As filed with the Securities and Exchange Commission on March 1,1999.
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
- ---------------------------------------------------------------------X
Pre-Effective Amendment No.
- -------------------------------------------------------------------------------
Post-Effective Amendment No. 8
- -------------------------------------------------------------------------------
X
- -------------------------------------------------------------------------------
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
- --------------------------------------------------------------------X
- -------------------------------------------------------------------------------
Amendment No. 12
- -------------------------------------------------------------------------------
X
TIFF INVESTMENT PROGRAM, INC.
(Exact name of registrant as specified in charter)
2405 Ivy Road, Charlottesville, VA 22903 (Address of
principal executive offices)
Registrant's telephone number: 800-984-0084
DAVID A. SALEM, President
Foundation Advisers, Inc.
2405 Ivy Road, Charlottesville, VA 22903
(Name and address of agent for service) With a copy
to:
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: / / immediately upon
filing pursuant to paragraph (b) / / On _____________, pursuant to paragraph (b)
/ / 60 days after filing, pursuant to paragraph (a)(1) / X/ 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.
<TABLE>
<S> <C>
1. Front and Back Cover Pages Cover Page and Back Cover Page
of Prospectus
- ----------------------------------------------------------------------------------------------------------------------
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>
- -------------------------------------------------------------------------------
TIFF Prospectus
Investment
Program March 1, 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 OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
===============================================================================
- -------------------------------------------------------------------------------
Contents
- -------------------------------------------------------------------------------
Highlights..............................................................
Fees and Annual Fund Operating Expenses.................................
Financial Highlights....................................................
About TIP...............................................................
Eligible Investors......................................................
Management and Administration of the Funds..............................
Money Managers..........................................................
Investment Objectives, Policies, and Restrictions.......................
Summary of Risks
Fund Descriptions
Investment Restrictions
Policy Implementation and Risks.........................................
Investment Strategies
Types of Investments
Purchases and Redemptions...............................................
Dividends and Distributions.............................................
Tax Considerations......................................................
Member Voting Rights and Procedures.....................................
Performance and Expense Information.....................................
Member Inquiries........................................................
Money Manager and Commingled Investment Vehicle Profiles........Appendix A
Service Provider Profiles.......................................Appendix B
- --------------------------------------------------------------------------
Fund Descriptions
- -------------------------------------------------------------------------------
TIFF Multi-Asset Fund
Investment Objective: To attain a growing stream of
current income and appreciation of principal that
at least offsets inflation as measured by the U.S.
Consumer Price Index.
Performance Objective: 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
index 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 Index constitutes an appropriate
long-term asset mix for organizations which seek to maintain the real or
inflation.
Investment Universe: The Fund will invest broadly in the available universe of
securities domiciled in the United States plus at least ten other countries.
Many of these securities will be denominated in currencies other than the U.S.
dollar. Under normal circumstances, not more than 40% of the Fund's assets will
be invested in emerging markets securities.
Allowable Investments: The types of securities the Fund will hold include US and
foreign common stocks (including ADRs and EDRs), debt securities such as those
listed in the descriptions of the Bond and Short-Term Funds, securities
convertible into common stocks, securities of investment companies and other
commingled investment vehicles, subscription rights, warrants, futures
contracts, and forward foreign currency exchange contracts.
Investment Strategies: The Fund seeks to
outperform its Constructed MAF Benchmark primarily
through two key investment strategies:
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.
Strategic Asset Allocation. The Fund retains Money Managers that can
potentially enhance the Fund's returns by rotating Fund assets among multiple
asset classes in a timely manner.
The Fund may also engage in duration management, dollar roll transactions,
hedging, repurchase and reverse repurchase agreements, securities lending, and
short sales.
Risks: The principal risks to which the Fund is exposed include correlation
risk, credit risk, currency risk, futures risk, hedging risk, interest rate
risk, liquidity risk, market risk, non-diversification risk, and prepayment
risk. A description of these terms as well as additional risks that apply to all
Funds are provided in the section below entitled Risks.
(bar chart of total return)
During the year ___ period shown the TIFF Multi-Asset Fund's bar chart, the
highest quarterly return was ___% (quarter ending _____ ___, ___) and the
lowest quarterly return was _____% (quarter ending ___ ___, ____).
TIFF International Equity Fund
Investment Objective: To attain a growing stream of
current income and appreciation of principal that
at least offsets inflation as measured by the U.S.
Consumer Price Index.
Performance Objective: 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 ten countries other than the
United States. Most of these securities will be denominated in currencies other
than the U.S. dollar. Under normal circumstances, not more than 30% of the
Fund's assets will be invested in emerging markets securities.
Allowable 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.
Investment Strategies: The Fund seeks to
outperform its benchmark primarily through two key
investment strategies:
Active Security Selection within
Countries. The Fund retains Money Managers it
believes can select securities that will outperform
the securities of a given country.
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 Fund may also engage in hedging, repurchase and reverse repurchase
agreements, securities lending, and short sales.
Risks: The principal risks to which the Fund is exposed include correlation
risk, credit risk, currency risk, futures risk, hedging risk, liquidity risk,
market risk, and non-diversification risk. A description of these terms as well
as additional risks that apply to all Funds are provided in the section below
entitled Risks.
(bar chart of total return)
During the year ___ period shown the TIFF International Equity Fund's bar chart,
the highest quarterly return was ___% (quarter ending _____ ___, ___) and the
lowest quarterly return was _____% (quarter ending ___ ___, ____).
TIFF Emerging Markets Fund
Investment Objective: To attain a growing stream of
current income and appreciation of principal that
at least offsets inflation as measured by the U.S.
Consumer Price Index.
Performance Objective: 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 U.S. 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 U.S. companies.
Allowable 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.
Investment Strategies: The Fund seeks to
outperform its benchmark primarily through two key
investment strategies:
Active Security Selection within
Countries. The Fund retains Money Managers it
believes can select securities that will outperform
the securities of a given country.
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 Fund may also engage in hedging, repurchase and reverse repurchase
agreements, securities lending, and short sales.
Risks: The principal risks to which the Fund is exposed include correlation
risk, credit risk, currency risk, futures risk, hedging risk, liquidity risk,
market risk, and non-diversification risk. A description of these terms as well
as additional risks that apply to all Funds are provided in the section below
entitled Risks.
(bar chart of total return)
During the year ___ period shown the TIFF Emerging Markets Fund's bar chart, the
highest quarterly return was ___% (quarter ending _____ ___, ___) and the
lowest quarterly return was _____% (quarter ending ___ ___, ____).
TIFF U.S. Equity Fund
Investment Objective: To attain a growing stream of
current income and appreciation of principal that
at least offsets inflation as measured by the U.S.
Consumer Price Index.
Performance Objective: 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.
Allowable 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.
Investment Strategies: The Fund seeks to
outperform its benchmark primarily through two key
investment strategies:
Active Security Selection. The Fund
retains Money Managers it believes can select
securities that will outperform the securities of a
given sector.
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 Fund may also engage in hedging, repurchase and reverse repurchase
agreements, and short sales.
Risks: The principal risks to which the Fund is exposed include correlation
risk, credit risk, futures risk, hedging risk, liquidity risk, market risk, and
non-diversification risk. A description of these terms as well as additional
risks that apply to all Funds are provided in the section below entitled Risks.
(bar chart of total return)
During the year ___ period shown the TIFF U.S. Equity Fund's bar chart, the
highest quarterly return was ___% (quarter ending _____ ___, ___) and the
lowest quarterly return was _____% (quarter ending ___ ___, ____).
TIFF Bond Fund
Investment Objective: 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.
Performance Objective: To outperform the Lehman Brothers Aggregate Bond Index by
0.50% (50 basis points), net of all expenses, on an annualized basis over a
market cycle.
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.)
Allowable 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.
Investment Strategies: The Fund seeks to outperform its benchmark through the
use of duration, quality, and interest rate management, dollar roll
transactions, hedging, repurchase and reverse repurchase agreements, and short
sales.
Risks: The principal risks to which the Fund is exposed include correlation
risk, credit risk, futures risk, hedging risk, interest rate risk, liquidity
risk, market risk, non-diversification risk, and prepayment risk. A description
of these terms as well as additional risks that apply to all Funds are provided
in the section below entitled Risks.
(bar chart of total return)
During the year ___ period shown the TIFF Bond Fund's bar chart, the
highest quarterly return was ___% (quarter ending _____ ___, ___) and the
lowest quarterly return was _____% (quarter ending ___ ___, ____).
TIFF Short-Term Fund
Investment Objective: 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
U.S. Treasury securities on a constant maturity basis.
Performance Objective: To outperform the Merrill
Lynch 182-Day Treasury Bill Index, net of all
expenses.
Allowable Investments: The Fund will invest
primarily in short-term (i.e., maturity of one year
or less) U.S. and non-U.S. debt securities,
including:
o securities issued or guaranteed by the U.S. 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.
Investment Strategies: The Fund seeks to outperform its benchmark through the
use of duration, quality, and interest rate management, dollar roll
transactions, hedging, repurchase and reverse repurchase agreements.
Risks: The principal risks to which the Fund is exposed include correlation
risk, credit risk, futures risk, hedging risk, interest rate risk, liquidity
risk, market risk, non-diversification risk, and prepayment risk. A description
of these terms as well as additional risks that apply to all Funds are provided
in the section below entitled Risks.
(bar chart of total return)
During the year ___ period shown the TIFF Short-Term Fund's bar chart, the
highest quarterly return was ___% (quarter ending _____ ___, ___) and the
lowest quarterly return was _____% (quarter ending ___ ___, ____).
Risks. General risks associated with the Funds'
investment policies and investment strategies are
as follows:
Correlation Risk. A Fund may experience changes in
value as between the securities held and the value
of a particular derivative instrument.
Credit Risk. A security issuer or counterparty to
a contract may default or otherwise become unable
to honor a financial obligation.
Currency Risk. Fluctuations in exchange rates
between the U.S. 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.
Futures Risk. The primary risks of using futures are related to the Money
Manager's 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 is a strategy used to offset
investment risk. While hedging can reduce or
eliminate losses, it also reduces or eliminates
gains if the hedged investment increases in value.
Interest Rate Risk. The possibility that a
fixed-rate debt instrument will decline in value as
a result of a rise in interest rates.
Liquidity Risk. Certain securities may be difficult
or impossible to purchase, sell, or convert to cash
quickly at favorable prices.
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, and 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 and other asset-backed securities bear the risk
of faster or slower than expected prepayment of principle, which affects the
duration and return of the security.
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 Fund's major service providers fail to process Year 2000, that could have a
significant negative impact on the Fund's operations and the services that are
provided to the Fund's Members. In addition, to the extent that the operations
of issuers of securities held by the Fund 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.
Funds' Status. The Fund has 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
believes that the costs associated with resolving this issue will not have a
material adverse effect on the Funds' operations.
- -------------------------------------------------------------------------------
Risk/Return Table
- -------------------------------------------------------------------------------
The table below illustrates the changes in each of the TIFF Funds' yearly
performance and show how each Fund's average returns for 1, 5 and 10 years
compare with a selected index. Please be aware past performance is not
necessarily an indication of how the Fund will perform in the future.
<TABLE>
<S> <C> <C> <C>
- --------------------------------------------------------- --------------------- ------------------ -------------------
Average Annual Total Returns Past 1 Year Past 5 Years Since Inception*
(for the periods ending December 31, 1998)
- --------------------------------------------------------- --------------------- ------------------ -------------------
- --------------------------------------------------------- --------------------- ------------------ -------------------
- --------------------------------------------------------- --------------------- ------------------ -------------------
- --------------------------------------------------------- --------------------- ------------------ -------------------
Multi-Asset
- --------------------------------------------------------- --------------------- ------------------ -------------------
- --------------------------------------------------------- --------------------- ------------------ -------------------
Constructed MAF Benchmark
- --------------------------------------------------------- --------------------- ------------------ -------------------
- --------------------------------------------------------- --------------------- ------------------ -------------------
International Equity
- --------------------------------------------------------- --------------------- ------------------ -------------------
- --------------------------------------------------------- --------------------- ------------------ -------------------
Morgan Stanley Capital International All Country
World Free ex US Stock Index
- --------------------------------------------------------- --------------------- ------------------ -------------------
- --------------------------------------------------------- --------------------- ------------------ -------------------
Emerging Markets
- --------------------------------------------------------- --------------------- ------------------ -------------------
- --------------------------------------------------------- --------------------- ------------------ -------------------
Morgan Stanley International Emerging Markets Free
stock Index
- --------------------------------------------------------- --------------------- ------------------ -------------------
- --------------------------------------------------------- --------------------- ------------------ -------------------
U.S. Equity
- --------------------------------------------------------- --------------------- ------------------ -------------------
- --------------------------------------------------------- --------------------- ------------------ -------------------
Wilshire 5000 Stock Index
- --------------------------------------------------------- --------------------- ------------------ -------------------
- --------------------------------------------------------- --------------------- ------------------ -------------------
Bond
- --------------------------------------------------------- --------------------- ------------------ -------------------
- --------------------------------------------------------- --------------------- ------------------ -------------------
Lehman Brothers Aggregate Bond Index
- --------------------------------------------------------- --------------------- ------------------ -------------------
- --------------------------------------------------------- --------------------- ------------------ -------------------
Short-Term
- --------------------------------------------------------- --------------------- ------------------ -------------------
- --------------------------------------------------------- --------------------- ------------------ -------------------
Merrill Lynch 182-Day Treasury Bill Index
- --------------------------------------------------------- --------------------- ------------------ -------------------
* List all Fund inception dates
</TABLE>
- -----------------------------------------------------
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>
- -------------------------------------- ------------ ----------------- ------------- ----------- ---------- -----------
Member Fees Multi-Asset International Emerging U.S. Short-Term
(paid directly from the investment) Equity Markets Equity Bond
- -------------------------------------- ------------ ----------------- ------------- ----------- ---------- -----------
- -------------------------------------- ------------ ----------------- ------------- ----------- ---------- -----------
Sales Loads None None None None None None
- -------------------------------------- ------------ ----------------- ------------- ----------- ---------- -----------
Transaction Charges
Paid to Funds
(as percentage of transaction amount)
Entry Fees on Purchases [a] 0.75% 0.75% 1.00% 0.25% None None
Exit Fees on Redemptions [a] 0.75% 0.75% 1.00% 0.25% None None
Exchange Fees [a] 0.75% 0.75% 1.00% 0.25% None None
- -------------------------------------- ------------ ----------------- ------------- ----------- ---------- -----------
Annual Operating Expenses
(deducted from Fund assets,
expressed as percentage of average
net assets)
Adviser Fees (Paid to FAI) 0.20% 0.15% 0.15% 0.15% 0.10% 0.00%
Money Manager Fees [b] 0.23% 0.75% 0.82% 0.36% 0.22% 0.08%
Other Expenses [c] 0.29% 0.31% 0.59% 0.19% 0.24% 0.27%
- -------------------------------------- ------------ ----------------- ------------- ----------- ---------- -----------
- -------------------------------------- ------------ ----------------- ------------- ----------- ---------- -----------
Total Annual 0.72% 1.21% 1.56% 0.70% 0.56% 0.35%
Operating Expenses
- -------------------------------------- ------------ ----------------- ------------- ----------- ---------- -----------
</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. 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). The Funds reserve
the right to redeem in-kind, in readily marketable securities in accordance with
the Securities and Exchange Commission's procedures, redemption requests above a
specified amount (see Purchases and Redemptions).
[b] Money Manager Fees. The Money Manager fees in the table are estimates for
the current fiscal year. The portfolio management fees accrued by all Funds in
the determination of daily net asset values are adjusted based on the
performance of certain Money Managers relative to specified indices. On an
annual basis, the total fees payable to Money Managers that have agreed to
performance-based fee arrangements are likely to range as suggested in the
graphs furnished in Appendix A and as described in the section of the Statement
of Additional Information entitled Performance-Based Fees for Money Managers. As
described therein, total Fund expenses will depend in part on the Money
Managers' performance (which cannot be estimated with any degree of certainty).
These expenses could be higher or lower than the estimated expenses shown in the
table. Certain Money Managers receive asset-based fees not tied to performance.
The Funds may also gain access to certain money managers via other commingled
investment vehicles. The Funds bear their pro rata share of management,
performance, and other fees and expenses associated with investments in other
commingled investment vehicles.
[c] Other Expenses. This category includes Administration fees, Custody fees,
legal, audit, and other miscellaneous Fund expenses, as estimated for the
current fiscal year.
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. Actual costs may be higher or lower.
For a discussion of the performance-based Money Manager fees, see footnote [b]
above.
Expenses per $10,000 Investment
<TABLE>
<S> <C> <C> <C> <C> <C>
- ------------------------------- -------------- -------------- -------------- ------------- -------------- -----------
Multi- International Emerging U.S. Short-Term
Asset Equity Markets Equity Bond
- ------------------------------- -------------- -------------- -------------- ------------- -------------- -----------
1 Year
With redemption $23 $21 $36 $12 $6 $5
at end of period
No redemption $15 $20 $26 $10 $6 $5
at end of period
- ------------------------------- -------------- -------------- -------------- ------------- -------------- -----------
3 Years
With redemption $39 $54 $70 $28 $18 $15
at end of period
- ------------------------------- -------------- -------------- -------------- ------------- -------------- -----------
No redemption $30 $46 $59 $25 $18 $15
at end of period
- ------------------------------- -------------- -------------- -------------- ------------- -------------- -----------
5 Years
- ------------------------------- -------------- -------------- -------------- ------------- -------------- -----------
With redemption $56 $82 $106 $44 $31 $26
at end of period
- ------------------------------- -------------- -------------- -------------- ------------- -------------- -----------
No redemption $47 $74 $94 $41 $31 $26
at end of period
- ------------------------------- -------------- -------------- -------------- ------------- -------------- -----------
10 Years
- ------------------------------- -------------- -------------- -------------- ------------- -------------- -----------
With redemption $108 $164 $208 $93 $70 $59
at end of period
- ------------------------------- -------------- -------------- -------------- ------------- -------------- -----------
No redemption $96 $153 $194 $89 $70 $59
at end of period
- ------------------------------- -------------- -------------- -------------- ------------- -------------- -----------
</TABLE>
- -------------------------------------------------------------------------------
About TIFF, TIP, and FAI
- -------------------------------------------------------------------------------
TIP TIFF Investment Program, a family of
no-load mutual funds offered
exclusively to foundations and other
501(c)(3) organizations
FAI Foundation Advisers, Inc., the
investment adviser of the TIP mutual
fund family
TIFF The Investment Fund for Foundations, a
not-for-profit membership organization
dedicated to enhancing foundations'
investment returns
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").
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 Manager. Each Money Manager specializes in a
particular market sector and utilizes a particular investment style.
- -----------------------------------------------------
Eligible Investors
- -----------------------------------------------------
Accredited Investors. 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 investors who invest at least
$750,000 in TIP or whose net worth exceeds $1.5 million. Organizations wishing
to confirm their eligibility should contact FAI.
Eligibility Criteria. Organizations eligible to
invest in TIP include:
o Organized and operated exclusively for charitable purposes, no part of the
net earnings of which inures to the benefit of any private individual or
corporation;
o Qualify for exemption from federal income taxes under Section 501(c)(3) of
the Internal Revenue Code of 1986, as amended, including:
Private foundations (including corporate foundations) as defined in Section
509(a) of the Internal Revenue Code that are required to file Form 990-PF
annually;
Community foundations that qualify for membership in the Council on
Foundations (whether or not the organization is actually a member of the
Council). A list of these qualifications is available upon request from FAI
or the Council on Foundations;
Other 501(c)(3) organizations (except educational endowments) that have
received a letter of exemption under Section 501(c)(3) of the Internal
Revenue Code.
o Non-U.S.-based charitable organizations that
have received 501(c)(3) equivalency
certificates from the Internal Revenue Service;
o So-called planned giving or split interest
assets of eligible organizations (in order to
be eligible, at least part of the income or
principal of such assets must be owned
irrevocably by an eligible organization, and
the organization must have legal control over
the securities or vehicles in which such assets
are invested); and
o FAI employees.
- -----------------------------------------------------
Management and Administration of the Funds
- -----------------------------------------------------
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.
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, page ---). 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> <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* Director Director
- ------------------------- ----------------- ---------------- --------------------- ----------------- -----------------
- ------------------------- ----------------- ---------------- --------------------- ----------------- -----------------
Gregory D. Curtis Director
- ------------------------- ----------------- ---------------- --------------------- ----------------- -----------------
- ------------------------- ----------------- ---------------- --------------------- ----------------- -----------------
Alice W. Handy Director
- ------------------------- ----------------- ---------------- --------------------- ----------------- -----------------
- ------------------------- ----------------- ---------------- --------------------- ----------------- -----------------
Robert A. Kasdin Director
- ------------------------- ----------------- ---------------- --------------------- ----------------- -----------------
- ------------------------- ----------------- ---------------- --------------------- ----------------- -----------------
John G. Mebane 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 Mng
Dir/Sec/Treas
- ------------------------- ----------------- ---------------- --------------------- ----------------- -----------------
- ------------------------- ----------------- ---------------- --------------------- ----------------- -----------------
Thomas N. Felker Managing Dir
- ------------------------- ----------------- ---------------- --------------------- ----------------- -----------------
- ------------------------- ----------------- ---------------- --------------------- ----------------- -----------------
Nina F. Scherago
- ------------------------- ----------------- ---------------- --------------------- ----------------- -----------------
- ------------------------- ----------------- ---------------- --------------------- ----------------- -----------------
Meredith A. Shuwall Managing Dir
- ------------------------- ----------------- ---------------- --------------------- ----------------- -----------------
- ------------------------- ----------------- ---------------- --------------------- ----------------- -----------------
William E. Vastardis Treasurer
- ------------------------- ----------------- ---------------- --------------------- ----------------- -----------------
- ------------------------- ----------------- ---------------- --------------------- ----------------- -----------------
Carla E. Dearing Ast. 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., 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 treasurer of the University of Virginia, Box 9012,
Charlottesville, VA, 22906, which has endowment assets exceeding $900 million.
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.
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 serves on the Budget and Finance
Committee and Executive Committee of the Conference of Southwest Foundations, as
a trustee of The Investment Fund for Foundations, and as chair of the TIFF
Investment Program, Inc.
Robert A. Kasdin is treasurer and chief financial officer of The University of
Michigan, 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, 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 chairs the board of Foundations Advisers, Inc. He is a Chartered
Financial Analyst.
Jack R. Meyer is president and chief executive officer of Harvard Management
Company (HMC), 600 Atlantic Avenue, Boston, MA, 02110. HMC is the endowment
management subsidiary of Harvard University, which has endowment assets
exceeding $9 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 treasurer and 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.
Jeffrey Tarrant is president of Arista Group, Inc., 712 Fifth Avenue, New York,
NY, 10019, 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., 382 Springfield
Avenue, Summit, NJ, 07901, a consulting and asset management firm providing
services to high net worth families and institutions. He is former director of
retirement plan investments and other investment programs for McKinsey &
Company, Inc. 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 Foundation Advisers Inc., 2405 Ivy Road,
Charlottesville, VA, 22903, and managing director of The Investment Fund for
Foundations. Prior to joining FAI, Ms. Cash was employed by Grantham, Mayo, Van
Otterloo & Co. ("GMO"), where her responsibilities included operations,
investment research, asset allocation, regulatory compliance, and communications
for GMO's institutional mutual funds. Prior to joining GMO, she was employed by
Cambridge Associates, Inc., where she was involved in systems design, research,
and consulting.
Carla E. Dearing is president and co-founder of
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 (MSCI).
Thomas N. Felker is managing director of Foundation Advisers Inc., 2405 Ivy
Road, Charlottesville, VA, 22903, and managing director of The Investment Fund
for Foundations. Prior to joining FAI, 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
Chartered Financial Analyst.
* David A. Salem is president of Foundation Advisers, Inc., 2405 Ivy Road,
Charlottesville, VA, 22903, and president and chief executive officer of The
Investment Fund for Foundations. Prior to assuming FAI's presidency in 1993, Mr.
Salem was a partner in the Boston-based investment advisory firm Grantham, Mayo,
Van Otterloo & Co., where his responsibilities included asset allocation and
strategic planning. Prior to joining GMO, Mr. Salem was a managing director of
Cambridge Associates, Inc., which provides investment and financial planning
services primarily to not-for-profit endowed institutions. He has served on the
faculties of Middlebury College 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 A. Jefferson Memorial Foundation (Monticello).
Nina F. Scherago is managing director of Foundation Advisers Inc., 2405 Ivy
Road, Charlottesville, VA, 22903, and managing director of The Investment Fund
for Foundations. Prior to joining FAI, 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 Chartered Financial Analyst.
Meredith A. Shuwall is managing director of Foundation Advisers Inc., 2405 Ivy
Road, Charlottesville, VA, 22903, and managing director of The Investment Fund
for Foundations. Prior to joining FAI, 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 U.S.
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.
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%):
<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
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.
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
of the Funds
- ----------------------------------------------------
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 Objectives. Performance Objectives and certain other Fund policies
are not fundamental and may be changed without Member approval upon notice to
Members. A Fund's Performance Objective 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 index, can be expected to vary from year to year. The
Funds attempt to attain their Performance Objectives over a combination of
rising and falling markets, not during a single rising or falling market or a
defined time period (such as one year).
- ----------------------------------------------------
Purchases and Redemptions
- ----------------------------------------------------
Application. An Account Application must be completed and submitted by each TIP
investor. Accompanying the completed application, members must also submit a
copy 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 TIP 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 on 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, the
Multi-Asset, International Equity, Emerging
Markets, and U.S. Equity Funds assess entry fees
(on purchases) and exit fees (on redemptions) as
set forth in the section entitled Fees and Annual
Fund Operating Expenses.
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,
the order has been accepted, and any applicable entry fee has been deducted.
Each Fund's net asset value is determined on the basis of market prices. All
purchases, except in-kind purchases, must be made in U.S. dollars. The Funds
reserve the right to reject any purchase order. Share purchase orders are deemed
accepted when Investors Capital 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
employees. 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.)
Procedure A purchaser must call
TIP at 800-984-0084
prior to 11:00 a.m.
Eastern time to inform
TIP of the incoming wire
transfer and must
clearly indicate which
Fund is to be
purchased. If federal
funds are received by
TIP by 1:00 p.m. Eastern
time, the order will be
effective on that day.
Notification If TIP receives
notification after 11:00
a.m. Eastern time and if
federal funds are not
received by the Transfer
Agent by 1:00 p.m.
Eastern time, such
purchase order shall be
executed as of the date
that federal funds are
received by 1:00 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 may be
redeemed upon Members' request, in any amount.
Who May Redeem Only a Member or any
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
11:00 am Eastern time on any Business Day.
Late Notice If the notice is
received on a day that
is not a Business Day,
or after 1:00 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,
except that 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.
Potential In-Kind Redemptions. According to the Security 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. The minimum for such an exchange is $5,000. 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 telephone 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 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 your organization
- --------------------------------------------------------------------------------
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. Member may elect additional redemption options
when completing the Account Application. Members wishing to adopt a fixed dollar
amount or percentage distribution should contact FAI to arrange for such
specific distributions. Members can change their distribution options by
contacting FAI in writing by the record date of the applicable dividend.
Tax-Related Warning to Private Foundations. If a private foundation subject to
excise taxation purchases shares shortly before a distribution of dividends and
capital gains, a portion of its investment will be classified as a taxable
distribution (regardless of whether it reinvests distributions or takes them in
cash).
- -----------------------------------------------------
Tax Considerations
- -----------------------------------------------------
The following discussion is for general information only. Members and
prospective Members should consult with their own tax advisers as to the tax
consequences of an investment in a Fund, including the status of distributions
from each Fund under applicable state or local laws.
Federal Taxes. Each Fund intends to qualify annually and elect to be treated as
a regulated investment company ("RIC") under the Internal Revenue Code. To
qualify, a Fund must meet certain income, distribution, and diversification
requirements. In any year in which a Fund qualifies as a RIC and distributes all
of its taxable income on a timely basis, the Fund generally will not pay U.S.
federal income or excise tax. Each Fund intends to distribute all of its taxable
income by automatically reinvesting such amount in additional shares of the Fund
and distributing those shares to its Members, unless a Member elects, on the
Account Application Form, to receive cash payments for such distributions.
Tax Treatment of Distributions. Dividends paid by a Fund from its investment
company taxable income (including interest and net short-term capital gains)
will be taxable to a U.S. Member as ordinary income. If a portion of a Fund's
income consists of dividends paid by U.S. corporations, a portion of the
dividends paid by the Fund may be eligible for the corporate dividends-received
deduction (assuming that the deduction is otherwise allowable in computing a
Member's federal income tax liability). Any distributions of net capital gains
(the excess of net long-term capital gains over net short-term capital losses)
designated as capital gain dividends are taxable to Members as long-term capital
gains, regardless of how long they have held their Fund shares. Dividends are
taxable to Members in the same manner whether received in cash or reinvested in
additional Fund shares.
A distribution will be treated as paid on December 31 of the current calendar
year if it is declared by a Fund in October, November, or December with a record
date in any such month and paid by the Fund during January of the following
calendar year. Such distributions will be taxable to Members in the calendar
year in which the distributions are declared, rather than the calendar year in
which they are received. Each Fund will inform Members of the amount and tax
status of all amounts treated as distributed to them not later than 60 days
after the close of each calendar year.
Tax Treatment of Capital Transactions. Any gain or loss realized by a Member
upon the sale or other disposition of shares of a Fund, or upon receipt of a
distribution in a complete liquidation of the Fund, generally will be a capital
gain or loss. Such capital gain or loss will be either long term or short term,
depending upon the Member's holding period for the shares.
State and Local Taxes. A Fund may be subject to state, local, or foreign
taxation in any jurisdiction in which it may be deemed to be doing business.
Fund distributions may be subject to state and local taxes. Distributions of a
Fund which are derived from interest on obligations of the U.S. Government and
certain of its agencies, authorities, and instrumentalities may be exempt from
state and local taxes in certain states.
Further information relating to tax consequences is contained in the Statement
of Additional Information.
- -----------------------------------------------------
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 Pricewaterhouse Coopers
LLC, whose report is included along with the Funds' financial statements in the
Annual Report (available upon request).
<TABLE>
<S> <C> <C> <C> <C>
TIFF Multi-Asset Fund
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
For a share outstanding Year Ended Year Ended Year Ended Period from
throughout each period 12/31/98 12/31/97 12/31/96 3/31/95* to 12/31/95
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
Per Share Data
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
Net Asset Value, beginning of period $12.08 $11.13 $10.00
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
Income from investment operations
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
Net investment income 0.44 0.17 0.26
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
Net realized and unrealized gain 0.21 1.45 1.14
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
Total from investment operations 0.65 1.62 1.40
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
Less distributions from
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
Net investment income (0.30) (0.18) (0.24)
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
Amounts in excess of (0.15) (0.13)
net investment income
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
Net realized gains (0.63) (0.36) (0.03)
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
Total distributions (1.08) (0.67) (0.27)
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
Net asset value, end of period $11.65 $12.08 $11.13
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
Total return (d) 5.51% 14.72% 13.87% (b)
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
Ratios/Supplemental Data
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
Net assets, end of period (000s) $382,317 $218,244 $92,630
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
Ratio of expenses to average net assets 0.72% 1.03% 0.80% (a)
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
Ratio of net investment income 3.30% 1.99% 4.00% (a)
to average net assets
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
Portfolio turnover 181.51% 100.66% 97.35% (b)
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
Average commission rate per share (c) $0.0132 $0.0145 NA
- ------------------------------------------ ---------------- --------------- --------------- ---------------------
</TABLE>
(a) Annualized. (b) Not annualized. (c) Represents total commissions paid on
portfolio securities divided by the total number of shares purchased or sold on
which commissions were charged. This disclosure is required by the SEC beginning
in 1996. (d) 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. NA Not
applicable. * Commencement of operations.
TIFF International Equity Fund
<TABLE>
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
For a share outstanding Year Ended Year Ended Year Ended Year Ended Period from
throughout each period 12/31/98 12/31/97 12/31/96 12/31/95 5/31/94* to
12/31/94
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
Per Share Data
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
Net Asset Value, beginning of period $12.19 $10.82 $9.98 $10.00
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
Income from investment operations
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
Net investment income 0.17 0.10 0.15 0.05
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
Net realized and unrealized gain (loss) (0.06) 1.62 0.83 0.06
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
Total from investment operations 0.11 1.72 0.98 0.11
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
Less distributions from
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
Net investment income (0.16) (0.09) (0.14) (0.04)
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
Amounts in excess of net investment income (0.09) (0.01)
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
Net realized gains (0.28) (0.26)
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
Amounts in excess of net realized gains (0.08)
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
Total distributions (0.53) (0.35) (0.14) (0.13)
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
Net asset value, end of period $11.77 $12.19 $10.82 $9.98
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
Total return (e) 0.91% 15.94% 9.85% 0.98% (b)(c)
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
Ratios/Supplemental Data
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
Net assets, end of period (000s) $241,072 $219,458 $155,422 $89,309
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
Ratio of expenses to average net assets 1.21% 1.11% 1.05% 1.08% (a)
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
Ratio of expenses to average net assets 1.21% 1.11% 1.05% 1.27% (a)
before expense waivers
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
Ratio of net investment income to average 0.72% 0.91% 1.48% 0.95% (a)
net assets
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
Portfolio turnover 25.55% 32.40% 32.91% 14.71% (b)
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
Average commission rate per share (d) $0.0070 $0.0095 NA NA
- ---------------------------------------------- ------------- ------------- ------------- ------------- ---------------
</TABLE>
(a) Annualized. (b) Not annualized. (c) Total return would have been lower had
certain expenses not been waived or reimbursed. (d) Represents total commissions
paid on portfolio securities divided by the total number of shares purchased or
sold on which commissions were charged. This disclosure is required by the SEC
beginning in 1996. (e) 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. NA Not applicable. * Commencement of operations.
<TABLE>
<S> <C> <C> <C> <C> <C>
TIFF Emerging Markets Fund
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
For a share outstanding Year Ended Year Ended Year Ended Year Ended Period from
hroughout each period 12/31/98 12/31/97 12/31/96 12/31/95 5/31/94* to
12/31/94
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
Per Share Data
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
Net Asset Value, beginning of period $8.63 $8.45 $9.24 $10.00
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
Income from investment operations 0.33 0.01 0.01
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
Net investment income
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
Net realized and unrealized gain (loss) (0.36) 0.21 (0.79) (0.71)
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
Total from investment operations (0.03) 0.22 (0.79) (0.70)
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
Less distributions from
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
Net investment income (0.24) (0.04) (0.00)# (0.01)
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
Amounts in excess of net investment income (0.27) (0.00)# (0.00)#
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
Net realized gains (0.00)#
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
Amounts in excess of net realized gains (0.00)# (0.05)
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
Total distributions (0.51) (0.04) (0.00)# (0.06)
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
Net asset value, end of period $8.09 $8.63 $8.45 $9.24
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
Total return (e) (0.40%) 2.51% (8.39%) (6.97%)(b)(c)
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
Ratios/Supplemental Data
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
Net assets, end of period (000s) $83,836 $89,736 $59,486 $50,032
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
Ratio of expenses to average net assets 1.56% 1.62% 2.35% 1.83% (a)
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
Ratio of expenses to average net assets 1.56% 1.62% 2.35% 2.25% (a)
before expense waivers
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
Ratio of net investment income to average net 0.95% 0.06% (0.15%) 0.40% (a)
assets
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
Portfolio turnover 72.23% 79.96% 104.30% 26.37% (b)
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
Average commission rate per share (d) $0.0013 $0.0095 NA NA
- ----------------------------------------------- ------------- ------------ ------------ --------------- ---------------
</TABLE>
(a) Annualized. (b) Not annualized. (c) Total return would have been lower had
certain expenses not been waived or reimbursed. (d) Represents total commissions
paid on portfolio securities divided by the total number of shares purchased or
sold on which commissions were charged. This disclosure is required by the SEC
beginning in 1996. (e) 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. NA Not applicable. * Commencement of operations. # Rounds to less than
$0.01.
<TABLE>
<S> <C> <C> <C> <C> <C>
TIFF U.S. Equity Fund
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
For a share outstanding Year Ended Year Ended Year Ended Year Ended Period from
throughout each period 12/31/98 12/31/97 12/31/96 12/31/95 5/31/94* to
12/31/94
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
Per Share Data
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
Net Asset Value, beginning of period $13.74 $12.36 $10.02 $10.00
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
Income from investment operations
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
Net investment income 0.50 0.20 0.20 0.15
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
Net realized and unrealized gain 3.94 2.52 3.37 0.19
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
Total from investment operations 4.44 2.72 3.57 0.34
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
Less distributions from
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
Net investment income (0.40) (0.17) (0.22) (0.15)
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
Amounts in excess of net investment (0.11) (0.10) (0.00)#
income
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
Net realized gains (2.01) (1.07) (1.01) (0.01)
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
Amounts in excess of net realized gains (0.16)
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
Total distributions (2.52) (1.34) (1.23) (0.32)
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
Net asset value, end of period $15.66 $13.74 $12.36 $10.02
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
Total return (e) 33.01% 21.91% 36.02% 3.49%(b)(c)
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
Ratios/Supplemental Data
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
Net assets, end of period (000s) $255,714 $176,797 $109,901 $58,173
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
Ratio of expenses to average net assets 0.70% 0.82% 0.93% 0.85% (a)
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
Ratio of expenses to average net assets 0.70% 0.82% 0.93% 1.06% (a)
before expense waivers
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
Ratio of net investment income to 1.34% 1.41% 1.67% 2.52% (a)
average net assets
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
Portfolio turnover 108.52% 105.18% 109.89% 44.59% (b)
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
Average commission rate per share (d) $0.0301 $0.0275 NA NA
- ------------------------------------------ --------------- -------------- ------------- -------------- ---------------
</TABLE>
(a) Annualized. (b) Not annualized. (c) Total return would have been lower had
certain expenses not been waived or reimbursed. (d) Represents total commissions
paid on portfolio securities divided by the total number of shares purchased or
sold on which commissions were charged. This disclosure is required by the SEC
beginning in 1996. (e) 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. NA Not applicable. * Commencement of operations. # Rounds to less than
$0.01.
<TABLE>
<S> <C> <C> <C> <C> <C>
TIFF Bond Fund
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
Year Ended Year Ended Year Ended Year Ended Period from
For a share outstanding throughout each 12/31/98 12/31/97 12/31/96 12/31/95 5/31/94* to
period 12/31/94
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
Per Share Data
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
Net Asset Value, beginning of period $10.06 $10.33 $9.68 $10.00
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
Income from investment operations
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
Net investment income 0.64 0.67 0.67 0.36
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
Net realized and unrealized gain 0.27 (0.27) 1.01 (0.32)
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
Total from investment operations 0.91 0.40 1.68 0.04
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
Less distributions from
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
Net investment income (0.64) (0.67) (0.66) (0.36)
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
Amounts in excess of net investment income (0.01) (0.00)# (0.01) (0.00)#
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
Net realized gains (0.08) (0.36)
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
Total distributions (0.73) (0.67) (1.03) (0.36)
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
Net asset value, end of period $10.24 $10.06 $10.33 $9.68
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
Total return 9.35% 3.75% 18.07% 0.46%(b)(c)
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
Ratios/Supplemental Data
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
Net assets, end of period (000s) $173,352 $127,491 $91,072 $79,671
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
Ratio of expenses to average net assets 0.56% 0.58% 0.96% 0.62%(a)
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
Ratio of expenses to average net assets 0.56% 0.58% 0.96% 0.94%(a)
before expense waivers
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
Ratio of net investment income to average 6.41% 6. 64% 6.34% 6.37%(a)
net assets
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
Portfolio turnover 398.16% 332.21% 406.24% 162.06% (b)
- ------------------------------------------- ---------------- ------------- ------------- -------------- --------------
</TABLE>
(a) Annualized. (b) Not annualized. (c) Total return would have been lower had
certain expenses not been waived or reimbursed. (d) 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. * Commencement of operations. # Rounds to less
than $0.01.
<TABLE>
<S> <C> <C> <C> <C> <C>
TIFF Short-Term Fund
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
Year Ended Year Ended Year Ended Year Ended Period from
For a share outstanding throughout each 12/31/98 12/31/97 12/31/96 12/31/95 5/31/94* o
period 12/31/94
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
Per Share Data
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
Net Asset Value, beginning of period $9.99 $10.01 $10.00 $10.00
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
Income from investment operations
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
Net investment income 0.54 0.54 0.58 0.28
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
Net realized and unrealized gain (0.02) (0.02) 0.05 0.02
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
Total from investment operations 0.52 0.52 0.63 0.30
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
Less distributions from
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
Net investment income (0.55) (0.54) (0.58) (0.28)
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
Amounts in excess of net investment (0.01) (0.00)# (0.00)# (0.00)#
income
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
Net realized gains (0.04) (0.01)
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
Net realized gains (0.00)# (0.01)
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
Total distributions (0.56) (0.54) (0.62) (0.30)
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
Net asset value, end of period $9.95 $9.99 $10.01 $10.00
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
Total return (c) 5.30% 5.28% 6.43% 3.10%(b)
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
Ratios/Supplemental Data
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
Net assets, end of period (000s) $34,431 $63,470 $96,580 $34,283
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
Ratio of expenses to average net assets 0.47% 0.36% 0.42% 0.40% (a)
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
Ratio of expenses to average net assets 0.56% 0.47% 0.54% 1.72% (a)
before expense waivers
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
Ratio of net investment income to 5.53% 5.35% 5.67% 4.98% (a)
average net assets
- ------------------------------------------ --------------- -------------- -------------- -------------- --------------
</TABLE>
(a) Annualized. (b) Not annualized. (c) Total return would have been
lower had certain expenses not been waived or reimbursed. * Commencement of
operations. # Rounds to less than $0.01.
- -------------------------------------------------------------------------------
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: 800-984-0084
Fax: 804-817-8231
E-mail: [email protected]
Website: www.tiff.org
- -----------------------------------------------------
- -----------------------------------------------------
- -----------------------------------------------------
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 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.
Information about the Funds (including the Prospectus and SAI) can be reviewed
and copied at the Security and Exchange Commission's Public Reference Room in
Washington, DC (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.
- -----------------------------------------------------
TIFF Statement of
Investment Additional Information
Program, Inc. April 30, 1999
Available through:
Foundation Advisers, Inc.
2405 Ivy Road
Charlottesville, VA 22903
phone (804) 984-0084
fax (804) 977-4479
TIFF Investment Program, Inc. ("TIP") is a no-load, open-end management
investment company that seeks to improve the net investment returns of its
shareholders ("Members") by making available to them a series of investment
vehicles (the "Funds"), each with its own investment objective and policies. The
Funds are available exclusively to grantmaking foundations and 501(c)(3)
organizations. The Funds and their investment adviser, Foundation Advisers, Inc.
("FAI") 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.
The Funds currently available in the TIP series are:
o TIFF Multi-Asset Fund
o TIFF International Equity Fund
o TIFF Emerging Markets Fund
o TIFF U.S. Equity Fund
o TIFF Bond Fund
o TIFF Short-Term Fund
This Statement of Additional Information is not a Prospectus and should be read
in conjunction with the Prospectus of TIP, dated May 1, 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 to or calling FAI at the address and telephone number provided above.
Contents
Organization of TIP..........................................................3
Supplemental Discussion of TIP's Origin......................................3
Suitability of TIP's Funds...................................................3
Supplemental Discussion of Fund Management and Administration................8
Performance-Based Fees for Money Managers...................................11
Control Persons and Principal Holders of Securities.........................15
Distribution of Fund Shares.................................................16
Supplemental Discussion of Investment Objectives, Policies, and
Restrictions........17
Supplemental Discussion of Policy Implementation and Risks..................17
Fund Transactions...........................................................34
Tax Considerations..........................................................35
Member Information..........................................................39
Calculation of Performance Data.............................................40
Determination of Net Asset Value............................................41
Additional Service Providers................................................42
Organization of TIP
TIP was incorporated 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 TIP's Funds shall be liable for the obligations of any other Fund.
Supplemental Discussion of TIP's Origin
Resources Needed to Invest Effectively. TIP is the outgrowth of several years of
research into the need for a foundation investment cooperative, including
extensive studies on foundation investment practices by The Investment Fund for
Foundations ("TIFF"). These studies suggest that many of America's approximately
34,000 private and community foundations lack the resources needed to earn
superior net investment returns. The necessary resources include: 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 TIP's Funds
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.
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 continuously reviewing and revising its own working
assumptions, strategies, and tactics.
One of the chief reasons TIP was created was to permit foundation trustees, who
generally lack the time or expertise to monitor continuously the rapid evolution
of markets and managers, to delegate this task to a group of investment
professionals (the directors of TIP and FAI) who have significant experience
investing foundation assets.
Active Investment Approaches. While conceding that few professional money
managers can accurately and consistently forecast major highs or lows in
financial markets, the directors of TIP and FAI believe that some money managers
are indeed able to pursue superior returns within selected asset classes and
investment sectors. By combining in a prudent manner investment approaches
appropriate to a given asset class, and then selecting money managers based on
their proven ability to implement successfully such approaches, a foundation
potentially can enhance its long-term investment returns.
Multi-Asset Fund. The TIFF Multi-Asset Fund is TIP's response to requests from
many foundations throughout the U.S. for assistance with asset allocation. Asset
allocation is critically important because the longer money is put to work the
wider the gap grows between returns on individual asset classes. For truly
long-term investors, these differences between asset class returns dwarf
differences in returns attributable to manager selection, fee negotiations, or
other investment-related tasks that TIP performs on behalf of its Members. All
of TIP's Funds enable Members to delegate to TIP responsibility for the
time-intensive tasks of selecting and monitoring money managers and other
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.
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, to adhere to
asset allocation policies that comport better with their long-term goal of
preserving fund purchasing power than do policies that place more emphasis on
controlling short-term price fluctuations.
Difficulty of Maintaining All-Equity Portfolios. TIP's directors recognized that
an all-equity portfolio would not fulfill the asset allocation needs of
grantmaking foundations in at least two important respects. First, many
governing boards cannot withstand the downside risks inherent in all-equity
portfolios, even those that are invested on a truly global basis. Second, even
if trustees have the discipline needed to maintain all-equity portfolios during
periods when stock prices are falling sharply, spending needs may leave them
with no choice but to sell equities at very depressed prices. 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 and FAI's boards hold but
which are not necessarily expected to provide high real returns when inflation
is high and accelerating.
Potential Value-Added from Active Management. In determining which asset classes
and strategies the Fund should employ for total return - as distinct from
hedging - purposes, TIP's directors sought to avoid a mistake common to many
investment programs. 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 TIP Funds employ primarily active management
techniques (passive approaches already being available to eligible foundations
at a lower cost than TIP could ever offer them), TIP's directors considered
carefully the extent to which active managers could potentially add value (net
of fees) to each asset class that the Multi-Asset Fund might hold. This
consideration is the chief reason that the Multi-Asset Fund's guidelines
emphasize: 1. foreign (and especially emerging) stock markets to a greater
extent than do the guidelines employed by most U.S.-based institutions at
present; and 2. opportunistic total return strategies such as global risk
arbitrage and
distressed securities investing.
Perceived Inefficiency of Foreign Stock Markets. TIP's directors believe that
foreign stock markets are less efficient than the U.S. stock market in a
valuation sense, and are likely to remain so for some time. This perception
creates a presumption on their part that carefully selected active managers can
produce higher excess returns investing in foreign stocks than they can when
investing in U.S. stocks. The assumption that active management will produce
higher excess returns (net of fees and trading costs) in foreign markets
justifies a heavier commitment to foreign stocks than the modest allocations
maintained by many U.S.-based investors.
Potential Risk Reduction from Investing in Assets with Low Return Correlations.
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. So long as investments held by the Fund as domestic equity
substitutes generate long-term returns at least equal to those expected from
domestic stocks, the general tendency of such investments to rise and fall at
different times than domestic stocks creates opportunities to enhance the Fund's
long-term returns. 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.
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 carefully, 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, 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 of Money Managers) to a reasonable minimum. Second, there are
securities law conditions which preclude complete overlap between the boards of
TIP and FAI. Specifically, to ensure that the cooperative complies with laws
discouraging direct control of the affairs of regulated investment companies by
the entities that sponsor them, 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). A complete list
of the directors of TIP and FAI is provided in the section of the Prospectus
entitled Management and Administration of the Funds.
Advisory Agreement. Pursuant to its Advisory Agreement with TIP, FAI provides
the following services to TIP and the TIP 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;
3. provides TIP with office space, equipment, and personnel.
As compensation for services rendered by FAI under the Advisory Agreement, each
Fund pays FAI a maximum monthly fee calculated by applying the following annual
basis point rates to such Fund's average daily net assets for the month (100 bp
equals 1.00%):
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------- ------------ -------------- ------------ ------------ -------------- ---------------
Assets Multi- International Emerging U.S Equity Bond Short- Term
Asset Equity Markets
- ------------------------------- ------------ -------------- ------------ ------------ -------------- ---------------
- ------------------------------- ------------ -------------- ------------ ------------ -------------- ---------------
On first $500 million 20 bp 15 bp 15 bp 15 bp 10 bp 3 bp
- ------------------------------- ------------ -------------- ------------ ------------ -------------- ---------------
- ------------------------------- ------------ -------------- ------------ ------------ -------------- ---------------
On next $500 million 18 bp 13 bp 13 bp 13 bp 8 bp 3 bp
- ------------------------------- ------------ -------------- ------------ ------------ -------------- ---------------
- ------------------------------- ------------ -------------- ------------ ------------ -------------- ---------------
On next $500 million 15 bp 11 bp 11 bp 11 bp 6 bp 2 bp
- ------------------------------- ------------ -------------- ------------ ------------ -------------- ---------------
- ------------------------------- ------------ -------------- ------------ ------------ -------------- ---------------
On next $500 million 13 bp 9 bp 9 bp 9 bp 5 bp 2 bp
- ------------------------------- ------------ -------------- ------------ ------------ -------------- ---------------
- ------------------------------- ------------ -------------- ------------ ------------ -------------- ---------------
On next $500 million 11 bp 7 bp 7 bp 7 bp 4 bp 1 bp
- ------------------------------- ------------ -------------- ------------ ------------ -------------- ---------------
- ------------------------------- ------------ -------------- ------------ ------------ -------------- ---------------
On remainder (>$2.5 billion) 9 bp 5 bp 5 bp 5 bp 3 bp 1 bp
- ------------------------------- ------------ -------------- ------------ ------------ -------------- ---------------
</TABLE>
Because FAI does not seek to earn a profit, it may waive a portion of its fees
from time to time. FAI is currently waiving its advisory fees on the Short-Term
Fund and has agreed to continue to do so until further notice.
The Advisory Agreement 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 so long
as such continuance is specifically approved at least annually by (a) the board
of directors or (b) the vote of a "majority" [as defined in the Investment
Company Act of 1940 (the "1940 Act")] of a Fund's outstanding shares voting as a
single class; provided that in either event the continuance is also approved by
at least a majority of the board of directors of TIP who are not "interested
persons" (as defined in the 1940 Act) of TIP or FAI by vote cast in person at a
meeting called for the purpose of voting on such approval. The Advisory
Agreement 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).
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 ---.
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 TIP 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.
Money 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 Fund's current
Money Managers and in considering the selection of other Money Managers include:
Important Attributes
1. A well-defined investment philosophy that gives the manager a
discernible competitive advantage in the gathering or processing of
investment data
2. A verifiable record that the firm has faithfully executed this philosophy
over time
3. A proven capacity to deliver reasonably uniform results to all clients'
assets to which this philosophy is applied
4. A reasonable amount of assets under management to which this philosophy is
applied
5. Satisfactory returns versus relevant benchmark indices 6. A proven capacity
to adapt to changes in financial markets 7. A proven willingness to invest
adequately in its own business (including
technological resources) in light of such changes
8. Investment professionals who have strong personal incentives (both financial
and psychological) to produce satisfactory results for their clients
Helpful Attributes
1. Money management is the firm's sole (preferably) or primary line of business
2. The firm's decision makers are seasoned professionals or the firm's
philosophy is unusually innovative (preferably both)
3. The firm is willing to use performance-based fee arrangements as an
expression of confidence in its own abilities
4. The firm complies fully with the Performance Standards promulgated by the
Association for Investment Management and Research
Undesirable Attributes
1. A high degree of personnel turnover
2. Insufficiently trained administrative personnel
3. Insufficiently robust investment accounting systems
4. Investment decision makers who are unduly burdened with
administrative tasks
5. An unwillingness to specify asset size limits for products or
services that require such limits
Disqualifying Attributes
1. Investment decision makers who are engaged primarily in brokerage
or financial planning (as distinct from portfolio management)
2. An inability to meet performance reporting deadlines 3. Relevant criminal
convictions or sanctions by the Commission or
other federal or state regulatory agencies
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. The agreements between TIP and the Money Managers (the
"Money Manager Agreements") continue in effect for successive annual periods, so
long as such continuance is specifically approved at least annually by (a) the
board of directors or (b) the vote of a "majority" (as defined in the 1940 Act)
of a Fund's outstanding shares voting as a single class, provided that in either
event the continuance is also approved by at least a majority of the board of
directors who are not "interested persons" (as defined in the 1940 Act) of TIP
or FAI by vote cast in person at a meeting called for the purpose of voting on
such approval.
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: 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 decision-making 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 Mangers' 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.
Target Expense Ratios. The target expense ratios for the TIP Funds are:
------------------------------------ --------------------------------
TIFF Multi-Asset Fund 0.95%
------------------------------------ --------------------------------
------------------------------------ --------------------------------
TIFF International Equity Fund 1.00%
------------------------------------ --------------------------------
------------------------------------ --------------------------------
TIFF Emerging Markets Fund 1.50%
------------------------------------ --------------------------------
------------------------------------ --------------------------------
TIFF U.S. Equity Fund 0.65%
------------------------------------ --------------------------------
------------------------------------ --------------------------------
TIFF Bond Fund 0.50%
------------------------------------ --------------------------------
------------------------------------ --------------------------------
TIFF Short-Term Fund 0.35%
------------------------------------ --------------------------------
These target expense ratios reflect informed estimates by the directors of TIP
and FAI of the costs that foundations must be prepared to incur to realize the
Performance Objectives 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 TIP
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 TIP Funds that employ performance-based fees for Money
Managers, each Fund's actual expense ratio could exceed its target expense ratio
if the performance of one or more Money Managers employed by it causes the
average fees paid to all of the Fund's Money Managers to exceed the difference
between (a) its target expense ratio and (b) all fees and expenses paid by it
other than Money Manager fees. For example, the U.S. Equity Fund's target
expense ratio is 0.65% per annum. 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.
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 board 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 TIP Fund are unknowable in advance. However, it should
be remembered that the annual standard return deviations of the asset classes in
which the TIP 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 1.85% 1.45%
- -------------------------------- ---------------------- ----------------------------- -----------------------------
- -------------------------------- ---------------------- ----------------------------- -----------------------------
TIFF International Equity Fund 3 1.85% 1.57%
- -------------------------------- ---------------------- ----------------------------- -----------------------------
- -------------------------------- ---------------------- ----------------------------- -----------------------------
TIFF Emerging Markets Fund 1 2.60% 2.60%
- -------------------------------- ---------------------- ----------------------------- -----------------------------
- -------------------------------- ---------------------- ----------------------------- -----------------------------
TIFF U.S. Equity Fund 7 2.00% 1.41%
- -------------------------------- ---------------------- ----------------------------- -----------------------------
- -------------------------------- ---------------------- ----------------------------- -----------------------------
TIFF Bond Fund 4 0.75% 0.66%
- -------------------------------- ---------------------- ----------------------------- -----------------------------
- -------------------------------- ---------------------- ----------------------------- -----------------------------
TIFF Short-Term Fund 1 0.70% 0.70%
- -------------------------------- ---------------------- ----------------------------- -----------------------------
</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.
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 constitute 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.
[OBJECT OMITTED]
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 indexes over the rolling
twelve-month time periods used in computing performance-based bonuses/penalties
are, therefore, the sum of each of the monthly returns in the applicable period.
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 U.S.
equity managers screened by FAI seek to outperform a relevant benchmark of U.S.
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.
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>
- ---------------------------------------------------------------- ------------------- --------------------------------
Money Manager Fulcrum Fee Excess Return over Manager's
Benchmark Required to Receive
Fulcrum Fee
- ---------------------------------------------------------------- ------------------- --------------------------------
- ---------------------------------------------------------------- ------------------- --------------------------------
Aronson + Partners 45 bp 210 bp
- ---------------------------------------------------------------- ------------------- --------------------------------
- ---------------------------------------------------------------- ------------------- --------------------------------
Atlantic Asset Management Partners, LLC 35 bp 165 bp
- ---------------------------------------------------------------- ------------------- --------------------------------
- ---------------------------------------------------------------- ------------------- --------------------------------
Bee & Associates, Inc 108 bp 458 bp
- ---------------------------------------------------------------- ------------------- --------------------------------
- ---------------------------------------------------------------- ------------------- --------------------------------
Eagle Capital Management 100 bp 621 bp
- ---------------------------------------------------------------- ------------------- --------------------------------
- ---------------------------------------------------------------- ------------------- --------------------------------
Emerging Markets Management 170 bp 370 bp
- ---------------------------------------------------------------- ------------------- --------------------------------
- ---------------------------------------------------------------- ------------------- --------------------------------
Fischer Francis Trees & Watts, Inc. (Bond Fund) 45 bp 251 bp
- ---------------------------------------------------------------- ------------------- --------------------------------
- ---------------------------------------------------------------- ------------------- --------------------------------
Harding, Loevner Management, L.P. 80 bp 400 bp
- ---------------------------------------------------------------- ------------------- --------------------------------
- ---------------------------------------------------------------- ------------------- --------------------------------
Investment Research Company (Large Cap Core Equity) 65 bp 281 bp
- ---------------------------------------------------------------- ------------------- --------------------------------
- ---------------------------------------------------------------- ------------------- --------------------------------
Investment Research Company (Market Neutral Defensive Equity) 105 bp 870 bp
- ---------------------------------------------------------------- ------------------- --------------------------------
- ---------------------------------------------------------------- ------------------- --------------------------------
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
- ---------------------------------------------------------------- ------------------- --------------------------------
- ---------------------------------------------------------------- ------------------- --------------------------------
Smith Breeden Associates, Inc. (Short-Term Fund) 40 bp 95 bp
- ---------------------------------------------------------------- ------------------- --------------------------------
- ---------------------------------------------------------------- ------------------- --------------------------------
Standard Pacific Capital LLC 108 bp 458 bp
- ---------------------------------------------------------------- ------------------- --------------------------------
- ---------------------------------------------------------------- ------------------- --------------------------------
Westport Asset Management, Inc 108 bp 430 bp
- ---------------------------------------------------------------- ------------------- --------------------------------
</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.
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 twelve 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 twelve month time period, the Money Managers
will receive only the minimum (floor) fee to which they are entitled. Upon
determination (on or about the tenth day of the fifteenth calendar month of its
employment by the Fund) of the precise amount of fees to which such Money
Manager is entitled for services rendered during the third through fourteenth
months, 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 9.3%
- ------------------------------------------------------------------------------------------------------- --------------
- ------------------------------------------------------------------------------------------------------- --------------
The Greater New Orleans Foundation; 2515 Canal St., Ste. 401; New Orleans, LA 70119 9.1%
- ------------------------------------------------------------------------------------------------------- --------------
- ------------------------------------------------------------------------------------------------------- --------------
Chemical Heritage Foundation; 315 Chestnut Street; Philadelphia, PA 19106 8.9%
- ------------------------------------------------------------------------------------------------------- --------------
- ------------------------------------------------------------------------------------------------------- --------------
Monterey Bay Aquarium Foundation; 886 Cannery Row; Monterey, CA 93940 7.6%
- ------------------------------------------------------------------------------------------------------- --------------
- ------------------------------------------------------------------------------------------------------- --------------
- ------------------------------------------------------------------------------------------------------- --------------
- ------------------------------------------------------------------------------------------------------- --------------
International Equity Fund
- ------------------------------------------------------------------------------------------------------- --------------
- ------------------------------------------------------------------------------------------------------- --------------
The Rockefeller Foundation; 420 Fifth Avenue, 22nd Floor; New York, NY 10018 20.7%
- ------------------------------------------------------------------------------------------------------- --------------
- ------------------------------------------------------------------------------------------------------- --------------
Houston Endowment Inc.; 600 Travis, Suite 6400; Houston, TX 77002 18.1%
- ------------------------------------------------------------------------------------------------------- --------------
- ------------------------------------------------------------------------------------------------------- --------------
Fan Fox and Leslie R. Samuels Foundation, Inc.; 630 Fifth Avenue, Suite 2255, New York, NY 10111 5.2%
- ------------------------------------------------------------------------------------------------------- --------------
- ------------------------------------------------------------------------------------------------------- --------------
- ------------------------------------------------------------------------------------------------------- --------------
- ------------------------------------------------------------------------------------------------------- --------------
Emerging Markets Fund
- ------------------------------------------------------------------------------------------------------- --------------
- ------------------------------------------------------------------------------------------------------- --------------
Mayo Foundation; 200 First Street, S.W.; Rochester, MN 55905 22.2%
- ------------------------------------------------------------------------------------------------------- --------------
- ------------------------------------------------------------------------------------------------------- --------------
Carnegie Corporation of New York; 437 Madison Avenue; New York, NY 10022 16.4%
- ------------------------------------------------------------------------------------------------------- --------------
- ------------------------------------------------------------------------------------------------------- --------------
Pew Memorial Trust, c/o Glenmede Trust; 1 Liberty Place, Ste 1200; 1650 Market St; Philadelphia, PA 14.1%
19103
- ------------------------------------------------------------------------------------------------------- --------------
- ------------------------------------------------------------------------------------------------------- --------------
The Colorado Trust; 1600 Sherman Street; Denver, CO 80203 8.5%
- ------------------------------------------------------------------------------------------------------- --------------
- ------------------------------------------------------------------------------------------------------- --------------
The Commonwealth Fund; One East 75th Street; New York, NY 10021 6.6%
- ------------------------------------------------------------------------------------------------------- --------------
- ------------------------------------------------------------------------------------------------------- --------------
ACF/CRF Joint Fund; 3773 Cherry Creek North Drive #955; Denver, CO 80209 5.9%
- ------------------------------------------------------------------------------------------------------- --------------
- ------------------------------------------------------------------------------------------------------- --------------
Charles Hayden Foundation; One Bankers Trust Plaza; 130 Liberty Street; New York, NY 10006 5.7%
- ------------------------------------------------------------------------------------------------------- --------------
- ------------------------------------------------------------------------------------------------------- --------------
- ------------------------------------------------------------------------------------------------------- --------------
- ------------------------------------------------------------------------------------------------------- --------------
U.S. Equity Fund
- ------------------------------------------------------------------------------------------------------- --------------
- ------------------------------------------------------------------------------------------------------- --------------
William & Flora Hewlett Foundation; 525 Middlefield Road #200; Menlo Park, CA 94025 14.0%
- ------------------------------------------------------------------------------------------------------- --------------
- ------------------------------------------------------------------------------------------------------- --------------
BellSouth Foundation, Inc.; 1155 Peachtree Street, Suite 14F05; Atlanta, GA 30309 10.4%
- ------------------------------------------------------------------------------------------------------- --------------
- ------------------------------------------------------------------------------------------------------- --------------
Denver Foundation; 455 Sherman Street, Suite 550; Denver, CO 80203 8.3%
- ------------------------------------------------------------------------------------------------------- --------------
- ------------------------------------------------------------------------------------------------------- --------------
Jacksonville Community Foundation; 112 W. Adams St., Suite 1414; Jacksonville, FL 32202 6.4%
- ------------------------------------------------------------------------------------------------------- --------------
- ------------------------------------------------------------------------------------------------------- --------------
UJA Federation of Greater Washington; 6101 Montrose Road; Rockville, MD 20852 5.5%
- ------------------------------------------------------------------------------------------------------- --------------
- ------------------------------------------------------------------------------------------------------- --------------
- ------------------------------------------------------------------------------------------------------- --------------
- ------------------------------------------------------------------------------------------------------- --------------
Bond Fund
- ------------------------------------------------------------------------------------------------------- --------------
- ------------------------------------------------------------------------------------------------------- --------------
The Duke Endowment; 100 North Tryon Street, Suite 3500; Charlotte, NC 28202 15.0%
- ------------------------------------------------------------------------------------------------------- --------------
- ------------------------------------------------------------------------------------------------------- --------------
Triangle Community Foundation; P.O. Box 12834; Research Triangle Park, NC 27709 8.3%
- ------------------------------------------------------------------------------------------------------- --------------
- ------------------------------------------------------------------------------------------------------- --------------
RosaMary Foundation; 6028 Magazine Street; New Orleans, LA 70118 6.8%
- ------------------------------------------------------------------------------------------------------- --------------
- ------------------------------------------------------------------------------------------------------- --------------
Short-Term Fund
- ------------------------------------------------------------------------------------------------------- --------------
- ------------------------------------------------------------------------------------------------------- --------------
Undisclosed Private Foundation; New York, NY 46.2%
- ------------------------------------------------------------------------------------------------------- --------------
- ------------------------------------------------------------------------------------------------------- --------------
Houston Endowment Inc.; 600 Travis, Suite 6400; Houston, TX 77002 10.2%
- ------------------------------------------------------------------------------------------------------- --------------
- ------------------------------------------------------------------------------------------------------- --------------
East Tennessee Foundation; 550 West Main Street; Knoxville, TN 37902 5.3%
- ------------------------------------------------------------------------------------------------------- --------------
</TABLE>
Distribution of Fund Shares
Shares of TIP are distributed by FAI as a registered branch office of AMT
Capital Securities, Inc., ("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).
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 these times will be processed on the next business day. Telephone
exchanges may also be subject to limitations as to amounts or frequency and to
other restrictions established by the board of directors to ensure that such
exchanges do not disadvantage TIP and its Members.
Tax Treatment of Exchanges. For federal income tax purposes an exchange between
Funds is a taxable event and, accordingly, a capital gain or loss may be
realized. Members 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 thus: 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. The costs are higher also, not only
because management fees and custody costs tend to be higher on international
portfolios, but also because foreign governments withhold a portion of the
income that 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 U.S. 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 twelve 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 shows that, in the more
than twenty-three 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 1979-81 time period. However, because the Fund will
not be invested exclusively in instruments backed by the full faith and credit
of the U.S. Government, it is possible that downgrades, defaults, and other
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.
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.
Supplemental Discussion of Policy Implementation and Risks
Deployment of Cash Reserves. 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.
Investment Strategies
Multi-Market and Multi-Currency Investing. Subject to the limitations on foreign
securities and foreign currency exposure in the table below 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 U.S. 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 to be gradual and
moderate, especially within the U.S. Equity, Bond and Short-Term Funds.
Primary Risks: There is no assurance that changes in a Fund's country
and currency allocations will enhance returns relative to more static
allocations, or relative to allocations that resemble more closely the
country and currency allocations inherent in a Fund's performance
benchmark.
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.
Foreign Currency Exposure. TIP's directors have studied carefully the impact of
exchange rate changes on the U.S. dollar value of foreign securities portfolios,
and have concluded that the impact of such changes declines dramatically as 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 U.S.
dollar terms will produce short-term losses in the dollar value of shares of
Japanese exporters, the increased competitiveness of such firms typically will
cause global investors to mark upwards such firms' relative price/earnings or
price/book value multiples, albeit with a lag.
Exchange rate movements can produce large losses over short- and even
medium-term time horizons, but TIP's directors strongly discourage foundations
from investing in foreign securities in pursuit of short-term gains, and they
believe that exchange rate movements are essentially 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.
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 U.S. 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 generally not possible because the market value of the
protected securities will fluctuate while forward contracts are in
effect. Adjustment transactions are theoretically possible but time
consuming and expensive, so 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 U.S. dollar. Furthermore, neither FAI nor the Money
Managers may be able to purchase forward contracts with respect to all
of the foreign currencies in which the Fund's portfolio securities may
be denominated. In 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 generally 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 U.S. dollars.
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
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 U.S.
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 U.S. stocks, it is becoming increasingly difficult to
outperform market averages. This is one reason why the U.S. Equity Fund seeks to
outperform its performance benchmark by a narrower margin than TIP's
international equity funds. 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 U.S. stock market is that
long/short strategies, while still unconventional, are becoming increasingly
popular among the large institutions that dominate the U.S. stock market.
Outperforming broad market averages without using long/short strategies remains
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).
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 generally.
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 actively lends the securities held in all of its Funds. The
incremental income from such lending activities varies from Fund to Fund, with
U.S. securities typically commanding much narrower lending "spreads" (according
to Kohlberg and Associates, average lending income might approximate 0.02% to
0.05% per annum) than foreign securities (0.15% to 0.75% per annum). These
differences stem primarily from the far greater availability of lendable U.S.
securities in relation to borrowing demand than exists in non-U.S. markets.
Each Fund is authorized to lend securities from its investment portfolios, with
a value not exceeding 331/3% of its total assets (including collateral received
in connection with any loans). Provided, however, it receives collateral in
cash, U.S. Government securities, or irrevocable bank stand-by letters of credit
maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities. The loans 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, so long as such
fees are set forth in a written contract and approved by the investment
company's board of directors. In addition, voting rights may pass with the
loaned securities, but if a material event 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, U.S. Government securities or other high grade
debt obligations in an amount sufficient to meet its purchase obligations under
the transactions.
Dollar rolls are similar to reverse repurchase agreements (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.
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 U.S. Bankruptcy Code or is otherwise
unable to meet its obligation to repurchase. The securities underlying a
repurchase agreement will be marked to market every business day so that the
value of such securities is at least equal to the value of the repurchase price
thereof, including the accrued interest.
In a reverse repurchase agreement, a Fund sells U.S. Government securities and
simultaneously agrees to repurchase them at an agreed-upon price and date. The
difference between the amount the Fund receives for the securities and the
additional amount it pays on repurchase is deemed to be a payment of interest.
TIP will maintain for each Fund a segregated custodial account containing cash,
U.S. Government securities, or other appropriate assets having an aggregate
value at least equal to the amount of such commitments to repurchase, including
accrued interest, until payment is made. Reverse repurchase agreements create
leverage, a speculative factor, but will not be considered borrowings for the
purposes of limitations on borrowings.
In addition, repurchase and reverse repurchase agreements may also involve the
securities of certain foreign governments in which there is an active repurchase
market. FAI and the Money Managers expect that such repurchase and reverse
repurchase agreements will primarily involve government securities of countries
belonging to the Organization for Economic Cooperation and Development ("OECD").
Transactions in foreign repurchase and reverse repurchase agreements may involve
additional risks.
Primary Risks: 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
Foreign Securities. Foreign financial markets generally have substantially less
volume than U.S. 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.
Primary risks: Delays in settlement could result in temporary periods
when a portion of a Fund's assets is uninvested and no return is earned
thereon. The inability of a Fund to make intended security purchases
due to settlement problems could cause the Fund to miss attractive
investment opportunities. Inability to dispose of portfolio securities
due to settlement problems could result in losses to a Fund due to
subsequent declines in value of the security or, if the Fund has
entered into a contract to sell the security, could result in possible
liability to the purchaser.
As foreign companies generally are not subject to uniform accounting,
auditing and financial reporting standards and practices comparable to
those applicable to domestic companies, there may be less
publicly-available information about certain foreign companies than
about domestic companies. Generally, there is less government
supervision and regulation of exchanges, financial institutions and
issuers in foreign countries than there is in the United States. A
foreign government may impose exchange control regulations which may
have an impact on currency exchange rates, and there are risks of
expropriation, confiscatory taxation, political or social instability,
or diplomatic developments which could affect U.S. investments in those
countries. Delivery of securities may not occur at the same time as
payment in some foreign markets.
Although the Funds will endeavor to achieve most favorable execution
costs in its portfolio transactions, fixed commissions on many foreign
stock exchanges are generally higher than negotiated commissions on
U.S. exchanges. Certain foreign governments levy withholding taxes
against dividend and interest income. Although in some countries a
portion of these taxes are recoverable, the non-recovered portion of
foreign withholding taxes will reduce the income received by the Funds
on these investments. However, these foreign withholding taxes are not
expected to have a significant impact on the Funds, since the Funds'
investment objectives are to seek long-term capital appreciation and
any income should be considered incidental.
Debt Securities
Bank Obligations. TIP limits its investments in U.S. bank obligations to
those of U.S. banks that in FAI's or the Money Managers' opinions are
sufficiently creditworthy. TIP limits its investments in foreign banks to
those obligations of foreign banks (including U.S. branches of foreign banks)
that, in the opinion of FAI or the Money Managers, are of an investment quality
comparable to obligations of U.S. banks in which each Fund may invest. It
defines domestic bank obligations to include instruments issued by U.S.
(domestic) banks; U.S. branches of foreign banks, if such branches are subject
to the same regulations as U.S. banks; and foreign branches of U.S. banks, if
FAI or a Money Manager determines that the investment risk associated with
investing in instruments issued by such branches is the same as that of
investing in instruments issued by the U.S. parent bank, in that the parent is
unconditionally liable in the event the foreign bank fails to perform under its
obligations.
Foreign Bank Obligations. Obligations of foreign banks involve somewhat
different investment risks than obligations of U.S. 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 U.S.
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.
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 U.S.
corporation (the "corporate borrower") which is administered and sold by an
intermediary bank. The borrower in the underlying loan will be deemed to be the
issuer of the participation interest except to the extent the Fund derives its
rights from the intermediary bank which sold the loan participation. Such loans
must be to issuers in whose obligations a Fund may invest. Any participation
purchased by a Fund must be sold by an intermediary bank in the United States
with assets exceeding $1 billion.
Primary Risks: Because the bank issuing a loan participation does not
guarantee the participation in any way, the participation is subject to
the credit risks generally associated with the underlying corporate
borrower. In addition, 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.
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, generally 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.
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 generally
increase with falling interest rates and decrease with rising interest
rates; furthermore, prepayment rates are influenced by a variety of
economic and social factors. In general, the collateral supporting
non-mortgage asset-backed securities is of shorter maturity than
mortgage loans and is less likely to experience substantial
prepayments. In addition to prepayment risk, 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 generally 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.
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.
U.S. Treasury and U.S. Government Agency Securities. U.S. Government
securities include instruments issued by the U.S. Treasury, including
bills, notes, and bonds. These instruments are direct obligations of the
U.S. Government and, as such, are backed by the full faith and credit of the
United States. They differ primarily in their interest rates, maturities,
and issuance dates. Other U.S. Government securities include securities issued
by instrumentalities of the U.S. Government, such as the Government National
Mortgage Association ("GNMA"), which are also backed by the full faith and
credit of the United States. U.S. Government Agency Securities are
instruments issued by instrumentalities established or sponsored by the U.S.
Government, such as the Student Loan Marketing Association ("SLMA"), the
Federal National Mortgage Association ("FNMA") and the Federal Home Loan
Mortgage Corporation ("FHLMC"). While these securities are issued, in
general, under the authority of an Act of Congress, the U.S. Government is not
obligated to provide financial support to the issuing instrumentalities.
Variable Amount Master Demand Notes. Variable amount master demand notes permit
the investment of fluctuating amounts at varying rates of interest pursuant to a
direct arrangement between a Fund (as lender) and the borrower. These notes are
generally 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 U.S. Treasury, zero coupon securities include U.S. 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 U.S. Treasury
bonds and notes themselves are held in book-entry form at the Federal Reserve
Bank or, in the case of bearer securities (i.e., unregistered securities which
are owned ostensibly by the bearer or holder thereof), in trust on behalf of the
owners thereof. Counsels to the underwriters 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 U.S. Treasury
securities.
Recently, the U.S. Treasury has facilitated transfer of ownership of zero coupon
securities by accounting separately for the beneficial ownership of particular
interest coupon and corpus payments on Treasury securities through the Federal
Reserve book-entry recordkeeping system. The Federal Reserve program as
established by the Treasury Department is known as "Separate Trading of
Registered Interest and Principal of Securities" ("STRIPS"). Under the STRIPS
program, a 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 U.S. Treasury
securities.
Derivative Securities
Futures Contracts. Each Fund may enter into contracts for the purchase or sale
for future delivery (a "futures contract") of fixed income securities or foreign
currencies, or based on financial indices including any index of common stocks,
U.S. Government securities, foreign government securities, or corporate debt
securities. A Fund may enter into futures contracts that are based on debt
securities that are backed by the full faith and credit of the U.S. Government,
such as long-term U.S. Treasury Bonds, Treasury Notes, GNMA-modified
pass-through mortgage-backed securities, and three-month U.S. Treasury Bills.
Each Fund also may enter into futures contracts based on securities that would
be eligible investments for such Fund and denominated in currencies other than
the U.S. dollar.
U.S. futures contracts have been designed by exchanges which have been
designated as "contracts markets" by the CFTC, and must be executed through a
futures commission merchant or brokerage firm which is a member of the relevant
contract market. Futures contracts trade on a number of exchange markets and,
through their clearing corporations, the exchanges guarantee performance of the
contracts as between the clearing members of the exchange.
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 U.S. exchanges may range from approximately 3% to
approximately 15% of the value of the securities or commodities underlying the
contract. Under certain circumstances, however, such as periods of high
volatility, the Fund may be required by an exchange to increase the level of its
initial margin payment. 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" generally will be
required, a process known as "marking to the market." Each day the Fund will be
required to provide (or will be entitled to receive) variation margin in an
amount equal to any decline (in the case of a long futures position) or increase
(in the case of a short futures position) in the contract's value since the
preceding day.
Primary Risks: Futures contracts entail special risks. Among other
things, the ordinary spreads between values in the cash and futures
markets, due to differences in the character of these markets, are
subject to distortions 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.
If predictions about the general direction of securities market
movements, foreign exchange rates or interest rates is incorrect, a
Fund's overall performance would be poorer than if it had not entered
into any such contracts or purchased or written options thereon. For
example, if a Fund had hedged against the possibility of an increase in
interest rates that would adversely affect the price of debt securities
held in its portfolio and interest rates decreased instead, the Fund
would lose part or all of the benefit of the increased value of its
assets that it had hedged because it would have offsetting losses in
its futures positions. In addition, particularly in such situations, if
the Fund has insufficient cash, it may have to sell assets from its
portfolio to meet daily variation margin requirements. Any such sale of
assets may or may not be at increased prices reflecting the rising
market. Consequently, the Fund may have to sell assets at a time when
it may be disadvantageous to do so.
A Fund's ability to establish and close out positions in futures
contracts and options on futures contracts depends on the existence of
a liquid market. Although a Fund generally will purchase or sell only
those futures contracts and options thereon for which there appears to
be a liquid market, there is no assurance that a liquid market on an
exchange will exist for any particular futures contract or option
thereon at any 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 U.S. or foreign
restrictions or regulations regarding the maintenance of foreign banking
arrangements by U.S. residents and may be required to pay any fees,
taxes or charges associated with such delivery which are assessed in the
country of the underlying currency.
Options on 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.
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 U.S.
dollar-equivalent value of its portfolio securities or payments due thereon or a
rise in the U.S. dollar-equivalent cost of securities that it intends to
purchase. A foreign currency put option grants the holder the right, but not the
obligation, to sell at a future date a specified amount of a foreign currency 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.
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, so long as
a Fund is obligated under the option, it owns an offsetting position in the
underlying security or maintains cash, U.S. Government securities or other
liquid high-grade debt obligations with a value sufficient at all times to cover
its obligations.
Primary Risks: The 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
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
generally will be able to realize the value of an OTC option it has
purchased only by exercising it or reselling it to the dealer who
issued it. Similarly, when the Fund writes an OTC option, it generally
will be able to close 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
become insolvent, the Fund may be unable to liquidate an OTC option.
Failure by the dealer to make 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 generally is representative of very large transactions in the
interbank market and thus may not reflect relatively smaller
transactions (i.e., less than $1 million) where rates may be less
favorable. The interbank market in foreign currencies is a global,
around-the-clock market. To the extent that the U.S. options markets
are closed while the markets for the underlying currencies remain open,
significant price and rate movements may take place in the underlying
markets which cannot be reflected in the options market until they
reopen. Foreign currency transactions occurring in the interbank market
involve substantially larger amounts than those that may be involved in
the use of foreign currency options, investors may be at a disadvantage
by having to deal in an odd lot market (generally consisting of
transactions of less than $1 million) for the underlying foreign
currencies at prices that are less favorable than for round lots.
Other Investments
Illiquid Securities. The staff of the Commission has taken the position that
purchased OTC options and the assets used as cover for written OTC options are
illiquid securities. Therefore, each Fund's investment policy states that,
generally, 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.
Warrants. So long as it remains a policy of the State of Texas, a Fund's
investment in warrants, taken at the lower of cost or market value, may not
exceed 5% of the Fund's net assets. Not more than 2% of a Fund's net assets may
be invested in warrants not listed on the New York or American Stock Exchanges.
Fund Transactions
The debt securities in which TIP invests are traded primarily in the
over-the-counter market by dealers who usually are acting as principals for
their own accounts. On occasion, securities may be purchased directly from the
issuer. The cost of securities purchased from underwriters includes an
underwriting commission or concession. Debt securities generally are traded on a
net basis and normally do not involve either brokerage commissions or transfer
taxes. The cost of executing transactions 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 generally
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)
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- 1/1/97- 1/1/96- 1/1/95-
12/31/98 12/31/97 12/31/96 12/31/95
- --------------------------------------------------------- --------------- -------------- ------------- -------------
- --------------------------------------------------------- --------------- -------------- ------------- -------------
TIFF Multi-Asset Fund $1,062,969 $519,532 $168,881*
- --------------------------------------------------------- --------------- -------------- ------------- -------------
- --------------------------------------------------------- --------------- -------------- ------------- -------------
TIFF International Equity Fund $351,419 $449,353 $416,390
- --------------------------------------------------------- --------------- -------------- ------------- -------------
- --------------------------------------------------------- --------------- -------------- ------------- -------------
TIFF Emerging Markets Fund $376,009 $408,836 $370,320
- --------------------------------------------------------- --------------- -------------- ------------- -------------
- --------------------------------------------------------- --------------- -------------- ------------- -------------
TIFF U.S. Equity Fund $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 U.S. federal tax laws and regulations in effect on the date of this
Statement of Additional Information, which are subject to change by legislative
or administrative action.
Qualification as a Regulated Investment Company. Each Fund intends to
qualify for annually and elect to be treated as a regulated investment
company ("RIC") under the Internal Revenue Code of 1986, as amended (the
"Code"). To qualify as a RIC, a Fund must, among other things:
1. derive at least 90% of its gross income each taxable year from
dividends, interest, payments with
respect to securities loans and gains from the sale or other disposition of
securities or foreign currencies, or other income (including gains from
options, futures, or forward contracts) derived from its business of
investing in securities or foreign currencies (the "Qualifying Income
Requirement");
2. derive less than 30% of its gross income each taxable year from sales or
other dispositions of certain assets, namely:
a. securities;
b. options, futures, and forward contracts (other than those on foreign
currencies); and c. foreign currencies (including options, futures, and
forward contracts on such currencies) not directly related to the
Fund's principal business of investing in stocks or securities (or
options and futures with respect to stocks or securities), held less
than three months (the "30% Limitation");
3. diversify its holdings so that, at the end of each quarter of the Fund's
taxable year: a. at least 50% of the market value of the Fund's assets is
represented by cash and cash items (including receivables), U.S.
Government securities, securities of other RICs, and other securities,
with such other securities of any one issuer limited to an amount not
greater than 5% of the value of the Fund's total assets
b. and not greater than 10% of the outstanding voting securities of such
issuer; and
c. not more than 25% of the value of the Fund's total assets is
invested in the securities of any one issuer (other than U.S.
Government securities or the securities of other RICs); and
4. distribute at least 90% of its investment company taxable income (which
includes, among other items, interest and net short-term capital gains
in excess of net long-term capital losses) and its net tax-exempt
interest income, if any.
The U.S. Treasury Department has authority to promulgate regulations pursuant to
which gains from foreign currency (and options, futures, and forward contracts
on foreign currency) not directly related to a RIC's principal business of
investing in stocks and securities would not be treated as qualifying income for
purposes of the Qualifying Income Requirement. To date, such regulations have
not been promulgated.
If for any taxable year a Fund does not qualify as a RIC, all of its taxable
income will be taxed to the Fund at corporate rates. For each taxable year that
the Fund qualifies as a RIC, it generally will not be subject to federal income
tax on that part of its investment company taxable income and net capital gains
(the excess of net long-term capital gain over net short-term capital loss) it
distributes to its Members. In addition, to avoid a nondeductible 4% federal
excise tax, the Fund must distribute during each calendar year at least 98% of
its ordinary income (not taking into account any capital gains or losses),
determined on a calendar year basis, at least 98% of its capital gains in excess
of capital losses, determined in general on an October 31 year-end basis, and
any undistributed amounts from previous years. Each Fund intends to distribute
all of its net income and gains by automatically reinvesting such income and
gains in additional shares of the Fund unless a Member requests such
distributions to be paid in cash. The 30% Limitation may require that a Fund
defer closing out certain positions beyond the time when it otherwise would be
advantageous to do so, in order not to be disqualified as a RIC. Each Fund will
monitor its compliance with all of the rules set forth in the preceding
paragraph.
Tax Treatment of Distributions. Dividends paid out of the Fund's investment
company taxable income will be taxable to the Fund's Members as ordinary income.
If a portion of a Fund's income consists of dividends paid by U.S. corporations,
a portion of the dividends paid by the Fund may be eligible for the corporate
dividends-received deduction (assuming that the deduction is otherwise allowable
in computing a Member's federal income tax liability). Distributions of any net
capital gains designated by the Fund as capital gain dividends will be taxable
to the Members as long-term capital gains, regardless of how long they have held
their Fund shares, and are not eligible for the corporate dividends-received
deduction. Members receiving distributions in the form of additional shares,
rather than cash, generally will have a cash basis in each such share equal to
the net asset value of a share of the Fund on the reinvestment date. A
distribution of an amount in excess of a Fund's current and accumulated earnings
and profits will be treated by a Member as a return of capital which is applied
against and reduces the Member's basis in its Fund shares. To the extent that
the amount of any such distribution exceeds the Member's basis in its Fund
shares, the excess will be treated as gain from a sale or exchange of the
shares. A distribution will be treated as paid on December 31 of the current
calendar year if it is declared by a Fund in October, November, or December with
a record date in such a month and paid by the Fund during January of the
following calendar year. Such distributions will be taxable to Members in the
calendar year in which the distributions are declared, rather than in the
calendar year in which the distributions are received. Each Fund will inform
Members of the amount and tax status of all amounts treated as distributed to
them not later than 60 days after the close of each calendar year.
Tax Treatment of Share Sales. Upon the sale or other disposition of shares of a
Fund, or upon receipt of a distribution in complete liquidation of a Fund, a
Member generally will realize a capital gain or loss which will be long-term or
short-term, generally depending upon the Member's holding period for the shares.
Any loss realized on the sale or exchange will be disallowed to the extent the
shares disposed of are replaced (including shares acquired pursuant to a
dividend reinvestment plan) within a period of 61 days beginning 30 days before
and ending 30 days after disposition of the shares. In such a case, the basis of
the shares acquired will be adjusted to reflect the disallowed loss. Any loss
realized by the Member on a disposition of Fund shares held by the Member for
six months or less will be treated as a long-term capital loss to the extent of
any distributions of net capital gains deemed received by the Member with
respect to such shares.
Tax Treatment of Zero Coupon Securities. Investments by a Fund in zero coupon
securities will result in income to the Fund equal to a portion of the excess of
the face value of the securities over their issue price (the "original issue
discount") each year that the securities are held. 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 short-term capital gain to the Fund. If the Fund enters into a
closing transaction, the difference between the amount paid to close out its
position and the premium received is short-term capital gain or loss. If a call
option written by a Fund is exercised, thereby requiring the Fund to sell the
underlying security, the premium will increase the amount realized upon the sale
of such security and any resulting gain or loss will be a capital gain or loss,
and will be long-term or short-term depending upon the holding period of the
security.
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
generally treated as 60% long-term and 40% short-term capital gains or losses
("60/40 treatment"), regardless of the Fund's actual holding period for the
contract. Also, a section 1256 contract held by a Fund at the end of each
taxable year (and generally, for the purposes of the 4% excise tax, on October
31 of each year) must be treated as if the contract had been sold at its fair
market value on that day ("mark to market treatment"), and any deemed gain or
loss on the contract is subject to 60/40 treatment. Foreign currency gains or
losses (discussed below) arising from section 1256 contracts may, however, be
treated as ordinary income or loss.
A Funds'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 Treatment of Short Sales. A Fund will not realize gain or loss on the short
sale of a security until it closes the transaction by delivering the borrowed
security to the lender. Pursuant to Code section 1233, all or a portion of any
gain arising from a short sale may be treated as short-term capital gain,
regardless of the period for which the Fund held the security used to close the
short sale. In addition, a Fund's holding period for any security which is
substantially identical to that which is sold short may be reduced or eliminated
as a result of the short sale. The 30% limitation and the distribution
requirements applicable to each Fund's assets may limit the extent to which each
Fund will be able to engage in short sales and transactions in options, futures
and forward contracts.
Tax Treatment of Partnership Investments. The current position of the Internal
Revenue Service generally is to treat a RIC, i.e., each Fund, as owning its
proportionate share of the income and assets of any partnership in which it is a
partner in applying the Qualifying Income Requirement, the 30% Limitation, and
the asset diversification requirements 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,
generally are treated as ordinary income or ordinary loss. Similarly, on
disposition of certain options, futures, and forward contracts and on
disposition of debt securities denominated in a foreign currency, gains or
losses attributable to fluctuations in the value of the foreign currency between
the date of acquisition of the security or contract and the date of disposition
also are treated as ordinary gain or loss. These gains or losses, referred to
under the Code as "section 988" gains or losses, may increase or decrease the
amount of a Fund's investment company taxable income to be distributed to
Members as ordinary income.
Tax Treatment of Passive Foreign Investment Companies. If a Fund invests in
stock of certain foreign investment companies, the Fund may be subject to U.S.
federal income taxation on a portion of any "excess distribution" with respect
to, or gain from the disposition of, such stock. The tax would be determined by
allocating on a pro rata basis such distribution or gain to each day of the
Fund's holding period for the stock. The distribution or gain so allocated to
any tax year of the Fund, other than the tax year of the excess distribution or
disposition, would be taxed to the Fund at the highest ordinary income rate in
effect for such year, and the tax would be further increased by an interest
charge to reflect the value of the tax deferral deemed to have resulted from the
ownership of the foreign company's stock. Any amount of distribution or gain
allocated to the tax year of the distribution or disposition would be included
in the Fund's investment company taxable income and, accordingly, would not be
taxable to the Fund to the extent distributed by the Fund as a dividend to its
Members.
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. Other elections may become available to the Funds that would provide
alternative tax treatment for investments in foreign investment companies.
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 U.S.
federal income tax liability, subject to limitations. Each Member will be
notified within 60 days after the close of the Fund's tax year whether the
foreign taxes paid by the Fund will "pass through" for that year. With the
possible exceptions of the Multi-Asset, International Equity, and Emerging
Markets Funds, it is not anticipated that the Funds will be eligible to make
this "pass-through" election. If a Fund is not eligible to make the election to
"pass through" to its Members its foreign taxes, the foreign taxes it pays will
reduce its investment company taxable income and distributions by the Fund will
be treated as U.S. source income.
Generally, a credit for foreign taxes is subject to the limitation that it may
not exceed the Member's U.S. tax attributable to its foreign source taxable
income. For this purpose, if the pass-through election is made, the source of
the Fund's income flows through to its Members. With respect to the Funds, gains
from the sale of securities will be treated as derived from U.S. sources and
certain currency fluctuation gains, including fluctuation gains from foreign
currency-denominated debt securities, receivables and payables, will be treated
as ordinary income derived from U.S. sources. The limitation on the foreign tax
credit is applied separately to foreign source passive income (as defined for
purposes of the foreign tax credit), including the foreign source passive income
passed through by the Funds. Members who are not liable for federal income taxes
other than the excise tax applicable to the net investment income of private
foundations will not be affected by any such "pass through" of foreign tax
credits.
Debt-Financed Shares. If a Member that generally is exempt from federal income
taxation under Code section 501(a) incurs indebtedness in connection with, or as
a result of, its acquisition of Fund shares, the shares may be treated as
"debt-financed property" under the Code. In such event, part of all of any
income or gain derived from the Member's investment in those shares could
constitute "unrelated business taxable income." Unrelated business taxable
income in excess of $1000 in any year is taxable and will require a Member to
file a federal income tax return on Form 990-T.
Backup Withholding. A Fund may be required to withhold U.S. federal income
tax at the rate of 31% of all amounts distributed, or deemed to be distributed
as a result of the automatic reinvestment by the Fund of its income and
gains in additional shares of the Fund, and all redemption payments made to
Members who:
1. fail to provide the Fund with their correct taxpayer identification
numbers; or
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 U.S. federal income tax liability.
Corporate Members and certain other Members (including organizations exempt from
federal income taxation under Code section 501(a)) are exempt from such backup
withholding.
Other Tax Considerations. A Fund may be subject to state, local, or foreign
taxes in any jurisdiction in which the Fund may be deemed to be doing business.
In addition, Members of a Fund may be subject to state, local, or foreign taxes
on distributions from the Fund. In many states, Fund distributions which are
derived from interest on certain U.S. Government obligations may be exempt from
taxation. Members should consult their own tax advisers concerning the
particular tax consequences to them of an investment in the Funds.
Member Information
Member Account Records. Investors Bank & Trust Company ("IBT"), TIP's Transfer
Agent, maintains an account for each Member upon which the registration and
transfer of shares are recorded, 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. The Transfer Agent will require that a Member
provide requests in writing, accompanied by a valid signature guarantee form,
when changing certain information in an account, including wiring instructions
and telephone privileges. TIP, FAI, Investors Capital, and the Transfer Agent
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.
Calculation of Performance Data
TIP may, from time to time, include a Fund's yield and total return in reports
to Members or prospective Members. 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.
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 5.8%
--------------------------------- -----------------------
--------------------------------- -----------------------
Short-Term Fund 5.3%
--------------------------------- -----------------------
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 Ended 12 Months Ended Annualized since Inception
12/31/98 12/31/97 Inception Date
- -------------------------------------- --------------------- -------------------- -------------------- --------------
- -------------------------------------- --------------------- -------------------- -------------------- --------------
Multi-Asset Fund 5.5% 12.3% 3/31/95
- -------------------------------------- --------------------- -------------------- -------------------- --------------
- -------------------------------------- --------------------- -------------------- -------------------- --------------
International Equity Fund 1.1% 7.6% 5/31/94
- -------------------------------------- --------------------- -------------------- -------------------- --------------
- -------------------------------------- --------------------- -------------------- -------------------- --------------
Emerging Markets Fund -0.4% -3.8% 5/31/94
- -------------------------------------- --------------------- -------------------- -------------------- --------------
- -------------------------------------- --------------------- -------------------- -------------------- --------------
U.S. Equity Fund 33.1% 25.8% 5/31/94
- -------------------------------------- --------------------- -------------------- -------------------- --------------
- -------------------------------------- --------------------- -------------------- -------------------- --------------
Bond Fund 9.6% 8.7% 5/31/94
- -------------------------------------- --------------------- -------------------- -------------------- --------------
- -------------------------------------- --------------------- -------------------- -------------------- --------------
Short-Term Fund 5.4% 5.6% 5/31/94
- -------------------------------------- --------------------- -------------------- -------------------- --------------
</TABLE>
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.
Many large institutions, that are otherwise able to employ money managers with
high separate account minimums (including several foundations represented on the
boards of TIP and FAI) voluntarily elect to invest through TIP in order to
reduce their custody, accounting, and audit costs. TIP seeks to reduce
accounting costs and complexity through the use of statements and reports geared
specifically to the needs of its Members. In addition, TIP Members benefit from
complete automation of the process by which TIP's Money Managers, custodians,
and other service providers are compensated for services rendered. Pursuant to
procedures mandated either by governmental authorities or the Funds' independent
accountant, the Funds' Custodian incorporates into its daily calculation of each
Fund's net asset value per share estimated fees paid or owed (i.e., accrued) to
service providers employed by the Fund. Thus, on any given day, the reported
market value of a Member's shares in a given Fund reflects the Member's costs of
investing in that Fund. At the same time, each Fund's performance (as reported
in Members' monthly statements and TIP's quarterly updates) also reflects the
costs of investing in it.
Determination of Net Asset Value
Business Days. Currently, there are eleven holidays during the year which are
not Business Days: New Year's Day, Martin Luther King's Birthday, Presidents'
Day, Good Friday, Memorial Day, Fourth of July, Labor Day, Columbus Day,
Veterans' Day, Thanksgiving, and Christmas. TIP will not accept purchase or
redemption orders on these holidays.
Equity Funds. The net asset value per share is determined by dividing the total
market value of each Fund's investments and other assets, less any liabilities,
by the total outstanding shares of the Fund. Net asset value per share is
determined as of the normal close of the New York Stock Exchange (currently 4:00
p.m. Eastern Time) on each day that the NYSE is open for business.
Bond and Short-Term Funds. The net asset value per share of each Fund is
determined by adding the market values of all the assets of the Fund,
subtracting all of the Fund's liabilities, dividing by the number of shares
outstanding, and adjusting to the nearest cent. The net asset value is
calculated by TIP's Accounting Agent as of 4:00 p.m. Eastern Time on each
Business Day.
Calculating an Individual Security's Value. Securities listed on a U.S.
securities exchange for which market quotations are available are valued at the
last quoted sale price on the day the valuation is made. Price information on
listed securities is taken from the exchange where the securities are primarily
traded. Securities listed on a foreign exchange are valued at the latest quoted
sales price available before the time at which such securities are valued. For
purposes of calculating net asset value per share, all assets and liabilities
initially expressed in foreign currencies (except for the Royal currencies of
the United Kingdom, Ireland, Euros, Australia, and New Zealand) are converted
into U.S. dollars at the bid price of such currencies against U.S. dollars as
provided by an independent pricing 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 U.S. 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. Pricewaterhouse Coopers 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 Pricewaterhouse Coopers LLP. Members may also
receive additional reports concerning the Funds or their Money Managers from
FAI. Pricewaterhouse Coopers LLP also renders accounting services to FAI and
certain Money Managers employed by the Funds.
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, filed
herewith.
(d53) Money Manager Agreement,
dated May 12, 1998,
between the Registrant
(TIFF International
Equity Fund) and Mercury
Asset Management
International Ltd., filed
herewith.
(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.,
filed herewith.
(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, filed herewith.
(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, filed herewith.
(g3) Amendment to Custodian Agreement,
between the Registrant and Investors Bank &
Trust Company dated May 29, 1998, filed
herewith.
(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., filed herewith.
(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) Not Applicable.
(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) Financial Data Schedules,
filed herewith.
(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 has duly caused this Post-Effective
Amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Charlottesville and the
Commonwealth of Virginia on the 1st day of March, 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: March 1, 1999
EXHIBIT INDEX
Exhibit No.
(d52) Money Manager Agreement, dated December 24, 1998, between the
Registrant (TIFF U.S. Equity Fund) and Aronson + Partners.
(d53) Money Manager Agreement, dated May 12, 1998, between the
Registrant (TIFF International Equity Fund) and Mercury Asset
Management International Ltd.
(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.
(e2) Distribution Agreement dated May 29, 1998 between Registrant
and AMT Capital Securities, LLC.
(g2) Delegation Agreement, dated May 12, 1998 between the
Registrant and Investors Bank & Trust Company.
(g3) Amendment to Custodian Agreement, between the
Registrant and Investors Bank & Trust Company dated
May 29, 1998.
(h3) Administration Agreement, dated May 29, 1998, between the
Registrant and Investors Capital Services, Inc.
(n) Financial Data Schedules.
Money Manager Agreement
This Agreement is between the TIFF Investment Program, Inc. ("TIP"), a
Maryland Corporation, for its TIFF U.S. Equity Fund and such other of its Funds
as TIP may from time to time allot assets for management under this agreement
(hereafter, the "Fund"), and Aronson + Partners (hereafter, the "Manager") and
is effective as of December __, 1998 (the "Effective Date").
Recitals
TIP is a non-diversified open-end management investment company
registered under the Investment Company Act of 1940 (the "1940 Act"); and
The Fund wishes to retain the Manager to render advisory services to
the Fund, and the Manager is willing to render those services.
Now, therefore, the parties agree as follows:
1. Managed Assets
The Manager will provide investment management services with respect to
assets placed with the Manager on behalf of the Fund from time to time. Such
assets, as changed by investment, reinvestment, additions, disbursements of
expenses, and withdrawals, are referred to in this Agreement as the "Managed
Assets." The Fund may make additions to or withdraw all or any portion of the
Managed Assets from this management arrangement at any time.
2. Appointment and Powers of Manager; Investment Approach
(a) Appointment. TIP, acting on behalf of the Fund, hereby appoints the
Manager to manage the Managed Assets for the period and on the terms set forth
in this Agreement. The Manager hereby accepts this appointment and agrees to
render the services herein described in accordance with the Manager Profile
(appended to this Agreement as Schedule II) and Investment Guidelines (appended
to this Agreement as Schedule III, (together, the "Investment Approach") as such
approach may be elaborated, amended, and refined with the mutual consent of
Foundation Advisers, Inc. ("FAI"), acting on behalf of the Fund, and the
Manager.
(b) Powers. Subject to the supervision of the Board of Directors of TIP
and subject to the supervision of FAI, the Manager shall direct investment of
the Managed Assets in accordance with the Manager's Investment Approach. The
Fund grants the Manager authority to:
(i) Acquire (by purchase, exchange,
subscription, or otherwise), hold and
dispose (by sale, exchange or otherwise)
investments and other securities;
(ii) Determine what portion of the Managed
Assets will be held uninvested; and
(iii) Enter into such agreements and make such
representations (including representations regarding
the purchase of securities for investment) as may be
necessary or proper in connection with the
performance by the Manager of its duties hereunder.
(c) Power of Attorney. To enable the Manager to exercise fully
discretion granted hereunder, TIP appoints the Manager as its attorney-in-fact
to invest, sell, and reinvest the Managed Assets as fully as TIP itself could
do. The Manager hereby accepts this appointment.
(d) Voting. The Manager shall be authorized to vote on behalf of the
Fund any proxies relating to the Managed Assets, provided, however, that the
Manager shall comply with any instructions received from the Fund as to the
voting of securities and handling of proxies.
(e) Independent Contractor. Except as expressly authorized herein, the
Manager shall for all purposes be deemed to be an independent contractor and
shall have no authority to act for or to represent TIP, the Fund or FAI in any
way or otherwise to be an agent of any of them.
(f) Reporting. The Manager shall furnish to TIP such information as TIP
reasonably may require to complete and submit any filing required by any
applicable state or federal securities law or regulation.
3. Requirements; Duties
(a) Requirements. In performing services for the Fund and otherwise
discharging its obligations under this Agreement, the Manager shall conform its
actions to the provisions in the following documents (referred to collectively
in this Agreement as the "Requirements"):
(i) The Articles of Incorporation and By-Laws
of TIP;
(ii) TIP's Registration Statement, on Form N-1A, as
amended from time to time ("the "Registration
Statement"), including the Investment Approach set
forth therein;
(iii) The 1940 Act, the Internal Revenue Code of 1986, as
amended, and all other applicable federal and state
laws and regulations which apply to the Manager in
conjunction with performing services for the Fund, if
any;
(iv) Written instructions and directions of the
Board of Directors of TIP;
(v) Written instructions and directions of
FAI; and
(vi) The Manager's Investment Guidelines, which shall be
amended from time to time through mutual agreement by
the Manager and FAI.
The Manager only shall be responsible for complying with those
requirements specified in this Paragraph 3 to the extent it has received from
TIP or FAI written instructions or directions or the document that contains or
states such requirements, other than the 1940 Act or the Internal Revenue Code
of 1986.
(b) Responsibility with Respect to Actions of Others. TIP places the
investment portfolio of each of its Funds, including the Fund, with one or more
investment managers. To the extent the applicability of, or conformity with,
Requirements depends upon investments made by, or activity of, managers other
than the Manager, the Manager agrees to comply with such Requirements: (i) to
the extent that such compliance is within the Manager's Investment Guidelines
and (ii) to the extent that the Manager is provided with information sufficient
to ascertain the applicability of such Requirements. If it appears to the Fund
at any time that the Fund may not be in compliance with any Requirement and the
Fund so notifies the Manager, the Manager shall promptly take such actions not
inconsistent with applicable law as the Fund may reasonably specify to effect
compliance.
(c) Responsibility with Respect to Performance of Duties. Except as
permitted by Paragraph 7 of this Agreement, in performing its duties under this
Agreement, the Manager will act solely in the interests of the Fund and shall
use reasonable care and its best judgment in matters relating to the Fund. The
Manager will not deal with the Managed Assets in its own interest or for its own
account.
4. Recordkeeping and Reporting
(a) Records. The Manager shall maintain proper and complete records
relating to the furnishing of investment management services under this
Agreement, including records with respect to the securities transactions for the
Managed Assets required by Rule 31a-1 under the 1940 Act. All records maintained
pursuant to this Agreement shall be subject to examination by the Fund and by
persons authorized by it during reasonable business hours upon reasonable
notice. Records required by Rule 31a-1 maintained as specified above shall be
the property of the Fund; the Manager will preserve such records for the periods
prescribed by Rule 31a-2 under the 1940 Act and shall surrender such records
promptly at the Fund's request. Upon termination of this Agreement, the Manager
shall promptly return records that are the Fund's property and, upon demand,
shall make and deliver to the Fund true and complete and legible copies of such
other records maintained as required by this Section 4(a) as the Fund may
request. The Manager may retain copies of records furnished to the Fund.
(b) Reports to Custodian. The Manager shall provide to the Fund's
custodian and to the Fund on each business day information relating to all
transactions concerning the Managed Assets.
(c) Other Reports. The Manager shall render to the Board of Directors
of TIP and to FAI such periodic and special reports as the Board or FAI may
reasonably request.
5. Purchase and Sale of Securities
(a) Selection of Brokers. The Manager shall place all orders for the
purchase and sale of securities on behalf of the Fund with brokers or dealers
selected by the Manager in conformity with the policy respecting brokerage set
forth in the Registration Statement. Neither the Manager nor any of its
officers, employees, or any of its "affiliated persons", as defined in the 1940
Act, will act as principal or receive any compensation in connection with the
purchase or sale of investments by the Fund other than the management fees
provided for in Section 6 hereof. The Manager will not be liable to Client for
any acts or omissions made by the Administrator, Custodian or other service
provider to the Fund, unless such liability resulted from acts or omissions of
the Manager or from information from the Manager.
(b) Aggregating Orders. On occasions when the Manager deems the
purchase or sale of a security to be in the best interest of the Fund as well as
other advisory clients of the Manager, the Manager, to the extent permitted by
applicable laws and regulations, may, but shall be under no obligation to,
aggregate the securities to be so sold or purchased in order to obtain the most
favorable price or lower brokerage commissions and efficient execution. In such
event, allocation of securities so purchased or sold, as well as the expense
incurred in the transaction, will be made by the Manager in the manner it
considers to be most equitable and consistent with its fiduciary obligations to
the Fund and its other advisory clients.
6. Management Fees; Expenses
(a) Management Fees. Schedule I attached hereto sets out the fees to be
paid by the Fund to the Manager by the tenth business day of the following month
in connection with this Agreement. The applicable fee rate will be applied to
the average daily net assets (gross of expenses except custodian transaction
charges) of the Managed Assets, computed as described in the Registration
Statement, pursuant to this Agreement.
(b) Expenses. The Manager shall furnish at its own expense all office
facilities, equipment and supplies, and shall perform at its own expense all
routine and recurring functions necessary to render the services required under
this Agreement, including administrative, bookkeeping and accounting, clerical,
statistical and correspondence functions. The Manager shall not have
responsibility for calculating the net asset value of the Fund's portfolio, but
must daily review the pricing of the Managed Assets. The Fund shall pay
directly, or, if the Manager makes payment, reimburse the Manager for, (i)
custodial fees for the Managed Assets, (ii) brokerage commissions, issue and
transfer taxes and other costs of securities transactions to which the Fund is a
party, including any portion of such commissions attributable to research and
brokerage services, and (iii) taxes, if any, payable by the Fund. In addition,
the Fund shall pay directly, or, if the Manager makes payment, reimburse the
Manager for, such non-recurring special out-of-pocket costs and expenses as may
be authorized in advance by the Fund.
7. Non-Exclusivity of Services
The Manager is free to act for its own account and to provide
investment management services to others. The Fund acknowledges that the Manager
and its officers and employees, and the Manager's other advisory clients may at
any time have, acquire, increase, decrease or dispose of positions in the same
investments which are at the same time being held, acquired for or disposed of
under this Agreement for the Fund. Neither the Manager nor any of its officers
or employees shall have any obligation to effect a transaction under this
Agreement simply because such a transaction is effected for his or its own
account or for the account of another advisory client. The Fund agrees that the
Manager may refrain from providing any advice or services concerning securities
of companies for which any officers, directors, partners or employees of the
Manager or any of the Manager's affiliates act as financial adviser, investment
manager or in any capacity that the Manager deems confidential, unless the
Manager determines in its sole discretion that it may appropriately do so. The
Fund appreciates that, for good commercial and legal reasons, material nonpublic
information which becomes available to affiliates of the Manager through these
relationships cannot be passed on to the Fund.
8. Liability
Manager shall not be liable to Client for any error of judgment, acts,
omission, or mistake of law or any loss arising out of its obligations and
duties in providing services under this Agreement, except that Manager shall be
liable to the Client for any loss resulting from Manager's willful misfeasance,
bad faith, gross negligence or reckless disregard by Manager of its obligations
and duties in providing services under this Agreement. Manager shall not be held
liable for any acts or omission of the Client's Custodian or Administrator or
any other third party, unless such liability resulted from acts or omissions of
the Manager or information from the Manager. Nothing in this Agreement shall
constitute a waiver or limitation of any rights which the Fund, TIP, or FAI may
have under applicable state or federal laws.
Client understands that the Manager, in the performance of its
obligations and duties under this Agreement, is entitled to rely in good faith
upon the accuracy of the information furnished by, or on behalf of, Client,
without further investigation.
9. Representations
(a) The Manager represents to the Fund that the Manager is registered
as an investment adviser under the Investment Advisers Act of 1940, that it has
full power and authority to enter into and perform fully the terms of this
Agreement, and that the execution of this Agreement on behalf of the Manager has
been duly authorized and, upon execution and delivery, this Agreement will be
binding upon the Manager in accordance with its terms.
(b) TIP represents to the Manager that it has full power and authority
to enter into this Agreement, its execution and delivery of this Agreement on
behalf of the Fund have been duly authorized and this Agreement represents the
legal, valid and binding obligation of TIP, enforceable in accordance with its
terms.
(c) TIP acknowledges receipt of copies of the Manager's Form ADV and
CTA Disclosure Document (if applicable).
(d) TIP hereby represents that TIP and the Fund are in full compliance
with all applicable state and federal securities laws and regulations.
10. Term
This Agreement shall continue in effect for a period of two (2) years
from the date hereof and shall thereafter be automatically renewed for
successive periods of one (1) year each, provided such renewals are specifically
approved at least annually in conformity with the requirements of the 1940 Act;
provided however, that this Agreement may be terminated without the payment of
any penalty by (a) the Fund, if a decision to terminate is made by the Board of
Directors of the Fund or by a vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Fund, or (b) the Manager, and in
either case with at least 30 days' written notice from the terminating party and
on the date specified in the notice of termination.
The rights and obligations that are provided in section (f) of
Paragraph 2 shall survive the cancellation, expiration or termination of this
Agreement.
This Agreement shall terminate automatically in the event of its
assignment (as defined in the 1940 Act).
11. Amendment
Except as otherwise provided in this Agreement, this Agreement may be
amended by mutual consent, but the consent of the Fund must be approved in
conformity with the requirements of the 1940 Act and any order of the Securities
and Exchange Commission that may address the applicability of such requirements
in the case of the Fund.
12. Notices
Notices or other communications required to be given pursuant to this
Agreement shall be deemed duly given when delivered in writing or sent by
telecopy or three days after mailing registered mail postage prepaid as follows:
To TIP, TIFF Investment Program, Inc.
the Fund, c/o Foundation Advisers, Inc.
or both: 2405 Ivy Road
Charlottesville, VA 22903
Telecopy: 804-984-0084
The Aronson + Partners
Manager: 230 South Broad Street
Twentieth Floor
Philadelphia, PA 19102
Attention: Theodore R. Aronson
Telecopy: 215-546-7506
Each party may change its address by giving notice as herein required.
13. Sole Instrument
This instrument constitutes the sole and only agreement of the parties
to it relating to its object and correctly sets forth the rights, duties and
obligations of each party to the other as of its date. Any prior agreements,
promises, negotiations or representations not expressly set forth in this
Agreement are of no force or effect.
14. Counterparts
This Agreement may be executed in counterparts; each of which shall be
deemed to be an original and all of which, taken together, shall be deemed to
constitute one and the same instrument.
15. Applicable Law
This Agreement shall be governed by, and the rights of the parties
arising hereunder construed in accordance with, the laws of the Commonwealth of
Virginia without reference to principles of conflict of laws. Nothing herein
shall be construed to require either party to do anything in violation of any
applicable law or regulation.
16. Change in Management or Control of Manager
The Manager agrees to notify TIP and the Fund in writing of any changes
in the membership of the Manager within a reasonable time period after such
change.
IN WITNESS WHEREOF, the parties hereto execute this Agreement on and make it
effective on the effective date specified in the first paragraph of this
Agreement.
TIFF Investment Program, Inc. Aronson + Partners
By: By:
Title: Treasurer Title:
Schedule I
Performance Fee Calculation
Compensation
As compensation for the services performed and the facilities and
personnel provided by the Manager pursuant to this Agreement, the Client will
pay to the Manager a fee according to the following formula:
Fee = 15 + [ 0.250 x (Excess Return - 90)]; subject to Floor of 10
b.p., Cap of 80 b.p. and computed in accordance with the following
provisions.
Certain Defined Terms
"Beginning Date" shall mean the date that the Manager begins (or
resumes after a hiatus) to render services under this Agreement.
"Excess Return" shall mean the return of the Money Manager that exceeds
the return of the benchmark.
"Managed Assets" is hereby defined as that portion of Client's assets
allocated to Manager.
"Minimum Fee" shall mean, with respect to any full calendar month, the
result obtained by multiplying the average daily value of the net assets (gross
of expenses) of Managed Assets during such month by 1/12th of the "floor rate"
set forth in this Agreement.
"Performance Adjusted Fee," shall mean the result obtained by
multiplying the average daily value of the net assets of the Managed Assets
during the performance measurement period (trailing 12 months performance) by
1/12th of the Performance Fee Rate determined in accordance with the formula
above.
"Performance Fee Rate" shall mean the rate of fee produced by
application of the formula set forth above. Under such formula, the rate of fee
varies directly with the time-weighted rate of return achieved for the Client by
the Manager over the applicable performance measurement period, but is never
greater than the "cap" rate nor less than the "floor" rate specified in the
formula. The rate of fee varies above and below the "fulcrum" fee rate, i.e.,
the rate that is midway between the cap rate and the floor rate, depending on
the amount by which the Manager's return exceeds, or is less than, the return of
the "benchmark" specified in the formula. (The rate of return at which the
Performance Fee Rate will equal the fulcrum fee rate is equal to the benchmark
return plus the "hurdle" rate incorporated in the formula.) The rate at which
the Performance Fee Rate changes in response to a specified increment of change
in the Manager's performance relative to the performance of the benchmark is
constant. The Performance Fee Rate will change as the Manager's performance
varies from the performance of the benchmark in increments of one basis point.
Fee For Services
(a) Fee. For services rendered by the Manager hereunder during
consecutive full calendar months subsequent, the Manager shall be entitled to a
fee equal to the Performance Adjusted Fee, payable by the Client on or about the
tenth day of the month following the month in which such fees are earned.
(b) Early Termination. If the Manager ceases to render services
hereunder at any time during, and before the end of, any such subsequent month,
the Manager shall be entitled to a fee for services rendered hereunder during
such month equal to 150% of the Minimum Fee (prorated based on the number of
days during such calendar month that the Manager provided services hereunder)
payable by the Client on or about the tenth day of the month following the month
in which the Manager ceased to render services hereunder.
Money Manager Agreement
This Agreement is between the TIFF Investment Program, Inc. ("TIP"), a
Maryland Corporation, for the account of its TIFF International Equity Fund and
such other of its Funds as may from time to time allot assets for management
under this agreement (hereafter "Client"), Mercury Asset Management
International Ltd. (hereafter "Manager") and is effective as of May 12, 1998
(the "Effective Date").
Recitals
TIP is a non-diversified open-end management investment company
registered under the Investment Company Act of 1940 (the "1940 Act"); and
Client wishes to retain Manager to render advisory services to Client
and Manager is willing to render those services.
Now, therefore, the parties agree as follows:
1. Managed Assets
Manager will provide investment management services with respect to
assets placed with Manager on behalf of Client from time to time. Such assets,
as changed by investment, reinvestment, additions, disbursements of expenses,
and withdrawals, are referred to in this Agreement as the "Managed Assets."
Client may make additions to or withdraw all or any portion of the Managed
Assets from this management arrangement at any time.
2. Manager Profile
A manager profile ("Manager Profile") pertaining to Manager is included
in the prospectus (the "Prospectus") which is part of the Registration Statement
under the 1940 Act and the Securities Act of 1933, as amended, on Form N-1A as
filed with the Securities and Exchange Commission relating to Client and the
shares of common stock in Client. The Registration Statement, with all
amendments thereto, is referred to herein as the "Registration Statement."
3. Appointment and Powers of Manager; Investment Approach
(a) Appointment. TIP, acting on behalf of Client, hereby appoints
Manager to manage the Managed Assets for the period and on the terms set forth
in this Agreement. Manager hereby accepts this appointment and agrees to render
the services herein described in accordance with the Manager's Investment
Approach set forth in the Manager Profile (Manager's "Investment Approach") as
such approach may be elaborated and refined with the consent of Foundation
Advisers, Inc. ("FAI"), acting on behalf of Client.
(b) Powers. Subject to the supervision of the Board of Directors of TIP
and subject to the supervision of FAI, which is Investment Adviser to Client,
Manager shall direct investment of the Managed Assets in accordance with
Manager's Investment Approach.
Client grants the Manager authority to:
(i) acquire (by purchase, exchange,
subscription, or otherwise), to hold, and
to dispose (by sale, exchange or
otherwise) investments and other
securities;
(ii) determine what portion of the Managed
Assets will be held uninvested; and
(iii) enter into such agreements and make such
representations (including representations regarding
the purchase of securities for investment) as may be
necessary or proper in connection with the
performance by Manager of its duties hereunder.
(c) Power of Attorney. To enable Manager to exercise fully discretion
granted hereunder, TIP appoints Manager as its attorney in fact to invest, sell,
and reinvest the Managed Assets as fully as TIP itself could do. Manager hereby
accepts this appointment.
(d) Voting. Manager shall be authorized to vote on behalf of Client any
proxies relating to the Managed Assets, provided, however, that Manager shall
comply with instructions received from Client as to the voting of securities and
handling of proxies.
(e) Independent Contractor. Except as expressly authorized herein,
Manager shall for all purposes be deemed to be an independent contractor and
shall have no authority to act for or to represent TIP, Client, or FAI in any
way, or otherwise to be an agent of any of them.
4. Requirements; Duties
(a) Requirements. In performing services and otherwise discharging its
obligations under this Agreement, Manager shall act in conformity with the
following requirements (referred to collectively in this Agreement as the
"Requirements"):
(i) the Articles of Incorporation and By-Laws
of TIP;
(ii) the Registration Statement, including the
Manager's Investment Approach set forth
therein;
(iii) the 1940 Act, the Internal Revenue Code, and all
other applicable federal and state laws and
regulations;
(iv) instructions and directions of the Board
of Directors of TIP;
(v) instructions and directions of FAI; and
(vi) the Manager's Investment Guidelines attached hereto
as Schedule 2 and made a part hereof.
(b) Responsibility with Respect to Actions of Others. TIP places the
investment portfolio of each of its Funds, including Client, with one or more
investment managers. To the extent the applicability of, or conformity with,
Requirements depends upon investments made by, or activity of, managers other
than Manager, Manager agrees to comply with such Requirements to the extent
Manager is provided with information sufficient to ascertain the applicability
of such Requirements. If it appears to Client at any time that Client may not be
in compliance with any Requirement and Client so notifies Manager, Manager shall
promptly take such actions not inconsistent with applicable law as Client may
specify to effect compliance.
(c) Responsibility with Respect to Performance of Duties. In performing
its duties under this Agreement, Manager will act solely in the interests of
Client and shall use reasonable care and its best judgment. Manager will not
deal with the Managed Assets in its own interest or for its own account.
5. Recordkeeping and Reporting
(a) Records. Manager shall maintain proper and complete records
relating to the furnishing of investment management services under this
Agreement, including records with respect to the Client's securities
transactions required by Rule 31a-1 under the 1940 Act. All records maintained
pursuant to this Agreement shall be subject to examination by Client and by
persons authorized by it during reasonable business hours upon reasonable
notice. Records required by Rule 31a-1 maintained as specified above shall be
the property of Client; Manager will preserve such records for the periods
prescribed by Rule 31a-2 under the 1940 Act and shall surrender such records
promptly at the Client's request. Upon termination of this Agreement, Manager
shall promptly return records that are Client's property and, upon demand, shall
make and deliver to Client true and complete and legible copies of such other
records maintained as required by this Section 5(a) as Client may request.
Manager may retain copies of records furnished to Client.
(b) Reports to Custodian. Manager shall provide to Client's custodian
and to the Client on each business day information relating to all transactions
concerning the Managed Assets.
(c) Other Reports. Manager shall render to the Board of Directors of
TIP and to FAI such periodic and special reports as the Board or FAI may
reasonably request.
6. Purchase and Sale of Securities
(a) Selection of Brokers. Manager shall place all orders for the
purchase and sale of securities on behalf of Client with brokers or dealers
selected by Manager in conformity with the policy respecting brokerage set forth
in the Registration Statement. Neither the Manager nor any of its officers,
employees, or affiliates will act as principal or receive any compensation in
connection with the purchase or sale of investments by Client other than the
management fees provided for in Section 7 hereof.
(b) Aggregating Orders. On occasions when Manager deems the purchase or
sale of a security to be in the best interest of Client as well as other clients
of Manager, the Manager, to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the securities
to be so sold or purchased in order to obtain the most favorable price or lower
brokerage commissions and efficient execution. In such event, the broker shall
confirm the transactions on an average price basis and allocation of securities
so purchased or sold, as well as the expense incurred in the transaction, will
be made by Manager in the manner it considers to be most equitable and
consistent with its fiduciary obligations to Client and its other clients.
7. Management Fees; Expenses
(a) Management Fees. Schedule 1 attached hereto sets out the fees to be
paid by Client to Manager in connection with this Agreement. The applicable fee
rate will be applied to the Manager's average daily net assets (gross of
expenses except custodian transaction charges), which is defined as that portion
of the average daily net assets (gross of expenses except custodian transaction
charges) of the Fund, computed as described in the Fund's Registration
Statement, that is managed pursuant to this Agreement by the Money Manager.
(b) Expenses. Manager shall furnish at its own expense all office
facilities, equipment and supplies, and shall perform at its own expense all
routine and recurring functions necessary to render the services required under
this Agreement including administrative, bookkeeping and accounting, clerical,
statistical, and correspondence functions. Client shall pay directly, or, if
Manager makes payment, reimburse Manager for, (i) custodial fees for the Managed
Assets, (ii) brokerage commissions, issue and transfer taxes and other costs of
securities transactions to which Client is a party, including any portion of
such commissions attributable to research and brokerage services; and (iii)
taxes, if any, payable by Client. In addition, Client shall pay directly, or, if
Manager makes payment, reimburse Manager for, such non-recurring special
out-of-pocket costs and expenses as may be authorized in advance by Client.
8. Non-Exclusivity of Services
Manager is free to act for its own account to provide services to
others similar to those to be provided to Client hereunder. Client acknowledges
that Manager and its officers and employees, and Manager's other clients may at
any time have, acquire, increase, decrease or dispose of positions in the same
investments which are at the same time being held, acquired for or disposed of
under this Agreement for Client. Neither Manager nor any of its officers or
employees shall have any obligation to effect a transaction under this Agreement
simply because such a transaction is effected for his or its own account or for
the account of another client.
9. Liability
Manager shall not be liable to Client for any error of judgment but
Manager shall be liable to Client for any loss resulting from willful
misfeasance, bad faith, or gross negligence by Manager in providing services
under this Agreement or from reckless disregard by Manager of its obligations
and duties under this Agreement.
10. Representations
(a) Manager hereby confirms to Client that Manager is registered as an
investment adviser under the Investment Advisers Act of 1940, that it has full
power and authority to enter into and perform fully the terms of this Agreement
and that the execution of this Agreement on behalf of Manager has been duly
authorized and, upon execution and delivery, this Agreement will be binding upon
Manager in accordance with its terms.
(b) TIP hereby confirms to Manager that it has full power and authority
to enter into this Agreement and that the execution of this Agreement on behalf
of Client has been duly authorized and, upon execution and delivery, this
Agreement will be binding upon Client in accordance with its terms.
11. Term
This Agreement shall continue in effect for a period of more than two
years from the date hereof only so long as such continuance is specifically
approved at least annually in conformity with the requirements for the 1940 Act;
provided however that this Agreement may be terminated without the payment of
any penalty, by the Client, if a decision to terminate is made by the Board of
Directors of Client or by a vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Client, or by the Manager, in
each case with at least 30 days' written notice from the terminating party and
on the date specified in the notice of termination.
This Agreement shall terminate automatically in the event of its
assignment (as defined in the 1940 Act).
12. Amendment
This Agreement may be amended by mutual consent, but the consent of
Client must be approved in conformity with the requirements of the 1940 Act and
any order of the Securities and Exchange Commission that may address the
applicability of such requirements in the case of Client.
13. Notices
Notices or other communications required to be given pursuant to this
Agreement shall be deemed duly given when delivered in person, or sent by
telecopy, or three days after mailing registered mail postage prepaid as
follows:
Client: TIFF Investment Program
c/o Foundation Advisers, Inc.
P.O. Box 5165
Charlottesville, Virginia 22905
Telecopy: 804-977-4479
Manager: Mercury Asset Management International Ltd.
780 Third Avenue, New York, NY 10017-2024
Attention: Steven W. Golann
Telecopy: 212-751-8553
Each party may change its address by giving notice as herein required.
14. Sole Instrument
This instrument constitutes the sole and only agreement of the parties
to it relating to its object and correctly sets forth the rights, duties, and
obligations of each party to the other as of its date. Any prior agreements,
promises, negotiations or representations not expressly set forth in this
Agreement are of no force or effect.
15. Counterparts
This Agreement may be executed in counterparts each of which shall be
deemed to be an original and all of which, taken together, shall be deemed to
constitute one and the same instrument.
16. Applicable Law
This Agreement shall be governed by, and the rights of the parties
arising hereunder construed in accordance with, the laws of the Commonwealth of
Virginia without reference to principles of conflict of laws. Nothing herein
shall be construed to require either party to do anything in violation of any
applicable law or regulation.
IN WITNESS WHEREOF, the parties hereto execute this Agreement on and make it
effective on the effective date specified in the first paragraph of this
Agreement.
On behalf of Client by the Mercury Asset Management
TIFF Investment Program, Inc. International Ltd.
Signature Signature
Name / Title Name / Title
Schedule I
Fee Calculation
Compensation
As compensation for the services performed and the facilities and
personnel provided by the Manager pursuant to this Agreement, the Client will
pay to the Manager a fee according to the following formula:
0.50% of average daily assets
Money Manager Agreement
This Agreement is between the TIFF Investment Program, Inc. ("TIP"), a
Maryland Corporation, for its TIFF U.S. Equity Fund, TIFF Multi-Asset Fund and
such other of its Investment Funds as TIP may from time to time allot assets for
management under this agreement (hereafter, the "Funds"), and Martingale Asset
Management, L.P. (hereafter, the "Manager") and is effective as of
___________________ (the "Effective Date").
Recitals
TIP is a non-diversified open-end management investment company
registered under the Investment Company Act of 1940 (the "1940 Act"); and
The Funds wish to retain the Manager to render advisory services to the
Funds, and the Manager is willing to render those services.
Now, therefore, the parties agree as follows:
1. Managed Assets
The Manager will provide investment management services with respect to
assets placed with the Manager on behalf of the Funds from time to time. Such
assets, as changed by investment, reinvestment, additions, disbursements of
expenses, and withdrawals, are referred to in this Agreement as the "Managed
Assets." The Funds may make additions to or withdraw all or any portion of the
Managed Assets from this management arrangement at any time.
2. Appointment and Powers of Manager; Investment Approach
(a) Appointment. TIP, acting on behalf of the Funds, hereby appoints
the Manager to manage the Managed Assets for the period and on the terms set
forth in this Agreement. The Manager hereby accepts this appointment and agrees
to render the services herein described in accordance with the Manager's
Investment Approach set forth in the Manager Profile and Investment Guidelines
(the "Investment Guidelines," and together with the Manager Profile, the
Manager's "Investment Approach") as such approach may be elaborated, amended,
and refined with the mutual consent of Foundation Advisers, Inc. ("FAI"), acting
on behalf of the Funds, and the Manager.
(b) Powers. Subject to the supervision of the Board of Directors of TIP
and subject to the supervision of FAI, the Manager shall direct investment of
the Managed Assets in accordance with the Manager's Investment Approach. The
Funds grants the Manager authority to:
(i) Acquire (by purchase, exchange,
subscription, or otherwise), hold and
dispose (by sale, exchange or otherwise)
investments and other securities;
(ii) Determine what portion of the Managed
Assets will be held uninvested; and
(iii) Enter into such agreements and make such
representations (including representations regarding
the purchase of securities for investment) as may be
necessary or proper in connection with the
performance by the Manager of its duties hereunder.
(c) Power of Attorney. To enable the Manager to exercise fully
discretion granted hereunder, TIP appoints the Manager as its attorney-in-fact
to invest, sell, and reinvest the Managed Assets as fully as TIP itself could
do. The Manager hereby accepts this appointment.
(d) Voting. The Manager shall be authorized to vote on behalf of the
Funds any proxies relating to the Managed Assets, provided, however, that the
Manager shall comply with any instructions received from the Funds as to the
voting of securities and handling of proxies.
(e) Independent Contractor. Except as expressly authorized herein, the
Manager shall for all purposes be deemed to be an independent contractor and
shall have no authority to act for or to represent TIP, the Funds or FAI in any
way or otherwise to be an agent of any of them.
(f) Reporting. The Manager shall furnish to TIP upon reasonable request
a Manager's Profile, which shall include such information that TIP may
reasonable require to complete and submit any filing required by any applicable
state or federal securities law or regulation.
3. Requirements; Duties
(a) Requirements. In performing services for the Funds and otherwise
discharging its obligations under this Agreement, the Manager shall conform its
actions to the provisions in the following documents (referred to collectively
in this Agreement as the "Requirements"):
(i) The Articles of Incorporation and By-Laws
of TIP;
(ii) TIP's Registration Statement, on Form N-1A, as
amended from time to time ("the "Registration
Statement"), including the Investment Approach set
forth therein;
(iii) The 1940 Act, the Internal Revenue Code of 1986, as
amended, and all other applicable federal and state
laws and regulations which apply to the Manager in
conjunction with performing services for the Funds,
if any;
(iv) Written instructions and directions of the
Board of Directors of TIP;
(v) Written instructions and directions of
FAI; and
(vi) The Manager's Investment Guidelines, which shall be
amended from time to time through mutual agreement by
the Manager and FAI.
The Manager only shall be responsible for complying with those
requirements specified in this Paragraph 3 to the extent it has received from
TIP or FAI written instructions or directions or the document that contains or
states such requirements, other than the 1940 Act or the Internal Revenue Code
of 1986.
(b) Responsibility with Respect to Actions of Others. TIP places the
investment portfolio of each of its Investment Funds, including the Funds, with
one or more investment managers. To the extent the applicability of, or
conformity with, Requirements depends upon investments made by, or activity of,
managers other than the Manager, the Manager agrees to comply with such
Requirements: (i) to the extent that such compliance is within the Manager's
Investment Guidelines and (ii) to the extent that the Manager is provided with
information sufficient to ascertain the applicability of such Requirements. If
it appears to the Funds at any time that the Funds may not be in compliance with
any Requirement and the Funds so notify the Manager, the Manager shall promptly
take such actions not inconsistent with applicable law as the Funds may
reasonably specify to effect compliance.
(c) Responsibility with Respect to Performance of Duties. Except as
permitted by Paragraph 7 of this Agreement, in performing its duties under this
Agreement, the Manager will act solely in the interests of the Funds and shall
use reasonable care and its best judgment in matters relating to the Funds. The
Manager will not deal with the Managed Assets in its own interest or for its own
account.
4. Recordkeeping and Reporting
(a) Records. The Manager shall maintain proper and complete records
relating to the furnishing of investment management services under this
Agreement, including records with respect to the securities transactions for the
Managed Assets required by Rule 31a-1 under the 1940 Act. All records maintained
pursuant to this Agreement shall be subject to examination by the Funds and by
persons authorized by it during reasonable business hours upon reasonable
notice. Records required by Rule 31a-1 maintained as specified above shall be
the property of the Funds; the Manager will preserve such records for the
periods prescribed by Rule 31a-2 under the 1940 Act and shall surrender such
records promptly at the Funds' request. Upon termination of this Agreement, the
Manager shall promptly return records that are the Funds' property and, upon
demand, shall make and deliver to the Funds true and complete and legible copies
of such other records maintained as required by this Section 4(a) as the Funds
may request. The Manager may retain copies of records furnished to the Funds.
(b) Reports to Custodian. The Manager shall provide to the Funds'
custodian and to the Funds on each business day information relating to all
transactions concerning the Managed Assets.
(c) Other Reports. The Manager shall render to the Board of Directors
of TIP and to FAI such periodic and special reports as the Board or FAI may
reasonably request.
5. Purchase and Sale of Securities
(a) Selection of Brokers. The Manager shall place all orders for the
purchase and sale of securities on behalf of the Funds with brokers or dealers
selected by the Manager in conformity with the policy respecting brokerage set
forth in the Registration Statement. Neither the Manager nor any of its
officers, employees, or any of its "affiliated persons", as defined in the 1940
Act, will act as principal or receive any compensation in connection with the
purchase or sale of investments by the Funds other than the management fees
provided for in Section 6 hereof.
(b) Aggregating Orders. On occasions when the Manager deems the
purchase or sale of a security to be in the best interest of the Funds as well
as other advisory clients of the Manager, the Manager, to the extent permitted
by applicable laws and regulations, may, but shall be under no obligation to,
aggregate the securities to be so sold or purchased in order to obtain the most
favorable price or lower brokerage commissions and efficient execution. In such
event, allocation of securities so purchased or sold, as well as the expense
incurred in the transaction, will be made by the Manager in the manner it
considers to be most equitable and consistent with its fiduciary obligations to
the Funds and its other advisory clients.
6. Management Fees; Expenses
(a) Management Fees. Schedule I attached hereto sets out the fees to be
paid by the Funds to the Manager by the tenth business day of the following
month in connection with this Agreement. The applicable fee rate will be applied
to the average daily net assets (gross of expenses except custodian transaction
charges) of the Managed Assets, computed as described in the Registration
Statement, pursuant to this Agreement.
(b) Expenses. The Manager shall furnish at its own expense all office
facilities, equipment and supplies, and shall perform at its own expense all
routine and recurring functions necessary to render the services required under
this Agreement, including administrative, bookkeeping and accounting, clerical,
statistical and correspondence functions. The Manager shall not have
responsibility for calculating the net asset value of the Funds' portfolios, but
must daily review the pricing of the Managed Assets. The Funds shall pay
directly, or, if the Manager makes payment, reimburse the Manager for, (i)
custodial fees for the Managed Assets, (ii) brokerage commissions, issue and
transfer taxes and other costs of securities transactions to which the Funds is
a party, including any portion of such commissions attributable to research and
brokerage services, and (iii) taxes, if any, payable by the Funds. In addition,
the Funds shall pay directly, or, if the Manager makes payment, reimburse the
Manager for, such non-recurring special out-of-pocket costs and expenses as may
be authorized in advance by the Funds.
7. Non-Exclusivity of Services
The Manager is free to act for its own account and to provide
investment management services to others. The Funds acknowledge that the Manager
and its officers and employees, and the Manager's other advisory clients may at
any time have, acquire, increase, decrease or dispose of positions in the same
investments which are at the same time being held, acquired for or disposed of
under this Agreement for the Funds. Neither the Manager nor any of its officers
or employees shall have any obligation to effect a transaction under this
Agreement simply because such a transaction is effected for his or its own
account or for the account of another advisory client. The Funds agree that the
Manager may refrain from providing any advice or services concerning securities
of companies for which any officers, directors, partners or employees of the
Manager or any of the Manager's affiliates act as financial adviser, investment
manager or in any capacity that the Manager deems confidential, unless the
Manager determines in its sole discretion that it may appropriately do so. The
Funds appreciate that, for good commercial and legal reasons, material nonpublic
information which becomes available to affiliates of the Manager through these
relationships cannot be passed on to the Funds.
8. Liability
The Manager shall not be liable to the Funds, TIP or FAI for any error
of judgment but the Manager shall be liable to the Funds for any loss resulting
from willful misfeasance, bad faith or gross negligence by the Manager in
providing services under this Agreement or from reckless disregard by the
Manager of its obligations and duties under this Agreement.
9. Representations
(a) The Manager represents to the Funds that the Manager is registered
as an investment adviser under the Investment Advisers Act of 1940, that it has
full power and authority to enter into and perform fully the terms of this
Agreement, and that the execution of this Agreement on behalf of the Manager has
been duly authorized and, upon execution and delivery, this Agreement will be
binding upon the Manager in accordance with its terms.
(b) TIP represents to the Manager that it has full power and authority
to enter into this Agreement, its execution and delivery of this Agreement on
behalf of the Funds have been duly authorized and this Agreement represents the
legal, valid and binding obligation of TIP, enforceable in accordance with its
terms.
(c) TIP acknowledges receipt of copies of the Manager's Form ADV and
CTA Disclosure Document (if applicable).
(d) TIP hereby represents that TIP and the Funds are in full compliance
with all applicable state and federal securities laws and regulations.
10. Term
This Agreement shall continue in effect for a period of two (2) years
from the date hereof and shall thereafter be automatically renewed for
successive periods of one (1) year each, provided such renewals are specifically
approved at least annually in conformity with the requirements of the 1940 Act;
provided however, that this Agreement may be terminated without the payment of
any penalty by (a) the Funds, if a decision to terminate is made by the Board of
Directors of TIP or by a vote of a majority of the outstanding voting securities
(as defined in the 1940 Act) of the Funds, or (b) the Manager, and in either
case with at least 30 days' written notice from the terminating party and on the
date specified in the notice of termination.
The rights and obligations that are provided in section (f) of
Paragraph 2 shall survive the cancellation, expiration or termination of this
Agreement.
This Agreement shall terminate automatically in the event of its
assignment (as defined in the 1940 Act).
11. Amendment
Except as otherwise provided in this Agreement, this Agreement may be
amended by mutual consent, but the consent of the Funds must be approved in
conformity with the requirements of the 1940 Act and any order of the Securities
and Exchange Commission that may address the applicability of such requirements
in the case of the Funds.
12. Notices
Notices or other communications required to be given pursuant to this
Agreement shall be deemed duly given when delivered in writing or sent by
telecopy or three days after mailing registered mail postage prepaid as follows:
To TIP, TIFF Investment Program, Inc.
the Funds, c/o Foundation Advisers, Inc.
or both: 2405 Ivy Road
Charlottesville, Virginia 22903
Telecopy: 804-817-8231
The Martingale Asset Management, L.P.
Manager: 222 Berkely Street
Boston, MA 02116
Telecopy: 617-424-4747
Each party may change its address by giving notice as herein required.
13. Sole Instrument
This instrument constitutes the sole and only agreement of the parties
to it relating to its object and correctly sets forth the rights, duties and
obligations of each party to the other as of its date. Any prior agreements,
promises, negotiations or representations not expressly set forth in this
Agreement are of no force or effect.
14. Counterparts
This Agreement may be executed in counterparts; each of which shall be
deemed to be an original and all of which, taken together, shall be deemed to
constitute one and the same instrument.
15. Applicable Law
This Agreement shall be governed by, and the rights of the parties
arising hereunder construed in accordance with, the laws of the Commonwealth of
Virginia without reference to principles of conflict of laws. Nothing herein
shall be construed to require either party to do anything in violation of any
applicable law or regulation.
IN WITNESS WHEREOF, the parties hereto execute this Agreement on and make it
effective on the effective date specified in the first paragraph of this
Agreement.
TIFF Investment Program, Inc. Martingale Asset Management, L.P.
By: By:
Title: Treasurer Title:
Schedule I
Performance Fee Calculation
Compensation
As compensation for the services performed and the facilities and
personnel provided by the Manager pursuant to this Agreement, the Funds will pay
to the Manager a fee according to the following formula:
The term "average daily net assets" shall hereto be defined in this performance
fee calculation as the sum of (a) the average daily net assets of the TIFF U.S.
Equity Fund, and (b) the average daily net assets of the TIFF Multi-Asset Fund
that comprise the normal benchmark allocation of TIFF Multi-Asset Fund to US
stocks (such percentage is currently fixed at 25%).
First $100 million of average daily net assets at 0.10%
Next $200 million of average daily net assets at 0.08%
Next $200 million of average daily net assets at 0.07%
Over $500 million of average daily net assets at 0.05%
DISTRIBUTION AGREEMENT
In consideration of the agreements hereinafter contained, TIFF
Investment Program, Inc. ("TIP"), an open-end, management investment company
organized as a corporation under the laws of the State of Maryland, has agreed
that AMT Capital Services, L.L.C. ("AMT Capital") shall be, for the period of
this Agreement, the exclusive distributor of shares of TIP (the "Shares").
1. Services as Distributor
1 AMT Capital will act as agent for the distribution of the Shares covered by
the registration statement, prospectus and statement of additional information,
all as defined hereafter in Section 3 for TIP then in effect under the
Securities Act of 1933, as amended (the "1933 Act"), and the Investment Company
Act of 1940, as amended (the "1940 Act").
2 AMT Capital agrees to use its best efforts to solicit orders
for the sale of the Shares at the
public offering price, as determined in accordance with the
registration statement, and will undertake such advertising
and promotion as it believes is reasonable in connection
with such solicitation. AMT Capital shall file such
materials with the Securities and Exchange Commission (the
"SEC") and the National Association of Securities Dealers,
Inc. (the "NASD") to the extent required by the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and the
1940 Act and the rules and regulations thereunder, and by
the rules of the NASD.
3 All activities by AMT Capital as distributor of the Shares shall comply with
all applicable laws, rules and regulations, including, without limitation, all
rules and regulations made or adopted by the SEC or by any securities
association registered under the 1934 Act.
4 AMT Capital acknowledges that the only information
provided to it by TIP is that contained in
the registration statement, the prospectus, the statement of
additional information and reports and financial information
referred to in Section 2.2 herein. Neither AMT Capital nor
any other person is authorized by TIP to give any
information or to make any representations, other than those
contained in such documents and any sales literature or
advertisements approved by appropriate representatives of
TIP.
5 AMT Capital will transmit any orders received by it for purchase or redemption
of shares of TIP to Investors Bank & Trust Company ("IBT") or any successor
transfer agent and dividend disbursing agent of which TIP has notified AMT
Capital in writing.
6 AMT Capital will provide to IBT or any successor to IBT of which TIP has
notified AMT Capital in writing, or in the alternative to a shareholder
servicing agent approved by the Board of Directors of TIP, and of which
shareholder servicing agent AMT Capital has received written notice, such
information or documents that it may require or request from time to time in
connection with purchases and redemptions of Shares and the establishment of
accounts.
1.7 AMT Capital acknowledges that, whenever in the judgment of
TIP's officers such action is warranted for any reason, including, without
limitation, market, economic or political conditions, those officers may decline
to accept any orders for, or make any sales of, the Shares until such time as
those officers deem it advisable to accept such orders and to make such sales.
1.8 AMT Capital will act only on its own behalf as principal
should it choose to enter into selling agreements with selected dealers or other
parties.
2. Duties of TIP 1.
1 TIP agrees at its own expense to execute any and all documents, to furnish any
and all information and to take any other actions that may be reasonably
necessary in connection with the qualification of the Shares for sale in those
states that AMT Capital may designate.
2 TIP shall furnish from time to time such information
and/or reports with respect to TIP and the
Shares as AMT Capital may reasonably request, all of which
shall be signed by one or more of TIP's duly authorized
officers; and TIP warrants that the statements contained in
any such reports, when so signed by one or more of TIPs'
officers, shall be true and correct. TIP shall also furnish
AMT Capital upon request with: (a) annual audit reports of
TIP's books and accounts made by independent public
accountants regularly retained by TIP, (b) semiannual
unaudited financial statements pertaining to TIP, (c)
quarterly earnings statements prepared by TIP, (d) monthly
itemized lists of the securities in the portfolios of TIP,
(e) monthly balance sheets as soon as practicable after the
end of each month and (f) from time to time such additional
information regarding TIP's financial condition as AMT
Capital may reasonably request.
3. Representations and Warranties 1.
TIP represents to AMT Capital that all registration
statements, prospectuses and statements of additional information filed by TIP
with the SEC under the 1933 Act and the 1940 Act with respect to the Shares have
been carefully prepared in conformity with the requirements of the 1933 Act, the
1940 Act and the rules and regulations of the SEC thereunder. As used in this
Agreement the terms "registration statement", "prospectus" and "statement of
additional information" shall mean any registration statement, prospectus and
statement of additional information filed by TIP with the SEC and any amendments
and supplements thereto which at any time shall have been filed with the SEC.
TIP represents and warrants to AMT Capital that any registration statement,
prospectus and statement of additional information, when such registration
statement becomes effective, will include all statements required to be
contained therein in conformity with the 1933 Act, the 1940 Act and the rules
and regulations of the SEC; that all statements of fact contained in any
registration statement, prospectus or statement of additional information will
be true and correct when such registration statement becomes effective; and that
neither any registration statement nor any prospectus or statement of additional
information when such filing becomes effective will include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading to a
purchaser of the Shares of TIP.
AMT Capital may, but shall not be obligated to, propose from
time to time such amendment or amendments to any registration statement and such
supplement or supplements to any prospectus or statement of additional
information as, in the light of future developments, may, in the opinion of AMT
Capital's counsel, be necessary or advisable. If TIP shall not propose such
amendment or amendments and/or supplement or supplements within fifteen days
after receipt by TIP of a written request from AMT Capital to do so, AMT Capital
may, at its option, terminate this Agreement. TIP shall not file any amendment
to any registration statement or supplement to any prospectus or statement of
additional information without giving AMT Capital reasonable notice thereof in
advance; provided, however, that nothing contained in this Agreement shall in
any way limit TIPs' right to file at any time such amendments to any
registration statement and/or supplements to any prospectus or statement of
additional information, of whatever character, as TIP may deem advisable, such
right being in all respects absolute and unconditional.
4. Expenses
AMT Capital shall furnish, at its expense and without cost to
TIP, the services of personnel to the extent that such services are required to
carry out its obligations under this Agreement.
5. Indemnification
1 TIP authorizes AMT Capital and any dealers
with whom AMT Capital has entered into dealer
agreements to use any prospectus or statement of additional
information furnished by TIP from time to time, in
connection with the sale of Shares of TIP. TIP agrees to
indemnify, defend and hold AMT Capital, its several officers
and directors, and any person who controls AMT Capital
within the meaning of Section 15 of the 1933 Act, free and
harmless from and against any and all claims, demands,
liabilities and expenses (including the cost of
investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection
therewith) which AMT Capital, its officers and directors, or
any such controlling person, may incur under the 1933 Act,
the 1940 Act or common law or otherwise, arising out of or
based upon any untrue statement or alleged untrue statement
of a material fact contained in any registration statement,
any prospectus or any statement of additional information,
or arising out of or based upon any omission or alleged
omission to state a material fact required to be stated in
any registration statement, any prospectus or any statement
of additional information, or necessary to make the
statements in any of them not misleading; provided, however,
that TIP's agreement to indemnify AMT Capital, its officers
and directors, and any such controlling person shall not be
deemed to cover any claims, demands, liabilities or expenses
arising out of or based upon any statements or
representations made by AMT Capital or its representatives
or agents other than such statements and representations as
are contained in any registration statement, prospectus or
statement of additional information and in such financial
and other statements as are furnished to AMT Capital
pursuant to paragraph 2.2 hereof; and further provided that
TIP's agreement to indemnify AMT Capital and TIP's
representations and warranties hereinbefore set forth in
paragraph 3 shall not be deemed to cover any liability to
TIP or its shareholders to which AMT Capital would otherwise
be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties, or by
reason of AMT Capital's reckless disregard of its
obligations and duties under this Agreement. TIP's
agreement to indemnify AMT Capital, its officers and
directors, and any such controlling person, as aforesaid, is
expressly conditioned upon TIP's being notified of any
action brought against AMT Capital, its officers or
directors, or any such controlling person, such notification
to be given by letter or by telegram addressed to TIP at its
principal office in Charlottesville, Virginia and sent to
TIP by the person against whom such action is brought,
within ten days after the summons or other first legal
process shall have been served. The failure so to notify
TIP of any such action shall not relieve TIP from any
liability that TIP may have to the person against whom such
action is brought by reason of any such untrue or alleged
untrue statement or omission or alleged omission otherwise
than on account of TIP's indemnification agreement contained
in this paragraph 5.1. TIP's indemnification agreement
contained in this paragraph 5.1 and TIP's representations
and warranties in this Agreement shall remain operative and
in full force and effect regardless of any investigation
made by or on behalf of AMT Capital, its officers and
directors, or any controlling person, and shall survive the
delivery of any of TIP's shares. This agreement of
indemnity will inure exclusively to AMT Capital's benefit,
to the benefit of its several officers and directors, and
their respective estates, and to the benefit of the
controlling persons and their successors. TIP agrees to
notify AMT Capital promptly of the commencement of any
litigation or proceedings against TIP, FAI, or any of their
officers, directors, or employees in connection with the
issuance and sale of any of TIP's Shares.
2 AMT Capital agrees to indemnify, defend and hold TIP, its
several officers and directors, and
any person who controls TIP within the meaning of Section 15
of the 1933 Act, free and harmless from and against any and
all claims, demands, liabilities and expenses (including the
costs of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection
therewith) that TIP, its officers and directors or any such
controlling persons may incur under the 1933 Act, the 1940
Act or common law or otherwise, but only to the extent that
such liability or expense incurred by TIP, its officers or
directors or such controlling person resulting from such
claims or demands shall arise out of or be based upon (a)
any unauthorized sales literature, advertisements,
information, statements or representations used or made by
AMT Capital not accurately reflecting information in the
registration statement, prospectus, Statement of Additional
Information, or information furnished to AMT Capital by TIP
under Section 2.2 hereof, or (b) any untrue or alleged
untrue statement of a material fact contained in
information, furnished in writing by AMT Capital to TIP and
used in the answers to any of the items of the registration
statement or in the corresponding statements made in the
prospectus or statement of additional information, or shall
arise out of or be based upon any omission or alleged
omission to state a material fact in connection with such
information furnished in writing by AMT Capital to TIP and
required to be stated in such answers or necessary to make
such information not misleading, provided, however, that AMT
Capital's agreement to indemnify TIP and AMT Capital's
representations and warranties herein before set forth in
paragraph 3 shall not be deemed to cover any liability to
AMT Capital to which TIP would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence
in the performance of its duties, or by reason of TIP's
reckless disregard of its obligations and duties under this
Agreement. AMT Capital's agreement to indemnify TIP, its
officers and directors, and any such controlling person, as
aforesaid, is expressly conditioned upon AMT Capital's being
notified of any action brought against FAI or TIP, its
officers or directors, or any such controlling person, such
notification to be given by letter or telegram addressed to
AMT Capital at its principal office in New York, New York
and sent to AMT Capital by the person against whom such
action is brought, within ten days after the summons or
other first legal process shall have been served. The
failure to so notify AMT Capital of any such action shall
not otherwise relieve AMT Capital from any liability that
AMT Capital may have to TIP, its officers or directors, or
to such controlling person by reason of any such untrue or
alleged untrue statement or omission or alleged omission on
account of AMT Capital's indemnification agreement contained
in this paragraph 5.2. AMT Capital agrees to notify TIP
promptly of the commencement of any litigation or
proceedings against AMT Capital or any of its officers or
directors in connection with the issuance and sale of any of
TIP's shares.
3 In case any action shall be brought against any party
indemnified under paragraph 5.1 or 5.2,
and such party shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be
entitled to participate in, and, to the extent that it shall
wish to do so, to assume the defense thereof with counsel
satisfactory to such indemnified party. If the indemnifying
party opts to assume the defense of such action, the
indemnifying party will not be liable to the indemnified
party for any legal or other expenses subsequently incurred
by the indemnified party in connection with the defense
thereof other than (a) reasonable costs of investigation or
the furnishing of documents or witnesses and (b) all
reasonable fees and expenses of separate counsel to such
indemnified party if (i) the indemnifying party and the
indemnified party shall have agreed to the retention of such
counsel or (ii) the indemnified party shall have concluded
reasonably that representation of the indemnifying party and
the indemnified party by the same counsel would be
inappropriate due to actual or potential differing interests
between them in the conduct of the defense of such action.
6. Effectiveness of Registration
None of the Shares shall be offered by AMT Capital or TIP
under any of the provisions of this Agreement and no orders for the purchase or
sale of the Shares hereunder shall be accepted by AMT Capital or TIP if and so
long as the effectiveness of the registration statement then in effect or any
necessary amendments thereto shall be suspended under any of the provisions of
the 1933 Act or if and so long as a current prospectus as required by Section
5(b)(2) of the 1933 Act is not on file with the SEC; provided, however, that
nothing contained in this paragraph 6 shall in any way restrict or have an
application to or bearing upon TIP's obligation to repurchase its Shares from
any shareholder in accordance with the provisions of TIP's prospectus, statement
of additional information or articles of incorporation.
7. Notice to AMT Capital
TIP agrees to advise AMT Capital
immediately
in writing:
(a) of any request by the SEC for amendments to the registration statement,
prospectuses or statements of additional information then in effect or for
additional information;
(b) in the event of the issuance by the SEC of any stop order suspending the
effectiveness of the registration statement then in effect or the initiation of
any proceeding for that purpose;
(c) of the happening of any event that makes untrue any statement of a material
fact made in the registration statement, prospectus or statement of additional
information then in effect or that requires the making of a change in such
registration statement, prospectus or statement of additional information in
order to make the statements therein not misleading; and
(d) of all actions of the SEC with respect to any amendment to any registration
statement, prospectus or statement of additional information which may from time
to time be filed with the SEC.
8. Term of Agreement
This Agreement shall continue until two years after the date
of this Agreement, and thereafter shall continue automatically for successive
annual periods, provided such continuance is specifically approved at least
annually by (i) TIP's Board of Directors, or (ii) by a vote of a majority (as
defined in the 1940 Act) of the outstanding voting securities of the relevant
Funds of TIP, provided that in either event the continuance is also approved by
the majority of the Directors of TIP who are not interested persons (as defined
in the 1940 Act) of any party to this Agreement, by vote cast in person at a
meeting called for the purpose of voting on such approval. This Agreement is
terminable, without penalty, on 60 days' notice by TIP's Board of Directors, by
vote of the holders of a majority of TIP's Shares, or on 60 days' notice by AMT
Capital. This Agreement will also terminate automatically in the event of its
assignment (as defined in the 1940 Act).
Please confirm that the foregoing is in accordance with your
understanding by indicating your acceptance thereof at the place below
indicated, whereupon it shall become a binding agreement between us.
Very truly yours,
TIFF INVESTMENT PROGRAM, INC.
By:
/s/David A. Salem
David A. Salem
President
Accepted:
AMT CAPITAL SERVICES, L.L.C.
By:
/s/Arthur Goetchis
Arthur Goetchis
Financial Operations Principal
Date: May , 1998
DELEGATION AGREEMENT
AS SUPPLEMENT TO THE
CUSTODIAN AGREEMENT
AGREEMENT, dated as of May 12, 1998 by and between INVESTORS BANK &
TRUST COMPANY, a Massachusetts trust Company (the "Delegate"), and TIFF
Investment Program, Inc., a Maryland Corporation (the "Fund").
WHEREAS, the Fund and the Delegate entered into a Custodian Agreement
dated as of April 1, 1995, (as amended an in effect from time to time, the
"Custodian Agreement"); and
WHEREAS, the Fund and the custodian desire to supplement certain
provisions of the Custodian Agreement to reflect revisions to Rule 17f-5
promulgated under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, pursuant to the provisions of Rule 17f-5(b) under the 1940
Act, and subject to the terms and conditions set forth herein, the Board of
Directors of the Fund desires to delegate to the Delegate, and the Delegate
hereby agrees to accept and assume, certain responsibilities described herein
concerning Assets held outside of the United States.
NOW THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto agree as follows:
1. Definitions
Capitalized terms in this Agreement have the following meanings:
a. Assets
Assets means any of the Fund's investments (including foreign
currencies) for which the primary market is outside the United States, and such
cash and cash equivalents as are reasonably necessary to effect the Fund's
transactions in such investments.
b. Authorized Representative
Authorized Representative means any one of the persons who are
empowered, on behalf of the parties to this Agreement, to receive notices from
the other party, to send notices to the other party, to add or delete
jurisdictions pursuant to Article 3, and to otherwise bind the respective
parties with respect to the subject matter of this Agreement.
c. Board
Board means the Board of Directors (or the body authorized to
exercise authority similar to that of the board of directors of a corporation)
of the Fund.
d. Compulsory Securities Depository
Compulsory Securities Depository means a Securities Depository
the use of which is mandatory (i) by law or regulation; (ii) because securities
cannot be withdrawn from the depository; or (iii) because maintaining securities
outside the Securities Depository is not consistent with prevailing custodial
practices.
e. Country Risk
Country Risk means all factors reasonably related to the
systemic risk of holding assets in a particular country including, but not
limited to, such country's financial infrastructure (including any Securities
Depositories operating in such country); prevailing custody and settlement
practices; and laws applicable to the safekeeping and recovery of Assets held in
custody.
f. Eligible Foreign Custodian
Eligible Foreign Custodian has the meaning set forth in Rule
17f-5(a)(1).
g. Foreign Custody Manager
Foreign Custody Manager has the meaning set forth in Rule
17f-5(a)(2).
h. Monitor
Monitor means to re-assess or re-evaluate, at reasonable
intervals, a decision or determination previously made.
i. Permissible Foreign Custodian
Permissible Foreign Custodian means any person with whom
Assets may be placed and maintained outside the United States under (i) the 1940
Act or (ii) an order of the U.S. Securities and Exchange Commission without
regard to Rule 17f-5.
j. Securities Depository
Securities Depository has the meaning set forth in Rule
17f-5(a)(6).
2. Representations
a. Delegate's Representations
Delegate represents that it is a trust company chartered under
the laws of the Commonwealth of Massachusetts. Delegate further represents that
the persons executing this Agreement and any amendment or appendix hereto on its
behalf are duly authorized to so bind the Delegate with respect to the subject
matter of this Agreement.
b. Fund's Representations
Fund represents that the Board has determined that it is
reasonable to rely on the Delegate to perform the responsibilities delegated by
this Agreement. The Fund further represents that the persons executing this
Agreement and any amendment or appendix hereto on its behalf are duly authorized
to so bind the Fund with respect to the subject matter of this Agreement.
3. Jurisdictions Covered
a. Initial Jurisdictions
The authority delegated by this Agreement applies only with
respect to Assets held in the jurisdictions listed in Appendix A.
b. Added Jurisdictions
Jurisdictions may be added to Appendix A by written agreement
in the form of Appendix B. The Delegate's responsibility and authority with
respect to any jurisdiction so added will commence at the later of (i) the time
that the Delegate's Authorized Representative and the Board's Authorized
Representative have both executed a copy of Appendix B listing such
jurisdiction, or (ii) the time that the Delegate's Authorized Representative
receives a copy of such fully executed Appendix B.
c. Withdrawn Jurisdictions
The Board may withdraw its delegation with respect to any
jurisdiction upon written notice to the Delegate. The Delegate may withdraw its
acceptance of delegated authority with respect to any jurisdiction upon written
notice to the Board. Ten days (or such longer period as to which the parties
agree) after receipt of any such notice by the Authorized Representative of the
party other than the party giving notice, the Delegate shall have no further
responsibility or authority under this Agreement with respect to the
jurisdiction or jurisdictions to which authority is withdrawn.
4. Delegation of Authority to Act as Foreign Custody Manager
a. Selection of Eligible Foreign Custodians
Subject to the provisions of this Agreement and the
requirements of Rule 17f-5 (and any other applicable law), the Delegate is
authorized and directed to place and maintain Assets in the care of any Eligible
Foreign Custodian or Custodians selected by the Delegate in each jurisdiction to
which this Agreement applies.
b. Contracts With Eligible Foreign Custodians
Subject to the provisions of this Agreement and the
requirements of Rule 17f-5 (and any other applicable law), the Delegate is
authorized to enter into, on behalf of the Fund, such written contracts
governing the Fund's foreign custody arrangements with such Eligible Foreign
Custodians as the Delegate deems appropriate.
5. Delegation of Authority to Place Assets with Permissible
Foreign Custodians
Subject to the requirements of the 1940 Act (and any other
applicable law or order), the Delegate is authorized to place and maintain
Assets in the care of any Permissible Foreign Custodian or Custodians in each
jurisdiction to which this Agreement applies and to enter into, on behalf of the
fund, such written contracts governing the fund's foreign custody arrangements
with such Permissible Foreign Custodians as the Delegate deems appropriate.
Articles 6, 7b, 7c, 7d, and 8 of this Agreement shall not apply to the
delegate's exercise of authority under this Article 5. The Delegate's exercise
of authority under this Article 5 shall be governed by the terms of the
Custodian Agreement.
6. Monitoring of Eligible Foreign Custodians and Contracts
In each case in which the Delegate has exercised the authority
delegated under this Agreement to place Assets with an Eligible Foreign
Custodian, the Delegate is authorized to, and shall, on behalf of the Fund,
establish a system to Monitor the appropriateness of maintaining Assets with
such Eligible Foreign Custodian. In each case in which the Delegate has
exercised the authority delegated under this Agreement to enter into a written
contract governing the Fund's foreign custody arrangements, the Delegate is
authorized to, and shall, on behalf of the Fund, establish a system to Monitor
the appropriateness of such contract.
7. Guidelines and Procedures for the Exercise of Delegated
Authority
a. Board's Conclusive Determination Regarding Country
Risk
In exercising its delegated authority under this Agreement,
the Delegate may assume, for all purposes, that the Board (or the Fund's
investment advisor, pursuant to authority delegated by the Board) has
considered, and pursuant to its fiduciary duties to the Fund and the Fund's
shareholders, determined to accept, such Country Risk as is incurred by placing
and maintaining Assets in the jurisdictions to which this Agreement applies. In
exercising its delegated authority under this Agreement, the Delegate may also
assume that the Board (or the Fund's investment advisor, pursuant to authority
delegated by the Board) has, and will continue to, Monitor such Country Risk to
the extent the Board deems necessary or appropriate.
Nothing in this Agreement shall require the Delegate to make
any selection or to engage in any Monitoring on behalf of the Fund that would
entail consideration of Country Risk.
b. Selection of Eligible Foreign Custodians
In exercising the authority delegated under this Agreement to
place Assets with an Eligible Foreign Custodian, the Delegate shall determine
that Assets will be subject to reasonable care, based on the standards
applicable to custodians in the market in which the Assets will be held, after
considering all factors relevant to the safekeeping of such assets, including,
without limitation:
i. The Eligible Foreign Custodian's
practices, procedures, and internal
controls, including, but not limited to,
the physical protections available for
certificated securities (if applicable),
the method of keeping custodial records,
and the security and data protection
practices;
ii. Whether the Eligible Foreign Custodian has
the requisite financial strength to
provide reasonable care for Assets;
iii. The Eligible Foreign Custodian's general reputation
and standing and, in the case of a Securities
Depository, the Securities Depository's operating
history and number of participants;
iv. Whether the Fund will have jurisdiction
over and be able to enforce judgments
against the Eligible Foreign Custodian,
such as by virtue of the existence of any
offices of the Eligible Foreign Custodian
in the United States or the Eligible
Foreign Custodian's consent to service of
process in the United States;
v. In the case of an Eligible Foreign Custodian that is
a banking institution or trust company, any
additional factors and criteria set forth in Appendix
C to this Agreement; and
vi. In the case of an Eligible Foreign Custodian that is
a Securities Depository, any additional factors and
criteria set forth in Appendix D to this Agreement.
c. Evaluation of Written Contracts
In exercising the authority delegated under this Agreement to
enter into written contracts governing the Fund's foreign custody arrangements
with an Eligible Foreign Custodian, the Delegate shall determine that such
contracts (or, in the case of a Securities Depository, such contract, the rules
or established practices or procedures of the depository, or any combination of
the foregoing) provide reasonable care for Assets based on the standards
applicable to Eligible Foreign Custodians in the relevant market. In making this
determination, the Delegate shall ensure that the terms of such contracts comply
with the provisions of Rule 17f-5(c)(2).
d. Monitoring
In exercising the authority delegated under this Agreement to
establish a system to Monitor the appropriateness of maintaining Assets with an
Eligible Foreign Custodian or the appropriateness of a written contract
governing the Fund's foreign custody arrangements, the Delegate shall consider
any factors and criteria set forth in Appendix E to this Agreement. If, as a
result of its Monitoring of Eligible Foreign Custodian relationships hereunder
or otherwise, the Delegate determines in its sole discretion that it is in the
best interest of the safekeeping of the Assets to move such Assets to a
different Eligible Foreign Custodian, the Fund shall bear any expense related to
such relocation of Assets.
8. Standard of Care
In exercising the authority delegated under this Agreement, the
Delegate agrees to exercise reasonable care, prudence and diligence such as a
person having responsibility for the safekeeping of assets of an investment
company registered under the Investment Company Act of 1940 would exercise.
9. Reporting Requirements
Delegate agrees to provide written reports notifying the Board of the
placement of Assets with a particular Eligible Foreign Custodian and of any
material change in the Fund's foreign custody arrangements. Such reports shall
be provided to the Board quarterly for consideration at the next regularly
scheduled meeting of the Board or earlier if deemed necessary or advisable by
the Delegate in its sole discretion.
10. Provision of Information Regarding Country Risk
With respect to the jurisdictions listed in Appendix A, or added
thereto pursuant to Article 3, the Delegate agrees to provide annually to the
Board, such information relating to Country Risk, if available, as is specified
in Appendix F to this Agreement. Such information relating to Country Risk shall
be updated from time to time as the Custodian deems necessary.
11. Limitation of Liability.
a. Notwithstanding anything in this Agreement to the contrary, in no
event shall the Delegate or any of its officers, directors, employees or agents
(collectively, the "Indemnified Parties") be liable to the Fund or any third
party, and the Fund shall indemnify and hold the Delegate and the Indemnified
Parties harmless from and against any and all loss, damage, liability, actions,
suits, claims, costs and expenses, including legal fees, (a "Claim") arising as
a result of any act or omission of the Delegate or any Indemnified Party under
this Agreement, except for any Claim resulting solely from the negligence,
willful misfeasance or bad faith of the Delegate or any Indemnified Party.
Without limiting the foregoing, neither the Delegate nor the Indemnified Parties
shall be liable for, and the Delegate and the Indemnified Parties shall be
indemnified against, any Claim arising as a result of:
i. Any act or omission by the Delegate or any
Indemnified Party in reasonable good faith reliance
upon the terms of this Agreement, any resolution of
the Board, telegram, telecopy, notice, request,
certificate or other instrument reasonably believed
by the Delegate to genuine;
ii. Any information which the Delegate
provides or does not provide under Section
10 hereof;
iii. Any acts of God, earthquakes, fires,
floods, storms or other disturbances of
nature, epidemics, strikes, riots,
nationalization, expropriation, currency
restrictions, acts of war, civil war or
terrorism, insurrection, nuclear fusion,
fission or radiation, the interruption,
loss or malfunction of utilities,
transportation or computers (hardware or
software) and computer facilities, the
unavailability of energy sources and other
similar happenings or events.
b. Notwithstanding anything to the contrary in this Agreement, in no
event shall the Delegate or the Indemnified Parties be liable to the Fund or any
third party for lost profits or lost revenues or any special, consequential,
punitive or incidental damages of any kind whatsoever in connection with this
Agreement or any activities hereunder.
12. Arbitration of Disputes
To the extent permitted by law, all disputes or claims arising under
this Agreement shall be resolved through arbitration. Arbitration under this
Article shall be conducted according to the Commercial Arbitration Rules of the
American Arbitration Association and shall take place in the City of Boston,
Massachusetts. This Article shall be enforced and interpreted exclusively in
accordance with applicable federal law, including the Federal Arbitration Act.
13. Effectiveness and Termination of Agreement
This Agreement shall be effective as of the later of the date of
execution on behalf of the Board or the Delegate and shall remain in effect
until terminated as provided herein. This Agreement may be terminated at any
time, without penalty, by written notice from the terminating party to the
non-terminating party. Termination will become effective 30 days after receipt
by the non-terminating party of such notice.
14. Authorized Representatives and Notices
The respective Authorized Representatives of the Fund and the Board,
and the addresses to which notices and other documents under this Agreement are
to be sent to each, are as set forth in Appendix G. Any Authorized
Representative of a party may add or delete persons from that party's list of
Authorized Representatives by written notice to an Authorized Representative of
the other party.
15. Governing Law
This Agreement shall be constructed in accordance with the laws of the
Commonwealth of Massachusetts without regard to principals of choice of law.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their Authorized Representatives as of the date first written above.
Investors Bank & Trust Company
By: ___________________________________
Name:
Title:
TIFF Investment Program, Inc.
By: ____________________________________
Name:
Title:
List of Appendices
A -- Jurisdictions Covered
B -- Additional Jurisdictions Covered
C -- Additional Factors and Criteria To Be Applied in the Selection of
Eligible Foreign Custodians That
Are Banking Institutions or Trust Companies
D -- Additional Factors and Criteria To Be Applied in the Selection of
Eligible Foreign Custodians that
are Securities Depositories
E -- Factors and Criteria To Be Applied in Establishing Systems For the
Monitoring of Foreign Custody Arrangements and Contracts
F -- Information Regarding Country Risk
G -- Authorized Representatives
APPENDIX A
Jurisdictions Covered
Argentina Estonia Latvia Romania
Austria Euroclear Lebanon Russia
Australia Finland Lithuania Singapore
Bangladesh France Luxembourg Slovak Republic
Belgium Germany Malaysia Slovenia
Bahrain Ghana Mauritius South Africa
Botswana Greece Mexico Spain
Brazil Hong Kong Morocco Sri Lanka
Canada Hungary Namibia Swaziland
Chile Iceland Netherlands Sweden
China India New Zealand Switzerland
Colombia Indonesia Norway Taiwan
Croatia Ireland Oman Thailand
Cyprus Israel Pakistan Turkey
Czech Republic Italy Papau New Guinea United Kingdom
Denmark Japan Peru Uruguay
Ecuador Jordan Philippines Venezuela
Egypt Kenya Poland Zambia
Korea Portugal Zimbabwe
APPENDIX B
Additional Jurisdictions Covered
Pursuant to Article 3 of this Agreement, the Delegate and the Board
agree that the following jurisdictions shall be added to Appendix A:
Bermuda, Bulgaria, Kazakhstan and Ukraine.
Investors Bank & Trust Company
By: ___________________________________
Name:
Title:
TIFF Investment Program, Inc.
By:____________________________________
Name:
Title:
DATE: ______________________________
APPENDIX C
Additional Factors and Criteria To Be Applied
In the Selection of Eligible Foreign Custodians
That Are Banking Institutions or Trust Companies
In addition to the factors set forth in Rule 17f-5(c)(1), in selecting
Eligible Foreign Custodians that are banking institutions or trust companies,
the Delegate shall consider the following factors, if such information is
available (check all that apply):
_________ None
_________ Other (list below):
APPENDIX D
Additional Factors and Criteria To Be
Applied in the Selection of Eligible Foreign
Custodians that are Securities Depositories
In addition to the factors set forth in Rule 17f-5(c)(1), in selecting
Eligible Foreign Custodians that are Securities Depositories, the Delegate shall
consider the following factors, if
such information is available:
1. Whether use is voluntary or compulsory
2. Ownership
3. Operating history
4. Established rules, practices and procedures
5. Membership
6. Financial strength
7. Governing regulatory body
APPENDIX E
Factors and Criteria To Be Applied
In the Establishing Systems For the Monitoring of
Foreign Custody Arrangements and Contracts
In establishing systems for the Monitoring of foreign custody
arrangements and contracts with Eligible Foreign Custodians, the Delegate shall
consider the following factors, if such information is available:
1. Operating performance
2. Established practices and procedures
3. Relationship with market regulators
4. Contingency planning
APPENDIX F
Information Regarding Country Risk
To aid the Board in its determinations regarding Country Risk, the
Delegate will furnish the Board annually with respect to the jurisdictions
specified in Article 3, the following information:
1. Copy of Addenda or Side Letters to Subcustodian Agreements
2. Legal Opinion, if available, with regard to:
a) Access to books and records by the Fund's accountants
b) Ability to recover assets in the event of bankruptcy of a custodian
c) Ability to recover assets in the event of a loss
d) Likelihood of expropriation or nationalization, if available
e) Ability to repatriate or convert cash or cash equivalents
3. Audit Report
4. Copy of Balance Sheet from Annual Report
5. Summary of Central Depository Information
6. Country Profile Matrix containing market practice for:
a) Delivery versus payment
b) Settlement method
c) Currency restrictions
d) Buy-in practice
e) Foreign ownership limits
f) Unique market arrangements
APPENDIX G
Authorized Representatives
The names and addresses of each party's authorized representatives are set forth
below:
A. Board
With a copy to:
B. Delegate
Investors Bank & Trust Company
200 Clarendon Street
P.O. Box 9130
Boston, MA 02117-9130
Attention: _______________, Director, Client Management
Fax: (617) 330-6033
With a copy to:
Investors Bank & Trust Company
200 Clarendon Street
P.O. Box 9130
Boston, MA 02117-9130
Attention: John E. Henry, General Counsel
Fax: (617) 946-1929
AMENDMENT AGREEMENT
AGREEMENT, effective as of May 29, 1998, by and between TIFF INVESTMENT
PROGRAM, INC., a Maryland corporation (the "Fund") and INVESTORS BANK & TRUST
COMPANY, a Massachusetts trust company (the "Bank").
WHEREAS, the Fund and the Bank entered into a Custodian Agreement dated
April 1, 1995 (the "Custodian Agreement"); and
WHEREAS, the Fund and the Bank desire to amend the Custodian Agreement
as set forth below.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein set forth, the parties hereto agree as follows:
1. Amendments.
(a) The date "December 31, 1999" used in the first sentence of Section
14.1 of the Custodian Agreement is hereby amended to read "June 1, 2001".
2. Miscellaneous.
(a) Except as amended hereby, the Custodian Agreement shall remain in
full force and effect.
(b) This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, each party hereto has caused this Agreement to be
executed by its duly authorized officer, as the case may be, as of the date and
year first above written.
INVESTORS BANK & TRUST COMPANY
By: ________________________________
Robert D. Mancuso
TIFF INVESTMENT PROGRAM, INC.
By: ________________________________
Name: _____________________________
Title: ______________________________
AMENDMENT AGREEMENT
AGREEMENT, effective as of May 29, 1998, by and between TIFF INVESTMENT
PROGRAM, INC., a Maryland corporation ("TIP") and INVESTORS CAPITAL SERVICES,
INC., a Delaware corporation ("Investors Capital") (formerly known as AMT
CAPITAL SERVICES, INC., ("AMT Capital")).
WHEREAS, TIP and AMT Capital entered into an Administration Agreement
dated February 10, 1994 (the "Administration Agreement"); and
WHEREAS, TIP and Investors Capital desire to amend the Administration
Agreement as set forth below.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein set forth, the parties hereto agree as follows:
1. Amendment.
(a) The first sentence of the Administration Agreement is hereby
amended to read as follows:
AGREEMENT dated as of February 10, 1994, by and between TIFF
INVESTMENT PROGRAM, INC., a Maryland corporation ("TIP"), and INVESTORS CAPITAL
SERVICES, a Delaware corporation ("Investors Capital").
(b) All occurrences and uses of the term "AMT Capital" in the
Administration Agreement shall be changed to the term "Investors Capital."
(c) Section 11 of the Administration Agreement is hereby amended to
read in its entirety as follows:
11. The initial term of this Agreement shall continue through
June 1, 2001 (the "Initial Term"), unless earlier terminated as provided herein.
After the expiration of the Initial Term, the term of this Agreement shall
automatically renew for successive one-year terms (each a "Renewal Term") unless
notice of non-renewal is delivered by the non-renewing party to the other party
no later than 120 days prior to the expiration of the Initial Term or any
Renewal Term, as the case may be.
(a) Either party hereto may terminate this Agreement prior to
the expiration of the Initial Term in the event the other party violates any
material provision of this Agreement, provided that the non-violating party
gives written notice of such violation to the violating party and the violating
party does not cure such violation within 30 days of receipt of such notice.
(b) Either party may terminate this Agreement during any
Renewal Term upon 120 days written notice to the other party. Any termination
pursuant to this paragraph 11 shall be effective upon expiration of such 120
days, provided, however, that the effective date of such termination may be
postponed to a date not more than 150 days after delivery of the written notice:
(i) at the request of Investors Capital, in order to prepare for the transfer by
Investors Capital of all records and other necessary materials; or (ii) at the
request of TIP, in order to give TIP an opportunity to make suitable
arrangements for a successor service company.
(c) In the event notice of termination is given to Investors
Capital by TIP under this paragraph, such notice shall be accompanied by a
resolution of the Board of Trustees, certified by the Secretary, electing to
terminate this Agreement and designating a successor service company.
2. Fiduciary Duty. The parties acknowledge that the fiduciary responsibilities
of Investors Capital as administrator to TIP shall be in no way altered or
affected by any affiliate relationship between Investors Capital and any other
service provider to TIP.
3. Miscellaneous.
(a) Except as amended hereby, the Administration Agreement shall remain
in full force and effect.
(b) This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, each party hereto has caused this Agreement to be
executed by its duly authorized officer, as the case may be, as of the date and
year first above written.
INVESTORS CAPITAL SERVICES, INC.
By: ________________________________
TIFF INVESTMENT PROGRAM, INC.
By: ________________________________
Name: _____________________________
Title: ______________________________
