies may be the most practical
or only manner in which the Funds can invest in these markets.
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 an investment partnership whose
manager 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 such a fund, a Fund would
bear its ratable share of expenses and would be subject to its share of the
management and performance fees charged by such entity. 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 is subject to the 15% limitation on illiquid
securities.
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 are traded on a net basis
and normally do not involve either brokerage commissions or transfer taxes. The
cost of executing transactions consists 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 executes, the spread between a security's bid and ask price
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 expense cap; nevertheless, the incurrence of this spread,
ignoring the other intended positive effects of the 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 usually
higher than costs associated with transactions in domestic securities, the
Funds' operating expense ratios can be expected to be higher than those 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. In executing portfolio transactions and selecting
brokers or dealers, the principal objective is to seek the best overall terms
available to the Fund, subject to specific directions from TIP or FAI.
Securities ordinarily are 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:
1. the breadth of the market in the security,
2. the price of the security,
3. the financial condition and execution
capability of the broker or dealer, and
4. the reasonableness of the commission, if any
(for the specific transaction and on a
continuing basis).
Fund Transactions continued
In addition, when selecting brokers or dealers and seeking the best overall
terms available, FAI and the Money Managers are authorized to consider the
"brokerage and research services" (as 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 which is in
excess of the commission another broker or dealer would have charged for
effecting the transaction. TIP, FAI, or the Money Manager, as appropriate, must
determine in good faith that such commission is reasonable in relation to the
value of the brokerage and research services provided. Reasonableness will be
viewed in terms of that particular transaction or in terms of all the accounts
over which FAI or the Money Manager exercises investment discretion.
The Funds paid brokerage commissions as follows:
<TABLE>
<S> <C> <C> <C> <C>
- ------------------------------------------ ------------------ ----------------- ----------------- -----------------
1/1/98-12/31/98 1/1/97-12/31/97 1/1/96-12/31/96 1/1/95-12/31/95
- ------------------------------------------ ------------------ ----------------- ----------------- -----------------
- ------------------------------------------ ------------------ ----------------- ----------------- -----------------
TIFF Multi-Asset Fund $871,810 $1,062,969 $519,532 $168,88 *
- ------------------------------------------ ------------------ ----------------- ----------------- -----------------
- ------------------------------------------ ------------------ ----------------- ----------------- -----------------
TIFF International Equity Fund $364,681 $351,419 $449,353 $416,390
- ------------------------------------------ ------------------ ----------------- ----------------- -----------------
- ------------------------------------------ ------------------ ----------------- ----------------- -----------------
TIFF Emerging Markets Fund $268,489 $376,009 $408,836 $370,320
- ------------------------------------------ ------------------ ----------------- ----------------- -----------------
- ------------------------------------------ ------------------ ----------------- ----------------- -----------------
TIFF U.S. Equity Fund $678,711 $355,548 $214,787 $148,197
- ------------------------------------------ ------------------ ----------------- ----------------- -----------------
</TABLE>
* Partial period from inception of Fund (3/31/95).
Tax Considerations
The following summary of tax consequences does not purport to be complete. It is
based on US 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
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. 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), US 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 US government
securities or the securities of other RICs); and
<PAGE>
Tax Considerations continued
3. 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 US 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 non-deductible 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. 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 US 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, 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 usually will realize a capital gain or loss which will be long term or
short term, 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.
<PAGE>
Tax Considerations continued
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. This is the case 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.
Option Sales. 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 a 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 a 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.
Option Purchases. 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 premium, 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 usually
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.
A Fund's hedging transactions 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. As a result, 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 Considerations continued
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.
Constructive Sales. Under certain circumstances, a Fund may recognize gain from
a constructive sale of an "appreciated financial position" it holds if it enters
into a short sale, forward contract, or other transaction that substantially
reduces the risk of loss with respect to the appreciated position. In that
event, the Fund would be treated as if it had sold and immediately repurchased
the property and would be taxed on any gain (but not loss) from the constructive
sale. The character of gain from a constructive sale would depend upon the
Fund's holding period in the property. Loss from a constructive sale would be
recognized when the property was subsequently disposed of, and its character
would depend on the Fund's holding period and the application of various loss
deferral provisions of the Code. Constructive sale treatment does not apply to
transactions closed in the 90-day period ending with the 30th day after the
close of the taxable year if certain conditions are met.
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 and the asset
diversification requirements set forth above for RICs. 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 typically
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 US
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.
In lieu of being taxable in the manner described above, each Fund may be able to
make an election 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. Alternatively, a Fund may be able to elect to mark to market the
Fund's PFIC shares at the end of each taxable year, with the result that
unrealized gains would be treated as though they were realized and reported as
ordinary income. Any mark-to-market losses and any loss from an actual
disposition of PFIC shares would be deductible as ordinary losses to the extent
of any net mark-to-market gains included in income in prior years.
Tax Considerations continued
Foreign Withholding Taxes. Fund income received 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 US
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 US source income.
Generally, a credit for foreign taxes is subject to the limitation that it may
not exceed the Member's US 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 US 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 US 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 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 US 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:
1. fail to provide the Fund with their correct
taxpayer identification numbers,
2. fail to make required certifications, or 3. 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 US 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 US 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.
<PAGE>
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. 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 account statements, which reflect shares purchased as a result of a
reinvestment of Fund distributions.
Requests That Must Be in Writing. IBT will require that a Member provide
requests in writing accompanied by a valid signature guarantee when changing
certain information in an account, including wiring instructions. TIP, FAI,
Investors Capital, and IBT will not be responsible for confirming the validity
of written or telephonic requests.
Initial Investment. Foundations seeking to invest through TIP are asked to
complete an Account Application. The completed Application is submitted to FAI
and Investors Capital 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 IBT 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 accounts or increase the number of 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 Investors Capital may ask a
member foundation to verify or supplement the information in the Account
Application that is on file.
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 affecting
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. 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. 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. Members
may remove directors 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.
Calculation of Performance Data
Yield. A Fund's yield quotation is based on all investment income (including
dividends and interest) per share during a particular 30-day (or one month)
period less expenses accrued during the period ("net investment income"). It is
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
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.
<PAGE>
Calculation of Performance Data continued
The Funds' yields, as defined above, for the 30-day period ended December 31,
1998, were as follows:
U.S Equity Fund 1.0%
Bond Fund 5.6%
Short-Term Fund 5.7%
Total Return. Quotations of average annual total return are expressed in terms
of the average annual compounded rate of return of a hypothetical investment in
a Fund over periods of 1, 5, and 10 years, or the life of the Fund, calculated
pursuant to the following formula as 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 Funds' total returns, as defined above, as of December 31, 1998, are as
follows:
<TABLE>
<S> <C> <C> <C> <C>
12 Months 12 Months Annualized
Ended Ended since Inception
12/31/98 12/31/97 Inception Date
Multi-Asset Fund 0.2% 5.6% 9.0% 3/31/1995
International Equity Fund 3.0% 0.9% 6.6% 5/31/1994
Emerging Markets Fund -33.4% -0.4% -11.2% 5/31/1994
U.S. Equity Fund 11.9% 33.1% 22.6% 5/31/1994
Bond Fund 7.2% 9.6% 8.4% 5/31/1994
Short-Term Fund 5.6% 5.4% 5.6% 5/31/1994
</TABLE>
Market and Manager Comparisons. 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.
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.
<PAGE>
Determination of Net Asset Value continued
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.
Calculating an Individual Security's Value. Securities listed on a US 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, Euros, Australia, and New Zealand) are converted
into US dollars at the bid price of such currencies against US dollars as
provided by an independent pricing supplier. 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, at
the closing bid price. Unlisted securities and listed US securities not traded
on the valuation date for which market quotations are readily available are
valued not exceeding the ask prices nor less than the bid prices. The value of
other assets is 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. TIP and FAI rely heavily on outside service
providers to perform most functions their directors deem may be delegated. TIP's
fund administrator, custodian, transfer agent, independent accountant, and legal
counsel were selected based on the following criteria:
1. corporate goals and cultures that are
consistent with TIP's mission,
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
operate.
Custodian, Fund Accounting Agent, Transfer Agent, Registrar, and Distribution
Disbursing Agent. Investors Bank & Trust Company, 200 Clarendon Street, Boston,
MA 02116, serves as the Custodian of the Funds' assets as well as their
accounting agent, transfer agent, registrar, and dividend disbursing agent. As
Custodian, IBT may employ sub-custodians outside the United States which are
approved by TIP's board of directors.
Legal Counsel. Dechert Price & Rhoads, 1775 Eye Street, N.W., Washington, DC
20006-2401, is TIP's legal counsel, for which it is compensated directly by TIP.
Independent Accountants. PricewaterhouseCoopers LLP, 1177 Avenue of the
Americas, New York, NY 10036, serves as TIP's independent auditor. Members
receive unaudited semi-annual financial statements and annual financial
statements which are audited by PricewaterhouseCoopers LLP. Members may also
receive additional reports concerning the Funds or their Money Managers from
FAI. PricewaterhouseCoopers LLP also renders accounting services to FAI and
certain Money Managers employed by the Funds.
Inquiries
Requests for the Prospectus, SAI, and Annual or Semi-Annual
Reports as well as other inquiries concerning TIP may be made
by contacting FAI at:
Foundation Advisers, Inc.
2405 Ivy Road
Charlottesville, VA 22903
Phone: 804-817-8200
Fax: 804-817-8231
E-mail: [email protected]
Website: www.tiff.org
Appendix A
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.
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
Fund / Money Manager Index
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TIFF Multi-Asset Fund Inflation + 5% and Constructed Index (described on pages C-2 -
C-3)
Bee & Associates, Inc. 10% Russell 2000; 90% constructed by blending the MSCI World
ex US
Small Cap Index with the MSCI Emerging Markets Free Index
Canyon Capital Management, LP 91-day Treasury bills plus 5% per annum
Daystar Partners 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
Harding, Loevner Management, LP MSCI All Country World Free Index
Lazard Asset Management MSCI Emerging Markets Free Index
Lone Pine Capital LLC 91-day Treasury bills plus 5% per annum
Mercury Asset Management BTAB European Smaller Companies Stock Index
Palo Alto Investors Russell 2000 Stock Index
Seix Investment Advisors, Inc. Lehman Aggregate Bond Index
Wellington Management Company, LLP 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
Wyser-Pratte Management Company, Inc. 91-day Treasury bills plus 5% per annum
TIFF International Equity Fund MSCI All Country World ex US Index
Bee & Associates, Inc. Constructed by blending the MSCI World ex US Small Cap Index
with the
MSCI Emerging Markets Free Index
City of London Investment Management Co., Ltd. MSCI Emerging Markets Free Index
Delaware International Advisers Ltd. MSCI EAFE Index
Everest Capital Inc. MSCI Emerging Markets Free Index
Harding, Loevner Management, LP MSCI All Country World Free ex US Index
Lazard Asset Management MSCI Emerging Markets Free Index
Marathon Asset Management, Ltd. MSCI All Country World Free ex US Index
Mercury Asset Management BTAB European Smaller Companies Stock Index
TIFF Emerging Markets Fund MSCI Emerging Markets Free Index
City of London Investment Management Co., Ltd. MSCI Emerging Markets Free Index
Emerging Markets Management MSCI Emerging Markets Free Index
Everest Capital Inc. MSCI Emerging Markets Free Index
Explorador Capital Management, LLC MSCI Emerging Markets Free Index
Lazard Freres Asset Management MSCI Emerging Markets Free Index
Table continued on next page
</TABLE>
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
Table continued from previous page
<TABLE>
<S> <C>
Fund / Money Manager Index
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TIFF U.S. Equity Fund Wilshire 5000 Stock Index
Aronson + Partners - Large Cap S&P 500 Stock Index
Gotham Partners, LP Wilshire 5000 Index
Martingale Asset Management, LP Customized for TIFF U.S. Equity Fund
Palo Alto Investors Russell 2000 Stock Index
Shapiro Capital Management Company, Inc. Russell 2000 Index
Westport Asset Management, Inc. Russell 2000 Stock Index
TIFF Bond Fund Lehman Brothers Aggregate Bond Index
Atlantic Asset Management Partners, LLC 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
</TABLE>
* 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 primary objective is to
produce an inflation-adjusted return of 5% or more over the long term. To
facilitate assessment of active strategies employed by the Fund, the Fund also
measures its performance against a constructed index comprising 25% Wilshire
5000; 25% MSCI All Country World Free ex US; 20% 3-month Treasury bill plus 5%
per annum; 10% inflation-hedging index; 15% Lehman Aggregate Bond Index; and 5%
J.P. Morgan Non-US Government 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
BTAB European Smaller Companies Index. The BTAB European Smaller Companies Index
comprises the bottom 10% by market capitalization of each country in the
European sector of the BTAB 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 BTAB 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 BTAB World
Indices. Stocks that are eliminated from the BTAB World Indices are also
eliminated from the Smaller Companies Index at the same time (usually three to
four times per year).
Morgan Stanley Capital International All Country World Free Stock Index. The
MSCI All Country World Free 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, 1999, the MSCI All
Country World Free Index consisted of 2,339 companies traded on stock markets in
47 countries. The weighting of the Index by country is indicated in the exhibit
entitled MSCI Country Weights. Unlike certain other broad-based indices, the
number of stocks included in the MSCI All Country World Free 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.
When available, TIFF uses the "Free" versions of MSCI indices, which means the
specified index is free of foreign ownership limits or legal restrictions at the
security and country level.
MSCI All Country World Free ex US Stock Index. Similar to the MSCI All
Country World Free Stock Index, the MSCI All Country World Free 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, 1999, the MSCI All Country World Free ex US
Index consisted of 1,973 companies traded on stock markets in 46 countries. The
MSCI All Country World Free 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-US 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, 1999, the EAFE Index comprised 1,028 companies, and represented
approximately 87% of the MSCI All Country World Free 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 25 countries, representing
approximately 60% of the capitalization of each underlying market. As of March
31, 1999, the Index comprised 869 companies, and represented approximately 9% of
the MSCI All Country World Free ex US Index.
US 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 US companies, as
determined by market capitalization. The Russell 3000 Index represents
approximately 98% of the investable US equity market. The companies in the
Russell 2000 Index represent approximately 11% of the Russell 3000 Index total
market capitalization, with an average capitalization of $592 million as of the
latest reconstitution. The largest company in the index had an approximate
market capitalization of $1.4 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 US 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 US
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 US 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 US 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 7,000 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 81% NYSE,
2% AMEX, and 17% 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: US Treasury and agency securities, corporate debt obligations,
mortgage-backed securities, and asset-backed securities. As of March 31, 1999,
these four classes represented the following proportions of the Index's total
market value:
US Treasury and Agency Securities 45%
Corporate Debt Securities 22%
Mortgage-Backed Securities 32%
Asset-Backed Securities 1%
As of March 31, 1999, approximately 7,400 issues (including bonds, notes,
debentures, and mortgage issues) were included in the Index, representing more
than $5.5 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 US 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, 1999, the Index's effective weighted average maturity and duration
were 8.86 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 US Treasury, excluding flower bonds
and foreign targeted issues, (2) all publicly issued debt of US Government
agencies and quasi-federal corporations, and (3) corporate debt guaranteed by
the US 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 approximately
32% of the Aggregate Index. 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.
J.P. Morgan Non-U.S. Government Bond Index. The J.P. Morgan Non-U.S. Government
Bond Index, calculated daily, tracks traded, fixed-rate domestic government
bonds from twelve 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, and the United Kingdom. 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-US 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.
<PAGE>
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.
<PAGE>
MSCI Country Weights
As of March 31, 1999
<TABLE>
<S> <C> <C> <C> <C> <C>
MSCI MSCI MSCI
All Country All Country MSCI Emerging
Index: World Free World Free ex US EAFE Markets Free
Benchmark for: Certain MAF TIFF International Certain IEF TIFF Emerging
Managers Equity Fund Managers Markets Fund
Europe 31.5% 61.9% 71.1%
Austria 0.1% 0.3% 0.3%
Belgium 0.7% 1.4% 1.6%
Denmark 0.3% 0.7% 0.8%
Finland 0.8% 1.6% 1.8%
France 4.1% 8.1% 9.3%
Germany 4.2% 8.2% 9.5%
Ireland 0.2% 0.4% 0.5%
Italy 2.2% 4.4% 5.0%
Netherlands 2.6% 5.1% 5.9%
Norway 0.2% 0.4% 0.4%
Portugal 0.3% 0.5% 0.6%
Spain 1.4% 2.7% 3.0%
Sweden 1.2% 2.4% 2.7%
Switzerland 3.3% 6.4% 7.3%
United Kingdom 9.9% 19.4% 22.3%
Pacific 12.8% 25.2% 28.9%
Australia 1.2% 2.5% 2.8%
Hong Kong 1.0% 1.9% 2.1%
Japan 10.2% 20.1% 23.1%
New Zealand 0.1% 0.2% 0.2%
Singapore 0.3% 0.6% 0.7%
North America 50.8% 3.5%
Canada 1.8% 3.5%
United States 49.1%
Emerging Markets 4.8% 9.4% 100.0%
Argentina 0.2% 0.3% 4.0%
Brazil 0.5% 1.0% 11.3%
Chile 0.4% 0.8% 9.4%
China 0.0% 0.0% 0.5%
Colombia 0.0% 0.0% 0.5%
Czech Republic 0.0% 0.1% 0.7%
Greece 0.3% 0.6% 6.7%
Hungary 0.1% 0.1% 1.1%
India 0.4% 0.7% 8.3%
Indonesia 0.1% 0.1% 1.3%
Israel 0.1% 0.3% 3.3%
Jordan 0.0% 0.0% 0.2%
Korea 0.4% 0.9% 10.2%
Malaysia
Mexico
Mexico Free 0.5% 1.0% 12.1%
Pakistan 0.0% 0.0% 0.4%
Peru 0.0% 0.1% 0.9%
Philippines
Philippines Free 0.1% 0.2% 1.8%
Poland 0.1% 0.1% 1.2%
Russia 0.1% 0.1% 1.7%
South Africa 0.4% 0.8% 9.5%
Sri Lanka 0.0% 0.0% 0.1%
Taiwan 0.8% 1.6% 9.3%
Thailand 0.1% 0.2% 2.2%
Turkey 0.1% 0.2% 2.5%
Venezuela 0.0% 0.1% 0.7%
Total 100.0% 100.0% 100.0% 100.0%
</TABLE>
* Taiwan is included in the Emerging Markets Free Index at 50% of its
market capitalization.
Source: Morgan Stanley Capital International Perspective, April 1999.
Note: Numbers may not add to totals due to rounding.
APPENDIX B
QUALITY RATING DESCRIPTIONS
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
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.
Part C OTHER INFORMATION
Item 23. Exhibits
The following exhibits are incorporated herein by
reference, are not required to be filed
or are
filed herewith (as indicated):
(a) 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).
(b) By-laws. (previously
filed as Exhibit No.
(2) to Pre-Effective
Amendment No. 2 to
Registrant's
Registration Statement
on Form N-1A).
(c) Not Applicable.
(d1) 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).
(d2) 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).
(d3) 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).
(d4) 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).
(d5)
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).
(d6)
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).
(d7)
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).
(d8)
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).
(d9)
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).
(d10) 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).
(d11) 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).
(d12) 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).
(d13)
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).
(d14)
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).
(d15) 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).
(d16)
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).
(d17) 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).
(d18) 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).
(d19) 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).
(d20) 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).
(d21) 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).
(d22) 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).
(d23) 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).
(d24) 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).
(d25) 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).
(d26) 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).
(d27) 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).
(d28) 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).
(d29) 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).
(d30) 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).
(d31) 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).
(d32) 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).
(d33) 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).
(d34) 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).
(d35) 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).
(d36) 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).
(d37) 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).
(d38) 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).
(d39) 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).
(d40) 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).
(d41) 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).
(d42) 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).
(d43) 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).
(d44) 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).
(d45) 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).
(d46) 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).
(d47) Money Manager
Agreement, dated June 30,
1996, between the
Registrant (TIFF
Multi-Asset Fund) and
Standard Pacific
Capital LLC.
(previously filed as
Exhibit (5aaa) to
Post-Effective
Amendment No. 6 to
Registrant's
Registration Statement
on Form N1-A).
(d48) Money Manager
Agreement, dated January 1,
1997, between the
Registrant (TIFF
Emerging Markets Fund)
and Emerging Markets
Management (previously
filed as Exhibit
(5aab) to
Post-Effective
Amendment No. 6 to
Registrant's
Registration Statement
on Form N1-A).
(d49) Money Manager
Agreement, dated January 7,
1997, between the
Registrant (TIFF
Multi-Asset Fund) and
Grantham, Mayo, Van
Otterloo & Co. LLC
(previously filed as
Exhibit (5aac) to
Post-Effective
Amendment No. 6 to
Registrant's
Registration Statement
on Form N1-A).
(d50) Money Manager
Agreement, dated June 2,
1997, between the
Registrant (TIFF
Multi-Asset Fund) and
Shapiro Capital
Management Co.
(previously filed as
Exhibit (5aad) to
Post-Effective
Amendment No. 7 to
Registrant's
Registration Statement
on Form N1-A).
(d51) Money Manager
Agreement, dated July 1,
1997, between the
Registrant (TIFF
Multi-Asset Fund) and
Seix Investment
Advisors Inc.
(previously filed as
Exhibit (5aae) to
Post-Effective
Amendment No. 7 to
Registrant's
Registration Statement
on Form N1-A).
(d52) Money Manager
Agreement, dated
December 24, 1998,
between the Registrant
(TIFF U.S. Equity
Fund) and Aronson +
Partners (previously
filed as Exhibit
(d)(52) to
Post-Effective
Amendment No. 8 to
Registrant's
Registration Statement
on Form N1-A).
(d53) Money Manager
Agreement, dated May
12, 1998, between the
Registrant (TIFF
International Equity
Fund) and Mercury
Asset Management
International Ltd.
(previously filed as
Exhibit (d)(53) to
Post-Effective
Amendment No. 8 to
Registrant's
Registration Statement
on Form N1-A).
(d54) Money Manager
Agreement, dated
September , 1998,
between the Registrant
(TIFF U.S. Equity Fund
and TIFF Multi-Asset
Fund) and Martingale
Asset Management,
L.P., (previously
filed as Exhibit
(d)(54) to
Post-Effective
Amendment No. 8 to
Registrant's
Registration Statement
on Form N1-A).
(e) 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).
(e1) 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).
(e2) Distribution Agreement dated May 29,
1998 between Registrant and AMT Capital
Securities, LLC, (previously filed as
Exhibit (e)(2) to Post-Effective Amendment
No. 8 to Registrant's Registration Statement
on Form N1-A).
(f) Not Applicable.
(g) 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).
(g1)
Amendment No. 1 to the
Amended and Restated
Custodian Agreement
between TIFF
Investment Program,
Inc. and Investors
Bank & Trust Company
dated March 14, 1997
(previously filed as
Exhibit (8a) to
Post-Effective
Amendment No. 6 to
Registrant's
Registration Statement
on Form N1-A).
(g2) Delegation Agreement,
dated May 12, 1998
between the Registrant
and Investors Bank &
Trust
Company(previously
filed as Exhibit
(g)(2) to
Post-Effective
Amendment No. 8 to
Registrant's
Registration Statement
on Form N1-A).
(g3) Amendment to
Custodian Agreement,
between the Registrant
and Investors Bank &
Trust Company dated
May 29, 1998
(previously filed as
Exhibit (g)(3) to
Post-Effective
Amendment No. 8 to
Registrant's
Registration Statement
on Form N1-A).
(h) 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).
(h1) 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).
(h2) 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).
(h3) Administration
Agreement, dated May
29, 1998, between the
Registrant
and Investors Capital
Services, Inc.,
(previously filed as
Exhibit (h)(3) to
Post-Effective
Amendment No. 8 to
Registrant's
Registration Statement
on Form N1-A).
(i) 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).
(j) Consent of PricewaterhouseCoopers LLP
dated 4/28/99 filed herewith.
(k) Not Applicable.
(l) 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).
(m) Not Applicable.
(n) Not Applicable
(0) Not Applicable.
Item 24
Persons Controlled by or under Common Control with the
Registrant
None.
Item 25
Indemnification.
The Registrant shall indemnify directors, officers, employees and
agents of the Registrant against judgements, 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, as amended (the "Securities Act"), may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, Registrant understands that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by Registrant of expenses incurred or paid by a director, officer or
controlling person of 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 Securities
Act and will be governed by the final adjudication of such issue.
Item 26
Business and Other Connections of Investment Adviser.
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 27
Principal Underwriters.
(a) In addition to the Registrant, AMT Capital Securities, L.L.C. currently acts
as distributor to Harding Loevner Funds, Inc., Holland Series Fund, Inc., SAMCO
Fund, Inc., and FFTW Funds, Inc. AMT Capital Securities, L.L.C. 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) For each Director or officer of AMT Capital Securities, L.L.C.
Name and Principal
Business Address Positions & Offices Positions & Offices
with Underwriter with Distributor with Registrant
Alan M. Trager Director, Chairman and None
600 Fifth Avenue Treasurer
26th Floor
New York, NY 10020
Arthur Goetchius President
600 Fifth Avenue
26th Floor
New York, NY 10020
Carla E. Dearing Vice President Assistant Treasurer
600 Fifth Avenue
26th Floor
New York, NY 10020
(c) Not applicable.
Item 28
Location of Accounts and Records.
All accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940, as amended
(the "1940 Act"), and the rules thereunder will be maintained at the offices of
the Investment Adviser, the Custodian and the Administrator.
Foundation Advisers, Inc.
2405 Ivy Road
Charlottesville, Virginia 22903
Investors Capital Services, Inc.
600 Fifth Avenue, 26th Floor
New York, New York 10020
Investors Bank & Trust Company
200 Clarendon Street
Boston, Massachusetts 02117-9130
Item 29
Management Services.
Not applicable.
Item 30
Undertakings.
Not applicable
Registrant hereby undertakes to call a meeting of shareholders for the purpose
of voting upon the question of removal of one or more of the Registrant's
directors when requested in writing to do so by the holders of at least 10% of
the Registrant's outstanding shares of common stock and, in connection with such
meeting, to assist in communications with other shareholders in this regard, as
provided under Section 16(c) of the 1940 Act.
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 of the
requirement for effectiveness of this registration statement under rule 485(b)
under the Securities Act of 1933 and has duly caused this registration statement
to be signed on its behalf by the undersigned, duly authorized, in the City of
Charlottesville and the Commonwealth of Virginia on the 30th day of April, 1999.
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, 1999
EXHIBIT INDEX
Exhibit No. Page
(j) Consent of PricewaterhouseCoopers LLP
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. 9 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated February 24, 1999, relating to the financial
statements and financial highlights appearing in the December 31, 1998 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 "Financial Highlights" in the Prospectus
and under the heading "Independent Accountants" in the Statement of Additional
Information.
PricewaterhouseCoopers LLP 1177 Avenue of the Americas New York, New York 10036
April 28, 1999
