<PAGE>
As Filed With The Securities And Exchange Commission On April 28, 2000
File Nos. 33-73408 and 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. 10 (X)
--
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 (X)
Amendment No. 14
TIFF INVESTMENT PROGRAM, INC.
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(Exact Name of Registrant as Specified in Charter)
2405 Ivy Road, Charlottesville, VA 22903
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(Address of Principal Executive Offices) (Zip Code)
(800) 984-0084
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(Registrant's Telephone Number, Including Area Code)
David A. Salem, President, Foundation Advisers, Inc., 2405 Ivy Road,
Charlottesville, VA 22903
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(Name and Address of Agent for Service of Process)
With a Copy to:
William E. Vastardis
Investors Capital Services, Inc.
600 Fifth Avenue, 26th Floor
New York, New York 10020
It is proposed that this filing will become effective:
/ / immediately upon filing pursuant to paragraph (b)
/X/ On April 28, 2000, pursuant to paragraph (b)
/ / 60 days after filing, pursuant to paragraph (a)(1)
/ / On ____, pursuant to paragraph (a) (1)
/ / 75 days after filing, pursuant to paragraph (a) (2)
/ / On _________, pursuant to paragraph (a) (2) of Rule 485.
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TIFF
PROSPECTUS INVESTMENT Investment management
April 28, 2000 PROGRAM for foundations
This page is not part of the Prospectus.
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Members of the Governing Boards
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TIFF The Investment Fund for Foundations, a not-for-profit membership
organization dedicated to enhancing foundations' investment returns
TIP TIFF Investment Program, a family of no-load mutual funds offered
exclusively to foundations and other 501(c)(3) organizations
FAI Foundations Advisers, Inc., the investment adviser of the TIFF mutual
fund family
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JOHN CRAIG is executive vice president and treasurer of The Commonwealth Fund
(New York, NY), a private foundation with assets exceeding $500 million. He
formerly served as assistant director of the John A. Hartford Foundation. [TIFF
Chair, TIP]
GREGORY CURTIS is president of Greycourt & Co. (Pittsburgh, PA), an investment
consulting firm. He was formerly president of the Laurel Foundation and C.S.
May Associates, a diversified investment and financial service firm. [FAI Chair]
ALICE HANDY is president of the University of Virginia Investment Management
Company (Charlottesville, VA), where she supervises endowment and trust assets
exceeding $1.7 billion. She formerly served as treasurer of the Commomwealth of
Virginia. [FAI]
SHERYL JOHNS is vice president, treasurer, and CFO of Houston Endowment Inc.
(Houston, TX), where she oversees an endowment of over $1 billion. She was
formerly a manager with the accounting firm of Ernst & Young. She is a Certified
Management Accountant, as well as a Certified Public Accountant. [TIFF, TIP
Chair]
ROBERT KASDIN is executive vice president and CFO of the University of Michigan
(Ann Arbor, MI), where he oversees an endowment of $3 billion. He formerly
served as treasurer and CIO of The Metropolitan Museum of Art. [FAI]
WILLIAM MCLEAN is senior managing director of asset and investment management of
the John D. and Catherine T. MacArthur Foundation (Chicago, IL), a private
foundation with assets exceeding $4 billion. He was formerly an investment
officer at The Duke Endowment. [FAI]
JACK MEYER is president and CEO of Harvard Management Company (Boston, MA), the
investment sudsidiary of Harvard University, where he oversees endowment,
pension, and trust assets exceeding $16 billion. He was formerly treasurer and
CIO of the Rockefeller Foundation. [FAI]
WILLIAM NICHOLS is treasurer of the William and Flora Hewlett Foundation (Menlo
Park, CA), which has assets exceeding $2.9 billion. He is also a director of
the Lucile Packard Foundation for Children's Health and a trustee of Channing
House. [TIP, FAI]
FRED RENWICK is a professor at New York University's Leonard M. Stern School of
Business (New York, NY). He also serves as chair of the Finance Committee of
Morehouse College and on several other eleemosynary boards. [TIP]
DAIVD SALEM is TIFF's founding president and CEO and president of FAI. He was
formerly a partner in the Boston-based investment advisory firm of Grantham,
Mayo, Van Otterloo & Co. and a managing director of the investment and financial
consulting firm Cambridge Associates, Inc. [TIPP, TIP, FAI]
ANN BROWNELL SLOANE is president of Sloane & Hinshaw (New York, NY), a firm that
furnishes strategic, financial planning, and management services to foundations
and other tax-exempt grantmaking organizations. She is a former trustee of the
Finance Committee of Swarthmore College and recently completed 20 years of
service on its Investment Committee.
DAVID SWENSEN is CIO at Yale University (New Haven, CT), where he oversees
endowment assets exceeding $6 billion. He was formerly a senior vice president
at Lehman Brothers. [FAI]
JEFFREY TARRANT is president of Arista Group (New York, NY), 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). [FAI]
ARTHUR WILLIAMS is founder of Pine Grove Associates (Summit, NJ), a consulting
and asset management firm serving 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. [FAI]
This page is not part of the Prospectus.
<PAGE>
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TIFF Prospectus
Investment
Program April 28, 2000
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TIFF Multi-Asset Fund Available through:
TIFF International Equity Fund Foundation Advisers, Inc.
TIFF Emerging Markets Fund 2405 Ivy Road
TIFF US 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, non-diversified, 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 to
foundations and other 501(c)(3) organizations.
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The Securities and Exchange Commission has not approved any fund's shares as an
investment or determined whether this prospectus is accurate or complete.
Anyone who states otherwise is committing a crime.
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Contents
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Risk Return Analysis
Fund Descriptions........................................................3
General Risks............................................................9
Performance Charts......................................................11
Performance Table.......................................................12
Fees and Annual Operating Expenses........................................13
Eligible Investors........................................................14
Management and Administration of the Funds................................14
Biographies of Unpaid Directors.........................................15
Biographies of Officers.................................................17
Money Managers..........................................................18
Investment Objectives, Policies, and Restrictions.........................20
Purchases and Redemptions.................................................21
Dividends and Distributions...............................................23
Tax Considerations........................................................24
Financial Highlights......................................................26
Inquiries.................................................................29
Money Manager Profiles............................................Appendix A
Service Provider Profiles.........................................Appendix B
2 TIP Prospectus
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Risk Return Analysis -- Fund Descriptions
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TIFF Multi-Asset Fund
Investment Objective. The Fund's investment objective is to attain a growing
stream of current income and appreciation of principal that at least offsets
inflation as measured by the US Consumer Price Index.
Investment Strategies. The Fund seeks to outperform its Constructed MAF
Benchmark (defined on page 12) primarily through active security selection
within asset class segments. The Fund retains Money Managers it believes can
select securities that will outperform the securities comprising each segment of
the Constructed MAF Benchmark. The Money Managers use an array of investment
philosophies, which range from investing in US and international securities
(both large and small cap) to actively managing duration to investing in
distressed securities. For a more complete description of FAI's process of
selecting Money Managers, please see the section below entitled Management and
Administration of the Funds -- Money Managers. For a more complete description
of the Money Managers and their investment philosophies, please refer to
Appendix A.
Performance Benchmark. The Fund seeks to attain a total return exceeding
inflation plus 5% per annum over the long term. To facilitate assessment of
active strategies employed by the Fund, the Fund also measures its performance
relative to a constructed benchmark including stocks, bonds, and short-term
securities (Constructed MAF Benchmark), net of all expenses, on an annualized
basis over a market cycle. TIP's directors believe this Constructed MAF
Benchmark constitutes an appropriate long-term asset mix for organizations which
seek to maintain the real or inflation-adjusted value of their invested assets
while distributing annually 5% of such assets.
Investment Universe. The Fund will invest broadly in the available universe
of securities domiciled in the United States plus at least 10 other countries.
Many of these securities will be denominated in currencies other than the US
dollar. Under normal circumstances, up to 40% of the Fund's assets may be
invested in emerging markets securities.
Principal Investments. The types of securities the Fund will hold include
US and foreign common stocks (including depositary receipts), debt securities of
all grades (such as those listed in the descriptions of the Bond and Short-Term
Funds), securities convertible into common stocks, securities of commingled
investment vehicles, financial futures contracts, and forward foreign currency
exchange contracts. Ordinarily, the Fund will invest at least 80% of its assets
in these securities.
Risks. A loss of invested assets could occur due to certain risks. These
include:
. correlation risk . foreign risk . liquidity risk
. credit risk . futures risk . market risk
. currency risk . hedging risk . non-diversification risk
. emerging markets risk . interest rate risk . prepayment risk
A description of these risks is provided in the section below entitled General
Risks.
April 28, 2000 3
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Risk Return Analysis -- Fund Descriptions
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TIFF International Equity Fund
Investment Objective. The Fund's investment objective is to attain a growing
stream of current income and appreciation of principal that at least offsets
inflation as measured by the US Consumer Price Index.
Investment Strategies. The Fund seeks to outperform its performance benchmark
(defined below) primarily through two key investment strategies:
1 -- Active Security Selection within Countries. The Fund retains Money
Managers it believes can select securities that will outperform the securities
of a given country.
2 -- Country Allocation. The Fund retains Money Managers that can potentially
enhance the Fund's returns by rotating Fund assets among various countries in a
timely manner.
The Money Managers use an array of investment philosophies, including value
investing, small company investing, and bottom-up or top-down approaches. For a
more complete description of FAI's process of selecting Money Managers, please
see the section below entitled Management and Administration of the Funds --
Money Managers. For a more complete description of the Money Managers and their
investment philosophies, please refer to Appendix A.
Performance Benchmark. The Fund seeks to attain a total return that exceeds
the net total return (after withholding taxes) of the Morgan Stanley Capital
International All Country World Free ex US Stock Index by 1.00%, net of all
expenses, on an annualized basis over a market cycle.
Investment Universe. The Fund will invest broadly in the available universe
of common stocks of companies domiciled in at least 10 countries other than the
United States. Most of these securities will be denominated in currencies other
than the US dollar. Under normal circumstances, up to 30% of the Fund's assets
may be invested in emerging markets securities.
Principal Investments. The types of securities the Fund will hold include
non-US common stocks (including depositary receipts), securities convertible
into common stocks, securities of investment companies and other commingled
investment vehicles, securities of US companies that derive a significant
portion of revenues (e.g., greater than 50%) from foreign operations,
subscription rights, warrants, futures contracts, and forward foreign currency
exchange contracts. Ordinarily, the Fund will invest at least 80% of its assets
in these securities but no less than 65% in international securities.
Risks. A loss of invested assets could occur due to certain risks. These
include:
. correlation risk . foreign risk . liquidity risk
. currency risk . futures risk . market risk
. emerging markets risk . hedging risk . non-diversification risk
A description of these risks is provided in the section below entitled General
Risks.
4 TIP Prospectus
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Risk Return Analysis -- Fund Descriptions
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TIFF Emerging Markets Fund
Investment Objective. The Fund's investment objective is to attain a growing
stream of current income and appreciation of principal that at least offsets
inflation as measured by the US Consumer Price Index.
Investment Strategies. The Fund seeks to outperform its performance benchmark
(defined below) primarily through two key investment strategies:
1 -- Active Security Selection within Countries. The Fund retains Money
Managers it believes can select securities that will outperform the securities
of a given country.
2 -- Country Allocation. The Fund retains Money Managers that can potentially
enhance the Fund's returns by rotating Fund assets among various countries in a
timely manner.
The Money Managers use an array of investment philosophies, ranging from bottom-
up to top-down approaches, value orientation, and investing in discounted
closed-end funds. For a more complete description of FAI's process of selecting
Money Managers, please see the section below entitled Management and
Administration of the Funds -- Money Managers. For a more complete description
of the Money Managers and their investment philosophies, please refer to
Appendix A.
Performance Benchmark. The Fund seeks to attain a total return that exceeds
the net total return (after withholding taxes) of the Morgan Stanley Capital
International Emerging Markets Free Stock Index by 1.00%, net of all expenses,
on an annualized basis over a market cycle.
Investment Universe. Emerging markets include any countries having an
"emerging stock market" as defined by Morgan Stanley Capital International, with
low- to middle-income economies according to the World Bank, or listed in World
Bank publications as developing. In order to exploit circumstances in which
the Fund's Money Managers believe that securities traded primarily in developed
markets are more attractively priced than securities traded primarily in
emerging markets, the Fund may invest in these developed markets. The Fund may
also invest in securities of US companies which derive, or are expected to
derive, a significant portion of their revenues from their foreign operations.
Under normal circumstances, up to 30% of the Fund's assets may be invested in
developed market securities and up to 15% of the Fund's assets may be invested
in securities issued by US companies.
Principal Investments. The types of securities the Fund will hold include
non-US common stocks (including depositary receipts), securities convertible
into common stocks, securities of investment companies and other commingled
investment vehicles, securities of US companies that derive a significant
portion of revenues from foreign operations, subscription rights, warrants,
futures contracts, and forward foreign currency exchange contracts. Ordinarily,
the Fund will invest at least 80% of its assets in these securities but no less
than 65% in emerging market securities.
Risks. A loss of invested assets could occur due to certain risks. These
include:
. correlation risk . foreign risk . liquidity risk
. currency risk . futures risk . market risk
. emerging markets risk . hedging risk . non-diversification risk
A description of these risks is provided in the section below entitled General
Risks.
April 28, 2000 5
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Risk Return Analysis -- Fund Descriptions
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TIFF US Equity Fund
Investment Objective. The Fund's investment objective is to attain a growing
stream of current income and appreciation of principal that at least offsets
inflation as measured by the US Consumer Price Index.
Investment Strategies. The Fund seeks to outperform its performance benchmark
(defined below) primarily through two key investment strategies:
1 -- Active Security Selection. The Fund retains Money Managers it believes
can select securities that will outperform the securities of a given sector.
2 -- Sector Allocation. The Fund retains Money Managers that can potentially
enhance the Fund's returns by rotating Fund assets among various industry and
economic sectors in a timely manner.
The Money Managers use an array of investment philosophies, which include
actively managing risk, trading in small publicly traded stocks, and investing
in value-oriented securities. For a more complete description of FAI's process
of selecting Money Managers, please see the section below entitled Management
and Administration of the Funds -- Money Managers. For a more complete
description of the Money Managers and their investment philosophies, please
refer to Appendix A.
Performance Benchmark. The Fund seeks to attain a total return exceeding
the total return of the Wilshire 5000 Stock Index by 1.25%, 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, up to 15% of the Fund's assets may be invested in common stocks
of foreign issuers.
Principal Investments. The types of securities the Fund will hold include
US and foreign common stocks (including depositary receipts), securities
convertible into common stocks, securities of investment companies and other
commingled investment vehicles, subscription rights, warrants, and futures
contracts. Ordinarily, the Fund will invest at least 80% of its assets in these
securities but no less than 65% in US securities.
Risks. A loss of invested assets could occur due to certain risks. These
include:
. correlation risk . foreign risk . market risk
. credit risk . hedging risk . non-diversification risk
. futures risk . liquidity risk
A description of these risks is provided in the section below entitled General
Risks.
6 TIP Prospectus
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Risk Return Analysis -- Fund Descriptions
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TIFF Bond Fund
Investment Objective. The Fund's investment objective is to attain a high rate
of current income, subject to restrictions designed to ensure liquidity and
manage exposure to interest rate and credit risk and to provide a hedge against
deflation-induced declines in common stock prices and dividend streams.
Investment Strategies. The Fund seeks to outperform its performance benchmark
(the Lehman Brothers Aggregate Bond Index) through the use of duration, quality,
and interest rate management, dollar roll transactions, hedging, repurchase and
reverse repurchase agreements, and short sales. The Fund's maturity and
duration will typically range between 80% and 120% of that of its performance
benchmark. The Money Managers use an array of investment philosophies,
including duration exposure, maturity selection, sector allocation, and credit
analysis. Duration measures the expected life of a debt security on a present
value basis. For a more complete description of FAI's process of selecting
Money Managers, please see the section below entitled Management and
Administration of the Funds -- Money Managers. For a more complete description
of the Money Managers and their investment philosophies, please refer to
Appendix A.
Performance Benchmark. The Fund seeks to outperform the Lehman Brothers
Aggregate Bond Index by 0.50%, net of all expenses, on an annualized basis over
a market cycle.
Investment Universe. The Fund will invest broadly in the available universe
of debt securities. Under normal circumstances, up to 40% of the Fund's assets
may be invested in non-dollar denominated securities and up to 30% of the Fund's
assets may be exposed to foreign currency exchange risk (i.e., invested in non-
dollar denominated securities on an unhedged basis). The Fund may own debt
securities of all grades, including both rated and unrated securities, provided,
however, that not more than 10% of its assets may be invested in securities that
are rated below investment grade (i.e., BBB by Standard & Poors Corporation or
Baa by Moody's Investors Service, Inc.). (See the Statement of Additional
Information for quality rating descriptions.)
Principal Investments. The Fund will invest primarily in US and non-US
debt securities, including:
. securities issued or guaranteed by the US Government and its agencies
or instrumentalities;
. obligations of domestic or foreign corporations or other entities;
. obligations of domestic or foreign banks;
. mortgage- and asset-backed securities; and
. short-term securities such as time deposits, certificates of deposit
(including marketable variable rate certificates of deposit), and
bankers' acceptances issued by a commercial bank or savings and loan
association.
Ordinarily, the Fund will invest at least 80% of its assets in these securities.
Risks. A loss of invested assets could occur due to certain risks. These
include:
. correlation risk . foreign risk . liquidity risk
. credit risk . hedging risk . market risk
. futures risk . interest rate risk . non-diversification risk
. prepayment risk
A description of these risks is provided in the section below entitled General
Risks.
April 28, 2000 7
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Risk Return Analysis -- Fund Descriptions
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TIFF Short-Term Fund
Investment Objective. The Fund's investment objective is to attain a high rate
of current income, subject to restrictions designed to ensure that the Fund's
interest rate risk does not exceed the interest rate risk of a portfolio
invested exclusively in six-month US Treasury securities on a constant maturity
basis.
Investment Strategies. The Fund seeks to outperform its performance benchmark
(defined below) through the use of duration, quality, and interest rate
management, dollar roll transactions, hedging, repurchase and reverse repurchase
agreements. The Money Managers use various investment philosophies, such as
duration exposure, maturity selection, sector allocation, and credit analysis.
For a more complete description of FAI's process of selecting Money Managers,
please see the section below entitled Management and Administration of the Funds
- -- Money Managers. For a more complete description of the Money Managers and
their investment philosophies, please refer to Appendix A.
Performance Benchmark. The Fund seeks to outperform the Merrill Lynch 182-
day Treasury bill Index, net of all expenses.
Principal Investments. The Fund will invest primarily in short-term (i.e.,
maturity of one year or less) US and non-US debt securities, including:
. securities issued or guaranteed by the US Government and its agencies
or instrumentalities;
. obligations issued or guaranteed by a foreign government, or any of
its political subdivisions, authorities, agencies, or
instrumentalities or by supranational organizations;
. obligations of domestic or foreign corporations or other entities;
. obligations of domestic or foreign banks;
. mortgage- and asset-backed securities; and
. short-term securities such as time deposits, certificates of deposit
(including marketable variable rate certificates of deposit), and
bankers' acceptances issued by a commercial bank or savings and loan
association.
Ordinarily, the Fund will invest at least 80% of its assets in investment-grade
securities.
Risks. A loss of invested assets could occur due to certain risks. These
include:
. correlation risk . foreign risk . liquidity risk
. credit risk . hedging risk . market risk
. futures risk . interest rate risk . non-diversification risk
. prepayment risk
A description of these risks is provided in the section below entitled General
Risks.
8 TIP Prospectus
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Risk Return Analysis -- General Risks
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Risks. Investment in any mutual fund has inherent risks. There can be no
assurance that the investment objectives of a fund will be realized or that a
fund's portfolio will not decline in value. Economic conditions change and
stock markets are volatile. If the investment advisor to a fund judges market
conditions incorrectly, the fund's portfolio may decline in value and an
investor could lose money. Prospective members should consider their own risk
tolerance, investment goals, and investment timeframe before committing assets
to the TIFF mutual funds. General risks associated with the funds' investment
policies and investment strategies are as follows:
Correlation Risk. The value of a particular derivative instrument may not move
in the same magnitude or direction as its related security.
Credit Risk. A security issuer or counterparty to a contract may default or
otherwise become less likely to honor a financial obligation.
Currency Risk. Fluctuations in exchange rates between the US dollar and foreign
currencies may negatively affect an investment. When hedges are used, the net
exposure of a fund to a currency may be different from that of its total assets
denominated in such currency.
Emerging Markets Risk. Emerging market countries can have relatively unstable
governments, may be highly vulnerable to changes in local or global trade
conditions, or may suffer from volatile debt burdens or inflation rates. As a
result, such securities can be especially volatile and unpredictable.
Foreign Risk. Historically, non-US developed markets are not as unpredictable
as emerging markets, but they can still pose significant risks, including
inadequate financial information and regulation, excessive taxation, and
political instability.
Futures Risk. The primary risks of using futures are related to the Money
Managers' ability to anticipate correctly the direction of movements in interest
rates, securities prices, and foreign currency exchange rates, and the imperfect
correlation between the price of futures contracts and movements in the prices
of the securities being hedged.
Hedging Risk. Hedging involves risks of imperfect correlation in price movements
of the hedge and movements in the price of the hedged security. If interest or
currency exchange rates do not move in the direction of the hedge, the Fund will
be in a worse position than if hedging had not been employed. The variable
degree of correlation between price movements of futures contracts and price
movements of the related security creates the possibility that losses could be
greater than gains.
Interest Rate Risk. Bond prices typically fluctuate due to changing interest
rates. As a rule, bond prices vary inversely with market interest rates. For a
given change in interest rates, longer duration bonds usually fluctuate more in
price than shorter duration bonds.
Liquidity Risk. Certain securities may be difficult or impossible to purchase,
sell, or convert to cash quickly at favorable prices.
April 28, 2000 9
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Risk Return Analysis -- General Risks continued
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Market Risk. The market value of a security may increase or decrease over time.
Such fluctuations can cause a security to be worth less than the price
originally paid for it or less than it was worth at an earlier time. Market
risk may affect a single issue, an entire industry, or the market as a whole.
Non-Diversification Risk. A portfolio is diversified when it spreads investment
risk by placing assets in several investment categories. A fund may invest in a
smaller number of individual issuers than a diversified investment company.
Accordingly, its risk may be higher if a particular investment category suffers
from adverse market conditions.
Non-Diversified Status. Each fund is classified as a "non-diversified"
investment company under the Investment Company Act of 1940, as amended (the
"Investment Company Act of 1940"), as to the proportion of its assets that may
be invested in the securities of a single issuer. Because it may invest in a
smaller number of individual issuers than a diversified company, a fund may be
riskier than a diversified investment company. However, each fund intends to
abide by certain diversification requirements of the Internal Revenue Code in
order to qualify as a regulated investment company. See the section entitled
Tax Considerations in the Statement of Additional Information.
Prepayment Risk. Mortgage-backed, asset-backed, and certain other fixed income
securities bear the risk of faster or slower than expected prepayment of
principal, which affects the duration and return of the security and
reinvestment opportunities.
10 TIP Prospectus
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Risk Return Analysis -- Performance Charts
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These charts are intended to show the risk that a member's returns may vary from
year to year. Total return includes the effects of entry and exit fees received
by the funds; however, net asset value per share at the beginning and end of
each period used for calculating total return excludes such entry and exit fees.
The funds' past performance does not necessarily indicate how the funds will
perform in the future.
<TABLE>
<S> <C>
TIFF Multi-Asset Fund
During the 4-year period shown in the bar chart at right, the highest quarterly [BAR CHART]
return was 10.00% (quarter ended 12/31/1999) and the lowest quarterly return was TIFF Multi-Asset Fund Total Return
- -11.56% (quarter ended 9/30/1998). 1996 1997 1998 1999
14.72% 5.51% 0.22% 22.65%
TIFF International Equity Fund
During the 5-year period shown in the bar chart at right, the highest quarterly [BAR CHART]
return was 17.50% (quarter ended 12/31/1999) and the lowest quarterly return was TIFF International Equity Fund Total Return
- -18.82% (quarter ended 9/30/1998). 1995 1996 1997 1998 1999
9.85% 15.94% 0.91% 3.03% 37.40%
TIFF Emerging Markets Fund
During the 5-year period shown in the bar chart at right, the highest quarterly [BAR CHART]
return was 30.86% (quarter ended 12/31/1999) and the lowest quarterly return was TIFF Emerging Markets Fund Total Return
- -28.93% (quarter ended 9/30/1998). 1995 1996 1997 1998 1999
(8.39%) 2.51% (0.40%) (33.38%) 75.49%
TIFF US Equity Fund
During the 5-year period shown in the bar chart at right, the highest quarterly [BAR CHART]
return was 20.77% (quarter ended 12/31/1998) and the lowest quarterly return was TIFF US Equity Fund Total Return
- -17.68% (quarter ended 9/30/1998). 1995 1996 1997 1998 1999
36.02% 21.91% 33.01% 11.85% 18.89%
TIFF Bond Fund
During the 5-year period shown in the bar chart at right, the highest quarterly [BAR CHART]
return was 6.12% (quarter ended 6/30/1995) and the lowest quarterly return was - TIFF Bond Fund Total Return
1.73% (quarter ended 3/31/1996). 1995 1996 1997 1998 1999
18.07% 3.75% 9.35% 7.31% (0.45%)
TIFF Short-Term Fund
During the 5-year period shown in the bar chart at right, the highest quarterly [BAR CHART]
return was 1.78% (quarter ended 6/30/1995) and the lowest quarterly return was TIFF Short-Term Fund Total Return
1.09% (quarter ended 12/31/1998). 1995 1996 1997 1998 1999
6.43% 5.28% 5.30% 5.59% 4.93%
</TABLE>
April 28, 2000 11
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Risk Return Analysis --Performance Table
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The table below illustrates the changes in each of the TIFF mutual funds' yearly
performance and shows how each fund's average returns for 1 year, 5 years, and
since fund inception compare with selected benchmarks. Note that past
performance is not necessarily an indication of how the funds will perform in
the future.
<TABLE>
<CAPTION>
Average Annual Total Return
through 12/31/1999
1 5 Since Fund
Year Years Inception Inception
<S> <C> <C> <C> <C>
TIFF Multi-Asset Fund 22.65% NA 11.74% 3/31/1995
CPI + 5% per annum 7.94% 7.45%
Constructed MAF Benchmark* 17.33% 14.32%
MSCI All Country World Free Index** 26.82% 19.39%
TIFF International Equity
Fund 37.40% 12.70% 11.51% 5/31/1994
MSCI All Country World Free ex US Index 30.91% 12.02% 10.91%
TIFF Emerging Markets Fund 75.49% 1.80% 0.31% 5/31/1994
MSCI Emerging Markets Free Index 63.70% -0.13% -0.16%
TIFF US Equity Fund 18.89% 24.03% 21.99% 5/31/1994
Wilshire 5000 Stock Index 23.56% 27.05% 24.30%
TIFF Bond Fund -0.45% 7.46% 6.74% 5/31/1994
Lehman Aggregate Bond Index -0.83% 7.73% 7.04%
TIFF Short-Term Fund 4.93% 5.53% 5.50% 5/31/1994
Merrill Lynch 182-day Treasury bill Index 4.63% 5.52% 5.44%
</TABLE>
* The Constructed MAF Benchmark consists of the following indices in the
indicated weights:
<TABLE>
<CAPTION>
Weight in
Constructed
Asset Class Benchmark Benchmark
<S> <C> <C>
US Stocks 25% Wilshire 5000 Stock Index
Foreign Stocks 25% MSCI All Country World Free ex US Index
Absolute Return Strategies 20% 3-month Treasury bills plus 5% per annum
Resource-Related Stocks 5% Resource-related sectors of MSCI World Index
75% Energy Services
20% Metals and Mining
5% Paper and Forest Products
Inflation-Linked Bonds 5% 10-year US Treasury Inflation Protected Security
US Bonds 20% Lehman Aggregate Bond Index
</TABLE>
Note: The Constructed MAF Benchmark has changed twice since the TIFF Multi-Asset
Fund's inception in order to more accurately reflect the Fund's composition. On
January 1, 1998, the Foreign Stock segment was reduced from 30% to 25% of the
benchmark and the Absolute Return segment was increased from 15% to 20%. On
October 1, 1999, the Resource-Related segment was reduced from 10% to 5%,
Foreign Bonds were eliminated, US Bonds increased from 15% to 20%, and
Inflation-Linked Bonds were added to the benchmark at a 5% weight.
** Please note that this Index is 100% stocks whereas the TIFF Multi-Asset Fund
normally comprises only 55% stocks. The MSCI All Country World Free Index is
included here solely to comply with SEC regulations.
12 TIP Prospectus
<PAGE>
Fees and Annual Operating Expenses
This table describes the fees and expenses that a member pays when buying or
holding shares of a fund.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Shareholder Fees
(paid directly from the shareholder's
investment) Multi-Asset International Equity Emerging Markets US Equity Bond Short-Term
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales Loads None None None None None None
- -------------------------------------------------------------------------------------------------------------------------------
Transaction Charges Paid to Funds (as
percentage of purchase or redemption
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)
. Management Fees [b] 0.32% 0.68% 1.03% 0.50% 0.24% 0.23%
. Other Expenses [c] 0.25% 0.32% 0.70% 0.17% 0.24% 0.22%
- -------------------------------------------------------------------------------------------------------------------------------
Total Annual Operating Expenses 0.57% 1.00% 1.73% 0.67% 0.48% 0.45%[d]
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[a] Entry and Exit Fees of Equity Funds. While the funds are no load and do
not charge sales commissions, all funds except the Bond and Short-Term Funds
assess entry and exit fees as set forth in the above table. The reasons for
these fees are described in detail in the section entitled Purchases and
Redemptions.
[b] Management Fees. The Management Fees listed above include advisory fees
and fees of those Money Managers that manage separate accounts on behalf of a
fund. Many of the Money Managers are on performance-based fee schedules and
therefore these fees will vary over time depending on the performance of the
funds. For further discussion of Money Manager fees, please see the section of
the Statement of Additional Information entitled Performance-Based Fees for
Money Managers.
[c] Other Expenses. This category includes administration fees, custody fees,
legal, audit, and other miscellaneous fund expenses.
[d] Fee Waiver. Because FAI waived all of its management fee and the Money
Manager waived a portion of its fee, total annual operating expenses were 0.35%
for the fiscal year ended December 31, 1999.
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, that the
fund's operating expenses remain the same, and that all dividends and
distributions are reinvested. Entry fees are reflected in both scenarios and
exit fees are reflected in the rows labeled "With redemption at end of period."
Actual costs may be higher or lower.
Expenses per $10,000 Investment
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Multi- International Emerging US
Asset Equity Markets Equity Bond Short-Term
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Year
With redemption at end of period $211 $ 254 $ 376 $119 $ 49 $ 46
No redemption at end of period $133 $ 176 $ 274 $ 93 $ 49 $ 46
- --------------------------------------------------------------------------------------------------------
3 Years
With redemption at end of period $341 $ 475 $ 749 $267 $154 $144
No redemption at end of period $256 $ 391 $ 639 $239 $154 $144
- --------------------------------------------------------------------------------------------------------
5 Years
With redemption at end of period $483 $ 714 $1,145 $428 $269 $252
No redemption at end of period $391 $ 623 $1,029 $397 $269 $252
- --------------------------------------------------------------------------------------------------------
10 Years
With redemption at end of period $898 $1,401 $2,257 $896 $604 $567
No redemption at end of period $783 $1,290 $2,121 $857 $604 $567
- --------------------------------------------------------------------------------------------------------
</TABLE>
April 28, 2000 13
<PAGE>
- --------------------------------------------------------------------------------
Eligible Investors
- --------------------------------------------------------------------------------
Asset Size. The TIFF mutual funds are available only to organizations meeting
the eligibility criteria set forth below. Because of the nature of certain
investments made by the Multi-Asset, International Equity, and Emerging Markets
Funds, shares of these funds are available only to organizations that invest at
least $750,000 in TIP or whose endowment assets exceed $1.5 million.
Organizations wishing to confirm their eligibility should contact FAI.
Eligibility Criteria. The TIFF mutual funds are open to:
. Organizations operated exclusively for charitable purposes, no part of the
net earnings of which inures to the benefit of any private individual or
corporation;
. Organizations that qualify for exemption from federal income taxes under
Section 501(c)(3) of the Internal Revenue Code of 1986, as amended;
. Non-US-based charitable organizations that have received 501(c)(3)
equivalency certificates from the Internal Revenue Service;
. Planned giving or split interest assets of eligible organizations where at
least part of the income or principal of such assets is owned irrevocably
by the eligible organization and the organization has legal control over
the securities or vehicles in which such assets are invested;
. Retirement plans maintained for the employees of organizations meeting the
above eligibility criteria; and
. FAI employees.
- --------------------------------------------------------------------------------
Management and Administration of the Funds
- --------------------------------------------------------------------------------
TIFF The Investment Fund for Foundations, a not-for-profit membership
organization dedicated to enhancing foundations' investment returns
TIP TIFF Investment Program, a family of no-load mutual funds offered
exclusively to 501(c)(3) organizations
FAI Foundation Advisers, Inc., the investment advisor of the TIFF mutual
funds, taxable but operated on a not-for-profit basis
The Cooperative. The TIFF Investment Program, Inc. ("TIP") seeks to improve the
net investment returns of its members by making available to them a series of
investment funds. Each fund has its own investment objective and policies. The
funds are advised by Foundation Advisers, Inc. ("FAI"). TIP and FAI were
organized by The Investment Fund for Foundations ("TIFF"). TIFF is a tax-
exempt, not-for-profit, member-controlled organization dedicated to enhancing
foundations' investment returns. Although certain members of TIFF's board of
trustees serve as directors of TIP and FAI, TIFF does not exercise control over
TIP. The directors of TIP are elected by the members of the funds. FAI is a
director-controlled corporation, and a majority of its directors are not
affiliated persons or interested persons of TIFF as those terms are defined in
the Investment Company Act of 1940.
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.
14 TIP Prospectus
<PAGE>
- --------------------------------------------------------------------------------
Management and Administration of the Funds continued
- --------------------------------------------------------------------------------
Selection Process. Initial members of the boards of FAI and TIP were selected
by TIFF's board of trustees. TIP's directors are elected by the funds' members
(see Member Voting Rights and Procedures in the Statement of Additional
Information). FAI's directors are elected according to procedures designed to
ensure that FAI's directors, officers, and employees remain responsive to
members' needs.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
TIP FAI
-------------------------- ------------------------------
Directors Officers Directors Officers
<S> <C> <C> <C> <C>
Unpaid Directors
Sheryl L. Johns Chair
William F. Nichols* Director Director
Fred B. Renwick Director
John E. Craig, Jr. Director
Gregory D. Curtis Chair
Alice W. Handy Director
Robert A. Kasdin Director
William McLean Director
Jack R. Meyer Director
Ann B. Sloane Director
David F. Swensen Director
Jeffrey Tarrant Director
Arthur Williams III Director
Officers and Paid
Directors
David A. Salem* Director President Director President
Esther L. Cash Vice Pres/Sec Managing Director
Thomas N. Felker Vice President Managing Director
Nina F. Scherago Vice President Managing Director
Meredith A. Shuwall Vice President Managing Director
William E. Vastardis Treasurer
- -----------------------------------------------------------------------------------------------------
</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, is a member of the Investment Committee of the Social
Science Research Council, and is a member of the board of the Greenwall
Foundation and the Picker Institute. He is chair of the board of The Investment
Fund for Foundations.
Gregory D. Curtis is president of Greycourt & Co., Inc., 607 College Street,
Pittsburgh, PA, 15232, an investment consulting firm. Mr. Curtis was formerly
president of the Laurel Foundation and C.S. May Associates, a private family
office. He is a trustee of the Center for the Study of Community, the
Contemporary Arts Stabilization Trust, and St. John's College.
Alice W. Handy is president of the University of Virginia Investment Management
Company, P.O. Box 400215, Charlottesville, VA, 22904, which has endowment and
trust assets exceeding $1.7 billion. Ms. Handy was formerly treasurer of the
Commonwealth of Virginia. She chairs the Investment Advisory Committee of the
Virginia Retirement System and is a member of the advisory board of First Union
Bank of Virginia.
April 28, 2000 15
<PAGE>
- --------------------------------------------------------------------------------
Management and Administration of the Funds continued
- --------------------------------------------------------------------------------
Sheryl L. Johns is vice president, treasurer, and chief financial officer of
Houston Endowment Inc., 600 Travis, Suite 6400, Houston, TX, 77002, a private
foundation with assets exceeding $1 billion. She was formerly a manager with
the accounting firm of Ernst & Young. Ms. Johns is a Certified Management
Accountant as well as a Certified Public Accountant. She is a member of the
board of directors of the Conference of Southwest Foundations, a member of the
steering committee of the Foundation Financial Officers Group, a trustee of The
Investment Fund for Foundations, and chair of the TIFF Investment Program, Inc.
Robert A. Kasdin is executive vice president and chief financial officer of the
University of Michigan, 3014 Fleming Administration Building, 503 Thompson
Street, Ann Arbor, MI, 48109, where he, among other responsibilities, oversees
an endowment of $3 billion. 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 former
member of the Finance Committee of the Rockefeller Brothers Fund and a current
member of the board of directors of the Institute for Ecosystem Studies.
William H. McLean is senior managing director of asset and investment management
of the John D. and Catherine T. MacArthur Foundation, Suite 1100, 140 South
Dearborn Street, Chicago, IL, 60603, a private foundation with assets exceeding
$4 billion. He was formerly an investment officer at The Duke Endowment.
Jack R. Meyer is president and chief executive officer of Harvard Management
Company, 600 Atlantic Avenue, 15th Floor, Boston, MA, 02110, the endowment
management subsidiary of Harvard University, which has endowment, pension, and
trust assets exceeding $16 billion. Mr. Meyer was formerly treasurer and chief
investment officer of the Rockefeller Foundation, deputy comptroller of New York
City, and a director of the Investor Responsibility Research Center.
William F. Nichols is treasurer of the William and Flora Hewlett Foundation, 525
Middlefield Road #200, Menlo Park, CA, 94025, which has assets of $2.9 billion.
He is also a director of the Lucile Packard Foundation for Children's Health 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 Foundation. He was formerly vice chair of the Board of Pensions of the
Evangelical Lutheran Church in America.
Ann Brownell Sloane is president of Sloane & Hinshaw, 67A East 77th 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
recently completed 20 years of service on 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.
16 TIP Prospectus
<PAGE>
- --------------------------------------------------------------------------------
Management and Administration of the Funds continued
- --------------------------------------------------------------------------------
Jeffrey Tarrant is president of Arista Group, Inc., One Rockefeller Plaza, Suite
1010 New York, NY, 10020, an investment advisory firm advising the Sidney Kimmel
Foundation and the Kimmel family private portfolio. He is also the founder of
Altvest, an Internet Website for alternative investments. He was formerly
president of Thurn und Taxis of America, Inc. and manager of the Thurn und Taxis
family capital portfolio (Regensburg, Germany).
Arthur Williams III is president of Pine Grove Associates, Inc., 350 Springfield
Avenue, Summit, NJ, 07901, an asset management and consulting firm providing
services to high net worth institutions and families. He is former director of
retirement plan investments and other investment programs for McKinsey &
Company, Inc. He is the author of Managing Your Investment Manager and a member
of the Nominating Committee of the Institute for Quantitative Research in
Finance. He also serves as trustee for a number of families.
Biographies of Officers
Esther L. Cash is managing director of The Investment Fund for Foundations and
Foundation Advisers, Inc., 2405 Ivy Road, Charlottesville, VA, 22903. Prior to
joining TIFF, Ms. Cash was employed by Grantham, Mayo, Van Otterloo & Co.
("GMO"), where her responsibilities included operations, investment research,
asset allocation, regulatory compliance, and communications for GMO's
institutional mutual funds. Prior to joining GMO, she was employed by Cambridge
Associates, Inc., where she was involved in systems design, research, and
consulting.
Thomas N. Felker is managing director of The Investment Fund for Foundations and
Foundation Advisers, Inc., 2405 Ivy Road, Charlottesville, VA, 22903. Prior to
joining TIFF, Mr. Felker was head of pension investments for Fort James
Corporation, where his responsibilities included formulating investment policy
and evaluating money managers. Prior to joining Fort James, Mr. Felker was a
tax manager and auditor at Ernst & Young. He is a Certified Public Accountant
and a CFA charterholder.
David A. Salem is president and chief executive officer of The Investment Fund
for Foundations and Foundation Advisers, Inc., 2405 Ivy Road, Charlottesville,
VA, 22903. Prior to assuming TIFF's presidency in 1993, Mr. Salem was a partner
in the Boston-based investment advisory firm Grantham, Mayo, Van Otterloo & Co.,
where his responsibilities included asset allocation and strategic planning.
Prior to joining GMO, Mr. Salem was a managing director of Cambridge Associates,
Inc., which provides investment and financial planning services primarily to
not-for-profit endowed institutions. He has served on the faculties of
Middlebury College and the University of Virginia and in the Office of the
Counsel to the President of the United States. Mr. Salem is a trustee of the
Core Knowledge Foundation and is former co-chair of the Cabinet of the Thomas
Jefferson Memorial Foundation (Monticello).
Nina F. Scherago is managing director of The Investment Fund for Foundations and
Foundation Advisers, Inc., 2405 Ivy Road, Charlottesville, VA, 22903. Prior to
joining TIFF, Ms. Scherago was director of private investments of the Howard
Hughes Medical Institute, where she oversaw a private investment portfolio of
approximately $1.2 billion. Prior to joining Howard Hughes, Ms. Scherago was
with the investment banking firm of Alex. Brown & Sons. She is a CFA
charterholder.
Meredith A. Shuwall is managing director of The Investment Fund for Foundations
and Foundation Advisers, Inc., 2405 Ivy Road, Charlottesville, VA, 22903. Prior
to joining TIFF, Ms. Shuwall was a vice president at Vrolyk & Company, where her
responsibilities included providing financial advisory and merger and
acquisition services for private companies. Prior to joining Vrolyk, Ms.
Shuwall was an associate at Onyx Partners, Inc., where she managed an
opportunistic real estate fund.
April 28, 2000 17
<PAGE>
- --------------------------------------------------------------------------------
Management and Administration of the Funds continued
- --------------------------------------------------------------------------------
William E. Vastardis is managing director of fund administration of Investors
Capital Services, Inc. ("Investors Capital"), 600 Fifth Avenue, 26th Floor, New
York, NY, 10020. Prior to joining Investors Capital, Mr. Vastardis served as
vice president and head of the private label mutual fund administration division
of the Vanguard Group, Inc. (1984-92) and in Vanguard's fund accounting
operations (1978-84). The Vanguard Group, headquartered in Malvern, PA, is the
second largest mutual fund family in the US.
Remuneration of Directors and Officers; Reimbursement of Expenses. The
following individuals receive remuneration for their services as directors or
officers of TIP or FAI: Ms. Cash, 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. Mr. Vastardis is a paid employee of Investors Capital and receives no
compensation directly from FAI or TIP. FAI and TIP directors may be reimbursed
for their out-of-pocket expenses associated with attending board meetings.
The Advisor. FAI, with principal offices at 2405 Ivy Road, Charlottesville, VA,
22903, is a non-exempt membership corporation that serves as the advisor 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 Investment Company Act of 1940) of FAI. This fact 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 the
funds' assets; and
3. invests funds held in the form of cash reserves pending allocation to Money
Managers or to meet redemption requests.
Money Managers
Multi-Manager Structure. With the exception of the Short-Term Fund, each fund
employs multiple Money Managers. FAI seeks to facilitate the attainment of each
fund's investment and performance objectives by allocating a portion of a fund's
assets to a number of Money Managers. Each Money Manager specializes in a
particular market sector and utilizes a particular investment style.
Discretion Afforded Money Managers. Each Money Manager has discretion to
purchase and sell securities for its allocated portion of a fund's assets,
subject to written investment objectives, policies, and restrictions. For
separate accounts, these guidelines are developed by TIP's board of directors
and FAI; for Money Managers that manage a fund's assets as 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.
18 TIP Prospectus
<PAGE>
- --------------------------------------------------------------------------------
Management and Administration of the Funds continued
- --------------------------------------------------------------------------------
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 in Appendix
A. FAI is responsible for identifying qualified Money Managers and (in the case
of separate account Money Managers) 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.
Manager Selection Criteria. In selecting Money Managers, FAI weighs a number of
relevant factors and makes its selection based on a comparison of all such
factors. FAI reviews the historical investment results of a universe of Money
Managers, evaluates written information about these money managers supplied by
the Money Managers and outside parties, and conducts face-to-face interviews
with the individuals who would actually manage money for TIP should their firms
be employed by it. Each of the Disqualifying Attributes noted below constitutes
a sufficient ground for rejection or dismissal of a Money Manager displaying it.
The factors considered by FAI in selecting the funds' current Money Managers and
in considering the selection of other Money Managers include:
Important Attributes
. A well-defined investment philosophy that gives the manager a
discernible competitive advantage in the gathering or processing of
investment data
. A verifiable record that the firm has faithfully executed this
philosophy over time
. A proven capacity to deliver reasonably uniform results to all clients'
assets to which this philosophy is applied
. A reasonable amount of assets under management to which this philosophy
is applied
. Satisfactory returns versus relevant benchmark indices
. A proven capacity to adapt to changes in financial markets
. A proven willingness to invest adequately in its own business (including
technological resources) in light of such changes
. Investment professionals who have strong personal incentives (both
financial and psychological) to produce satisfactory results for their
clients
Helpful Attributes
. Money management is the firm's sole (preferably) or primary line of
business
. The firm's decisionmakers are seasoned professionals or the firm's
philosophy is unusually innovative (preferably both)
. The firm is willing to use performance-based fee arrangements as an
expression of confidence in its own abilities
. The firm complies fully with the Performance Presentation Standards of
the Association for Investment Management and Research
Undesirable Attributes
. A high degree of personnel turnover
. Insufficiently trained administrative personnel
. Insufficiently robust investment accounting systems
. Investment decisionmakers who are unduly burdened with administrative
tasks
. An unwillingness to specify asset size limits for products or services
that require such limits
April 28, 2000 19
<PAGE>
- --------------------------------------------------------------------------------
Management and Administration of the Funds continued
- --------------------------------------------------------------------------------
Disqualifying Attributes
. Investment decisionmakers who are engaged primarily in brokerage or
financial planning (as distinct from portfolio management)
. An inability to meet performance reporting deadlines
. Relevant criminal convictions or sanctions by the SEC or other federal
or state regulatory agencies
Other Considerations. When evaluating persons who might potentially manage
money for TIP, FAI's directors consider carefully the financial viability and
stability of the firms with which they are associated, but they do not assume
that the age (or size) of an investment management organization and the quality
of its services are always positively correlated. Indeed, if properly
structured and managed, a newly established investment management organization
has the potential to deliver superior services to its clients or members at a
lower cost than competing suppliers precisely because its human and
technological resources have been assembled recently: technology is evolving so
rapidly that organizations structured and equipped specifically to compete under
current, as distinct from past, market conditions often have a discernible edge;
provided, of course, that the persons leading them are sufficiently skilled and
experienced.
Money Manager Agreements. In order to preserve the flexibility needed to
respond to changes in TIP's operating environment, the Agreements between TIP
and each Money Manager do not specify the percentage of a fund's assets to be
allocated to the Money Manager. Members and prospective members seeking to know
the actual allocation of each fund's assets across Money Managers at a given
time can obtain this information by contacting FAI.
<TABLE>
<CAPTION>
Multi- International Emerging US Short-
Asset Equity Markets Equity Bond Term
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Management Fees Paid to FAI and Money
Managers for Fiscal Year Ended 12/31/99 0.32% 0.68% 1.03% 0.50% 0.24% 0.23%*
- ---------------------------------------------------------------------------------------------------------
</TABLE>
*As a result of waivers of all of FAI's advisory fee and a portion of the Money
Manager's management fee, the actual management fee paid by the Short-Term Fund
for the fiscal year ended December 31, 1999 was 0.13%.
- --------------------------------------------------------------------------------
Investment Objectives, Policies, and Restrictions
- --------------------------------------------------------------------------------
Overview. Each fund's investment objective and certain investment policies and
restrictions are fundamental, which means that they may be changed only with the
approval of the fund's members holding a majority of that fund's outstanding
voting securities. Other investment policies and restrictions may be changed by
the funds' board of directors without member approval. There can be no
assurance a fund will attain its Investment Objective.
Performance Goals. Performance benchmarks and certain other fund policies are
not fundamental and may be changed without member approval upon notice to
members. A fund's performance benchmark serves to monitor its success over a
full market cycle (for these purposes, a market cycle is defined as the period
from the peak of one rising market to the peak of the next rising market, or the
corresponding troughs of falling markets). The performance of each fund, when
compared to its specified benchmark, can be expected to vary from year to year.
The funds attempt to attain their performance goals over a combination of rising
and falling markets, not during a single rising or falling market or a defined
time period (such as one year).
20 TIP Prospectus
<PAGE>
- --------------------------------------------------------------------------------
Purchases and Redemptions
- --------------------------------------------------------------------------------
Account Application. An Account Application must be completed and submitted by
each TIP investor. Accompanying the completed application, members must also
submit a copy of proof of their tax exempt status from the IRS. Organizations
admitted as members of TIP that are subsequently determined to be ineligible
will be asked to redeem all shares that they hold in all TIFF mutual 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 Company, as of the end of regular trading hours of the New York Stock
Exchange (currently 4:00 p.m. Eastern time) on the days that the New York Stock
Exchange, the Federal Reserve Bank of New York, the Distributor, the
Administrator, the Transfer Agent, and the Custodian are all open for business,
which is typically Monday through Friday, except holidays ("Business
Days").
Fees. Purchases and redemptions of shares in the funds include no sales
charges. However, all funds except the Bond and Short-Term Funds assess entry
and exit fees as set forth in the section entitled Fees and Annual Operating
Expenses. These fees are paid directly to the funds themselves and not to FAI
or other fund Service Providers. They apply to initial investments in each fund
and all subsequent purchases, exchanges, or redemptions but not to reinvested
dividends or capital gains distributions. These entry and exit fees are
designed to allocate transaction costs associated with purchases, exchanges, and
redemptions of fund shares to members actually making such transactions, rather
than to the funds' other members. These fees are deducted automatically from
the amount invested or redeemed and cannot be paid separately. Entry and exit
fees may be waived at FAI's discretion when the transaction will not result in
significant costs for the affected fund (e.g., in-kind purchases and
redemptions).
Offering Dates, Times, and Prices. The fund continuously offers fund shares,
and purchases may be made on any Business Day. Fund shares may be purchased at
each fund's net asset value, next determined after an order and payment are
accepted and any applicable entry fee has been deducted. Each fund's net asset
value is determined on the basis of market prices or fair value as determined by
the fund's board of directors. All purchases, except in-kind purchases, must be
made in US dollars. The funds reserve the right to reject any purchase order.
Share purchase orders are deemed accepted when Investors Capital Services
receives a completed Account Application and other required documents and funds
become available to TIP in TIP's account with the Custodian as set forth
below.
Investment Minimums. The minimum initial investment in each fund is $100,000
with the exception of the Short-Term Fund, which has a minimum initial
investment of $50,000. The individual fund minimum may be waived if a member
invests at least $750,000 in any combination of funds. Minimums may be waived
for FAI employees. Subsequent purchases and redemptions may be made in any
amount.
Order and Payment Procedures. To purchase shares on a particular Business Day,
the following procedures apply:
When Allowed Purchases may be made on any Business Day.
Payment Procedure Federal funds should be wired to the funds' Custodian and
Transfer Agent, Investors Bank & Trust Company, Boston,
Massachusetts. (See Wiring Instructions below.)
Procedure A purchaser must call TIP at 804-817-8200 to inform TIP of
the incoming wire transfer and must clearly indicate which
fund is to be purchased. If federal funds are received by TIP
prior to 4 p.m. Eastern time, the order will be effective on
that day.
April 28, 2000 21
<PAGE>
- --------------------------------------------------------------------------------
Purchases and Redemptions continued
- --------------------------------------------------------------------------------
Notification If TIP receives notification after 4:00 p.m. Eastern time or
if federal funds are not received by the Transfer Agent by
4:00 p.m. Eastern time, such purchase order shall be
executed as of the date that federal funds are received by
4:00 p.m. Eastern time.
Converted Funds Funds transferred by bank wire may or may not be converted
into federal funds the same day, depending on the time the
funds are received and on the bank wiring the funds. If
funds are not converted the same day, they will be converted
the next Business Day.
Redemption Procedures. To redeem shares on a particular Business Day, the
following procedures apply:
Type of Redemption Full and fractional shares in any amount may be redeemed
upon member's request.
Who May Redeem Only an authorized agent as designated on the member's
Account Application may request a redemption.
Notification The member must inform FAI of the dollar or share amount to
be redeemed, the account to which the proceeds should be
wired (as designated on the Account Application), and the
member's name and account number.
Time of Notice TIP must receive notice of redemption by 4:00 p.m. Eastern
time on any Business Day.
Late Notice If the notice is received on a day that is not a Business
Day or after 4:00 p.m. Eastern time, it will be deemed
received as of the next Business Day.
Redemption Price The redemption will be based on the NAV per share next
determined after receipt by the Transfer Agent of proper
notice.
Payment Payment generally will be made on the day following receipt
of notice, less any applicable exit fee, but TIP reserves
the right to delay payment for up to seven 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.
TIP will take reasonable steps to ensure that telephone instructions are
legitimate and will not 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. The funds reserve the right to redeem in-kind,
in readily marketable securities, any redemption request by a member if the
aggregate market value of the shares being redeemed by that member during any
90-day period exceeds the lesser of $250,000 or 1% of the fund's net asset value
during such period. Redemptions in-kind entail the distribution to a redeeming
member of readily marketable securities held by the fund whose shares it seeks
to redeem, selected by FAI in its discretion, as opposed to the cash
distributions normally made to redeeming members.
Exchange Privilege. One fund's shares may be exchanged for shares of any other
of the funds based on the respective net asset values of the shares involved in
the exchange. There is no minimum for such an exchange. An exchange order is
treated as a redemption followed by a purchase for tax purposes and for purposes
of determining whether an entry or exit fee should be assessed. Investors
wishing to make exchange requests should contact FAI. The exchange privilege is
available only in states where the exchange legally may be made.
22 TIP Prospectus
<PAGE>
- --------------------------------------------------------------------------------
Purchases and Redemptions continued
- --------------------------------------------------------------------------------
Wire Transfer Instructions. A member's bank may impose its own processing fee
for outgoing wires (in connection with purchases of fund shares) or incoming
wires (in connection with redemptions of fund shares). A member may change its
authorized agent or the account designated to receive redemption proceeds at any
time by writing to FAI with an appropriate signature guarantee. Further
documentation may be required when deemed appropriate by FAI, Investors Capital,
or the Transfer Agent.
Funds should be wired to:
Investors Bank & Trust Company
Boston, Massachusetts
ABA#: 011001438
Attention: Transfer Agent
Deposit Account: 433334444
Further Credit: TIFF Investment Program
Member Name: Name of Member 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>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Multi- International Emerging US Short-
Asset Equity Markets Equity Bond Term
<S> <C> <C> <C> <C> <C> <C>
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 the same 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.
April 28, 2000 23
<PAGE>
- --------------------------------------------------------------------------------
Dividends and Distributions continued
- --------------------------------------------------------------------------------
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 the same fund at the net asset value per share according to the schedule
listed above.
Additional Redemption Options. Members wishing to adopt a fixed dollar amount or
percentage distribution should contact FAI to arrange for such specific
distributions. Members can change their distribution options by contacting FAI
in writing by the record date of the applicable dividend.
Tax-Related Warning to Private Foundations. If a private foundation subject to
excise taxation purchases shares shortly before a distribution of dividends and
capital gains, a portion of its investment will be classified as a taxable
distribution (regardless of whether it reinvests distributions or takes them in
cash).
- --------------------------------------------------------------------------------
Tax Considerations
- --------------------------------------------------------------------------------
The following discussion is for general information only. Members and
prospective members should consult with their own tax advisors as to the tax
consequences of an investment in a fund, including the status of distributions
from each fund under applicable state or local laws.
Federal Taxes. The fund generally will not pay US federal income or excise tax.
Each fund intends to distribute all of its taxable income by automatically
reinvesting such amount in additional shares of the fund and distributing those
shares to its members, unless a member elects on the Account Application to
receive cash payments for such distributions.
Tax Treatment of Distributions. The funds intend to make distributions that may
be taxed as ordinary income and capital gains. Dividends paid by a fund from
its investment company taxable income (including interest and net short-term
capital gains) will be taxable to a US member as ordinary income. If a portion
of a fund's income consists of dividends paid by US corporations, a portion of
the dividends paid by the fund may be eligible for the corporate dividends-
received deduction (assuming that the deduction is otherwise allowable in
computing a member's federal income tax liability). Any distributions of net
capital gains (the excess of net long-term capital gains over net short-term
capital losses) designated as capital gain dividends are taxable to members as
long-term capital gains, regardless of how long they have held their fund
shares. Dividends are taxable to members in the same manner whether received in
cash or reinvested in additional fund shares. An exchange of one fund's shares
for shares of another fund will be treated as a sale of the first fund's shares
and purchase of the second fund's shares. Any gain on the transaction may be
subject to federal income tax.
A distribution will be treated as paid on December 31 of a calendar year if it
is declared by a fund in October, November, or December with a record date in
any such month and paid by the fund during January of the following calendar
year. Such distributions will be taxable to members in the calendar year in
which the distributions are declared rather than the calendar year in which they
are received. The US Equity fund expects that its distributions will represent
primarily capital gains, and the Bond and Short-Term Funds expect that their
distributions will represent primarily ordinary income. Each fund will inform
members of the amount and tax status of all amounts treated as distributed to
them within 60 days after the close of each calendar year.
Tax Treatment of Capital Transactions. Any gain or loss realized by a member
upon the sale or other disposition of shares of a fund, or upon receipt of a
distribution in a complete liquidation of the fund, generally will be a capital
gain or loss. Such capital gain or loss will be either long term or short term,
depending upon the member's holding period for the shares.
24 TIP Prospectus
<PAGE>
- --------------------------------------------------------------------------------
Tax Considerations
- --------------------------------------------------------------------------------
Backup Withholding. As with all mutual funds, a fund may be required to
withhold US federal income tax at the rate of 31% of all taxable distributions
payable to members who fail to provide the fund with correct taxpayer
identification numbers or to make required certifications or who have been
notified by the IRS that they are subject to backup withholding. Backup
withholding is not an additional tax; rather, it is a way in which the IRS
ensures it will collect taxes otherwise due. Any amount withheld may be
credited against US federal income tax liability.
State and Local Taxes. A fund may be subject to state, local, or foreign
taxation in any jurisdiction in which it may be deemed to be doing business.
Fund distributions may be subject to state and local taxes. Distributions of a
fund which are derived from interest on obligations of the US Government and
certain of its agencies, authorities, and instrumentalities may be exempt from
state and local taxes in certain states.
Further information relating to tax consequences is contained in the Statement
of Additional Information.
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
The financial highlights tables are intended to help members understand the
funds' financial performance for the period of each fund's operations. Certain
information reflects financial results for a single share of a fund. The total
returns in the tables represent the rate that an investor would have earned (or
lost) on an investment in a given fund, assuming reinvestment of all dividends
and distributions. This information has been audited by PricewaterhouseCoopers
LLP, whose report is included along with the funds' financial statements in the
Annual Report (available upon request).
TIFF Multi-Asset Fund
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Period from
For a share outstanding throughout each period 12/31/99 12/31/98 12/31/97 12/31/96 3/31/95*-12/31/95
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period $ 11.42 $ 11.65 $ 12.08 $ 11.13 $ 10.00
Income from investment operations:
Net investment income 0.22 0.20 0.44 0.17 0.26
Net realized and unrealized gain (loss) on
investments** 2.30 (0.20) 0.01 1.37 1.08
--------- --------- --------- --------- ------------------
Total from investment operations 2.52 0.00 0.45 1.54 1.34
Less distributions from:
Net investment income (0.41) (0.07) (0.30) (0.18) (0.24)
Amounts in excess of net investment income (0.09) (0.19) (0.15) (0.13) --
Net realized gains (0.07) -- (0.63) (0.36) (0.03)
--------- --------- --------- --------- ------------------
Total distributions (0.57) (0.26) (1.08) (0.67) (0.27)
--------- --------- --------- --------- ------------------
Entry/exit fee per share 0.04 0.03 0.20 0.08 0.06
--------- --------- --------- --------- ------------------
Net asset value, end of period $ 13.41 $ 11.42 $ 11.65 $ 12.08 $ 11.13
--------- --------- --------- --------- ------------------
Total return (c) 22.65% 0.22% 5.51% 14.72% 13.87%(b)
- ------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (000s) $ 238,644 $ 291,847 $ 382,317 $ 218,244 $ 92,630
Ratio of expenses to average net assets 0.57% 0.65% 0.72% 1.03% 0.80%(a)
Ratio of net investment income to average net assets 2.20% 1.85% 3.30% 1.99% 4.00%(a)
Portfolio turnover 154.49% 196.06% 181.51% 100.66% 97.35%(b)
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Annualized.
(b) Not annualized.
(c) Total return includes the effects of entry/exit fees received by the Fund;
however, net asset value per share at the beginning of each period used for
calculating total return excludes such entry/exit fees.
* Commencement of operations.
** Including foreign currency-related transactions.
TIFF International Equity Fund
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
For a share outstanding throughout each year 12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of year $ 11.17 $ 11.77 $ 12.19 $ 10.82 $ 9.98
Income from investment operations:
Net investment income 0.13 0.19 0.17 0.10 0.15
Net realized and unrealized gain (loss) on
investments* 3.93 0.12 (0.11) 1.59 0.80
--------- --------- --------- --------- ---------
Total from investment operations 4.06 0.31 0.06 1.69 0.95
Less distributions from:
Net investment income (0.05) (0.12) (0.16) (0.09) (0.14)
Amounts in excess of net investment income (0.08) (0.20) (0.09) -- --
Net realized gains (1.54) (0.62) (0.28) (0.26) --
--------- --------- --------- --------- ---------
Total distributions (1.67) (0.94) (0.53) (0.35) (0.14)
--------- --------- --------- --------- ---------
Entry/exit fee per share 0.02 0.03 0.05 0.03 0.03
Net asset value, end of year $ 13.58 $ 11.17 $ 11.77 $ 12.19 $ 10.82
--------- --------- --------- --------- ---------
Total return (b) 37.40% 3.03% (a) 0.91% 15.94% 9.85%
- ----------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of year (000s) $ 246,429 $ 260,030 $ 241,072 $ 219,458 $ 155,422
Ratio of expenses to average net assets 1.00% 0.81% (c) 1.21% 1.11% 1.05%
Ratio of expenses to average net assets before
expense waivers 1.00% 0.84% (c) 1.21% 1.11% 1.05%
Ratio of net investment income to average net assets 1.32% 1.47% 0.72% 0.91% 1.48%
Portfolio turnover 28.33% 30.62% 25.55% 32.40% 32.91%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total return would have been lower had certain expenses not been waived or
reimbursed.
(b) 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 year
used for calculating total return excludes such entry/exit fees.
(c) Expenses include tax expense for the year ended December 31, 1998. Without
the tax expense, the ratio of expenses to average net assets and the ratio
of expenses to average net assets before expense waivers would have been
0.76% and 0.79%, respectively.
* Including foreign currency-related transactions.
26 TIP Prospectus
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights continued
- --------------------------------------------------------------------------------
TIFF Emerging Markets Fund
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
For a share outstanding throughout each year 12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of year $ 5.19 $ 8.09 $ 8.63 $ 8.45 $ 9.24
Income from investment operations:
Net investment income (loss) (0.09) (0.01) 0.33 0.01 --
Net realized and unrealized gain (loss) on
investments* 3.99 (2.73) (2.83) 3.17 (0.82)
--------- --------- --------- --------- ---------
Total from investment operations 3.90 (2.74) (2.50) 3.18 (0.82)
Less distributions from:
Net investment income -- -- (0.24) (0.04) (0.00) #
Amounts in excess of net investment income (0.20) (0.17) (0.27) (0.00) # (0.00) #
Net realized gains -- -- -- (0.00) # --
--------- --------- --------- --------- ---------
Amounts in excess of net realized gains -- -- -- -- (0.00) #
Total distributions (0.20) (0.17) (0.51) (0.04) (0.00) #
--------- --------- --------- --------- ---------
Entry/exit fee per share 0.01 0.01 2.47 (2.96) 0.03
Net asset value, end of year $ 8.90 $ 5.19 $ 8.09 $ 8.63 $ 8.45
--------- --------- --------- --------- ---------
Total return (b) 75.49% (33.38%) (a) (0.40%) 2.51% (8.39%)
- --------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of year (000s) $ 82,396 $ 58,167 $ 83,836 $ 89,736 $ 59,486
Ratio of expenses to average net assets 1.73% 3.09% (c) 1.56% 1.62% 2.35%
Ratio of expenses to average net assets before
expense waivers/reimbursements 1.73% 3.14% (c) 1.56% 1.62% 2.35%
Ratio of net investment income (loss) to average net 0.01% (0.55%) 0.95% 0.06% (0.15%)
assets
Portfolio turnover 45.94% 47.62% 72.23% 79.96% 104.30%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total return would have been lower had certain expenses not been waived or
reimbursed.
(b) 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 year
used for calculating total return excludes such entry/exit fees.
(c) Expenses include tax expense for the year ended December 31, 1998. Without
the tax expense, the ratio of expenses to average net assets and the ratio
of expenses to average net assets before expense waivers would have been
2.98% and 3.03%, respectively.
# Rounds to less than $0.01.
* Including foreign currency-related transactions.
TIFF US Equity Fund
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
For a share outstanding throughout each year 12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of year $ 15.62 $ 15.66 $ 13.74 $ 12.36 $ 10.02
Income from investment operations:
Net investment income 0.09 0.17 0.50 0.20 0.20
Net realized and unrealized gain (loss) on investments 2.70 1.58 3.93 2.51 3.36
--------- --------- --------- --------- ---------
Total from investment operations 2.79 1.75 4.43 2.71 3.56
Less distributions from:
Net investment income (0.43) (0.07) (0.40) (0.17) (0.22)
Amounts in excess of net investment income -- (0.07) (0.11) (0.10) --
Net realized gains (2.21) (1.66) (2.01) (1.07) (1.01)
--------- --------- --------- --------- ---------
Total distributions (2.64) (1.80) (2.52) (1.34) (1.23)
--------- --------- --------- --------- ---------
Entry/exit fee per share 0.01 0.01 0.01 0.01 0.01
--------- --------- --------- --------- ---------
Net asset value, end of year $ 15.78 $ 15.62 $ 15.66 $ 13.74 $ 12.36
--------- --------- --------- --------- ---------
Total return (a) 18.89% 11.85% 33.01% 21.91% 36.02%
- ----------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of year (000s) $ 280,853 $ 312,587 $ 255,714 $ 176,797 $ 109,901
Ratio of expenses to average net assets 0.67% 0.72% 0.70% 0.82% 0.93%
Ratio of net investment income to average net assets 0.68% 0.99% 1.34% 1.41% 1.67%
Portfolio turnover 73.59% 98.30% 108.52% 105.18% 109.89%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total return includes the effects of entry/exit fees received by the Fund;
however, net asset value per share at the beginning and end of each year
used for calculating total return excludes such entry/exit fees.
April 28, 2000 27
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights continued
- --------------------------------------------------------------------------------
TIFF Bond Fund
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
For a share outstanding throughout each year 12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of year $ 10.29 $ 10.24 $ 10.06 $ 10.33 $ 9.68
Income from investment operations:
Net investment income 0.61 0.60 0.64 0.67 0.67
Net realized and unrealized gain (loss) on investments (0.65) 0.13 0.27 (0.27) 1.01
--------- --------- --------- --------- ---------
Total from investment operations (0.04) 0.73 0.91 0.40 1.68
Less distributions from:
Net investment income (0.63) (0.60) (0.64) (0.67) (0.66)
Amounts in excess of net investment income (0.00) # (0.02) (0.01) (0.00) # (0.01)
Net realized gains (0.02) (0.06) (0.08) -- (0.36)
--------- --------- --------- --------- ---------
Total distributions (0.65) (0.68) (0.73) (0.67) (1.03)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 9.60 $ 10.29 $ 10.24 $ 10.06 $ 10.33
--------- --------- --------- --------- ---------
Total return (0.45%) 7.31% 9.35% 3.75% 18.07%
- -----------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of year (000s) $ 184,508 $ 197,652 $ 173,352 $ 127,491 $ 91,072
Ratio of expenses to average net assets 0.48% 0.46% 0.56% 0.58% 0.96%
Ratio of net investment income to average net assets 6.01% 5.82% 6.41% 6. 64% 6.34%
Portfolio turnover 474.10% 329.49% 398.16% 332.21% 406.24%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
# Rounds to less than $0.01.
TIFF Short-Term Fund
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
For a share outstanding throughout each year 12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of year $ 9.97 $ 9.95 $ 9.99 $ 10.01 $ 10.00
Income from investment operations:
Net investment income 0.52 0.54 0.54 0.54 0.58
Net realized and unrealized gain (loss) on investments (0.03) 0.01 (0.02) (0.02) 0.05
--------- --------- --------- --------- ---------
Total from investment operations 0.49 0.55 0.52 0.52 0.63
Less distributions from:
Net investment income (0.52) (0.53) (0.55) (0.54) (0.58)
Amounts in excess of net investment income (0.00) # -- (0.01) (0.00) # (0.00) #
Net realized gains -- -- -- -- (0.04)
--------- --------- --------- --------- ---------
Amounts in excess of net realized gains -- -- -- -- (0.00) #
---------
Total distributions (0.52) (0.53) (0.56) (0.54) (0.62)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 9.94 $ 9.97 $ 9.95 $ 9.99 $ 10.01
--------- --------- --------- --------- ---------
Total return (a) 4.93% 5.59% 5.30% 5.28% 6.43%
- ----------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of year (000s) $ 89,756 $ 74,907 $ 34,431 $ 63,470 $ 96,580
Ratio of expenses to average net assets 0.35% 0.35% 0.47% 0.36% 0.42%
Ratio of expenses to average net assets before 0.45% 0.53% 0.56% 0.47% 0.54%
expense waivers
Ratio of net investment income to average net assets 5.14% 5.41% 5.53% 5.35% 5.67%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total return would have been lower had certain expenses not been waived or
reimbursed.
# Rounds to less than $0.01.
28 TIP Prospectus
<PAGE>
- --------------------------------------------------------------------------------
Inquiries
- --------------------------------------------------------------------------------
Requests for the prospectus, SAI, and Annual or Semi-Annual Reports as well as
other inquiries concerning TIP may be made by contacting FAI at:
Foundation Advisers, Inc.
2405 Ivy Road
Charlottesville, VA 22903
Phone: 804-817-8200
Fax: 804-817-8231
E-mail: [email protected]
Website: www.tiff.org
April 28, 2000 29
<PAGE>
Appendix A
Money Manager and
Commingled Investment Vehicle Profiles
The following profiles include a summary of the investment approach utilized by
each Money Manager and each commingled investment vehicle in which the funds may
invest, based on materials provided by each Money Manager and each commingled
vehicle. These summaries are furnished as a means of assisting investors in
understanding how each Money Manager or commingled investment vehicle describes
its own approach.
Each profile also includes a description of fees to be paid by TIP to each Money
Manager and a description of fees chargeable to TIP as an investor in each
commingled investment vehicle. The performance-based fees of Money Managers are
presented in the form of graphs and formulas. For a detailed description of the
performance-based fee structure and the reasons underlying it, see Performance-
Based Fees for Money Managers in the Statement of Additional Information.
<PAGE>
Aronson + Partners
- --------------------------------------------------------------------------------
Organization
- --------------------------------------------------------------------------------
230 South Broad Street
Twentieth Floor
Philadelphia, PA 19102
phone: 215-546-7500
fax: 215-546-7506
Independent Investment Counsel
Controlled by Theodore Aronson, Partner
Founded in 1984
Total Assets under Management: $4.0 bil (12/31/99)
- --------------------------------------------------------------------------------
Representative Clients
- --------------------------------------------------------------------------------
John D. and Catherine T. MacArthur Foundation
State of Florida
Virginia Retirement System
- --------------------------------------------------------------------------------
Personnel
- --------------------------------------------------------------------------------
Key TIP Account Manager
Theodore R. Aronson, CFA, CIC, Partner
MBA/BS, Wharton
1984-present: Aronson + Partners
previous experience: Addison Capital; Drexel
Burnham Lambert
Paul Dodge, CFA, Partner
BA, College of William & Mary
1994-present: Aronson + Partners
previous experience: Cambridge Associates
Kevin M. Johnson, Partner
PhD, North Carolina; BS, Delaware
1993-present: Aronson + Partners
previous experience: DuPont Pension; Vanguard Group
Martha E. Ortiz, CFA, CIC, Partner
MBA, Wharton; BA, Harvard
1987-present: Aronson + Partners
previous experience: Wilshire Associates;
Continental Grain
Money Manager for the TIFF Multi-Asset and
TIFF US Equity Funds
- --------------------------------------------------------------------------------
Investment Philosophy
- --------------------------------------------------------------------------------
Philosophy: Large Cap Equity
Assets Using This Philosophy: $1.9 bil (12/31/99)
Account Type: Separate Account
- --------------------------------------------------------------------------------
Investment Approach
- --------------------------------------------------------------------------------
The firm focuses on asset-rich companies (stocks with low price-to-book
ratios), selling at relatively low market valuations (stocks with low price-to-
earnings ratios), with proven management talent (reflected in a quantitative
measure of historic management savvy and confidence, dubbed the management
factor). A strict selection algorithm is applied separately to 11 economic
sectors that include the 400 largest cap stocks. Risk-adjusted relative
strength and estimate revision tests and an assessment of individual fundamental
characteristics produce final selection adjustments and determine individual
position sizes. Economic sector weights are held to within close tolerances of
their weights in the S&P 500. Portfolio changes are executed by a number of
trading methods, including electronic crossing and basket trades. The firm
measures and monitors closely its trading costs, including market impact and
opportunity costs. Portfolios contain an average of 100 to 120 stocks, ranging
in size from 0.4% to 5.0% of assets. Annual turnover averages 100%.
- --------------------------------------------------------------------------------
Manager's Benchmark
- --------------------------------------------------------------------------------
S&P 500 Stock Index
- --------------------------------------------------------------------------------
Fee Paid by TIP to This Manager
- --------------------------------------------------------------------------------
[LINE GRAPH]
Fee = 15 + [ .250 x ( Excess Return - 90 ) ] subject to
Floor of 10 bp; Cap of 80 bp
Measurement Period = Trailing 12 Months
Excess Return = Manager's Return - Benchmark Return
A-1
<PAGE>
Atlantic Asset Management, LLC
- --------------------------------------------------------------------------------
Organization
- --------------------------------------------------------------------------------
Clearwater House
2187 Atlantic Street
Stamford, CT 06902
phone: 203-363-5100
fax: 203-363-5110
Independent Investment Counsel
Controlled by IBJ Whitehall, Ronald W. Sellers, and other principals of
Atlantic Asset Management
Founded in 1992
Total Assets under Management: $5.0 bil (12/31/99)
- --------------------------------------------------------------------------------
Representative Clients
- --------------------------------------------------------------------------------
Catholic Foundation
Local 282
Local 803
Masonic Charity Foundation
National Maritime Union
Omaha School Employees' Retirement System
Samford University
- --------------------------------------------------------------------------------
Personnel
- --------------------------------------------------------------------------------
Key TIP Account Managers
Ronald W. Sellers, President
MBA, Oklahoma State; MA, College of Holy Names;
AB, California-Berkeley
1992-present: Atlantic Asset Mgmt, LLC
1985-92: Weiss Peck & Greer, Partner,
Co-Director, Fixed Income
Elaine S. Hunt, CFA, Senior Vice President
MBA, Chicago; BA, Beloit College
1992-present: Atlantic Asset Mgmt, LLC
Weiss, Peck & Greer; William M. Mercer
Donald W. Trotter, CFA, Senior Vice President
MBA, Missouri; BS/BA, Kansas
1992-present: Atlantic Asset Mgmt, LLC
DeMarche Associates, Inc.; Phillips Petroleum
Robert F. Bayer, CFA, CPA, Senior Vice President,
Portfolio Strategist
MA, MIT; BS, Wharton
1998-present: Atlantic Asset Mgmt, LLC
1990-1998: Brundage Story and Rose
Victor P. Silano, Vice President, Mortagages
BBA, Dowling College
1999-present: Atlantic Asset Management, LLC
1997-1999: ARM Capital Advisors
Money Manager for the TIFF Bond Fund
- --------------------------------------------------------------------------------
Investment Philosophy
- --------------------------------------------------------------------------------
Philosophy: Active Duration
Assets Using This Philosophy: $59 mm (12/31/99)
Account Type: Separate Account
- --------------------------------------------------------------------------------
Investment Approach
- --------------------------------------------------------------------------------
Atlantic Asset Management manages fixed income portfolios using a proprietary
analytic framework that eliminates the need for economic or interest rate
forecasting. Quantitative methods are used to target and control portfolio risk
exposures. Portfolio duration is varied slightly around an index, a strategy
designed to benefit from interest rate volatility. This strategy entails the
purchase of longer maturity bonds as interest rates rise (prices fall) and their
sale as rates fall (prices rise) resulting in a buy low, sell high discipline.
The firm's exploitation of yield curve anomalies is based on statistical
analysis of recent past relationships between the shape of the yield curve and
subsequent returns. In the corporate sector, a well diversified portfolio is
constructed by screening companies to identify issuers with improving margins
and strong cash flows, thereby increasing the probability of credit upgrades
while reducing the possibility of downgrades. In the mortgage sector, option
adjusted valuation models are used to identify securities that can produce
returns from interest rate movements which are consistent with the overall
duration and yield strategy. The components of the strategy are combined
through the use of optimization programs to provide the best expected return
profile in a unified portfolio. Portfolio contains an average of 50 to 80
positions. Annual turnover averages 200%.
- --------------------------------------------------------------------------------
Manager's Benchmark
- --------------------------------------------------------------------------------
Lehman Government/Corporate Bond Index
- --------------------------------------------------------------------------------
Fee Paid by TIP to This Manager
- --------------------------------------------------------------------------------
[LINE GRAPH]
Fee = 15 + [ .200 x ( Excess Return - 65 ) ] subject to
Floor of 10 bp; Cap of 60 bp
Measurement Period = Trailing 12 Month
Excess Return = Manager's Return - Benchmark Return
A-2
<PAGE>
Canyon Capital Management, LP
- --------------------------------------------------------------------------------
Organization
- --------------------------------------------------------------------------------
Canyon Capital Advisors, LLC
9665 Wilshire Blvd., Suite 200
Beverly Hills, CA 90212
phone: 310-247-2700
fax: 310-247-2701
Independent Investment Adviser
Controlled by Joshua S. Friedman, Mitchell R. Julis,
R. Christian B. Evensen
Founded in 1990
Total Assets under Management: $763 mm (02/29/00)
- --------------------------------------------------------------------------------
Representative Clients
- --------------------------------------------------------------------------------
Grosvenor Capital Management, LP
Ivy Asset Management
McKinsey & Company, Inc.
Permal Asset Management
Pine Grove Associates
Worms Asset Management, Inc.
- --------------------------------------------------------------------------------
Personnel
- --------------------------------------------------------------------------------
Key TIP Account Managers
Joshua S. Friedman, Managing Partner
JD/MBA/BA, Harvard; MA, Oxford University
1990-present: Canyon Capital Advisors, LLC
Drexel Burnham Lambert
Mitchell R. Julis, Managing Partner
JD/MBA, Harvard; BA, Princeton
1990-present: Canyon Capital Advisors, LLC
Drexel Burnham Lambert
R. Christian B. Evensen, Managing Partner
BA, Williams College
1990-present: Canyon Capital Advisors, LLC
Drexel Burnham Lambert
Money Manager for the TIFF Multi-Asset Fund
- --------------------------------------------------------------------------------
Investment Vehicle
- --------------------------------------------------------------------------------
Vehicle: The Value Realization Fund, LP
Assets Using This Vehicle: $297 mm (2/29/00)
Account Type: Commingled Vehicle
- --------------------------------------------------------------------------------
Investment Approach
- --------------------------------------------------------------------------------
The Fund seeks above average gains (both capital appreciation and current
income) with moderate risk by employing a "bottom up" approach to investing in
financial instruments perceived to be inefficiently priced as a result of
business, financial, or legal uncertainties. Capital preservation is a
fundamental priority, and as a result, the Fund has a strong debt orientation.
Generally, the Fund invests in event driven situations, including bankruptcies,
reorganizations, mergers, spin-offs, and other special situations.
- --------------------------------------------------------------------------------
Manager's Benchmark
- --------------------------------------------------------------------------------
91-Day Treasury Bills plus 5% per annum
- --------------------------------------------------------------------------------
Fee Paid by TIP to This Manager
- --------------------------------------------------------------------------------
1% of net assets per annum plus 20% of net profit. The net profit interest is
subject to a "high water mark" provision that prohibits the manager's receipt of
a profit participation unless the market value of each partner's interest
exceeds its cost basis.
A-3
<PAGE>
City of London Investment Management Co., Ltd.
- --------------------------------------------------------------------------------
Organization
- --------------------------------------------------------------------------------
City of London
10 Eastcheap
London, England EC3M 1LX
phone: 44-207-711-0771
fax: 44-207-711-0772
City of London
The Barn
1125 Airport Road
Coatesville, PA 19320
phone: 610-380-2110
fax: 610-380-2116
Independent Investment Adviser
Controlled by FMH Investments NV, AMIC. Third Canadian Investments, AMB
Investments, Barry Olliff, Scaleoption CoL ESOP
Founded in 1991
Total Assets under Management: $1.0 bil (12/31/99)
- --------------------------------------------------------------------------------
Representative Clients
- --------------------------------------------------------------------------------
Bush Foundation
Duke University
General Mills
Robert Wood Johnson Foundation
Southern Methodist University
University of Richmond
- --------------------------------------------------------------------------------
Personnel
- --------------------------------------------------------------------------------
Key TIP Account Managers
Barry Olliff, Chief Portfolio Manager
1991-present: City of London Investment
Management Co., Ltd.
1987-1991: Olliff & Partners
1979-1987: Lains & Cruickshank
1964-1979: Denny Bros. (Pinchin Denny)
Mark Dwyer, Portfolio Manager
BA, Kingston University
1995-present: City of London Investment
Management Co., Ltd.
Melissa Novak, Portfolio Manager
BA, Dickinson College
1997- present: City of London Investment
Management Co., Ltd.
Money Manager for the TIFF Emerging Markets Fund
- --------------------------------------------------------------------------------
Investment Vehicle
- --------------------------------------------------------------------------------
Vehicle: Investable Emerging Markets Country Fund
Assets Using This Vehicle: $180 mm (12/31/99)
Account Type: Commingled Vehicle
- --------------------------------------------------------------------------------
Investment Approach
- --------------------------------------------------------------------------------
City of London's (CoL) investment philosophy is value oriented. The firm seeks
to provide long-term capital growth via active country allocation and stock
selection in emerging markets. Its key objective is to provide above average,
long-term outperformance versus the appropriate funds' emerging market
benchmark.
The firm aims to provide this outperformance with a significantly lower level of
risk than the benchmark index and its peer group. This is effected by the
choice of closed-end funds as the prime investment medium. Implementation of
the philosophy is by a disciplined investment methodology characterized as a
top-down approach to country asset allocation overlaid with a pure value
approach to stock selection.
- --------------------------------------------------------------------------------
Manager's Benchmark
- --------------------------------------------------------------------------------
MSCI Emerging Markets Free Index
- --------------------------------------------------------------------------------
Fee Paid by TIP to This Manager
- --------------------------------------------------------------------------------
1.5% of net assets per annum
A-4
<PAGE>
Delaware International Advisers Ltd.
- --------------------------------------------------------------------------------
Organization
- --------------------------------------------------------------------------------
Portfolio Management:
3rd Floor, 80 Cheapside
London, England EC2V 6EE
phone: 020-7477-7000
fax: 020-7523-0300
US Liaison Office:
Delaware Management Company, Inc. (Affiliate)
One Commerce Square
Philadelphia, PA 19103
phone: 215-972-2312
fax: 215-972-8849
Independent Investment Adviser
Controlled by Lincoln National Corporation
Founded in 1990 (Predecessor firm founded in 1929)
Total Assets under Management: $16.0 bil (12/31/99)
- --------------------------------------------------------------------------------
Representative Clients
- --------------------------------------------------------------------------------
Allied-Signal, Inc.
Father Flanagan's Boy's Town (DPT)
McDermott International
Sandia National Laboratories
Salvation Army (DPT)
Stanford Management Company
The Amherst H. Wilder Foundation (DPT)
Warner Lambert Company
- --------------------------------------------------------------------------------
Personnel
- --------------------------------------------------------------------------------
Key TIP Account Managers
David G. Tilles, Managing Director, CIO
Sorbonne/Warwick University/Heidelberg
University
1990-present: Delaware International Advisers Ltd.
1974-90: Hill Samuel Investment Advisers, CIO
Hamish O. Parker, Director and Senior Portfolio
Manager
Oxford University
1990-present: Delaware International Advisers Ltd.
1986-90: Hill Samuel Investment Advisers,
Senior Portfolio Manager
Other Personnel
Charles E. Haldeman, Jr., CFA, Chairman
JD/MBA, Harvard
2000-present: Delaware International Advisers Ltd.
2000-present: Lincoln National Investment Cos., Inc.
1998-2000: United Asset Management Corp.
1974-98: Cooke & Bicler, Inc.
Money Manager for the TIFF Multi-Asset
and TIFF International Equity Funds
- --------------------------------------------------------------------------------
Investment Philosophy
- --------------------------------------------------------------------------------
Philosophy: Value-Oriented International Equity Mgmt
Assets Using This Philosophy: $11.6 bil (12/31/99)
Account Type: Separate Account
- --------------------------------------------------------------------------------
Investment Approach
- --------------------------------------------------------------------------------
Delaware International is a value-oriented defensive manager. The company's
senior investment professionals have worked together for many years. The firm
invests in securities where dividend discount analysis identifies value in terms
of the long-term flow of income. The firm uses the same dividend discount
valuation model of future income streams across all countries, securities, and
industries. This distinguishes Delaware International from many of its
competitors that use different investment criteria in each country and sector.
The most important aspects of the firm's security selection process are
fundamental company analyses and a comprehensive program of visiting current and
prospective holdings. Equity market valuations are based on inflation-adjusted
dividend discount analysis, coupled with long-term purchasing power parity
analysis of currencies. The resulting valuations are then analyzed with the
help of a computer-based optimization program, which produces a list of
attractive portfolio allocations for consideration by Delaware International's
Investment Committee. As a defensive measure to protect real returns, Delaware
International will hedge a currency when its inflation-adjusted exchange rate
suggests that it is overvalued. The company's portfolios normally exhibit high-
income yields and low P/E ratios. Portfolios contain an average of 35 to 55
stocks. Annual turnover generally averages 25%.
- --------------------------------------------------------------------------------
Manager's Benchmark
- --------------------------------------------------------------------------------
MSCI EAFE Index
- --------------------------------------------------------------------------------
Fee Paid by TIP to This Manager
- --------------------------------------------------------------------------------
0.50% per annum on first $50 million
0.35% per annum on next $50 million
0.30% per annum on remainder
A-5
<PAGE>
Emerging Markets Management, LLC
- --------------------------------------------------------------------------------
Organization
- --------------------------------------------------------------------------------
1001 Nineteenth Street North, 16th Floor
Arlington, VA 22209-1722
phone: 703-243-5200
fax: 703-243-2464
Independent Registered Investment Adviser
A Limited Liability Corporation, the managing
shareholder of which is Emerging Markets Investors
Corporation, a Delaware corporation controlled by
Antoine van Agtmael
Founded in 1987
Total Assets under Management: $3.8 bil (12/31/99)
- --------------------------------------------------------------------------------
Representative Clients
- --------------------------------------------------------------------------------
Harvard Management Company
The Rockefeller Foundation
Yale University
- --------------------------------------------------------------------------------
Personnel
- --------------------------------------------------------------------------------
Key TIP Account Manager
Antoine W. van Agtmael, President & CIO
MBA, New York University; MA, Yale; BA, Netherlands
School of Economics
1987-present: Emerging Markets Management, LLC
Other Personnel
Michael Duffy, CFA, Managing Director
PhD/MA, Chicago; BA, Michigan
World Bank Pension Plan, Senior Pension Investment
Officer
Felicia Morrow, Managing Director & Portfolio Manager
(Latin America and Southeast Asia)
MBA, Harvard; BA, Stanford
World Bank, Consultant
John Niepold, Portfolio Manager (Africa)
MBA, UNC-Chapel Hill; BA, Davidson
Crosby Securities, Senior Investment Analyst
Dobrinka Cidrof, CFA, Portfolio Manager (Turkey)
MBA, George Washington Univ; BA, Bosphorous Univ
TEB Investment Bank
Arindam Bhattacharjee, CFA, Portfolio Manager (India)
MBA, American University; BA, Davidson University
World Bank
Martin Horn, Portfolio Manager (Quantitative Strategies)
Education in Germany
Citibank Global Asset Management London
Money Manager for the TIFF Emerging Markets Fund
- --------------------------------------------------------------------------------
Investment Philosophy
- --------------------------------------------------------------------------------
Philosophy: Emerging Markets
Assets Using This Philosophy: $485 mm (12/31/99)
Account Type: Separate Account
- --------------------------------------------------------------------------------
Investment Approach
- --------------------------------------------------------------------------------
EMM focuses on both maximizing long-term capital appreciation and on minimizing
volatility through broad diversification and a systematic, disciplined, and
quantitative investment approach. The firm's top-down approach is to invest in
most of the countries that are part of the emerging markets universe but to vary
weights (relative to market weights) on the basis of Emerging Markets
Management's proprietary country allocation model (probabilistic-based
allocation model with the key inputs being expected real returns, volatilty, and
benchmark country weights). Typically, no country is overweighted more than four
times its market weight and no country represents more than 25% of the
portfolio. The firm diversifies its equity investments over geographic sectors
and industries and through bottom-up selection of companies that are
characterized by attractive valuations and favorable return prospects over a
three- to five-year time horizon with market capitalizations typically at least
$15 million and having acceptable trading volumes for established core
positions. Increasingly, less well-researched (i.e., relatively undiscovered)
companies are making up the portfolio. The firm actively monitors a universe of
approximately 1,800 stocks in over 53 countries. Portfolios contain an average
of 250 stocks. About 40% of the issues in a typical account are drawn from
outside IFC and MSCI Emerging Markets indices. Annual turnover depends heavily
on market conditions, but has typically averaged 40%.
- --------------------------------------------------------------------------------
Manager's Benchmark
- --------------------------------------------------------------------------------
MSCI Emerging Markets Free Index
- --------------------------------------------------------------------------------
Fee Paid by TIP to This Manager
- --------------------------------------------------------------------------------
[LINE GRAPH]
Fee = 105 + [ .394 x (Excess Return - 205) ] subject to
Floor of 40 bp; Cap of 300 bp
Measurement Period = Trailing 12 Months
Excess Return = Manager's Return - Benchmark Return
A-6
<PAGE>
Everest Capital Limited
- --------------------------------------------------------------------------------
Organization
- --------------------------------------------------------------------------------
Everest Capital Limited
Bank of Butterfield Building
65 Front Street, 6th Floor
Hamilton HM JX Bermuda
phone: 441-292-2200
fax: 441-292-2285
Independent Investment Adviser
Controlled by Marko Dimitrijevic
Founded in 1990
Total Assets under Management: $2.0 bil (12/31/99)
- --------------------------------------------------------------------------------
Representative Clients
- --------------------------------------------------------------------------------
Clients not disclosed.
- --------------------------------------------------------------------------------
Personnel
- --------------------------------------------------------------------------------
Key TIP Account Managers
Marko Dimitrijevic, President, Everest Capital Inc.
MBA, Stanford; BS, Univ of Lausanne (Switzerland)
1990-present: Everest Capital Limited
Timothy P. Mistele, Managing Director, Everest
Capital Inc.
MBA, Stanford; AB, Princeton
1997-present: Everest Capital Limited
Gabelli & Co. (Rye, New York)
Money Manager for the TIFF International Equity
and TIFF Emerging Markets Funds
- --------------------------------------------------------------------------------
Investment Vehicle
- --------------------------------------------------------------------------------
Vehicle: Everest Capital Frontier Fund
Assets Using This Vehicle: $510 mm (12/31/99)
Account Type: Commingled Vehicle
- --------------------------------------------------------------------------------
Investment Approach
- --------------------------------------------------------------------------------
Everest invests on an opportunistic basis in debt and equity securities that are
neglected, distressed, or inefficiently priced. Typical strategies and
investments include: (1) capital structure arbitrage - purchase long and sell
short two bonds of the same sovereign issuer to exploit aberrations in the
bonds' relative pricing or as a hedged way to maintain a long exposure; (2) high
yield and distressed debt - the purchase of bonds of emerging countries or
companies trading at distressed prices; (3) value investment - because much
emerging investing is done on a top-down or macro basis, many opportunities
exist for value investing employing fundamental bottom-up analysis; and (4)
arbitrages and special situations - the purchase of undervalued convertible
securities and closed-end funds, outright or via arbitrage strategies. In
addition, the Fund seeks arbitrages between a company's various classes of
stocks and its US listed ADRs.
- --------------------------------------------------------------------------------
Manager's Benchmark
- --------------------------------------------------------------------------------
MSCI Emerging Markets Free Index
- --------------------------------------------------------------------------------
Fee Paid by TIP to This Manager
- --------------------------------------------------------------------------------
1.5% of net assets per annum plus 20% of net profit
A-7
<PAGE>
Explorador Capital
Management, LLC
- --------------------------------------------------------------------------------
Organization
- --------------------------------------------------------------------------------
One Maritime Plaza, Suite 1475
San Francisco, CA 94111
phone: 415-392-1300
fax: 415-392-1306
Independent Investment Counsel
Controlled by Andrew H. Cummins
Founded in 1995
Total Assets under Management: $ 75 mm (12/31/99)
- --------------------------------------------------------------------------------
Representative Clients
- --------------------------------------------------------------------------------
Clients not disclosed.
- --------------------------------------------------------------------------------
Personnel
- --------------------------------------------------------------------------------
Key TIP Account Manager
Andrew H. Cummins, Portfolio Manager
MBA, Harvard; BS, University of California-Berkeley
1995-present: Explorador Capital Management, LLC
1992-1995: Emerging Markets Investors Corporation
Oswaldo Sandoval, Co-Portfolio Manager
MBA, Stanford; BS, University of Pennsylvania
1997-present: Explorador Capital Management, LLC
1993-1995: IFC at World Bank
Money Manager for the TIFF Emerging Markets Fund
- --------------------------------------------------------------------------------
Investment Vehicle
- --------------------------------------------------------------------------------
Vehicles: The Explorador Fund, LP
Assets Using This Vehicle: $75 mm (12/31/99)
Account Type: Commingled Vehicle
- --------------------------------------------------------------------------------
Investment Approach
- --------------------------------------------------------------------------------
Explorador Capital specializes in equity investments in Latin America. The fund
seeks to generate superior risk-adjusted rates of return through investment
opportunities in Latin America. Despite higher political risks and less
economic stability in countries in the region, the premium paid to investors to
assume such risks is occasionally very compelling. In addition to long equity
positions, the fund also seeks to exploit relative value "paired-trades" and
other short-term volatility-driven opportunities. To mitigate the negative
effects of strong market corrections, the fund maintains, from time to time,
short positions in shares of companies that its managers believe to be
overvalued. A typical core position might represent 3%-5% of fund capital, but
the fund will commit up to 15% to the securities of a single issuer if the
fundamental outlook is sufficiently attractive.
- --------------------------------------------------------------------------------
Manager's Benchmark
- --------------------------------------------------------------------------------
MSCI Emerging Markets Free Index
- --------------------------------------------------------------------------------
Fee Paid by TIP to This Manager
- --------------------------------------------------------------------------------
1.5% of net assets per annum
A-8
<PAGE>
Farallon Capital Management, LLC
- --------------------------------------------------------------------------------
Organization
- --------------------------------------------------------------------------------
One Maritime Plaza, Suite 1325
San Francisco, CA 94111
phone: 415-421-2132
fax: 415-421-2133
Independent Investment Adviser
Controlled by Thomas F. Steyer
Founded in 1990
Total Assets under Management: $5.4 bil (2/1/00)
- --------------------------------------------------------------------------------
Representative Clients
- --------------------------------------------------------------------------------
Clients not disclosed.
- --------------------------------------------------------------------------------
Personnel
- --------------------------------------------------------------------------------
Key TIP Account Manager
Thomas F. Steyer, Senior Managing Member
MBA, Stanford University; BA, Yale University
1990-present: Farallon Capital Management, LLC
Managing Members
Enrique Boilini
David Cohen
Joseph Downes
William Duhamel
Jason Fish
Andrew Fremder
Richard Fried
William Mellin
Stephen Millham
Meridee Moore
Andrew Spokes
Money Manager for the TIFF Multi-Asset Fund
- --------------------------------------------------------------------------------
Investment Vehicle
- --------------------------------------------------------------------------------
Vehicle: Farallon Capital Institutional Partners, LP
Assets Using This Vehicle: $1.5 bil (2/1/00)
Account Type: Limited Partnership
- --------------------------------------------------------------------------------
Investment Approach
- --------------------------------------------------------------------------------
Farallon's investments are primarily "event driven," in which a known or
expected event will cause an appreciation in the value of a particular portfolio
position. Holdings include securities and other claims associated with
reorganizations, bankruptcies, liquidations, recapitalizations, mergers, tender
offers, or exchange offers; non-performing and sub-performing mortgages;
securities affected by ongoing or pending litigation; emerging market
securities; and securities held to facilitate fixed income arbitrage. Merger
arbitrage opportunities have improved over the last year and risk arbitrage
remains a core business for Farallon. In addition, a significant portion of
Farallon's investments have been in the bank debt of troubled companies and in
loans to private limited partnerships and LLCs that invest in underlying assets
such as real estate and mortgage loans. Convertible securities arbitrage,
direct investments, and liquidations make up the balance of Farallon's
portfolio. Farallon maintains a diversified portfolio in which no single
investment determines success or failure. The portfolio typically consists of
more than 150 core positions.
- --------------------------------------------------------------------------------
Manager's Benchmark
- --------------------------------------------------------------------------------
91-day Treasury bills plus 5% per annum
- --------------------------------------------------------------------------------
Fee Paid by TIP to This Manager
- --------------------------------------------------------------------------------
1% of net assets per annum plus 20% of net profit
A-9
<PAGE>
Fischer Francis Trees & Watts,
Inc.
- --------------------------------------------------------------------------------
Organization
- --------------------------------------------------------------------------------
200 Park Avenue, 46th Floor
New York, NY 10166
phone: 212-681-3000
fax: 212-681-3250
Independent Investment Counsel
Controlled by Charter Atlantic Corporation
Founded in 1972
Total Assets under Management: $30 bil (12/31/99)
- --------------------------------------------------------------------------------
Representative Clients
- --------------------------------------------------------------------------------
Dow Chemical Company
Fortune Brands
Genentech
Monsanto Company
PG&E
The World Bank
- --------------------------------------------------------------------------------
Personnel
- --------------------------------------------------------------------------------
Key TIP Account Managers
David J. Marmon, Managing Director
MA, Duke; BA, Alma College
1990-present: Fischer Francis Trees & Watts, Inc.
1988-90: Yamaichi International, Vice President
Jeffrey Holtman, Portfolio Manager
BS, Carnegie Mellon University
1996-present: Fischer Francis Trees & Watts, Inc.
1994-96: J.P. Morgan
Other Personnel
Karen McKeel Calby, Director, Client Service
MBA, Wharton; AB, Dartmouth College
Oliver, Wyman & Company, Partner
O. John Olcay, Managing Director
MBA/MA, Wharton; BA, Robert College
W. Greenwell, Managing Partner
Money Manager for the TIFF Short-Term Fund
- --------------------------------------------------------------------------------
Investment Philosophy
- --------------------------------------------------------------------------------
Philosophy: Enhanced Cash
Assets Using This Philosophy: $4.4 bil (12/31/99)
Account Type: Separate or Commingled
- --------------------------------------------------------------------------------
Investment Approach
- --------------------------------------------------------------------------------
FFTW seeks to outperform its benchmark while simultaneously limiting risk by
making frequent small changes in positions. The firm focuses on five specific
areas (in rough order of potential return contribution): duration exposure,
maturity selection (or yield curve), sector allocation, credit, and selection of
individual securities. FFTW assesses the possibilities and opportunities in
each of these dimensions and takes exposures away from the benchmark, relying on
technical analysis, historical spread relationships, economic and portfolio
models, and market convictions. Throughout the process, a number of proprietary
computer models are employed. These include a portfolio optimization model that
suggests portfolio structures in accord with investment scenarios suggested by
the investment team and an unemployment model that projects forthcoming
employment data and translates portfolio managers' views of rate relationships
into optimal portfolios. Portfolios contain an average of 20 to 25 positions.
Annual turnover averages 20 to 30 times per year.
- --------------------------------------------------------------------------------
Manager's Benchmark
- --------------------------------------------------------------------------------
Merrill Lynch 182-Day Treasury Bill Index
- --------------------------------------------------------------------------------
Fee Paid by TIP to This Manager
- --------------------------------------------------------------------------------
0.20% on first $100 million
0.15% on remainder
A-10
<PAGE>
Harding, Loevner Management, LP
- --------------------------------------------------------------------------------
Organization
- --------------------------------------------------------------------------------
50 Division Street, Suite 401
Somerville, NJ 08876
phone: 908-218-7900
fax: 908-218-1915
Independent Investment Counsel
Controlled by Daniel D. Harding, CIO; David R. Loevner, CEO; Simon Hallett,
Senior Portfolio Manager
Founded in 1989
Total Assets under Management: $1.4 bil (12/31/99)
- --------------------------------------------------------------------------------
Representative Clients
- --------------------------------------------------------------------------------
Carleton College
Catholic University of America
Robert Wood Johnson Foundation
Longwood Gardens
Mercersburg Academy
Museum of Natural History
National Gallery of Art
Public Welfare Foundation
- --------------------------------------------------------------------------------
Personnel
- --------------------------------------------------------------------------------
Key TIP Account Managers
Simon Hallett, CFA, Senior Portfolio Manager
MA, Oxford
1991-present: Harding, Loevner Management
1984-90: Jardine Fleming Investment Management,
Director
Daniel D. Harding, CFA, CIO
BA, Colgate University
1989-present: Harding, Loevner Management
1978-89: Rockefeller & Co., Senior Investment Manager
Other Personnel
David R. Loevner, CFA, CEO
MPhil/MSc, Oxford; AB, Princeton
Harding, Loevner Management
Rockefeller & Co., Ltd., Managing Director
World Bank, Economist
Money Manager for the TIFF Multi-Asset and
TIFF International Equity Funds
- --------------------------------------------------------------------------------
Investment Philosophy
- --------------------------------------------------------------------------------
Philosophy: Global and International Equity
Assets Using Global Philosophy: $112 mm (12/31/99)
Assets Using International Philosophy: $1.25 bil (12/31/99)
Account Type: Separate Account
- --------------------------------------------------------------------------------
Investment Approach
- --------------------------------------------------------------------------------
HLM's investment approach is "bottom up." Stock selection criteria include
growth, quality, and value considerations. HLM seeks to identify companies with
capital strength, sustainable internally generated growth, high financial
returns, capable and forthright management, and enduring competitive advantages.
It invests only in companies that it knows well, generally through research and
visitation conducted over a period of years. Valuation tests, including local
market and cross-border comparisons, help determine when to invest in companies
meeting the firm's growth and quality standards. HLM invests for the long term,
divesting only if a company's shares become greatly overvalued or if its
business results, management quality, or competitive position change for the
worse. Portfolios are broadly diversified by country, industry, and size.
Country weightings reflect the results of stock selection, rather than any
explicit allocation process. However, prospects for its respective industry,
national economy, and stock market are important factors in HLM's evaluation of
an individual stock and thus strongly influence portfolio weightings. Foreign
currency exposure is hedged occasionally. Portfolios contain an average of 45
stocks. Annual turnover averages 35%.
- --------------------------------------------------------------------------------
Manager's Benchmark
- --------------------------------------------------------------------------------
MSCI All Country World Free Index (MAF) or
MSCI All Country World Free ex US Index (IEF)
- --------------------------------------------------------------------------------
Fee Paid by TIP to This Manager
- --------------------------------------------------------------------------------
[LINE GRAPH]
Fee = 30 + [ .185 x ( Excess Return - 130 ) ] subject to
Floor of 10 bp; Cap of 150 bp
Measurement Period = Trailing 12 Months
Excess Return = Manager's Return - Benchmark Return
A-11
<PAGE>
Lazard Asset Management
- --------------------------------------------------------------------------------
Organization
- --------------------------------------------------------------------------------
30 Rockefeller Plaza
New York, NY 10112-6300
phone: 212-632-6000
fax: 212-332-5913
Independent Investment Counsel
Wholly owned by Lazard Freres & Company
Founded in 1848
Total Assets under Management: $74.4 bil (12/31/99)
Closed-end Funds $1.3 bil (12/31/99)
- --------------------------------------------------------------------------------
Representative Clients
- --------------------------------------------------------------------------------
Howard Hughes Medical Institute
ITT Pension Fund
Marathon Oil
Mayo Foundation
Ohio State Retirement System
Phoenix Mutual
Swarthmore College
US Steel & Carnegie
- --------------------------------------------------------------------------------
Personnel
- --------------------------------------------------------------------------------
Key TIP Account Managers
Alexander Zagoreos, Managing Director
MIA/MBA/BA, Columbia University
1977-present: Lazard Asset Management
Kun Geoffrey Deng, Senior Vice President
MIA, Columbia University; MA, Beijing University
1997-present: Lazard Asset Management
1994-97: Newgate Asset Management
Lee Ann Cannon, Vice President
MBA, New York University; BA, University of Delaware
1991-present: Lazard Asset Management
1990-91: Mitsubishi Bank
John K. Chase, Vice President and Portfolio Analyst
MBA, Rensselaer Polytechnic; BA, St. Anselm College
1997-present: Lazard Asset Management
1995-97: The Recovery Group
Vikram Raju, Vice President and Portfolio Analyst
MIA, Columbia; MBA/BA, Bombay University
1997-present: Lazard Asset Management
1996-97: Merrill Lynch & Co.
J. Steuart Marshall, Assistant Portfolio Manager
BA, Denison University
1994-present: Lazard Asset Management
1990-94: US Trust
Money Manager for the TIFF Multi-Asset, TIFF
International Equity, and TIFF Emerging Markets Funds
- --------------------------------------------------------------------------------
Investment Philosophy
- --------------------------------------------------------------------------------
Philosophy: Emerging Markets Portfolio
Assets Using This Philosophy: $1.2 bil (12/31/99)
Account Type: Separate or Commingled
- --------------------------------------------------------------------------------
Investment Approach
- --------------------------------------------------------------------------------
Lazard Asset Management seeks long-term capital appreciation primarily through
investing in an internationally diversified portfolio of closed-end funds that
invest in companies outside the United States. The closed-end funds in which
the Fund invests will ordinarily be trading at a discount to their underlying
net asset value. The manager uses a top down approach seeking markets that it
deems undervalued on a price to earnings, price to cash, price to book, and
return on asset basis. Using these parameters, the manager uses closed-end
funds that have strong performance records and that trade at steep discounts to
asset value.
- --------------------------------------------------------------------------------
Manager's Benchmark
- --------------------------------------------------------------------------------
MSCI Emerging Markets Free Index
- --------------------------------------------------------------------------------
Fee Paid by TIP to This Manager
- --------------------------------------------------------------------------------
0.50% straight asset-based fee
A-12
<PAGE>
Lone Pine Capital LLC
- --------------------------------------------------------------------------------
Organization
- --------------------------------------------------------------------------------
Independent Investment Counsel
Controlled by Stephen F. Mandel, Jr.
Founded in 1997
Total Assets under Management: $1.4 bil (12/31/99)
- --------------------------------------------------------------------------------
Representative Clients
- --------------------------------------------------------------------------------
Clients not disclosed.
- --------------------------------------------------------------------------------
Personnel
- --------------------------------------------------------------------------------
Key TIP Account Managers
Stephen F. Mandel, Jr., Portfolio Manager and
Consumer Analyst
MBA, Harvard; BS, Dartmouth
1997-present: Lone Pine Management LLC
1990-1997: Tiger Management
John B. Sommi, Jr., Managing Director, Trading
BS, University of Virginia
1997-present: Lone Pine Management LLC
1992-1997: Tiger Management
Other Personnel
Kerry A. Tyler, Managing Director, Chief Financial
Officer
BS, University of Arizona
previous experience: SoundView Financial Group, Ernst
& Young LLP; KPMG Peat Marwick LLP
Leslie Dahl, Director of Investor Services
AB, Dartmouth
previous experience: J.P. Morgan & Co., Inc.
Money Manager for the TIFF Multi-Asset Fund
- --------------------------------------------------------------------------------
Investment Vehicle
- --------------------------------------------------------------------------------
Philosophy: Lone Redwood, LP
Assets Using This Vehicle: $711 mm (12/31/99)
Account Type: Commingled Vehicle
- --------------------------------------------------------------------------------
Investment Approach
- --------------------------------------------------------------------------------
Lone Pine Capital (LPC) invests primarily in equity and equity-related
securities based on a bottom-up, fundamental analysis of stock picking, long and
short. The portfolio typically contains 50 to 75 long positions averaging three
to five percent of equity each and 75 to 125 short positions averaging one to
two percent of equity each. LPC invests primarily in issues within the
following economic sectors: (1) telecom/media, (2) healthcare, (3)
consumer/retail, (4) technology, and (5) financial services. The partnership
invests globally, although the majority of the capital is invested in US stocks.
Currency exposure is not hedged and is minimized through natural hedges -
offsetting longs or shorts - to minimize exposure to any single currency. LPC
may invest up to five percent of the fund's total assets in private placement
securities, utilize both over-the-counter and exchange traded instruments invest
in other investment funds, and invest in the high yield and convertible fixed
income markets.
- --------------------------------------------------------------------------------
Manager's Benchmark
- --------------------------------------------------------------------------------
91-day Treasury bills plus 5% per annum
- --------------------------------------------------------------------------------
Fee Paid by TIP to This Manager
- --------------------------------------------------------------------------------
1% of net assets per annum plus 20% of net profit for the fiscal year in excess
of the hurdle amount. The hurdle amount is the amount that a limited partner
would have earned for a fiscal year if it had received an annual rate of return
on its opening capital account equivalent to the one-year US Treasury bill rate
as of the close of business on the last Business Day of the preceding fiscal
year, but in no event will the applicable rate exceed 8%.
A-13
<PAGE>
Marathon Asset Management, Ltd.
- --------------------------------------------------------------------------------
Organization
- --------------------------------------------------------------------------------
Orion House
5 Upper St. Martin's Lane
London, England WC2H 9EA
phone: 44 20 7497 2211
fax: 44 20 7497 2399
Independent Investment Counsel
Controlled by William J. Arah, Jeremy J. Hosking, and
Neil M. Ostrer, Investment Directors
Founded in 1986
Total Assets under Management: $10.6 bil (12/31/99)
- --------------------------------------------------------------------------------
Representative Clients
- --------------------------------------------------------------------------------
Asea Brown Boveri Inc.
GTE Corporation
Minnesota Mining & Manufacturing
Pennsylvania Public School Employees' Retirement
System
University of Michigan
- --------------------------------------------------------------------------------
Personnel
- --------------------------------------------------------------------------------
Key TIP Account Managers
Jeremy J. Hosking, Director
MA, Cambridge University
1986-present: Marathon Asset Management, Ltd.
previous experience: G.T. Management (Asia) Ltd.
William J. Arah, Director
MA, Oxford University
1987-present: Marathon Asset Management, Ltd.
previous experience: Goldman Sachs & Co. (Tokyo)
Neil M. Ostrer, Director
MA, Cambridge University
1986-present: Marathon Asset Management, Ltd.
Carnegie International, Director, Institutional Sales
previous experience: GT Management, Manager and Director
Money Manager for the TIFF International Equity Fund
- --------------------------------------------------------------------------------
Investment Philosophy
- --------------------------------------------------------------------------------
Philosophy: Active International Equities
Assets Using This Philosophy: $10.6 bil (12/31/99)
Account Type: Separate Account
- --------------------------------------------------------------------------------
Investment Approach
- --------------------------------------------------------------------------------
The firm believes that above-market returns can be generated from disciplined
stock-picking in global equity markets. Marathon employs three qualitative
disciplines, all of which it believes have predictive power for shareholder
value. The essence of the firm's approach, which it refers to as "supply side"
analysis, is to focus on variables that are under the control of companies,
rather than the economic environment. In particular, Marathon monitors the
competitive environment within industries, focusing on industries marked by
consolidation and a declining number of competitors, eschewing industries with
rising competition. Levels of capital spending are also monitored closely. At
the company level, Marathon visits company managements and evaluates specific
reinvestment strategies within an industry context. In country selection,
priority is given to top down monetary conditions rather than economic growth.
Portfolios typically represent a hybrid of value, growth, and economic themes
whose attributes would be difficult to replicate using quantitative techniques.
Portfolios contain an average of 150 to 200 stocks. Annual turnover averages
less than 50%.
- --------------------------------------------------------------------------------
Manager's Benchmark
- --------------------------------------------------------------------------------
MSCI All Country World Free ex US Index
- --------------------------------------------------------------------------------
Fee Paid by TIP to This Manager
- --------------------------------------------------------------------------------
[LINE GRAPH]
Fee = 40 + [ .167 x ( Excess Return - 140 ) ] subject to
Floor of 15 bp; Cap of 160 bp
Measurement Period = Trailing 12 Months
Excess Return = Manager's Return - Benchmark Return
A-14
<PAGE>
Martingale Asset Management, LP
- --------------------------------------------------------------------------------
Organization
- --------------------------------------------------------------------------------
222 Berkeley Street
Boston, MA 02116
phone: 617-424-4700
fax: 617-424-4747
Independent Investment Counsel
Controlled by Commerzbank AG
Founded in 1987
Total Assets under Management: $1.4 bil (12/31/99)
- --------------------------------------------------------------------------------
Representative Clients
- --------------------------------------------------------------------------------
Dartmouth College
General Motors Corporation
Pennsylvania State Employees Retirement System
Saint-Gobain Corporation
University of Southern California
- --------------------------------------------------------------------------------
Personnel
- --------------------------------------------------------------------------------
Key TIP Account Manager
William E. Jacques, CFA, Executive Vice President,
Chief Investment Officer
MBA, Wharton School; BA, Lafayette College
1987-present: Martingale Asset Management, LP
previous experience: Batterymarch Financial
Management, Vice President, Trustee
Other Personnel
Patricia J. O'Connor, Sr. Vice President, Treasurer
University of Massachusetts, Boston College
previous experience: Batterymarch Financial Management
Arnold S. Wood, President, CEO
BA, Trinity College
previous experience: Batterymarch Financial Management
Money Manager for the TIFF US Equity Fund
- --------------------------------------------------------------------------------
Investment Philosophy
- --------------------------------------------------------------------------------
Philosophy: Active Completeness Manager
Assets Using This Philosophy: $237 mm (12/31/99)
Account Type: Separate Account
- --------------------------------------------------------------------------------
Investment Approach
- --------------------------------------------------------------------------------
The functions of the Martingale active completeness portfolio are, stated in
order of importance: (1) to ensure that the US Equity Fund is not overly under-
or overweighted in important market sectors; (2) to minimize the undesirable
"misfit risk" characteristic of most multi-manager fund structures, thereby
limiting the Fund's exposure to uncompensated volatility of its returns relative
to returns on the Wilshire 5000; and (3) in attempting to perform the two
preceding functions, to add value where possible through the selection of
fundamentally underpriced stocks. It is reasonable to think of the active
completeness portfolio as customized diversification. Many institutional funds
experience risk from chronic underexposure to the electric utility and telephone
industries. Commonly used asset weighting policies of active managers
systematically underrepresent large capitalization stocks. Overweighted
positions in higher volatility stocks, notably health care and drug companies,
add uncompensated risk. In performing its assigned duties, Martingale employs a
variety of computer-based analytical tools, including stock valuation techniques
that emphasize heavily an assessment of perceived investor preferences. The
firm uses a variety of sector-specific models (e.g., cyclical stocks are
analyzed differently than utilities) to analyze the prices investors currently
pay for earnings, assets, growth, and risk. Differences between the perceived
"fair market value" of issues and their market prices represent opportunities
for Martingale to generate incremental returns while also ensuring that the
Fund's holdings are properly diversified. Martingale puts all trades out for
competitive bid among several brokers and attempts to keep trading costs well
below instituitonal norms. Portfolios contain an average of 100 to 200 stocks.
Annual turnover ranges from 60% to 100%.
- --------------------------------------------------------------------------------
Manager's Benchmark
- --------------------------------------------------------------------------------
Customized for TIFF US Equity Fund
- --------------------------------------------------------------------------------
Fee Paid by TIP to This Manager
- --------------------------------------------------------------------------------
0.10% on first $100 million
0.08% on next $200 million
0.07% on next $200 million
0.05% on excess over $500 million
Percentages apply to total US Equity Fund assets (reflecting Martingale's unique
role as active completeness manager).
A-15
<PAGE>
Oechsle International Advisors, LLC
- --------------------------------------------------------------------------------
Organization
- --------------------------------------------------------------------------------
One International Place
Boston, MA 02110
phone: 617-330-8810
fax: 617-330-8620
Independent Investment Counsel
Controlled by principals of Oechsle International
Advisors, LLC
Founded in 1986
Total Assets under Management: $19.1 bil (12/31/99)
- --------------------------------------------------------------------------------
Representative Clients
- --------------------------------------------------------------------------------
Ameritech
CalPERS
Eastman Kodak
Stanford University
Frank Russell Trust Company
- --------------------------------------------------------------------------------
Personnel
- --------------------------------------------------------------------------------
Key TIP Account Manager
S. Dewey Keesler, Jr., Chief Investment Officer
BA, Washington & Lee
1986-present: Oechsle International Advisors, LLC
previous experience: Putnam International Advisors
Kathleen Harris, CFA, Principal
MBA, University of Chicago; BS, Illinois
1995-present: Oechsle International Advisors, LLC
previous experience: State of Wisconsin Investment Board
L. Sean Roche, Principal
BSC, London School of Economics
1986-present: Oechsle International Advisors, LLC
previous experience: Putnam International
Martina Oechsle Vasconcelles, Principal
MBA, University of Chicago; BA, Northwestern
1990-present: Oechsle International Advisors, LLC
previous experience: Coldwell Banker
Money Manager for the TIFF Multi-Asset
and International Equity Funds
- --------------------------------------------------------------------------------
Investment Philosophy
- --------------------------------------------------------------------------------
Philosophy: International Equity
Assets (Core-Plus/Emerging Mkts): $6.6 bil (12/31/99)
Assets (Select): $916 mm (12/31/99)
Account Type: Separate Account
- --------------------------------------------------------------------------------
Investment Approach
- --------------------------------------------------------------------------------
Oechsle's investment process is rooted in fundamental analysis. A judgmental,
team process is used to combine top-down and bottom-up fundamental analysis in
order to identify the most attractive markets and individual securities in the
World (ex US). The firm's research focuses on a one- to two-year horizon where,
in its judgment, the greatest identifiable inefficiencies occur. The firm seeks
to identify inefficiencies both within and among the international equity
markets. A Select portfolio uses the "best ideas" arising from this process.
- --------------------------------------------------------------------------------
Manager's Benchmark
- --------------------------------------------------------------------------------
MSCI All Country World Free ex US Index
- --------------------------------------------------------------------------------
Fee Paid by TIP to This Manager
- --------------------------------------------------------------------------------
Core Plus with Emerging Markets
[LINE GRAPH]
Fee = 40 + [.100 x (Excess Return - 200)] subject to
Floor of 20 bp; Cap of 60 bp
Measurement Period = Trailing 12 Months
Excess Return = Manager's Return - Benchmark Return
Select
[LINE GRAPH]
Fee = 60 + [.133 x (Excess Return - 300)] subject to
Floor of 20 bp; Cap of 100 bp
Measurement Period = Trailing 12 Months
Excess Return = Manager's Return - Benchmark Return
A-16
<PAGE>
Palo Alto Investors
- --------------------------------------------------------------------------------
Organization
- --------------------------------------------------------------------------------
470 University Avenue
Palo Alto, CA 94301
phone: 650-325-0772
fax: 650-325-5028
Independent Investment Counsel
Controlled by William L. Edwards, President
Founded in 1989
Total Assets under Management: $151 mm (12/31/99)
- --------------------------------------------------------------------------------
Representative Clients
- --------------------------------------------------------------------------------
Clients not disclosed.
- --------------------------------------------------------------------------------
Personnel
- --------------------------------------------------------------------------------
Key TIP Account Manager
William L. Edwards, President
MS/BS, Stanford
1989-present: Palo Alto Investors
1987-89: Volpe & Covington, Partner
1982-87: T. Rowe Price, Vice President
Ted Janus, Analyst
MBA/BA, University of California
1997-present: Palo Alto Investors
1994-1997: Bank of America, Vice President
1985-1992: City of Palo Alto, Project Manager
Paul L. Zweng, Analyst
PhD/BS, Stanford; MS, Queen's University
1995-1999: BHP Copper, Manager New Business
Development
1988-1995: Patagonia Exploration, Inc., Founder &
President
Anthony Joon Yun
MD, Duke University; BA, Harvard
1998-present: Targesome Corporation, Founder, Medical
Director
1995-present: Stanford University Medical Center
Money Manager for the TIFF Multi-Asset
and TIFF US Equity Funds
- --------------------------------------------------------------------------------
Investment Philosophy
- --------------------------------------------------------------------------------
Philosophy: Micro-Cap Opportunistic Small Cap Value
Assets Using This Philosophy: $151 mm (12/31/99)
Account Type: Separate Account
- --------------------------------------------------------------------------------
Investment Approach
- --------------------------------------------------------------------------------
Palo Alto Investors specializes in very small, publicly traded equities. The
firm concentrates on companies with market values under $300 million; its median
capitalization is typically between $60 and $90 million. These securities tend
to have a very low correlation to the market and are less efficiently priced
than larger capitalization stocks. Palo Alto does its own extensive, original
research. This work is designed to enable the firm to look beyond past earnings
difficulties or product transitions to find companies with limited downside risk
and excellent upside potential. The firm believes that quality management is
extremely important, particularly in small companies. It visits every company in
which it invests, looking for high inside ownership and competent and motivated
management teams. In doing so, the firm seeks demonstrable proof that
management's goals are aligned with shareholder goals, which is often a reliable
predictor of above-average stock market performance. Portfolios are highly
concentrated and have low (30%-40%) annual turnover.
- --------------------------------------------------------------------------------
Manager's Benchmark
- --------------------------------------------------------------------------------
Russell 2000 Stock Index
- --------------------------------------------------------------------------------
Fee Paid by TIP to This Manager
- --------------------------------------------------------------------------------
[LINE GRAPH]
Fee = 20 + [ .198 x ( Excess Return - 95 ) ] subject to
Floor of 10 bp; Cap of 200 bp
Measurement Period = Trailing 12 Months
Excess Return = Manager's Return - Benchmark Return
A-17
<PAGE>
Seix Investment Advisors, Inc.
- --------------------------------------------------------------------------------
Organization
- --------------------------------------------------------------------------------
300 Tice Boulevard
Woodcliff Lake, NJ 07675-7633
phone: 201-391-0300
fax: 201-391-0303
Independent Investment Counsel
Controlled by Christina Seix, Chairman and CIO
Founded in 1992
Total Assets under Management: $5.2 bil (12/31/99)
- --------------------------------------------------------------------------------
Representative Clients
- --------------------------------------------------------------------------------
Bell Atlantic
City of Hope
Ford Foundation
GTE
Indiana State Teachers
Los Angeles Philharmonic
Shell Oil
The Turrell Foundation
UFCW International
United Methodist Church
- --------------------------------------------------------------------------------
Personnel
- --------------------------------------------------------------------------------
Key TIP Account Managers
Christina Seix, CFA, Chairman and CIO
MA, State University of New York; BA, Fordham
1992-present: Seix Investment Advisors, Inc.
1987-92: MacKay-Shields, Chairman and CEO
John Talty, CFA, President
BA, Connecticut College
1993-present: Seix Investment Advisors, Inc.
1991-92: J.P. Morgan Securities, Senior Fixed Income
Strategist
1988-91: Morgan Stanley & Co., Portfolio Strategist
Barbara Hoffmann, Managing Director, Fixed Income
1994-present: Seix Investment Advisors, Inc.
1993-94: MetLife Investment Management Corp., Senior
Bond Portfolio Manager
1991-93: Capital Growth Management, Senior Bond
Portfolio Manager
Money Manager for the TIFF Multi-Asset
and TIFF Bond Funds
- --------------------------------------------------------------------------------
Investment Philosophy
- --------------------------------------------------------------------------------
Philosophy: Full Market Bond
Assets Using This Philosophy: $2.6 bil (12/31/99)
Account Type: Separate Account
- --------------------------------------------------------------------------------
Investment Approach
- --------------------------------------------------------------------------------
The firm's fixed income investment approach is founded on four cornerstones: (1)
Targeted Duration, (2) Yield Tilt, (3) Comprehensive Sector Construction, and
(4) the use of Proprietary Analytics. Targeted Duration: Portfolios are managed
with a duration that is close to the duration of their benchmark. Value is added
through sector, security, and yield curve decisions rather than maturity
management. Yield Tilt: Although portfolios are managed on a total return
basis, a premium is placed on yield. Income is considered the most powerful
contributor to fixed income returns. Non-Treasury sectors generally play a
dominant role in the portfolio. The yield of the benchmark is used as a
performance goal in addition to its total return. Comprehensive Sector
Construction: Sector commitments are made based on the duration contribution of
each sector to the overall duration of the portfolio rather than the sector
weighting. Proprietary Analytics: Because of the growing complexity of the
bond market, the firm believes that the use of proprietary techniques is key to
identifying value and to adequately controlling risk. Portfolios contain an
average of 50 to 60 positions. Annual turnover averages 200% to 250%.
- --------------------------------------------------------------------------------
Manager's Benchmark
- --------------------------------------------------------------------------------
Lehman Aggregate Bond Index (MAF) or
Lehman Government/Corporate Bond Index (BF)
- --------------------------------------------------------------------------------
Fee Paid by TIP to This Manager
- --------------------------------------------------------------------------------
[LINE GRAPH]
Fee = 15 + [ .231 x ( Excess Return - 65 ) ] subject to
Floor of 10 bp; Cap of 80 bp
Measurement Period = Trailing 12 Months
Excess Return = Manager's Return - Benchmark Return
A-18
<PAGE>
Shapiro Capital Management Company, Inc.
- --------------------------------------------------------------------------------
Organization
- --------------------------------------------------------------------------------
One Buckhead Plaza, Suite 1555
3060 Peachtree Road, N.W.
Atlanta, GA 30305
phone: 404-842-9600
fax: 404-842-9601
Independent Investment Counsel
Controlled by Samuel R. Shapiro
Founded in 1990
Total Assets under Management: $1.1 bil (12/31/99)
- --------------------------------------------------------------------------------
Representative Clients
- --------------------------------------------------------------------------------
Federal Express Corporation
Joyce Mertz-Gilmore Foundation
Montgomery Securities
New York State Teachers Retirement System
Tredegar Industries, Inc.
University of Richmond
- --------------------------------------------------------------------------------
Personnel
- --------------------------------------------------------------------------------
Key TIP Account Managers
Samuel R. Shapiro, President and CIO
BBA, University of Georgia
1990-present: Shapiro Capital Management Co., Inc.
1977-1989: Bear Stearns & Co.
Michael McCarthy, CFA, Director of Research
MSIM, Georgia Institute of Technology; BS, New Jersey
Institute of Technology
1990-present: Shapiro Capital Management Co., Inc.
Louis Shapiro, Research/Portfolio Manager
ABJ, University of Georgia
1992-present: Shapiro Capital Management Co., Inc.
Money Manager for the TIFF US Equity Fund
- --------------------------------------------------------------------------------
Investment Philosophy
- --------------------------------------------------------------------------------
Philosophy: Small Cap Value
Assets Using This Philosophy: $950 mm (12/31/99)
Account Type: Separate Account
- --------------------------------------------------------------------------------
Investment Approach
- --------------------------------------------------------------------------------
Shapiro Capital Management (SCM) employs a research intensive, value approach
that often entails a contrarian stance versus market consensus. Value is
determined with respect to the economic return available at the operational
level of a company. To qualify as an investment candidate, a company must
compete in an industry that is easily understood and that displays superior
economic characteristics. Common attributes of companies that qualify as
investment candidates include (1) a high return on invested assets, (2) ample
free cash flow, (3) true franchise characteristics, (4) significant barriers to
entry, (5) products with minimal chance of obsolescence, (6) substantial
congruence of financial interests between management and outside shareholders.
Each investment is preceded by a comprehensive analysis performed by SCM's
principals. The research includes an exhaustive analysis of financial statements
including all published material for at least the three most recent fiscal
years. Areas of focus include historical accounting procedures, asset
valuations, and cash flow. Management interviews are conducted both prior to
purchase and throughout each stock's holding period. Company facilities are
visited when doing so can provide additional insight into a firm's operations.
Interviews with suppliers, competitors, and customers are an integral part of
the research process. By assuming a proactive research-based approach, SCM
accepts responsibility for all of its investments rather than being held
accountable for the efforts and opinions of others.
- --------------------------------------------------------------------------------
Manager's Benchmark
- --------------------------------------------------------------------------------
Russell 2000 Index
- --------------------------------------------------------------------------------
Fee Paid by TIP to This Manager
- --------------------------------------------------------------------------------
[LINE GRAPH]
Fee = 46 + [ .130 x ( Excess Return - 121 ) ] subject to
Floor of 50 bp; Cap of 95 bp
Measurement Period = Trailing 12 Months
Excess Return = Manager's Return - Benchmark Return
A-19
<PAGE>
Smith Breeden Associates, Inc.
- --------------------------------------------------------------------------------
Organization
- --------------------------------------------------------------------------------
100 Europa Drive, Suite 200
Chapel Hill, NC 27514
phone: 919-967-7221
fax: 919-933-3157
Independent Investment Counsel
Controlled by Douglas T. Breeden, Chairman of the Board
Founded in 1982
Total Assets under Management: $8.2 bil (12/31/99)
- --------------------------------------------------------------------------------
Representative Clients
- --------------------------------------------------------------------------------
Amdahl Corporation
Columbia/HCA Healthcare Corporation
Eastman Kodak Company
State of Florida, Division of Treasury
State of Florida, SBA
State of New Mexico Public Employees
Retirement Association
Unisys Corporation
- --------------------------------------------------------------------------------
Personnel
- --------------------------------------------------------------------------------
Key TIP Account Managers
Daniel C. Dektar, Principal, Director
MBA, Stanford; BS, California-Berkeley
1986-present: Smith Breeden Associates, Inc.
Timothy D. Rowe, Principal
MBA, Chicago; BA, Duke University
1988-present: Smith Breeden Associates, Inc.
William F. Quinn, CFA, Principal
MS/BS, MIT
1986-present: Smith Breeden Associates, Inc.
Key TIP Contact
Stephen A. Eason, CFA, Principal, Director
MBA, Wharton; BS, Arkansas
Salomon Brothers, Vice President
Chase Manhattan Bank, Assistant Treasurer
Other Personnel
Douglas T. Breeden, Chairman of the Board
PhD, Stanford; BS, MIT
Stanford/Chicago/Duke, Professor of Finance
The Journal of Fixed Income, Editor
- ---------------------------
Eugene Flood, Jr., President and CFO
PhD, MIT; BA, Harvard
Morgan Stanley Asset Management
Money Manager for the TIFF Bond Fund
- --------------------------------------------------------------------------------
Investment Philosophy
- --------------------------------------------------------------------------------
Philosophy: Bond
Assets Using This Philosophy: $5.2 bil (12/31/99)
Account Type: Separate Account
- --------------------------------------------------------------------------------
Investment Approach
- --------------------------------------------------------------------------------
Smith Breeden believes that in-depth research can provide a superior
understanding of fixed income security relative value, and the goal of its
research effort is to identify investments that generate risk-adjusted returns
in excess of the market return. By constructing a portfolio of such securities
and matching the portfolio's effective duration to the benchmark duration the
firm seeks to produce a total return in excess of the benchmark return without
incremental interest rate risk. Smith Breeden's research seeks to identify
attractive investment opportunities in the Agency mortgage-backed security
market, and the firm's portfolios are typically concentrated in this high credit
quality sector. The firm's prepayment forecasting and mortgage option-adjusted
pricing techniques are the outgrowth of seventeen years of proprietary research
and development. This technology has enabled Smith Breeden portfolio managers
to detect and measure differences in prepayment forecasts among different sets
of investors, and in turn to construct portfolios that seek to exploit these
market inefficiencies. Smith Breeden believes that the incremental return
available from relative value analysis and research is significantly greater and
more consistent than the incremental return from predicting the direction of
interest rates; therefore, its professionals do not incorporate any interest
rate forecasts into their investment decisions. Portfolios contain an average
of 30 to 50 positions. Annual turnover averages between 200% and 300%.
- --------------------------------------------------------------------------------
Manager's Benchmark
- --------------------------------------------------------------------------------
Lehman Mortgage-Backed Securities Index
- --------------------------------------------------------------------------------
Fee Paid by TIP to This Manager
- --------------------------------------------------------------------------------
[LINE GRAPH]
Fee = 20 + [ .315 x ( Excess Return - 70 ) ] subject to
Floor of 10 bp; Cap of 85 bp
Measurement Period = Trailing 12 Months
Excess Return = Manager's Return - Benchmark Return
A-20
<PAGE>
Wellington Management Company, LLP
- --------------------------------------------------------------------------------
Organization
- --------------------------------------------------------------------------------
75 State Street
Boston, Massachusetts 02109
phone: 617-951-5000
fax: 617-263-4022
Independent Investment Counseling Firm
Controlled by Managing Partners: Laurie A. Gabriel,
Duncan M. McFarland, and John R. Ryan
Founded in 1928
Total Assets under Management: $236 bil (12/31/99)
- --------------------------------------------------------------------------------
Representative Clients
- --------------------------------------------------------------------------------
AT&T Investment Management Company
The Dow Chemical Company
Hartford Life Insurance Company
International Monetary Fund
Massachusetts Institute of Technology
SunAmerica, Inc.
The Vanguard Group
- --------------------------------------------------------------------------------
Personnel
- --------------------------------------------------------------------------------
Key TIP Account Managers
Ernst H. von Metzsch, Portfolio Manager
PhD, Harvard; MSC, University of Leiden
1973-present: Wellington Management Company, LLP
Karl E. Bandtel, Analyst
MS, University of Wisconsin
1990-present: Wellington Management Company, LLP
James Bevilacqua, Analyst
MBA, Stanford
1994-present: Wellington Management Company, LLP
Paul M. Mecray, III, Analyst
MBA, Wharton
1968-present: Wellington Management Company, LLP
Nilesh Undavia, Analyst
MBA, Dartmouth
1993-present: Wellington Management Company, LLP
Kim Williams, Analyst
MSC, University of London
1986-present: Wellington Management Company, LLP
Money Manager for the TIFF Multi-Asset Fund
- --------------------------------------------------------------------------------
Investment Philosophy
- --------------------------------------------------------------------------------
Philosophy: Natural Resource-Related Stocks
Assets Using This Philosophy: $1.4 bil (12/31/99)
Account Type: Separate Account
- --------------------------------------------------------------------------------
Investment Approach
- --------------------------------------------------------------------------------
Fundamental research is central to the investment process of Wellington
Management Company. The firm's proprietary research efforts allow for an
independent evaluation of market opportunities. The firm expects to outperform
the market over time primarily through superior bottom-up security selection.
Value added decisions are typically accomplished through analysis of the quality
of companies' assets and internal reinvestment opportunities, combined with the
analysis of how companies formulate their investment plans and react to changes
in the environment. Wellington's research-oriented approach to the natural
resource sector specifically draws upon investment professionals who are highly
specialized. The companies in which the firm invests vary widely with respect
to factors such as leverage, growth, yield, and risk. Companies within the
natural resource-related industries are subject to long cycles, the length of
which are determined by industry factors (the petroleum industry), and general
economic conditions (metals producers). These industries also have cycles which
are generally self-correcting; consequently, the best prospective returns are
typically in currently out-of-favor securities. Identifying quality management
teams is crucial to determining which firm can capitalize on opportunities for
increased shareholder value.
- --------------------------------------------------------------------------------
Manager's Benchmark
- --------------------------------------------------------------------------------
75% Energy sector of MSCI World Index
20% Metals and Mining sector of MSCI World Index
5% Forest Products and Paper sector of MSCI World
Index
- --------------------------------------------------------------------------------
Fee Paid by TIP to This Manager
- --------------------------------------------------------------------------------
0.45% on first $50 million
0.40% on next $50 million
0.35% on remainder (over $100 million)
A-21
<PAGE>
Westport Asset Management, Inc.
- --------------------------------------------------------------------------------
Organization
- --------------------------------------------------------------------------------
253 Riverside Avenue
Westport, CT 06880
phone: 203-227-3601
fax: 203-226-6306
Independent Investment Counsel
Controlled by Andrew J. Knuth, Chairman; Ronald H.
Oliver, President
Founded in 1983
Total Assets under Management: $2.5 bil (12/31/99)
- --------------------------------------------------------------------------------
Representative Clients
- --------------------------------------------------------------------------------
American Red Cross
Army & Air Force Exchange Service Trust
Danbury Hospital Endowment
Harvard University
McGraw-Hill Master Trust
Rockefeller Brothers Fund
Yale University
- --------------------------------------------------------------------------------
Personnel
- --------------------------------------------------------------------------------
Key TIP Account Managers
Andrew J. Knuth, CFA, Chairman
MBA, New York University; BA, Dickinson
1983-present: Westport Asset Management
previous experience: Lazard Freres & Co., Founder,
Institutional Equity Group
Ronald H. Oliver, President
BS, San Jose State University
1981-present: Westport Asset Management
previous experience: Starwood Corporation, President
Other Personnel
Albert H. Cohn
BS, Northwestern University
previous experience: David J. Greene & Co., Sr. Partner, Portfolio Manager
Paine Webber, Portfolio Manager
Edmund H. Nicklin, Jr.
PhD/MS/BS, Rensselaer Polytechnic Institute
previous experience:Evergreen Growth & Income Fund, Portfolio Manager
Alex Brown & Sons, Inc., Analyst
Money Manager for the TIFF US Equity Fund
- --------------------------------------------------------------------------------
Investment Philosophy
- --------------------------------------------------------------------------------
Philosophy: Small Cap Value
Assets Using This Philosophy: $2.5 bil (12/31/99)
Account Type: Separate Account
- --------------------------------------------------------------------------------
Investment Approach
- --------------------------------------------------------------------------------
Westport Asset Management emphasizes "small cap" low price/earnings stocks. The
firm seeks to generate superior investment returns without assuming the risks
generally associated with an "aggressive management" style. The firm believes
stock selection and adherence to relative valuation analysis are the principal
factors in superior long-term performance. Its investment approach seeks to
identify companies whose future earnings, cash flow, or return on equity are
expected to improve materially. To be considered as investments, the firm must
see compelling evidence that a stock can appreciate a minimum of 50% over a 18-
to 24-month period. These stocks must sell at or below market valuations or
below valuations of peer groups. The firm's portfolios emphasize but are not
limited to companies with capitalizations under $1.75 billion. Westport works
to achieve 5% positions on each of its core holdings, however, it will exceed
that percentage if a company's fundamental outlook is sufficiently attractive.
Portfolios contain an average of 20 to 50 stocks depending on the asset size of
the portfolio. Annual turnover averages less than 20%.
- --------------------------------------------------------------------------------
Manager's Benchmark
- --------------------------------------------------------------------------------
Russell 2000 Stock Index
- --------------------------------------------------------------------------------
Fee Paid by TIP to This Manager
- --------------------------------------------------------------------------------
[LINE GRAPH]
Fee = 25 + [ .250 x ( Excess Return - 100 ) ] subject to
Floor of 15 bp; Cap of 200 bp
Measurement Period = Trailing 12 Months
Excess Return = Manager's Return - Benchmark Return
A-22
<PAGE>
Appendix B
Service Provider Profiles
<PAGE>
Investors Capital Services, Inc.
- --------------------------------------------------------------------------------
Organization
- --------------------------------------------------------------------------------
600 Fifth Avenue, 26th Floor
New York, NY 10020
phone: 212-332-5211
fax: 212-332-5190
Mutual Fund Administrator
Founded in 1992
- --------------------------------------------------------------------------------
Clients Served
- --------------------------------------------------------------------------------
FFTW Funds, Inc.
Sponsored by Fischer Francis Trees & Watts, Inc.
Hyperion Funds, Inc.
Sponsored by Hyperion Capital Management
TIFF Investment Program, Inc.
Sponsored by Foundation Advisers, Inc.
- --------------------------------------------------------------------------------
Key Personnel
- --------------------------------------------------------------------------------
William E. Vastardis, Managing Director
BS, Villanova University
previous experience: Vice President and head of Private Label Administration
Group, The Vanguard Group
Fund Administrator for the
TIFF Investment Program
- --------------------------------------------------------------------------------
Description of Services
- --------------------------------------------------------------------------------
Investors Capital Services, Inc. ("Investors Capital"), formerly AMT Capital
Services, Inc. prior to its acquisition by Investors Financial Services, Inc. in
May 1998, is a leading mutual fund administration company which provides third-
party fund administration services to a select group of institutional investment
management firms. Investors Capital and Investors Bank & Trust Company, TIP's
custodian, transfer agent, and fund accounting agent, are affiliates of each
other in that they are both owned by Investors Financial Services, Inc.
As fund administrator, Investors Capital is responsible for supervising all
elements of the day-to-day operations of TIP, including oversight of TIP's other
service providers with the exception of TIP's investment adviser and money
managers. Investors Capital seeks to lower TIP's administrative cost structure
through its application of technology, experience in managing complex operations
in the mutual fund industry, and economies of scale of working with more than
one fund group.
Investors Capital currently has approximately $6.0 billion in assets under
administration in mutual funds, limited partnerships, and offshore funds.
B-1
<PAGE>
Investors Bank & Trust Company
- --------------------------------------------------------------------------------
Organization
- --------------------------------------------------------------------------------
200 Clarendon Street
Boston, MA 02116
phone: 617-330-6700
fax: 617-330-6033
Providing securities processing services since 1962. Additional offices in
Dublin, Toronto, and the Cayman Islands.
- --------------------------------------------------------------------------------
Services
- --------------------------------------------------------------------------------
Global Custody Offshore Administration
Master/Feeder Processing Cash Management
Fund Administration Transfer Agency
Hub & Spoke Processing Foreign Exchange
Limited Partnership Securities Lending
Processing Multi-Currency Fund
Accounting
- --------------------------------------------------------------------------------
Dimensions
- --------------------------------------------------------------------------------
$265 billion in Custody Assets
1675 Daily Priced Funds
245 Offshore Funds
50 Unit Investment Trusts
Global Network in 92 Countries
1,500 Employees
- --------------------------------------------------------------------------------
Custodial or
Transfer Agency Clients
- --------------------------------------------------------------------------------
Aetna Retirement Services ICMA Retirement Corporation
Albion/Alliance Capital Indocam
Allmerica Financial John Hancock Funds
Allstate Life Kayne Anderson
Anchor Lazard
Atlas Funds M Financial Group
Bailard Beihl & Kaiser Mass Mutual Life Insurance
Banco Santander/Vega Asset Mgmt Merrill Lynch
Bank Julius Baer MetaMarkets.Com
Bankers Trust Mexico
Barclays Global Investors Northeast Investors
Brandes Investment Partners PaineWebber Incorporated
Chase PIMCO
Christian Science Republic National Bank
The Clinton Group of New York
Commonfund Salomon Smith Barney
The Copeland Companies Schwendiman
COVA Life Seix Investment Management
David L. Babson & Co., Inc. Shott Capital Management
Deutsche Bank Smith Breeden Associates
Diversified Investment Standard Life, U.K.
Advisers (AEGON) Standish Ayer & Wood
Domini State Farm Investment Management
Eaton Vance Corp. Strong Capital Management
Ebrd The Investment Fund for
E*Trade Foundations
Eyres Reed Thomas J. Herzfeld & Co. Inc.
Federated Investors Touchstone Family of Funds
Fiduciary Trust Trust Company of the West
Fischer Francis Trees & Watts Unicredito/Europlus
Goldman Sachs Asset Management Wells Fargo Bank
Grantham, Mayo, Van Otterloo & Co. Western Reserve Life
Guinness Flight Investment Assurance Co.
Management Ltd. William Blair & Co.
Harding Loevner Wright Investors Services
X.Com
Custodian and Transfer Agent
for the TIFF Investment Program
- --------------------------------------------------------------------------------
Service Approach
- --------------------------------------------------------------------------------
Investors Bank focuses its resources on developing the people, systems, and
technology to support the ever-changing financial services industry. The Bank
is committed to tailored, responsive service built on a conscious strategy of
employing professional personnel at all levels and supporting them with
extensive training and sophisticated technology. The Bank's structure is
designed to facilitate quick, accurate responses by expert professionals who are
dedicated to individual clients.
In order to provide clients with the best service at a competitive price,
Investors Bank relies on fully integrated, state-of-the-art systems. For
example, the high level of automation with the Investors Bank Fund Accounting
and Custody Tracking System (FACTS) has elevated the typical fund accountant's
role away from mundane tasks like data entry to more analytical and control-
oriented tasks. The benefits to clients are increased control, improved
accuracy, and ultimately superior service.
Investors Bank's client base is global in scope and includes some of the most
recognized institutions in the business. Responsiveness and attention to detail
are the foundation for the long-term partnerships between the Bank and its
clients.
The Transfer Agency operations of Investors Bank focus on the institutional
investor. Highly trained shareholder servicing personnel are dedicated to each
client and become intimately familiar with that client's products. The result
is a satisfied investor whose inquiries are addressed by a shareholder
representative who knows both the investor's account history and the product
options available.
- --------------------------------------------------------------------------------
Key Personnel
- --------------------------------------------------------------------------------
Kevin Sheehan, President & CEO
BA, University of Massachusetts
previous experience: Senior Vice President, Bank of New England
Michael Rogers, Executive Managing Director,
Custody/Fund Accounting
MBA, College of William and Mary
BA, Boston College
previous experience: Manager, Bank of New England
Robert Mancuso, Marketing/Client Management
MBA, Boston College
BA, Finance, Boston College
B-2
<PAGE>
First Fund Distributors, Inc.
- --------------------------------------------------------------------------------
Organization
- --------------------------------------------------------------------------------
4455 E. Camelback Rd, Suite 261E
Phoenix, AZ 85018
phone: 602-952-1100
fax: 602-952-8520
Fund Distributor
Founded in 1990
Subsidiary of The Wadsworth Group
Founded in 1982
- --------------------------------------------------------------------------------
Clients Served
- --------------------------------------------------------------------------------
Advisors Series Trust
Brandes Investment Funds
Fleming Capital Mutual Fund Group, Inc.
Fremont Mutual Funds, Inc.
Guiness Flight Investment Funds
Jurika & Voyles Fund Group
Kayne Anderson Mutual Funds
Masters' Select Investment Trust
O'Shaughnessy Funds, Inc.
PIC Investment Trust
Professionally Managed Portfolios
Puget Sound Alternative Investment Series Trust
The Purisima Funds
Rainier Investment Management Mutual Funds
RNC Mutual Fund Group, Inc.
- --------------------------------------------------------------------------------
Key Personnel
- --------------------------------------------------------------------------------
Robert H. Wadsworth, President & Treasurer
MBA, Pace University; BA Princeton University
1982-present: The Wadsworth Group (founder)
1979-82: Prudential Securities, Inc.
1965-79: Calvin Bullock, Ltd.
Steven J. Paggioli, Vice President & Secretary
JD BA, University of Connecticut
1986-present: The Wadsworth Group
previous experience: J&W Seligman & Co.;
Staff Attorney, Securities & Exchange Commission
Eric M. Banhazl, Vice President
MBA, Tulane University; BA University of
Massachusetts
1990-present: The Wadsworth Group
1988-90: Huntington Advisors, Inc.
1986-88: L.F. Rothschild Fund Management, Inc.
1982-86: Price Waterhouse
Fund Distributor for the
TIFF Investment Program
- --------------------------------------------------------------------------------
Description of Services
- --------------------------------------------------------------------------------
First Fund Distributors, Inc. ("FFDI") is a broker-dealer registered with the
Securities & Exchange Commission and is authorized by the National Association
of Securities Dealers to act as a mutual fund underwriter and distributor. FFDI
serves as distributor for over 80 mutual fund portfolios with assets over $70
billion. It has approximately 15 employees in offices located in New York, New
Jersey and Arizona.
B-3
<PAGE>
- --------------------------------------------------------------------------------
TIFF INVESTMENT PROGRAM
- --------------------------------------------------------------------------------
TIFF Investment Program, Inc. is a no-load, open-end management investment
company that seeks to improve the net investment returns of its members by
making available to them a series of commingled investment vehicles, each with
its own investment objective and policies. The funds are open exclusively to
foundations and other 501(c)(3) organizations.
<TABLE>
<S> <C> <C>
Adviser...............................Foundation Advisers, Inc................2405 Ivy Road; Charlottesville, VA 22903
Fund Administrator....................Investors Capital Services, Inc.........600 Fifth Avenue, 26th Floor; New York, NY 10020
Custodian and Transfer Agent..........Investors Bank & Trust Company..........200 Clarendon Street; Boston, MA 02116
Fund Distributor......................First Fund Distributors, Inc............4455 E. Camelback Rd., Suite 261E; Phoenix, AZ 85018
Independent Accountant................PricewaterhouseCoopers LLP..............1177 Avenue of the Americas; New York, NY 10036
Legal Counsel.........................Dechert Price & Rhoads..................1500 K Street, NW; Washington, DC 20005
</TABLE>
<TABLE>
<CAPTION>
TIFF TIFF TIFF TIFF TIFF
Multi- Intl Emerging U.S. TIFF Short-
Asset Equity Markets Equity Bond Term
Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C>
Aronson + Partners...................................X...............................................X...........................
Atlantic Asset Management, LLC................................................................................................X..
Canyon Capital Management, LP........................X...........................................................................
City of London Investment Co., Ltd...................................................X...........................................
Delaware International Advisers Ltd...................................X..........................................................
Emerging Markets Management, LLC.....................................................X...........................................
Everest Capital Limited...............................................X..............X...........................................
Explorador Capital Management, LLC...................................................X...........................................
Farallon Capital Management, LLC.....................X...........................................................................
Fischer Francis Trees & Watts, Inc............................................................................................X..
Harding, Loevner Management, LP......................X................X..........................................................
Lazard Asset Management..............................................................X...........................................
Lone Pine Capital LLC................................X...........................................................................
Marathon Asset Management, Ltd........................................X..........................................................
Martingale Asset Management, LP......................................................................X...........................
Oechsle International Advisors, LLC..................X................X..........................................................
Palo Alto Investors..................................................................................X...........................
Seix Investment Advisors, Inc........................X.............................................................X.............
Shapiro Capital Management Company, Inc..............................................................X...........................
Smith Breeden Associates, Inc......................................................................................X.............
Wellington Management Company, LLP...................X...........................................................................
Westport Asset Management, Inc.......................................................................X...........................
</TABLE>
- --------------------------------------------------------------------------------
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 28, 2000, which
has been filed with the Securities and Exchange Commission and which can be
obtained without charge by contacting FAI at the address and telephone number
listed on the previous page under the heading Inquiries. The Statement of
Additional Information is incorporated herein by reference. Further information
about the funds' investments is also available in the TIP Annual and Semi-Annual
Reports to members. The funds' Annual Report contains a discussion of the
market conditions and investment strategies that significantly affected the
funds' performance during the last fiscal year and is available without charge
by contacting FAI.
Information about the funds (including the prospectus and SAI) can be reviewed
and copied at the Securities and Exchange Commission's Public Reference Room in
Washington, DC (for information, call 1-202-942-8090). 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 20549-0102.
- --------------------------------------------------------------------------------
SEC File Number 811-8234
<PAGE>
TIFF Statement of
Investment Additional
Program Information
April 28, 2000
TIFF Multi-Asset Fund Available through:
TIFF International Equity Fund Foundation Advisers, Inc.
TIFF Emerging Markets Fund 2405 Ivy Road
TIFF U.S. Equity Fund Charlottesville, VA 22903
TIFF Bond Fund phone: 804-817-8200
TIFF Short-Term Fund fax: 804-817-8231
TIFF Investment Program, Inc. ("TIP") is a no-load, non-diversified, 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 to
foundations and 501(c)(3) organizations. The funds and their investment
advisor, 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.
This Statement of Additional Information is not a Prospectus and should be read
in conjunction with the TIP Prospectus dated April 28, 2000 (the "Prospectus"),
which has been filed with the Securities and Exchange Commission ("SEC") and
which is incorporated herein by reference. The Prospectus can be obtained
without charge by writing or calling FAI at the address and telephone number
provided above.
The funds' audited Financial Statements, including the Financial Highlights, for
the period ended December 31, 1999, appearing in the Annual Report to
Shareholders and the report thereon of PricewaterhouseCoopers LLP, independent
auditors, appearing therein are incorporated by reference in this Statement of
Additional Information. The Annual Report to Shareholders will be delivered to
shareholders upon request.
<PAGE>
Contents
<TABLE>
<S> <C>
Organization of TIP........................................................... 3
Origin of TIP................................................................. 3
Suitability of TIFF Funds..................................................... 3
Supplemental Discussion of Fund Management and Administration................. 8
Performance-Based Fees for Money Managers..................................... 13
Control Persons and Principal Holders of Securities........................... 17
Distribution of TIFF Funds.................................................... 18
Supplemental Discussion of Investment Objectives, Policies, and Restrictions.. 19
Policy Implementation and Risks............................................... 22
Fund Transactions............................................................. 43
Tax Considerations............................................................ 44
Member Information............................................................ 49
Calculation of Performance Data............................................... 49
Determination of Net Asset Value.............................................. 50
Additional Service Providers.................................................. 51
Financial Statements.......................................................... 52
Description of Indices..................................................Appendix A
Quality Ratings.........................................................Appendix B
</TABLE>
2 TIP Statement of Additional Information
<PAGE>
Organization of TIP
The TIFF Investment Program, Inc. (TIP) was incorporated under Maryland law on
December 23, 1993. The authorized capital stock of TIP consists of
3,500,000,000 shares with $.001 par value, allocated in increments of
500,000,000 shares to each of the Multi-Asset, International Equity, Emerging
Markets, U.S. Equity, Bond, and Short-Term Funds (500,000,000 unallocated).
Shares of each fund have equal voting rights. Members have one vote for each
dollar of net asset value they hold. All shares issued and outstanding are
fully paid and non-assessable, transferable, and redeemable at net asset value
at the option of the member. Shares have no preemptive or conversion rights.
The shares of TIP possess non-cumulative voting rights. This means that the
holders of more than 50% of the shares voting for the election of directors can
elect 100% of the directors if they choose to do so. In such event, the holders
of the remaining percentage (less than 50%) of shares voting for the election of
directors will not be able to elect any person or persons to the board of
directors.
TIP's Articles of Incorporation permit new series of shares evidencing new funds
in addition to the six funds described in the Prospectus.
None of the funds shall be liable for the obligations of any other fund.
Origin of TIP
Resources Needed to Invest Effectively. TIP is the outgrowth of several years
of research into the need for a foundation investment cooperative, including
extensive studies on foundation investment practices by The Investment Fund for
Foundations ("TIFF"). These studies suggest that many of America's
approximately 34,000 private and community foundations lack the resources needed
to earn superior net investment returns. The necessary resources include:
1. an asset base sufficient to diversify across asset classes and investment
styles in an economic manner,
2. staff and trustees with the time and expertise needed to select outstanding
Money Managers and monitor and adjust manager and asset class weights, and
3. the bargaining power and skills needed to strike attractive fee arrangements
with money managers, custodians, accountants, lawyers, and other service
providers.
Investing through TIP enables governing boards to delegate responsibility for
time-intensive tasks (e.g., service provider selection and evaluation and fee
negotiations), thus providing them with more time to devote to the sensitive and
supremely important task of formulating appropriate asset allocation guidelines.
Suitability of TIFF Funds
Manager Selection. The Money Managers selected by FAI on behalf of TIP are all
experienced investment professionals with verifiable performance records that
FAI's directors have reviewed. These directors (and the FAI staff that supports
them) have extensive experience performing their assigned functions, as do the
principals and supporting staff of all outside service providers employed by
TIP.
April 28, 2000 3
<PAGE>
Suitability of TIFF Funds continued
Changing Existing Investment Management Arrangements. Changing investment
management practices is almost always costly. It can also be painfully time-
consuming, especially when long-standing relationships must be disrupted. For
these reasons, change for its own sake should be avoided. At the same time,
foundation fiduciaries should recognize that investment markets and the vast
universe of service providers that furnish investment-related services to
foundations are highly dynamic. They are so dynamic that the uncertain but very
real costs of not changing settled practices sometimes can exceed the known
costs of steering a different course. This is especially true with respect to
the difficult and time-consuming task of selecting superior money managers. Due
to the very powerful mean-reverting tendencies of investment markets -- the
tendency for the performance of a manager (or investment style) generating
superior returns over a given time period to regress to the mean or average of
all managers over future time periods -- sticking with a proven winner can,
paradoxically, be very perilous unless the successful organization is itself
committed to the task of continually reviewing and revising its own working
assumptions, strategies, and tactics.
One of the chief reasons TIP was created was to permit foundation trustees, who
often lack the time or expertise to monitor continually the rapid evolution of
markets and managers, to delegate this task to a group of investment
professionals (the directors of TIP and FAI) who have significant experience
investing foundation assets.
Active Investment Approaches. While conceding that few professional money
managers can accurately and consistently forecast major highs or lows in
financial markets, the directors of TIP and FAI believe that some money managers
are indeed able to pursue superior returns within selected asset classes and
investment sectors. By combining in a prudent manner investment approaches
appropriate to a given asset class, and then selecting money managers based on
their proven ability to implement successfully such approaches, a foundation
potentially can enhance its long-term investment returns.
Multi-Asset Fund. The TIFF Multi-Asset Fund is TIP's response to requests from
many foundations throughout the United States for assistance with asset
allocation. Asset allocation is critically important because the longer money
is put to work the wider the gap grows between returns on individual asset
classes. For truly long-term investors, these differences between asset class
returns dwarf differences in returns attributable to manager selection, fee
negotiations, or other investment-related tasks that TIP performs on behalf of
its members. All of the 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.
4 TIP Statement of Additional Information
<PAGE>
Suitability of TIFF Funds continued
Based on their own study of capital market history, TIP's directors have
concluded that the achievement of five percent or higher real returns
presupposes a willingness to invest in risky (i.e., volatile) assets. The TIFF
Multi-Asset Fund's return objective is to produce an adequate (i.e., five
percent or higher) real return for participating foundations in as consistent a
manner as possible -- not every quarter or even every year, given the volatile
nature of capital markets, but with sufficient consistency over multi-year time
periods to induce member foundations to "stay the course." That is, foundations
should adhere to asset allocation policies that comport better with their long-
term goal of preserving fund purchasing power than do policies that place more
emphasis on controlling short-term price fluctuations.
Difficulty of Maintaining All-Equity Portfolios. TIP's directors recognized
that an all-equity portfolio would not fulfill the asset allocation needs of
grantmaking foundations in at least two important respects. First, many
governing boards cannot withstand the downside risks inherent in all-equity
portfolios, even those that are invested on a truly global basis. Second, even
if trustees have the discipline needed to maintain all-equity portfolios during
periods when stock prices are falling sharply, spending needs may leave them
with no choice but to sell equities at very depressed prices. For these
reasons, TIP's directors elected to include in the Fund's asset mix securities
that have the potential to cushion price declines in economic environments that
are especially inhospitable to equities, i.e., deflation or very high rates of
unanticipated inflation. These securities are held primarily in the "volatility
control" segment of the Fund and include resource-related equities, bonds, and
cash equivalents. It is important to note that securities held in the
volatility control segment of the Fund can themselves be quite volatile: the
term "volatility control" denotes such securities' potential to cushion losses
experienced in the "total return" segment of the Fund.
Unique Deflation-Hedging Role of Bonds. The Fund's 20% "normal" allocation to
bonds reflects the directors' judgment that such bond holdings could prove
uniquely useful in a deflationary environment like the 1930s when trustees would
otherwise be forced to sell stocks at depressed prices to meet annual spending
needs. To provide adequate deflation-hedging protection, a bond portfolio must
emphasize intermediate or longer maturity, high quality, non-callable bonds --
an imperative that is reflected in the benchmarks against which the Fund's bond
commitments will be measured.
The Need for a Hedge against High Rates of Unanticipated Inflation. Similarly,
the Fund's 5% "normal" allocation to a portfolio emphasizing natural resource-
related equities reflects the directors' judgment that such stock holdings could
prove uniquely useful in a highly inflationary environment like the 1970s when
many stocks outside the resource-related sector produced sharply negative
inflation-adjusted returns. There is no assurance that the resource-related
portfolio will produce satisfactory real returns in an environment of rapidly
rising inflation, but TIP's directors believe that it has the potential to serve
as a more reliable hedge than alternate inflation hedges that regulated
investment companies are permitted to own (e.g., shares of real estate
investment trusts).
The Fund does not hold direct investments in real estate because SEC regulations
prohibit regulated investment companies from doing so. While the Fund does not
hold real estate-related equities [e.g., shares of publicly traded real estate
investment trusts ("REITs")] on a permanent basis, the guidelines set forth for
several of the Fund's Money Managers permit them to hold such securities on an
opportunistic basis. TIP's directors rejected a permanent allocation to real
estate-related equities such as REIT shares because the directors believe that
returns on such securities have a disturbingly high correlation with stock
market indices when inflation is spiraling upward, i.e., they provide unreliable
inflation-hedging protection. Although there is no assurance that the natural
resource-related securities in which the Fund invests will produce satisfactory
real returns in environments of unexpectedly high inflation, TIP's directors
believe that such securities constitute more reliable inflation hedges than real
estate-related equities. The directors' experience suggests that firms engaged
in producing or distributing natural resources can more readily pass through
inflation-induced cost increases to their customers than can landlords who must
wait for leases to expire to negotiate price increases. This constraint also
undermines the inflation-hedging protection of direct real estate investments,
which several institutional funds represented on TIP's and FAI's boards hold but
which are not necessarily expected to provide high real returns when inflation
is high and accelerating.
April 28, 2000 5
<PAGE>
Suitability of TIFF funds continued
Potential Value-Added from Active Management. In determining which asset
classes and strategies the Fund should employ for total return -- as distinct
from hedging -- purposes, TIP's directors sought to avoid a mistake common to
many investment programs. That is, in allocating assets among asset classes,
many investors use expected returns, which assume that all assets will be
managed passively (i.e., indexed), even though they themselves intend to rely
heavily on active managers. The Multi-Asset Fund itself relies on active
managers, which is the chief reason that the Multi-Asset Fund's guidelines
emphasize:
1. foreign (and especially emerging) stock markets to a greater extent than do
the guidelines employed by most US-based institutions at present and
2. opportunistic total return strategies such as global risk arbitrage and
distressed securities investing.
Perceived Inefficiency of Foreign Stock Markets. TIP's directors believe that
foreign stock markets are less efficient than the US stock market in a valuation
sense and are likely to remain so for some time. This perception creates a
presumption on their part that carefully selected active managers can produce
higher excess returns investing in foreign stocks than they can when investing
in US stocks. The assumption that active management will produce higher excess
returns (net of fees and trading costs) in foreign markets justifies a heavier
commitment to foreign stocks than the modest allocations maintained by many US-
based investors.
Potential Risk Reduction from Investing in Assets with Low Return Correlations.
The chief reason TIP's directors endorse the use of "non-traditional" or
"alternative"assets such as foreign stocks and opportunistic total return
portfolios is their perceived potential for attractive returns through active
management. The case for including these allocations is reinforced by the
tendency of returns on these non-traditional investments to be imperfectly (or,
in some cases, negatively) correlated with returns on domestic stocks.
Occasions can arise when foreign stocks (whether developed or emerging), global
risk arbitrage portfolios, distressed securities, and other investments that the
Fund might hold strictly for total return purposes, will join domestic stocks in
producing negative returns. However, this unfortunate fact does not undermine
the fundamental soundness of a diversified approach to long-term asset
allocation. As long as investments held by the Fund as domestic equity
substitutes generate long-term returns at least equal to those expected from
domestic stocks, the general tendency of such investments to rise and fall at
different times than domestic stocks creates opportunities to enhance the Fund's
long-term returns. This may be achieved through periodic rebalancing of the
Fund's asset class weights back to more normal percentages. The supposition
here is that market movements will periodically cause such weights to differ
from whatever initial "norms" TIP's directors might establish. Through a
combination of manager-induced and board-induced rebalancing moves, the Fund can
potentially benefit from the inherent volatility of the assets and strategies it
employs. As perhaps the most comprehensive study of this phenomenon concludes,
"disciplined rebalancing can boost returns as much as a fairly large shift in
the policy mix itself" (Arnott and Lovell, 1992).
Determining Asset Class Ranges. The Multi-Asset Fund's asset class ranges were
arrived at using a combination of resources, including computer simulations
quantifying the damage to long-term returns of forced sales of stocks at
depressed prices under the "disaster" scenarios described above (deflation and
very high rates of unanticipated inflation), as well as other qualitatively
driven analyses of the risk tolerance of foundation governing boards and their
capacity to reduce budgeted grant outlays (consistent with legally mandated
payout requirements) during periods when common stock prices are falling
sharply. While appreciative of the advantages of purely statistical approaches
to asset allocation, TIP's directors recognize that such approaches can and
often do attempt to achieve a false precision. The Fund's asset allocation
guidelines therefore reflect qualitative as well as quantitative judgments about
asset class weights best suited to the long-term needs of foundations.
6 TIP Statement of Additional Information
<PAGE>
Suitability of TIFF Funds continued
Statistical Justification of Fund's Guidelines. TIP and FAI do not provide such
statistics for several reasons. First, even very long-term studies of the risk
and return characteristics of asset classes and investment strategies are highly
sensitive to starting and ending dates. An attempt to depict how a hypothetical
portfolio managed in accordance with the Fund's guidelines would have performed
over time could prove misleading.
Second, some of the asset classes and strategies that the Fund employs have
relatively short histories (e.g., emerging market stocks, for which reliable
return series extend back less than a decade at present). This compounds the
problem of time-period sensitivity just mentioned, especially with respect to
that portion of the Fund allocated to opportunistic equity strategies, such as
global risk arbitrage, that seek to outperform absolute return benchmarks
(Treasury bills plus five percent).
Third, many governing boards seek TIP's assistance in formulating asset
allocation guidelines precisely because of their concern for lack of time and
expertise. Burdening such trustee groups with quantitative justifications of
the Fund's guidelines would contravene their stated wishes and could also
provide a false sense of security that the Fund will produce superior risk-
adjusted returns relative to more conventional asset mixes comprising only
domestic stocks and bonds. While the Fund has the potential to outperform other
asset mixes, there is no assurance that it will do so, and the Fund could
potentially underperform more conventional asset mixes in certain market
environments (e.g., when foreign stocks and bonds are performing materially
worse than their domestic equivalents). While TIP's decision to employ such
strategies bespeaks its directors' judgment that capital markets will continue
to provide opportunities for the Money Managers within such segments to generate
satisfactory absolute returns, there is no assurance that they will do so.
Prospective investors must not extrapolate past results into the future.
Fund's Suitability for Foundations with "Conservative" Boards. Whether the Fund
is suitable for a foundation that favors conservative investment policies
depends on one's definition of "conservative." Many investors who describe
themselves as "conservative" pursue strategies that in fact entail the risk of
large losses, especially to the ravages of inflation. Examples include:
1. investors willing to own only short-term Treasury bills, which provide safety
of principal but which have historically generated less than one-fifth of the
real returns needed to preserve the long-term purchasing power of funds with
withdrawal rates of five percent per annum,
2. investors willing to own only very high grade bonds, which provide safety of
principal if held to maturity but can produce large interim losses if
interest rates spike upward, and
3. investors willing to own only the highest quality (i.e., "safest") stocks,
such as IBM in 1987 ($175 per share versus less than $50 per share just five
years later) or Philip Morris in 1992 ($86 per share versus $49 per share
less than one year later).
When scrutinized, the investment policies of many so-called "conservative"
investors are in fact not conducive to wealth preservation -- certainly not
after adjusting for inflation. A more apt label for such policies would be
"conventional."
TIP's directors believe that the most relevant measure of conservatism for
foundation investors is not how closely their investment policies comport with
traditional norms but rather how effective such policies are in maintaining fund
purchasing power within acceptable volatility constraints. Diversifying among
many asset classes, strategies, and money managers can be a powerful means of
improving the return-to-risk ratio of an investment program. For this reason,
most of the institutional funds represented on the TIP and FAI boards make
extensive use of assets other than domestic stocks and bonds and strategies
other than conventional long-only approaches.
April 28, 2000 7
<PAGE>
Supplemental Discussion of Fund Management and Administration
TIP and FAI Boards. There is considerable, though not complete, overlap among
the boards of TIP and FAI for two reasons. First, given the highly dynamic
character of financial markets, it is important that decision-making at all
levels of the cooperative be as streamlined as possible. This imperative is
best fulfilled by keeping the number of individuals responsible for a given task
(e.g., selecting and monitoring Money Managers) to a reasonable minimum.
Second, there are securities law conditions which preclude complete overlap
between the boards of TIP and FAI. Specifically, to ensure that the cooperative
complies with laws discouraging direct control of the affairs of regulated
investment companies by the entities that sponsor them, FAI board members cannot
occupy more than 49% of the seats on TIP's board of directors. For this reason
and also because the duties of TIP's board presuppose extensive audit and
operations experience, a majority of TIP's board of directors are persons who
serve or have served on the Audit and Operations Committee of 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 Greg Curtis, President of
Greycourt & Company (Pittsburgh, PA). The following is a list of the directors
of TIP and FAI.
<TABLE>
<CAPTION>
Directors Birthdate
<S> <C> <C>
Sheryl L. Johns TIP Chair 3/15/1956
William F. Nichols* TIP/FAI Director 7/4/1934
Fred B. Renwick TIP Director 2/1/1930
John E. Craig TIP Director 6/3/1944
Gregory D. Curtis FAI Chair 1/14/1947
Alice W. Handy FAI Director 4/17/1948
Robert A. Kasdin FAI Director 4/20/1958
William McLean FAI Director 4/22/1955
Jack R. Meyer FAI Director 10/4/1945
David A. Salem* TIP/FAI Director/President 4/27/1956
Ann B. Sloane FAI Director 11/1/1938
David F. Swensen FAI Director 1/26/1954
Jeffrey Tarrant FAI Director 4/4/1956
Arthur Williams III FAI Director 5/12/1941
- -----------------------------------------------------------------------------------------------
</TABLE>
An asterisk (*) has been placed next to the name of each director who is an
"interested person" of TIP, as such term is defined in the Investment Company
Act of 1940, as amended (the "1940 Act"), by virtue of such person's affiliation
with TIP or FAI.
Excepting the President, David Salem, the members of TIP and FAI boards are not
compensated for their service as directors.
Code of Ethics. Rule 17j-1 of the Investment Company Act of 1940, as amended,
addresses conflicts of interest that arise from personal trading activities of
investment company personnel. The rule requires TIP, their investment advisor,
FAI, and their Money Managers to adopt a code of ethics and to report
periodically to the board on issues raised under its code of ethics. To assure
compliance with these restrictions, TIP and FAI have adopted and agreed to be
governed by a joint code of ethics, and the Money Managers have each adopted and
agreed to be covered by their individual Code of Ethics (the "Codes of Ethics")
containing provisions reasonably necessary to prevent fraudulent, deceptive or
manipulative acts with regard to the personal securities transactions of their
employees. The Codes of Ethics permits personal investing transactions of TIP's,
FAI's and the Money Managers' directors, officers and employees which avoid
conflicts of interest with TIP.
Information about these Codes of Ethics may be obtained by calling the
SEC's Public Reference Room at 1-202-942-8090. Copies of the Codes of Ethics
may also be obtained on the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. Alternatively, this information may be obtained, upon
payment of a duplicating fee, by writing the Public Reference Section of the
SEC, Washington D.C. 20549-0102 or by electronic request at the following e-mail
address: [email protected].
8 TIP Statement of Additional Information
<PAGE>
Supplemental Discussion of Fund Management continued
Advisory Agreement. Pursuant to its Advisory Agreement with TIP, FAI provides
the following services the funds:
1. develops the investment programs, selects the Money Managers from a broad
universe of investment managers, negotiates agreements with Money Managers on
behalf of the TIP board of directors (which has final authority for the
approval or disapproval of such agreements), allocates and reallocates assets
among Money Managers, and monitors the Money Managers' investment activities
and results,
2. provides or oversees the provision of all general management, investment
advisory, and portfolio management services, and
3. provides TIP with office space, equipment, and personnel.
The Advisory Agreement was approved by the initial members of the International
Equity, Emerging Markets, U.S. Equity, Bond, and Short-Term Funds on March 29,
1994, and by the initial members of the Multi-Asset Fund on September 13, 1994.
The Advisory Agreement continues in force for successive annual periods as long
as such continuance is specifically approved at least annually by (a) the board
of directors or (b) the vote of a "majority" [as defined in the Investment
Company Act of 1940 (the "1940 Act")] of a fund's outstanding shares voting as a
single class; provided that in either event the continuance is also approved by
at least a majority of the board of directors of TIP who are not "interested
persons" (as defined in the 1940 Act) of TIP or FAI by vote cast in person at a
meeting called for the purpose of voting on such approval. The Advisory
Agreement may be terminated without penalty on not less than 60 days' notice by
the board of directors of TIP or by a vote of the holders of a majority of the
relevant fund's outstanding shares voting as a single class, or upon not less
than 60 days' notice by FAI. The Advisory Agreement will terminate
automatically in the event of its "assignment" (as defined in the 1940 Act).
Advisor 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 percentage rates to such fund's average daily net
assets for the month:
<TABLE>
<CAPTION>
Multi- International Emerging U.S Short-
Assets Asset Equity Markets Equity Bond Term
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
On first $500 million 0.20% 0.15% 0.15% 0.15% 0.10% 0.03%
On next $500 million 0.18% 0.13% 0.13% 0.13% 0.08% 0.03%
On next $500 million 0.15% 0.11% 0.11% 0.11% 0.06% 0.02%
On next $500 million 0.13% 0.09% 0.09% 0.09% 0.05% 0.02%
On next $500 million 0.11% 0.07% 0.07% 0.07% 0.04% 0.01%
On remainder (>$2.5 billion) 0.09% 0.05% 0.05% 0.05% 0.03% 0.01%
- ---------------------------------------------------------------------------------------------
</TABLE>
For the years ended December 31, 1999, December 31, 1998, and December 31, 1997,
the amount of advisory fees paid to FAI and the money managers by each fund was
as follows:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998 December 31, 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TIFF Multi-Asset Fund $ 885,415 $1,122,685 $1,423,180
- ----------------------------------------------------------------------------------------------------------
TIFF International Equity Fund $1,602,155 $1,147,078 $2,186,201
- ----------------------------------------------------------------------------------------------------------
TIFF Emerging Markets Fund $ 689,179 $1,636,075 $ 851,605
- ----------------------------------------------------------------------------------------------------------
TIFF U.S. Equity Fund $1,546,753 $1,523,645 $1,136,192
- ----------------------------------------------------------------------------------------------------------
TIFF Bond Fund $ 447,625 $ 368.550 $ 496,344
- ----------------------------------------------------------------------------------------------------------
TIFF Short-Term Fund $ 173,602 $ 138,420 $ 66,835
- ----------------------------------------------------------------------------------------------------------
</TABLE>
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
April 28, 2000 9
<PAGE>
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
10 TIP Statement of Additional Information
<PAGE>
Supplemental Discussion of Fund Management continued
qualifying shares of TIP under federal and state laws and regulations; expenses
of printing and distributing reports, notices, and proxy materials to existing
members; expenses of printing and filing reports and other documents filed with
governmental agencies; expenses of annual and special members' meetings;
expenses of directors of TIP who are not employees of FAI; membership dues in
the Investment Company Institute; insurance premiums; and extraordinary expenses
such as litigation expenses. Fund expenses directly attributable to a fund are
charged to that fund; other expenses are allocated proportionately among all of
the funds in relation to the net assets of each fund.
Fund Administrator. Consistent with their mission of helping foundations
exploit the economies of scale inherent in many aspects of investing, TIP and
FAI rely heavily on outside 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 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% of average daily net assets for reducing the expense ratio of one or more
funds below certain levels specified for such funds. A profile of Investors
Capital is provided in Appendix B of the Prospectus.
For the years ended December 31, 1999, December 31, 1998, and December 31, 1997,
the amount of administration fees paid by each fund was as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
December 31, 1999 December 31, 1998 December 31, 1997
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TIFF Multi-Asset Fund $206,999 $332,577 $252,206
- ------------------------------------------------------------------------------------------------------------------------
TIFF International Equity Fund $142,251 $194,693 $133,200
- ------------------------------------------------------------------------------------------------------------------------
TIFF Emerging Markets Fund $ 36,790 $ 38,406 $ 48,710
- ------------------------------------------------------------------------------------------------------------------------
TIFF U.S. Equity Fund $172,190 $161,064 $123,362
- ------------------------------------------------------------------------------------------------------------------------
TIFF Bond Fund $143,361 $104,422 $ 85,660
- ------------------------------------------------------------------------------------------------------------------------
TIFF Short-Term Fund $ 41,666 $ 33,045 $ 21,735
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Money Manager Agreements. The agreements between TIP and the Money Managers
that manage a separate account on behalf of a fund (the "Money Manager
Agreements") continue in effect for successive annual periods, as long as such
continuance is specifically approved at least annually by (a) the board of
directors or (b) the vote of a "majority" (as defined in the 1940 Act) of a
fund's outstanding shares voting as a single class, provided that in either
event the continuance is also approved by at least a majority of the board of
directors who are not "interested persons" (as defined in the 1940 Act) of TIP
or FAI by vote cast in person at a meeting called for the purpose of voting on
such approval.
Exemption from Requirement that Members Approve New Money Manager Agreements.
TIP has received an order from the SEC effective August 30, 1995, exempting each
of the funds from the requirement that agreements between regulated investment
companies and their investment advisors or subadvisors 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:
April 28, 2000 11
<PAGE>
Supplemental Discussion of Fund Management continued
1. employ a new Money Manager pursuant to the terms of a new Money Manager
Agreement, either as a replacement for an existing Money Manager or as an
additional Money Manager,
2. change the terms of a Money Manager Agreement, or
3. continue to employ an existing Money Manager on the same terms where an
Agreement has been assigned because of a change in control of the Money
Manager.
Any such action would be followed by written notice to members, which must
include the information concerning the Money Manager that would normally be
included in a proxy statement.
In negotiating Money Manager fee agreements, FAI's staff analyzes a number of
variables, including:
1. the proposed size of a Manager's account,
2. the Manager's historical and expected future performance against relevant
benchmarks,
3. the historical and expected future volatility of the Manager's relative
returns,
4. the Manager's assets under management, and
5. the impact (if any) that linking a Manager's compensation to its performance
might have on its decisionmaking process.
Manager Allocation Criteria. In allocating assets among Money Managers, FAI
considers each fund's Investment and Performance Objectives as well as other
variables. To accommodate fluctuations in the relative sizes of Money Managers'
accounts caused solely by market movements, allocations formulated by FAI take
the form of ranges: minimum, normal, and maximum percentages of fund assets to
be allocated to each Money Manager retained by it. While these ranges are not
expected to change frequently, FAI has discretionary authority to alter these
ranges and to reallocate assets among Money Managers in response to changing
market conditions.
Activating Money Managers' Accounts. Not all Money Managers profiled in
Appendix A of the Prospectus are employed at all times. Whether a given Money
Manager is employed at a given time depends on:
1. a fund's size,
2. its projected growth rate,
3. FAI's perception of the relative attractiveness of the Money Manager's
approach in light of prevailing market conditions, and
4. the extent to which a given Money Manager's investment style would complement
those of the other Money Managers to which a fund's assets have been
allocated.
Future market conditions are unforecastable, and TIP cannot predict the amount
to be allocated to each Money Manager over time. As a general rule, however,
given the incremental custodial costs of activating a Money Manager's account,
it is expected that the initial allocation to each Money Manager managing a
separate account on a fund's behalf will be at least $5 million. A Money
Manager receives no compensation from TIP until it is actually managing funds
for TIP and is entitled to no compensation if, due to its own changed
circumstances or changes in the investment environment generally, FAI decides
not to allocate assets to it.
Foundations seeking to know the actual allocation of each fund's assets across
Money Managers at a given time can obtain this information by contacting FAI.
Termination of Money Manager Agreements. The Money Manager Agreements may be
terminated without penalty on not less than 60 days' notice by the board of
directors of TIP or by a vote of the holders of a majority of the relevant
fund's outstanding shares voting as a single class, or upon not less than 60
days' notice by the Money Manager. A Money Manager Agreement will terminate
automatically in the event of its "assignment" (as defined in the 1940 Act).
12 TIP Statement of Additional Information
<PAGE>
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.
April 28, 2000 13
<PAGE>
Supplemental Discussion of Fund Management continued
Target Expense Ratios. The target expense ratios for the TIFF funds are:
Multi-Asset Fund 0.95%
International Equity Fund 1.00%
Emerging Markets Fund 1.50%
U.S. Equity Fund 0.65%
Bond Fund 0.50%
Short-Term Fund 0.35%
These target expense ratios reflect informed estimates by the directors of TIP
and FAI of the costs that foundations must be prepared to incur to realize the
performance objectives for each fund. For example, the Performance Objective of
the U.S. Equity Fund is to outperform the Wilshire 5000 Stock Index by 1.25% 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
1.90% (i.e., the 0.65% in fees incurred in pursuit of the Fund's objective plus
the 1.25% 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 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 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 1.25%
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
1.90% (1.25% 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 1.25% per annum.
14 TIP Statement of Additional Information
<PAGE>
Performance-Based Fees for Money Managers
Overview. The following discussion outlines the principles that FAI follows in
negotiating Money Manager fees and describes the performance-based fee structure
that the funds have entered into with many (but not all) of their Money
Managers. These principles are the product of both the combined investment
experience of members of FAI's and TIP's boards and policy choices made by TIP's
board in its formulation of objectives and guidelines for each fund.
Optimizing versus Minimizing Expenses. Even modest differences in a fund's
annual investment-related costs can have profound effects on a foundation's
cumulative returns. Therefore, foundation trustees should consider carefully
the costs of alternative investment vehicles. By pooling the investment assets
of numerous foundations, TIP can and does seek to minimize members' expenses for
investment-related services as custody and portfolio accounting. With respect
to Money Manager fees, which typically constitute the lion's share of
investment-related expenses, the directors of TIP and FAI believe that a
strategy aimed at optimizing these outlays is potentially more profitable than a
strategy aimed merely at minimizing them. For this reason, TIP relies primarily
on active (as distinct from passive) money management techniques and makes
extensive use of performance-based fees in compensating Money Managers for
services rendered to TIP.
Some foundation investors may be uncomfortable by the fact that the exact costs
of investing through each TIFF fund are unknowable in advance. However, it
should be remembered that the annual standard return deviations of the asset
classes in which the TIFF funds that utilize performance-based fees primarily
invest (i.e., the non-diversifiable or systemic risks of each asset class)
greatly exceed the economic uncertainty associated with fluctuating manager
fees. This is the case even under worst case conditions. Differences between
the minimum and maximum fees payable to Money Managers currently managing assets
for the funds are shown in the following table as of August 20, 2000.
<TABLE>
<CAPTION>
Number of Managers Largest Difference between Average Difference between
Receiving Minimum and Maximum Fees Payable Minimum and Maximum Fees Payable
Performance-Based Fees to Any Money Manager to Any Money Manager
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TIFF Multi-Asset Fund 4 1.40% 0.80%
- ----------------------------------------------------------------------------------------------------------------------------------
TIFF International Equity Fund 3 1.45% 1.22%
- ----------------------------------------------------------------------------------------------------------------------------------
TIFF Emerging Markets Fund 1 2.60% 2.60%
- ----------------------------------------------------------------------------------------------------------------------------------
TIFF U.S. Equity Fund 4 1.90% 1.23%
- ----------------------------------------------------------------------------------------------------------------------------------
TIFF Bond Fund 3 0.75% 0.65%
- ----------------------------------------------------------------------------------------------------------------------------------
TIFF Short-Term Fund 0 NA NA
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: Reflects only fees payable to Money Managers that manage a
separate account on behalf of a fund. 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.
April 28, 2000 15
<PAGE>
Performance-Based Fees for Money Managers continued
Money Manager Evaluation Criteria Seek to Discourage Undue Risk-Taking. TIP
does not employ performance-based fees as a means of inducing its Money Managers
to perform better than they would if they received straight asset-based fees.
Rather, it employs performance-based fees, among other means, in seeking to
optimize members' investment-related expenses. A Money Manager's proven
capacity to deliver uniform results to all accounts managed in accordance with
the philosophy presented to TIP is one of the important criteria used in
choosing Money Managers. FAI's initial selection criteria are the same used to
evaluate their ongoing performance. Portfolio investment decisions that cause
the performance of TIP's account to differ materially from the performance of
purportedly similar accounts, whether such decisions are motivated by the desire
to earn higher fees from TIP or not, could trigger their dismissal. FAI
compares the results each Money Manager produces for TIP to the results it
produces for its other clients. A Money Manager's unwillingness to share these
other results with FAI or its failure to manage TIP's account in a manner that
is as similar as possible to the manner in which other accounts with the same
mandate are managed also constitutes grounds for dismissal.
Preferred Performance-Based Fee Structure. FAI is mindful that no fee structure
can possibly prove suitable to all Money Managers, even as a starting point for
discussion. However, in an effort to streamline the negotiation process, FAI
has formulated a preferred performance-based fee model. The graph below
illustrates the application of this model to one particular Money Manager.
Common Characteristics. All Money Manager Agreements entailing performance-
based fees have certain common characteristics. These include (1) minimum fees
("floors"), (2) maximum fees ("caps"), and (3) fee formulas that, in the
judgment of members of TIP's and FAI's boards, produce reasonable fees in
relation to the margin of outperformance that a Money Manager must achieve to
earn a given level of fees.
In each case, the formula embodies the concept of a "fulcrum fee," i.e., a fee
midway between the minimum and the maximum. An equation is used under which the
actual fees paid to a Money Manager are always proportionately related to
performance above or below the fulcrum point. The formula is designed to
augment a mutually agreed-upon basic fee if the excess return (i.e., actual
gross total return less benchmark total return) on the Money Manager's portfolio
exceeds a specified level and to reduce this basic fee if the excess return
falls below this level. As the graph illustrates, in each case the slope of the
fee line between the floor and the cap is uniform throughout.
Definition of Total Return. "Total Return" as used here means the change in the
market value of the Money Manager's portfolio, or the benchmark index, as the
case may be, over one month measurement periods, adjusted on a time-weighted
basis for any assets added to or withdrawn from the Money Manager's portfolio.
The total returns of portfolios or benchmark indices over the rolling 12-month
time periods used in computing performance-based bonuses/penalties are,
therefore, the product of compounding each of the monthly returns in the
applicable period.
16 TIP Statement of Additional Information
<PAGE>
Performance-Based Fees for Money Managers continued
Manager-Specific Benchmark Indices. The benchmark index used in computing the
Money Manager's excess return is the index deemed most relevant for that Money
Manager. In many cases, this benchmark index is the same as the overall
performance benchmark for the fund retaining the Money Manager. In some cases,
however, FAI's objective of melding Money Managers espousing different
philosophies into an integrated manager structure that is both effective and
efficient dictates that a Money Manager's benchmark index be different from the
fund benchmark.
Fee Function Tied to Fund's Overall Objective. The performance-based fee
structure permits FAI to craft manager-specific fee agreements that link
compensation to the return objectives of the fund in question. In crafting fee
proposals, FAI and the directors of TIP ask a number of questions, including
those discussed below. All answers are considered when evaluating fee
arrangements.
1. What is a reasonable fee for this Money Manager if it outperforms its
benchmark by the same margin that the fund employing it aims to outperform
its benchmark?
For example, the U.S. Equity fund seeks to outperform its benchmark (the
Wilshire 5000 Stock Index) by 125 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 125 basis points
net of fees, then FAI has defined one point on the fee line for Manager X: 165
basis points of excess return equates to 40 basis points of fees.
2. What is a reasonable fee for a Money Manager if it performs as expected?
As a practical matter, most Money Managers screened by FAI expect to outperform
their agreed-upon benchmark by a margin greater than that reflected in the
targeted excess return of the fund they seek to serve. For example, most US
equity managers screened by FAI seek to outperform a relevant benchmark of US
equities by more than the 125 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.
April 28, 2000 17
<PAGE>
Performance-Based Fees for Money Managers continued
4. What is a reasonable fee "floor"?
As with all model inputs, FAI's choice of an appropriate "floor" for each Money
Manager is based on an analysis of both the Money Manager's idiosyncratic
attributes and the perceived availability of qualified alternate Money Managers.
Having identified an appropriate minimum fee for each Money Manager, FAI then
identifies the level of return at which the fee "bottoms out."
5. What is a reasonable fee "cap"?
Having identified an appropriate floor, FAI then identifies, for each Money
Manager, the fee "cap." In all cases, the cap and the level of excess return at
which it is reached are selected in accordance with criteria that aim to reward
the Money Manager adequately for superior performance without creating
incentives for either undue risk-taking or undue risk aversion (i.e., "closet
indexing" of portfolio assets to the agreed-upon benchmark).
<TABLE>
<CAPTION>
Excess Return over Manager's
Benchmark Required to Receive
Money Manager Fulcrum Fee Fulcrum Fee
<S> <C> <C>
Aronson + Partners 45 bp 210 bp
Atlantic Asset Management Partners, LLC 35 bp 165 bp
Emerging Markets Management 170 bp 370 bp
Harding, Loevner Management, L.P. 80 bp 400 bp
Marathon Asset Management, Ltd. 88 bp 424 bp
Oechsle International Advisors, LLC (Select) 60 bp 300 bp
Oechsle International Advisors, LLC (CPEM) 40 bp 200 bp
Palo Alto Investors 105 bp 524 bp
Seix Investment Advisors, Inc. 45 bp 195 bp
Shapiro Capital Management Co., Inc. 73 bp 325 bp
Smith Breeden Associates, Inc. (Bond Fund) 48 bp 157 bp
Westport Asset Management, Inc. 108 bp 430 bp
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Computing and Remitting Fees. The computation and remittance procedures that
the funds employ are described immediately below. All fee schedules are applied
to the average daily net assets in each Money Manager's account for the time
period in question. For purposes of computing the funds' daily net asset
values, however, performance-based fees are accrued based on investment returns
achieved during the current performance fee period.
Computing and Remitting Fees. For the first two months following the inception
of their accounts, Money Managers receive a straight asset-based fee equal to
150% of the minimum (floor) rate, regardless of performance. Accrual of
performance-based fees begins in the third calendar month rather than at an
earlier date because the indices with reference to which Money Managers'
performance is computed are typically not available until five or more business
days after month-end. Since it is impractical to adjust fee accrual rates
intra-month (e.g., during the second calendar month of investment operations
based on performance achieved during the first month), the earliest that such
accruals can reflect Money Managers' actual performance is the third calendar
month.
18 TIP Statement of Additional Information
<PAGE>
Performance-Based Fees for Money Managers continued
Thereafter, a Money Manager is compensated according to its performance-based
fee formula with the fee for a given month based on the Money Manager's
performance for the 12 months ending two months prior to that month. A two-
month time lag is employed because, while TIP's directors would prefer that fees
paid by members in a given month reflect their actual returns, two facts
preclude perfect linkage:
1. the law requires a minimum 12-month measurement period for performance-based
fees and
2. the returns on some managers' benchmarks (e.g., certain foreign stock
indices) are not available until after month-end.
In the third through fourteenth calendar month of their employment by a fund,
Money Managers agreeing to performance-based fee arrangements may receive only a
portion of the fees accrued by a fund with respect to segments of the fund
managed by them. This occurs because of the legal requirement that there be a
minimum one-year measurement period for performance-based portfolio management
fees. Specifically, during this 12-month time period, the Money Managers will
receive only the minimum (floor) fee to which they are entitled. Upon
determination (on or about the tenth day of the fifteenth calendar month of its
employment by the fund) of the precise amount of fees to which such Money
Manager is entitled for services rendered during the third through fourteenth
months, any fees owed to the Money Manager will be disbursed.
Advantages and Disadvantages of Accrual and Remittance Procedures. TIP's board
of directors recognizes that the procedure described above could give rise to
inequities among members. However, such inequities are likely to be less acute
than those produced by performance-based fee arrangements entailing measurement
periods longer than one year. For example, some regulated investment companies
have performance-based portfolio management fee arrangements entailing rolling
36-month performance measurement periods. Under such arrangements, shareholders
entering the fund in, for example, month 72 may be forced to pay the maximum
fees to which a money manager is entitled for several months following their
initial purchase if the manager's performance was sufficiently good during
months 36 through 71. This could occur even though the manager's performance is
less good in the months immediately following the new shareholder's entry (e.g.,
months 72 through 84), because the fees for these months will reflect the
manager's performance during prior time periods. The one-year measurement
period that TIP employs does not eliminate these intergenerational inequities
among changing shareholder populations, but it can help to minimize them.
Because TIP's board seeks to tie the portfolio management fees paid by
individual members as closely as possible to the gross investment returns they
actually realize, the board has approved performance-based fee arrangements with
certain Money Managers entailing the minimum one-year measurement period
permitted by law.
Control Persons and Principal Holders of Securities
As of March 31, 2000, 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, 2000, the
following members held five percent or more of the outstanding shares of each
fund as indicated:
Multi-Asset Fund
1. William Caspar Graustein Memorial Fund; 84 Trumbull Street; New Haven, CT
06511 19.7%
2. Greater New Orleans Foundation; 1055 St. Charles Avenue, Suite 100; New
Orleans, LA 70130 6.6%
3. MJH Foundation; 459 Locust Avenue; Charlottesville, VA 22902 6.5%
4. Presbyterian Homes and Family Services; 150 Linden Avenue, Lynchburg, VA
24503 5.2%
5. Wartburg Foundation; Wartburg Place; Mt. Vernon, NY 10552 5.2%
International Equity Fund
1. Houston Endowment Inc.; 600 Travis, Suite 6400; Houston, TX 77002 37.2%
2. BellSouth Foundation; 1155 Peachtree Street, Room 14F05; Atlanta, GA 30309
7.2%
April 28, 2000 19
<PAGE>
Control Persons and Principal Holders of Securities continued
Emerging Markets Fund
1. Mayo Foundation; 200 First Street, SW; Rochester, MN 55905 20.2%
2. Carnegie Corporation of New York; 437 Madison Avenue; New York, NY 10022
19.9%
3. Pew Memorial Trust, c/o Glenmede; 1 Liberty Place, Ste 1200; 1650 Market St;
Philadelphia, PA 19103 15.9%
4. The Colorado Trust; 1600 Sherman Street; Denver, CO 80203 8.1%
5. The Commonwealth Fund; One East 75th Street; New York, NY 10021 7.0%
6. William T. Grant Foundation; 570 Lexington Avenue, 18th Floor; New York, NY
10022 5.7%
U.S. Equity Fund
1. BellSouth Foundation, Inc.; 1155 Peachtree Street, Suite 14F05; Atlanta, GA
30309 13.3%
2. Denver Foundation; 950 S. Cherry Street, Suite 200; Denver, CO 80246 10.2%
3. Jacksonville Community Foundation; 112 W. Adams St., Suite 1414;
Jacksonville, FL 32202 6.9%
4. East Tennessee Foundation; 550 W. Main Street, Suite 550; Knoxville, TN 37902
5.8%
Bond Fund
1. The Duke Endowment; 100 North Tryon Street, Suite 3500; Charlotte, NC 28202
13.0%
2. Richard M. Fairbanks Foundation; 9292 North Meridian Street, Suite 304;
Indianapolis, IN 46260 8.1%
3. RosaMary Foundation; 6028 Magazine Street; New Orleans, LA 70118 7.3%
4. East Tennessee Foundation; 550 W. Main Street, Suite 550; Knoxville, TN 37902
6.2%
5. Jacksonville Community Foundation; 112 W. Adams St., Suite 1414;
Jacksonville, FL 32202 5.5%
Short-Term Fund
1. Undisclosed Private Foundation; New York, NY 33.3%
2. Houston Endowment Inc.; 600 Travis, Suite 6400; Houston, TX 77002 18.3%
3. Woods Fund of Chicago; 3 First National Plaza, Suite 2010; Chicago, IL 60602
6.2%
4. Wartburg Foundation; Wartburg Place; Mt. Vernon, NY 10552 5.4%
Distribution of TIFF Funds
Distributor. The distribution agreement (the "Distribution Agreement") among the
TIP, Investors Bank & Trust Company, an affiliate of the Administrator, and
First Fund Distributors, Inc., (the "Distributor") became effective January 1,
2000. The Distributor shall receive compensation in the amount of $25,000 per
annum, to be paid no less frequently than monthly by the Administrator. In
addition, the Distributor will be entitled to reimbursement of reasonable out-
of-pocket expenses incurred (including but not limited to NASD filing fees
incurred pursuant to the Distribution Agreement) within ten days of delivery of
a valid invoice. Prior to First Fund Distributors, Inc., the distributor of TIP
was AMT Capital Securities, LLC.
The Distribution Agreement will remain in effect for an initial two-year period.
The Distribution Agreement will continue in effect for successive one-year
periods, provided that each such continuance is specifically approved (i) by the
vote of a majority of the Directors or by a vote of a majority of the shares of
the relevant fund; and (ii) by a majority of the Directors who are not parties
to the Distribution Agreement or interested persons (as defined in the 1940 Act)
of any such person, cast in person at a meeting called for the purpose of voting
on such approval. The Distribution Agreement was approved by TIP's Board of
Directors on March 7, 2000.
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.
20 TIP Statement of Additional Information
<PAGE>
Distribution of TIFF Funds continued
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 SEC 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 SEC 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. Telephone exchanges will be accepted only if the
shares to be exchanged are held by the fund for the account of the shareholder
and the registrations of the two accounts are identical. Telephone requests for
exchanges received prior to 4:00 p.m. Eastern time will be processed as of the
close of business on the same day. Requests received after 4:00 p.m. will be
processed on the next business day. Telephone exchanges may also be subject to
limitations as to amounts or frequency and to other restrictions established by
the board of directors to ensure that such exchanges do not disadvantage TIP and
its members.
Tax Treatment of Exchanges. For federal income tax purposes an exchange between
funds is a taxable event and, accordingly, a capital gain or loss may be
realized. Members should consult their tax advisors 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.
April 28, 2000 21
<PAGE>
Supplemental Discussion of Investment
Objectives, Policies, and Restrictions continued
A long-term investment horizon is appropriate because foundation governing
boards, which typically meet on a part-time basis, are generally unable to shift
funds profitably between domestic and foreign markets in anticipation of short-
term market movements. The safer assumption is that shifts of this sort will
not produce profits net of trading costs. The opportunity to enhance long-term
returns by investing in foreign markets lies in the fact that international
money managers have far more companies (and countries) to choose from than do
managers investing solely in domestic securities. Therefore, the potential
added value from active portfolio management is higher for international stock
portfolios than for purely domestic ones.
The costs of investing in foreign securities are higher also, not only because
management fees and custody costs tend to be higher on international portfolios
but also because foreign governments withhold a portion of the income that
investors earn abroad. Despite these higher costs, the dual benefits of
investing in foreign securities (increased diversification and the opportunity
to earn higher returns by exploiting valuation inefficiencies in foreign
markets) make a substantial allocation to them worthy of serious consideration
by most foundation boards.
Performance Objectives. The funds seek to outperform their performance
benchmarks by different margins. These margins differ because:
1. the costs of implementing each fund's investment policies differ and
2. the markets in which the funds primarily invest vary in terms of efficiency,
with the US stock and fixed income markets arguably the most efficient (in a
valuation sense) of all.
The margin by which each fund seeks to outperform its performance benchmark thus
reflects judgments by TIP's directors of the excess return that a properly
diversified, actively managed fund might realistically seek to earn net of the
costs that must be incurred to produce this excess return. "Excess return" as
used here means the difference between a Fund's total return and the total
return of its performance benchmark.
Short-Term Fund. As experienced foundation fiduciaries, members of the boards
of TIP and FAI recognize that many foundations seek to control downward
fluctuations in the value of assets earmarked for spending or distribution (in
the form of grants) within 12 months ("current year spending"). This is
generally achieved by investing them exclusively in cash equivalents, either
directly or via money market funds. While such a policy comports well with the
risk tolerances of some foundation fiduciaries, numerous studies of the
risk/return characteristics of alternate short-term investment strategies
suggest that a short-term bond fund whose average maturity ranges between the
one to three months typical of regulated money market funds and the six months
inherent in the Short-Term Fund's performance benchmark has the potential to
augment foundation resources over time. Of course, the higher yields three- to
six-month instruments typically display relative to shorter-term instruments may
be insufficient to offset the larger principal losses longer-term securities
produce in rising interest rate environments. However, the data below indicate
that there is a high probability of earning positive total returns in a given
month by investing exclusively in securities included in the Short-Term Fund's
benchmark (i.e., six-month Treasury bills). The data show that, in the more
than 23-year period ending March 31, 1998, there were only four calendar months
in which a portfolio invested exclusively in six-month Treasury bills produced a
negative total return. The worst loss was 0.15% (October 1979) and the average
loss (four months, equally weighted) was 0.10%. It is important to note that
this period encompasses several years (e.g., 1979-81) in which short-term
interest rates rose at a speed and to a level that were unprecedented.
Risks of Investing Current Year Spending Monies in the Short-Term Fund. While
there is no assurance that the Short-Term Fund's average duration will be less
than six months in an environment of rising short-term interest rates, the
Fund's Money Managers are authorized to shorten its average duration if they
expect short-term interest rates to rise and are prohibited by the Fund's
investment policy from maintaining a weighted average duration exceeding six
months. Consequently, in the opinion of TIP's board, it is unlikely that rising
interest rates alone will
22 TIP Statement of Additional Information
<PAGE>
cause the Fund's net asset value to decline materially over one-month (or
longer) holding periods, even if short-term rates rise as quickly as they did in
the 1979-1981 time period. However, because the Fund will not be invested
exclusively in
April 28, 2000 23
<PAGE>
Supplemental Discussion of Investment
Objectives, Policies, and Restrictions continued
instruments backed by the full faith and credit of the US government, it is
possible that downgrades, defaults, and other elements of credit risk could
cause the Fund's net asset value to decline by more than 0.15% in any given one-
month holding period.
In the judgment of TIP's board, the potential rewards of investing monies
earmarked for current year spending in a more aggressive manner than that
typical of money market funds in general, and government money market funds in
particular, outweigh the risks. However, the board recognizes that many
foundations may remain unpersuaded by this argument, and it encourages such
foundations to invest such monies not in the Short-Term Fund but rather in
carefully selected, institutionally oriented money market funds with competitive
expense ratios and adequate restrictions on the maturity and quality of
portfolio holdings.
Fundamental Investment Restrictions. The funds have adopted certain fundamental
investment restrictions, which cannot be changed without the approval of the
holders of a majority of the fund's outstanding voting securities. Under these
restrictions, which apply on a fund by fund basis, no fund may:
1. Invest more than 25% of the value of the fund's total assets in the
securities of companies engaged primarily in any one industry (other than
the US government, its agencies, and instrumentalities). For purposes of
this restriction, wholly owned finance companies are considered to be in
the industry of their parents if their activities are primarily related to
financing the activities of their parents. This restriction shall not
apply, however, to the Short-Term Fund, which may invest more than 25% of
its total assets in domestic bank obligations.
2. Acquire short positions in the securities of a single issuer (other than
the US government, its agencies, and instrumentalities) whose value (as
measured by the amounts needed to close such positions) exceeds 2% of the
fund's total assets.
3. Borrow money, except from a bank for temporary or emergency purposes
provided that bank borrowing not exceed one-third (33/1//3%) of the fund's
total assets at the time of borrowing. No fund may borrow for leveraging
purposes. Reverse repurchase agreements, dollar roll transactions, and
collateralized securities loans that are covered with cash or liquid high-
grade securities or other acceptable assets are not considered borrowings
subject to this restriction.
4. Issue senior securities [other than as permitted in (2) and (3)].
5. Make loans, except:
(a) through the purchase of all or a portion of an issue of debt
securities in accordance with its investment objective, policies, and
limitations;
(b) by engaging in repurchase agreements with respect to portfolio
securities; or
(c) by lending securities to other persons, provided that no securities
loan may be made if, as a result, more than one-third (33/1//3%) of
the value of the fund's total assets would be loaned to other persons.
6. Underwrite securities of other issuers.
7. Purchase or sell real estate (other than marketable securities representing
interests in, or backed by, real estate and securities of companies that
deal in real estate or mortgages) or real estate limited partnerships, or
purchase or sell physical commodities or contracts relating to physical
commodities.
24 TIP Statement of Additional Information
<PAGE>
8. Invest directly in interests in oil, gas, or other mineral exploration or
development programs or mineral leases.
April 28, 2000 25
<PAGE>
Supplemental Discussion of Investment
Objectives, Policies, and Restrictions continued
Non-Fundamental Investment Restrictions. The funds have adopted certain non-
fundamental restrictions, which may be changed by the board of directors without
member approval. Under these restrictions, no fund may:
1. Acquire more than 10% of the outstanding voting securities or 10% of all of
the securities of any one issuer.
2. Acquire long positions in the securities of a single issuer (other than the
US government, its agencies, and instrumentalities) whose value exceeds 10%
of the fund's total assets.
3. Purchase securities of any company having less than three years' continuous
operations (including operations of any predecessors) if such purchase
causes the value of the fund's investments in all such companies to exceed
5% of its total assets. This restriction shall not apply, however, to
purchases of investment company securities, US government securities,
securities of issuers that are rated investment grade by at least one
nationally recognized statistical rating organization, municipal
obligations, and obligations issued by any foreign governments, agencies,
or instrumentalities, or any political subdivisions thereof.
4. Purchase securities of another investment company if such purchases cause
the percentage of such investment company's outstanding shares owned by the
TIP fund in question to exceed 3%.
5. Invest in companies for the purpose of exercising control or management.
6. Invest more than 15% of the fund's net assets in illiquid securities
(typically defined as those which cannot be sold or disposed of in the
ordinary course of business within seven days for approximately the amount
at which the fund has valued the securities).
7. Purchase puts, calls, straddles, spreads, and any combination thereof, if
the value of such purchases, excluding offsetting positions and in-the-
money amounts, exceeds 5% of the fund's total assets.
Percentage Limitations Applied at Time of Purchase. The above standards and
restrictions are determined immediately after and as a result of the fund's
acquisition of such security or other asset. Accordingly, any later increase or
decrease in a percentage resulting from a change in values, assets, or other
circumstances will not be considered when determining whether that investment
complied with the fund's investment policies and limitations.
Policy Implementation and Risks
Funds to Be Substantially Fully Invested. Each fund intends to be substantially
fully invested according to its investment objective and policies under normal
market conditions.
Deployment of Cash Reserves. Each fund is authorized to invest its cash
reserves (funds awaiting investment in the securities in which it primarily
invests) in money market instruments and debt securities that are at least
comparable in quality to the fund's permitted investments. In lieu of separate,
direct investments in money market instruments, the fund's cash reserves may be
invested in other regulated investment companies approved by TIP's board of
directors. Alternatively, FAI may exercise investment discretion or select a
Money Manager to exercise investment discretion over a fund's cash reserves.
26 TIP Statement of Additional Information
<PAGE>
Policy Implementation and Risks continued
Temporary Equity Exposure. At FAI's discretion, the cash reserves segment of
each fund may be used to create a temporary equity exposure for the Multi-Asset
and U.S. Equity Funds, a foreign equity exposure for the Multi-Asset,
International Equity, and Emerging Markets Funds, or a fixed income exposure of
suitable duration for the Bond and Multi-Asset Funds, as the case may be, until
those balances are allocated to and invested by the Money Managers or used for
fund transactions. The desired market exposure would be created with long
positions in the appropriate number of futures contracts or options on futures
contracts within applicable regulatory limits.
Portfolio Turnover. Decisions to buy and sell securities are made by the Money
Managers with respect to the assets assigned to them and by FAI with respect to
cash reserves not allocated to Money Managers. Each Money Manager decides to
purchase or sell securities independently of other Money Managers. Generally,
the Multi-Asset, International Equity, Emerging Markets, and U.S. Equity Funds
will not trade in securities for short-term profits; however, circumstances may
warrant that securities be sold without regard to length of time held. It is
expected that the annual portfolio turnover rate normally will not exceed 100%.
However, due to some Money Managers' active management styles, turnover rates
for the Bond and Short-Term Funds may be higher than other mutual funds
investing primarily in debt securities and may exceed 100%. In the Bond and
Short-Term Funds, the costs associated with turnover are expected to be lower
than equity fund turnover costs.
Primary Risks. High portfolio turnover may result in greater brokerage
commissions and other transaction costs, which will be borne by the funds.
In addition, high portfolio turnover rates may result in increased short-
term capital gains which, when distributed to private foundation members,
are treated as ordinary income for excise taxation purposes.
A fund may have two or more Money Managers. As such, one Money Manager
could be selling a security when another, for the same fund, is purchasing
the same security. In addition, when a Money Manager's services are
terminated and those of another are retained, the new Money Manager may
significantly restructure the portfolio. These practices may increase the
funds' portfolio turnover rates, realization of gains or losses, and
brokerage commissions.
Borrowing. Each fund may borrow money temporarily from banks when:
1. it is advantageous to do so in order to meet redemption requests,
2. a fund fails to receive transmitted funds from a member on a timely basis,
3. TIP's Custodian fails to complete delivery of securities sold, or
4. a fund needs cash to facilitate the settlement of trades made by the fund.
In addition, each fund may make securities loans or lend securities by engaging
in reverse repurchase agreements and/or dollar roll transactions, described
below. By engaging in such transactions, a fund may, in effect, borrow money.
Securities may be borrowed under repurchase agreements.
Duration Management. The Multi-Asset, Bond, and Short-Term Funds invest in debt
securities of varying durations. Duration is a measure of the expected life of
a debt security on a present value basis. It takes the length of the time
intervals between the present time and the time that the interest and principal
payments are scheduled to be received and weights them by the present values of
the cash to be received at each future point in time.
The longer the duration of a debt security, the more its price will tend to fall
as interest rates in the economy generally rise and vice-versa. For example, in
a portfolio with a duration of five years, a 1% increase in interest rates could
result in approximately a 5% decrease in market value. Money Managers can
change the weighted average duration of their holdings as interest rates move by
replacing portfolio securities or using derivative securities.
April 28, 2000 27
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Policy Implementation and Risks continued
Primary Risks. There is no assurance that deliberate changes in a fund's
weighted average duration will enhance its return relative to more static
duration policies or portfolio structures. For example, a Money Manager's
decision to increase the duration of its segment of the Bond Fund could
reduce the Fund's return if interest rates in the economy rise following
the manager's duration-lengthening trades.
Multi-Market and Multi-Currency Investing. Subject to certain limitations on
foreign securities and foreign currency exposure defined in each Money Manager's
guidelines, Money Managers may adjust the exposure of the funds to different
countries' markets and currencies based on their perceptions of their relative
valuations. In doing so, Money Managers will assess:
1. general market and economic conditions,
2. the relative yield and anticipated direction of interest rates in particular
markets, and
3. the relationship among the currencies of various countries.
In their evaluations, Money Managers will use internal financial, economic, and
credit analysis resources as well as information from external sources.
The ranges permit U.S. Equity Fund Money Managers to respond to circumstances in
which foreign stocks are more attractively priced than US stocks by investing up
to 15% of the Fund's assets in foreign stocks. They permit Money Managers of
the Multi-Asset, International Equity, and Emerging Markets Funds to hedge up to
50% of the foreign currency exposure of each fund's assets. It is expected that
adjustments to the country and currency exposures of each fund will be gradual
and moderate, especially within the U.S. Equity, Bond, and Short-Term Funds.
Primary Risks. There is no assurance that changes in a fund's country and
currency allocations will enhance returns relative to more static
allocations, or relative to allocations that resemble more closely the
country and currency allocations inherent in a fund's performance
benchmark.
Foreign Currency Exposure. TIP's directors have studied carefully the impact of
exchange rate changes on the US dollar value of foreign securities portfolios
and have concluded that the impact of such changes declines dramatically as the
investment time horizon lengthens. This is especially true because global
investors routinely adjust the prices they are willing to pay for shares of a
given firm in response to changes in the foreign exchange value of the
currencies in which its products (and costs) are denominated. For example,
while it is likely that a sudden 10% decline in the Japanese yen's value in US
dollar terms will produce short-term losses in the dollar value of shares of
Japanese exporters, the increased competitiveness of such firms typically will
cause global investors to mark upwards such firms' relative price/earnings or
price/book value multiples, albeit with a lag.
Exchange rate movements can produce large losses over short- and even medium-
term time horizons, but TIP's directors strongly discourage foundations from
investing in foreign securities in pursuit of short-term gains, and they believe
that exchange rate movements are essentially neutral over the longer-term time
horizons which most global investors properly employ. The logic of this
position can be assessed by considering the implications of the opposite belief:
that investors can earn an economic return over the very long term merely by
holding certain currencies (i.e., continually rolling over long positions in a
given currency or basket of currencies in the spot or futures markets). While
there have undeniably been short-term periods when currency exposure per se
produced positive real returns (e.g., holding Japanese yen during the five years
ending December 1993), global trade and capital flows make it very difficult for
the imbalance created by massive changes (up or down) in the foreign currency
exchange value to persist. Countries whose currencies plummet in value can
suffer enormous hardships, as can holders of shares denominated in such
currencies. However, devaluations ultimately enhance these countries'
competitiveness, thereby inducing global investors to sell shares of firms
domiciled in countries with revalued currencies in order to fund purchases of
shares of firms domiciled in countries with devalued ones.
28 TIP Statement of Additional Information
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Policy Implementation and Risks continued
Foreign Currency Hedging. Each of the funds may enter into forward foreign
currency contracts (a "forward contract") and may purchase and write (on a
covered basis) exchange-traded or over-the-counter ("OTC") options on
currencies, foreign currency futures contracts, and options on foreign currency
futures contracts. The primary objective of such transactions is to protect
(hedge) against a decrease in the US dollar equivalent value of its foreign
securities or the payments thereon that may result from an adverse change in
foreign currency exchange rates. Conditions in the securities, futures,
options, and foreign currency markets will determine whether and under what
circumstances TIP will employ any of the techniques or strategies described
below. TIP's ability to pursue certain of these strategies may be limited by
applicable regulations of the Commodity Futures Trading Commission ("CFTC") and
the federal tax requirements applicable to regulated investment companies (see
Tax Considerations).
Forward Contracts. A forward exchange contract is the purchase or sale of
foreign currency at an exchange rate established now but with payment and
delivery at a specified future time. It insulates returns from securities
denominated in that currency from exchange rate fluctuations to the extent of
the contract while the contract is in effect. A sale contract will be
advantageous if the currency falls in value against the dollar and
disadvantageous if it increases in value against the dollar. A purchase
contract will be advantageous if the currency increases in value against the
dollar and disadvantageous if it falls in value against the dollar.
Funds may use forward contracts to insulate existing security positions
("position hedges") or proposed transactions ("transaction hedges"). For
example, to establish a position hedge, a forward currency contract might be
sold to protect the gain from a decline in the value of that currency against
the dollar. To establish a transaction hedge, a foreign currency might be
purchased on a forward basis to protect against an anticipated increase in the
value of that currency against the dollar.
Primary Risks. The success of currency hedging depends on the Money
Manager's ability to predict exchange rate fluctuations. Predicting such
fluctuations is extremely difficult, and thus the successful execution of a
hedging strategy is highly uncertain. An incorrect prediction will hurt
fund performance. Forward contracts that protect against anticipated
losses have the corresponding effect of canceling possible gains if the
currency movement prediction is incorrect.
Precise matching of forward contract amounts and the value of portfolio
securities is often not possible because the market value of the protected
securities will fluctuate while forward contracts are in effect.
Adjustment transactions are theoretically possible but time consuming and
expensive, so forward contract positions are likely to be approximate, not
perfect, hedges.
The cost to a fund of engaging in forward contracts varies with factors
such as the foreign currency involved, the length of the contract period,
and prevailing market conditions, including general market expectations as
to the direction of various foreign currency movements against the US
dollar. Furthermore, neither FAI nor the Money Managers may be able to
purchase forward contracts with respect to all of the foreign currencies in
which the fund's portfolio securities may be denominated. In that case,
the correlation between exchange rates and the portfolio's foreign currency
exposure may not be precise. Moreover, if the forward contract is an over-
the-counter transaction, as is usually the case, the fund will be exposed
to the credit risk of its counterparty. If, on the other hand, a fund
enters into such contracts on a foreign exchange, the contract will be
subject to the rules of that foreign exchange, which may impose significant
restrictions on the purchase, sale, or trading of such contracts, including
the imposition of limits on price moves. Such limits may significantly
affect the ability to trade such a contract or otherwise close out the
position and could create potentially significant discrepancies between the
cash and market value of the position in the forward contract. Finally,
the cost of purchasing forward contracts in a particular currency will
reflect, in part, the rate of return available on instruments denominated
in that currency. The cost of purchasing forward contracts to hedge
portfolio securities that are denominated in currencies that in general
yield high rates of return may thus tend to reduce that rate of return
toward the rate of return that would be earned on assets denominated in US
dollars.
April 28, 2000 29
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Policy Implementation and Risks continued
Other Hedging Strategies and Tactics. A fund may employ other hedging
strategies, such as interest rate, currency and index swaps, and the purchase or
sale of related caps, floors, and collars. An index swap is an agreement to
swap cash flows on a notional amount based on changes in the values of the
referenced indices. The purchase of a cap entitles the purchaser to receive
payments on a notional principal amount from the party selling such cap to the
extent that a specified index exceeds a predetermined interest rate or amount.
The purchase of a floor entitles the purchaser to receive payments on a notional
principal amount from the party selling such floor to the extent that a
specified index falls below a predetermined interest rate or amount. A collar
is a combination of a cap and a floor that preserves a certain return within a
predetermined range of interest rates or values.
Each fund may enter into these transactions primarily:
1. to preserve a return or spread on a particular investment or portion of its
portfolio,
2. to protect against currency fluctuations,
3. as a duration management technique, or
4. to protect against any increase in the price of securities the fund
anticipates purchasing at a later date.
The funds intend to use these transactions as hedges and not as speculative
investments and will not sell interest rate caps or floors where it does not own
securities or other instruments providing the income stream the fund may be
obligated to pay. With respect to swaps, a fund will accrue the net amount of
the excess, if any, of its obligations over its entitlements with respect to
each swap on a daily basis and will segregate an amount of cash or liquid
securities having a value equal to the accrued excess. Caps, floors, and
collars require segregation of assets with a value equal to the fund's net
obligation, if any.
Long/Short Strategies. In the opinion of TIP's and FAI's directors, the US
stock market is highly efficient in terms of valuation and is becoming more so
at a rapid rate due to the combined impact of falling computing costs,
globalization of financial markets, and regulatory changes. In short, with so
many powerful computers and skilled professionals attempting to exploit
valuation anomalies among US stocks, it is becoming increasingly difficult to
outperform market averages. This is one reason why the U.S. Equity Fund employs
so-called long/short investment strategies, which entail the construction of a
portfolio comprising long positions in stocks which the Money Manager perceives
as undervalued, offset by an equivalent dollar amount of short positions in
stocks which the Money Manager perceives as overvalued. Because the long and
short subportfolios offset or neutralize each other, long/short strategies are
sometimes referred to as "market neutral" strategies.
Long versus Short Positions. The rationale for using long/short strategies is
simply stated: if you believe that skilled active managers can identify stocks
that are likely to outperform market averages (i.e., they are undervalued), then
it is also logical to assume that skilled active managers can identify stocks
that are likely to underperform market averages (i.e., they are overvalued
issues). In an increasingly efficient market, "short" sale techniques are
appealing because they exploit a structural inefficiency in capital markets: the
tendency of most investors to focus on the identification of undervalued, as
distinct from overvalued, securities. Indeed, one of the chief reasons why it
is becoming increasingly difficult to outperform the US stock market is that
long/short strategies, while still unconventional, are becoming increasingly
popular among the large institutions that dominate the US stock market.
Outperforming broad market averages without using long/short strategies remains
possible, of course, but in the opinion of TIP's directors the advantages of
allocating a defined portion (zero to 30%) of the U.S. Equity Fund to such
strategies outweigh the risks (discussed immediately below).
30 TIP Statement of Additional Information
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Policy Implementation and Risks continued
Primary Risks. Risks of investing in short strategies are markedly
different from those associated with long positions. Given the
restrictions to which managers employing long/short strategies are subject,
however, U.S. Equity Fund members are not exposed to the risk of losing all
their invested capital as a result of a stratospheric increase in the value
of a single security (or indeed the stock market generally). Like the
other institutions employing long/short strategies with which TIP and FAI
directors are associated, TIP employs several safeguards to control the
risks of such strategies:
1. Any long/short portfolios held by the fund must comprise an
approximately equivalent dollar amount of long and short positions in a
diversified list of issues and must be overlaid with long positions in
stock index futures contracts, thus limiting potential losses on the
short positions caused by a rise in stock prices.
2. The dollar size of a short position in a single stock may not represent
more than 2% of a fund's net assets.
Securities Lending. Through its custodial bank and subject to strict guidelines
summarized below, TIP may actively lend the securities held in all of its funds.
The incremental income from such lending activities varies from fund to fund,
with US securities typically commanding much narrower lending "spreads"
(according to Kohlberg and Associates, average lending income might approximate
0.02% to 0.05% per annum) than foreign securities (0.15% to 0.75% per annum).
These differences stem primarily from the far greater availability of lendable
US securities in relation to borrowing demand than exists in non-US markets.
Each fund is authorized to lend securities from its investment portfolios, with
a value not exceeding 331/3% of its total assets (including collateral received
in connection with any loans) provided, however, that it receives collateral in
cash, US government securities, or irrevocable bank stand-by letters of credit
maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities. The loans may be terminated at any time
by TIP, and the relevant fund will then receive the loaned securities within
five days. During the loan period, the fund receives the income on the loaned
securities and a loan fee and may thereby increase its total return. At the
present time, the SEC does not object if an investment company pays reasonable
negotiated fees in connection with loaned securities as long as such fees are
set forth in a written contract and approved by the investment company's board
of directors. In addition, voting rights may pass with the loaned securities,
but if a material event occurs affecting a security on loan, the loan must be
called and the securities voted.
Dollar Roll Transactions. Dollar roll transactions consist of the sale to a
counterparty (a bank or broker-dealer) of GNMA certificates or other mortgage-
backed securities together with a commitment to purchase from the counterparty
GNMA certificates or other mortgage-backed securities at a future date at the
same price. The counterparty receives all principal and interest payments,
including prepayments, made on the security while it is the holder. The fund
receives a fee from the counterparty as consideration for entering into the
commitment to repurchase. Dollar rolls may be renewed with a new purchase and
repurchase price fixed and a cash settlement made at each renewal without
physical delivery of securities. Moreover, the transaction may be preceded by a
firm commitment agreement pursuant to which the fund agrees to buy a security on
a future date. A fund will not use such transactions for leverage purposes and,
accordingly, will segregate cash, US government securities, or other high grade
debt obligations in an amount sufficient to meet its purchase obligations under
the transactions.
Dollar rolls are similar to reverse repurchase agreements (described below)
because they involve the sale of a security coupled with an agreement to
repurchase. Like borrowings, a dollar roll involves costs to a fund. For
example, while a fund receives a fee as consideration for agreeing to repurchase
the security, it foregoes the right to receive all principal and interest
payments while the counterparty holds the security. These payments to the
counterparty may exceed the fee received by the fund, thereby effectively
charging the fund interest on its borrowing. Further, although the fund can
estimate the amount of expected principal prepayment over the term of the dollar
roll, a variation in the actual amount of prepayment could increase or decrease
the cost of the fund's entry into the dollar roll.
April 28, 2000 31
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Policy Implementation and Risks continued
Primary Risks. Dollar rolls involve potential risks of loss which are
different from those related to the securities underlying the transactions.
For example, if the counterparty becomes insolvent, a fund's right to
purchase from the counterparty might be restricted. Additionally, the
value of such securities may change adversely before the fund is able to
repurchase them. Similarly, a fund may be required to purchase securities
in connection with a dollar roll at a higher price than may otherwise be
available on the open market. Since the counterparty is not required to
deliver an identical security to a fund, the security that the fund is
required to buy under the dollar roll may be worth less than an identical
security. Finally, there can be no assurance that a fund's use of cash
that it receives from a dollar roll will provide a return that exceeds
borrowing costs.
Repurchase and Reverse Repurchase Agreements. In a repurchase agreement, a fund
buys securities from a counterparty (e.g., a bank or securities firm) with the
agreement that the counterparty will repurchase them at the same price plus
interest at a later date. Repurchase agreements may be characterized as loans
secured by the underlying securities. Such transactions afford an opportunity
for the fund to earn a return on available cash at minimal market risk, although
the fund may be subject to various delays and risks of loss if the counterparty
becomes subject to a proceeding under the US Bankruptcy Code or is otherwise
unable to meet its obligation to repurchase. The securities underlying a
repurchase agreement will be marked to market every business day so that the
value of such securities is at least equal to the value of the repurchase price
thereof, including the accrued interest.
In a reverse repurchase agreement, a fund sells US government securities and
simultaneously agrees to repurchase them at an agreed-upon price and date. The
difference between the amount the fund receives for the securities and the
additional amount it pays on repurchase is deemed to be a payment of interest.
TIP will maintain for each fund a segregated custodial account containing cash,
US government securities, or other appropriate assets having an aggregate value
at least equal to the amount of such commitments to repurchase, including
accrued interest, until payment is made. Reverse repurchase agreements create
leverage, a speculative factor, but will not be considered borrowings for the
purposes of limitations on borrowings.
In addition, repurchase and reverse repurchase agreements may also involve the
securities of certain foreign governments in which there is an active repurchase
market. FAI and the Money Managers expect that such repurchase and reverse
repurchase agreements will primarily involve government securities of countries
belonging to the Organization for Economic Cooperation and Development ("OECD").
Transactions in foreign repurchase and reverse repurchase agreements may involve
additional risks.
Primary Risks. If the counterparty defaults on its obligation to
repurchase the underlying securities at a time when the value of these
securities has declined, a fund may incur a loss upon their disposition.
If the counterparty becomes insolvent and subject to liquidation or
reorganization under the Bankruptcy Code or other laws, a bankruptcy court
may determine that the underlying securities are collateral not within the
control of the fund and are therefore subject to sale by the trustee in
bankruptcy. Finally, it is possible that the fund may not be able to
substantiate its interest in the underlying securities. While TIP's
management acknowledges these risks, it is expected that they can be
mitigated through stringent security selection criteria and careful
monitoring procedures.
Types of Investments
Equity Securities. Equities are ownership interests possessed by shareholders
in a corporation, commonly referred to as "stocks."
General Risks of Equity Securities. Common stock prices will decline over
short or extended periods. Both the US and foreign stock markets tend to
be cyclical with periods when stock prices generally rise and periods when
prices generally decline.
32 TIP Statement of Additional Information
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Policy Implementation and Risks continued
Warrants. Warrants are instruments which give the holder the right to purchase
the issuer's securities at a stated price during a stated term.
Primary Risks. Warrants involve a risk of loss of the warrant purchase
price if the market price of the securities subject to the warrants does
not exceed the price paid for the warrants plus the exercise price of the
warrants.
As long as it remains a policy of the State of Texas, a fund's investment in
warrants, taken at the lower of cost or market value, may not exceed 5% of the
fund's net assets. Not more than 2% of a fund's net assets may be invested in
warrants not listed on the New York or American Stock Exchanges.
Foreign Equities. Foreign equities include shares denominated in currencies
other than the US dollar, including any single currency or multi-currency units,
as well as ADRs and EDRs. ADRs typically are issued by a US bank or trust
company and evidence ownership of underlying securities issued by a foreign
corporation. EDRs, which are sometimes referred to as Continental Depositary
Receipts, are receipts issued in Europe, typically by foreign banks and trust
companies, which evidence ownership of either foreign or domestic underlying
securities.
Foreign financial markets generally have substantially less volume than US
markets, and securities of many foreign companies are less liquid and their
prices more volatile than securities of comparable domestic companies. The
foreign markets also have different clearance and settlement procedures, and in
certain markets settlements have sometimes been unable to keep pace with the
volume of transactions making it difficult to conclude such transactions.
Under certain adverse conditions, each fund may restrict the financial markets
or currencies in which its assets are invested, and it may invest its assets
solely in one financial market or in obligations denominated in one currency.
Primary Risks of Foreign Equities Generally. Like domestic stocks, foreign
equities entail stock market risk. In addition, in certain foreign
countries there is the possibility of expropriation of assets, confiscatory
taxation, political or social instability, or diplomatic developments that
could adversely affect investment. There may be less publicly available
information regarding operations and financial results, and foreign
entities may not be subject to accounting, auditing, and financial
reporting standards and requirements comparable to those of United States
entities. A fund could encounter difficulties in obtaining or enforcing a
judgment against the issuer in certain foreign countries. In addition,
certain foreign investments may be subject to foreign withholding or other
taxes, although the fund will seek to minimize such withholding taxes
whenever practical.
Risks Associated with Currency Exchange Rate Changes. Changes in foreign
currency exchange rates may affect the value of a fund's investments.
While a fund may hedge its assets against foreign currency risk, there can
be no assurance that currency values will change as predicted, and a fund
may suffer losses as a result of such hedging.
Emerging Markets Equities. The funds define emerging markets as those countries
having an "emerging stock market" as defined by Morgan Stanley Capital
International, low- to middle-income economies according to the World Bank, or
those listed in World Bank publications as developing. Under this definition,
the funds consider emerging markets to include all markets except Australia,
Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland,
Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Singapore,
Spain, Sweden, Switzerland, the United Kingdom, and the United States.
April 28, 2000 33
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Policy Implementation and Risks continued
Primary Risks of Emerging Markets Equities. In addition to the risks of
foreign equities as set forth above, stock prices in emerging markets can
be significantly more volatile than in developed nations, reflecting the
greater uncertainties of investing in less established economies, in that
the countries may:
1. have relatively unstable governments, raising the risk of sudden adverse
government action and even nationalization of businesses,
2. place restrictions on foreign ownership or prohibitions on repatriation
of assets, or
3. provide relatively less protection of property rights.
In addition, their economies:
1. may be based predominantly on one or a few industries,
2. may be highly vulnerable to changes in local or global trade
conditions, and
3. may suffer from extreme and volatile debt burdens or inflation rates.
Local securities markets may trade a small number of securities and may be
unable to respond effectively to increases in trading volume, potentially
making prompt liquidation of substantial holdings difficult or impossible
at times. Settlement and dividend collection procedures may be less
reliable. These securities may have limited marketability and may be
subject to more abrupt or erratic price movements.
Debt Securities. The characteristics and primary risks of the debt securities
in which the funds typically invest are described below.
Primary Risks of Debt Securities Generally. Debt securities entail
interest rate, prepayment, credit, and event risks.
Interest Rate Risk. Interest rate risk is the risk of fluctuations in bond
prices due to changing interest rates. As a rule, bond prices vary
inversely with market interest rates. For a given change in interest
rates, longer maturity bonds fluctuate more in price than shorter maturity
bonds. To compensate investors for these larger fluctuations, longer
maturity bonds usually offer higher yields than shorter maturity bonds,
other factors (including credit quality) being equal.
Because the Bond fund's benchmark is the Lehman Aggregate Bond Index -- an
index with an intermediate-term average weighted maturity -- the fund is
subject to a moderate to high level of interest rate risk, as is that
portion of the Multi-Asset fund normally invested in bonds.
Prepayment Risk. Prepayment risk is the possibility that, during periods
of declining interest rates, higher-yielding securities with optional
prepayment rights will be repaid before scheduled maturity, and a fund will
be forced to reinvest the unanticipated payments at lower interest rates.
Debt obligations that can be prepaid (including most mortgage-backed
securities) will not rise as much in market value as other bonds when
interest rates fall.
Credit Risk. Credit risk is the risk that an issuer of securities will be
unable to make payments of interest or principal. The credit risk assumed
by a fund is a function of the credit quality of its underlying securities.
Event Risk. Event risk is the risk that corporate debt securities may
suffer a substantial decline in credit quality and market value due to a
corporate restructuring. Corporate restructurings, such as mergers,
leveraged buyouts, takeovers, or similar events, are often financed by a
significant increase in corporate debt. As a result of the added debt
burden, the credit quality and market value of a firm's existing debt
securities may decline significantly. While event risk may be high for
certain securities held by the funds, event risk for each fund in the
aggregate is low because of the number of issues held by each fund.
34 TIP Statement of Additional Information
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Policy Implementation and Risks continued
Bank Obligations. Each fund may invest in obligations of domestic and foreign
banks, including time deposits, certificates of deposit, bankers' acceptances,
bank notes, deposit notes, Eurodollar time deposits, Eurodollar certificates of
deposit, variable rate notes, loan participations, variable amount master demand
notes, and custodial receipts.
1. Time deposits are non-negotiable deposits maintained in a banking institution
for a specified period of time at a stated interest rate.
2. Certificates of deposit are negotiable short-term obligations issued by
commercial banks or savings and loan associations against funds deposited in
the issuing institution.
3. Variable rate certificates of deposit are certificates of deposit on which
the interest rate is adjusted periodically prior to the stated maturity based
upon a specified market rate.
4. A bankers' acceptance is a time draft drawn on a commercial bank by a
borrower, usually in connection with an international commercial transaction
(to finance the import, export, transfer, or storage of goods).
Foreign Bank Obligations. Obligations of foreign banks involve somewhat
different investment risks than obligations of US banks. Their liquidity could
be impaired because of future political and economic developments; they may be
less marketable than comparable obligations of United States banks; a foreign
jurisdiction might impose withholding taxes on interest income payable on these
obligations; foreign deposits may be seized or nationalized; foreign
governmental restrictions such as exchange controls may be adopted that might
adversely affect the payment of principal and interest on those obligations; and
the selection of those obligations may be more difficult because there may be
less publicly available information concerning foreign banks or the accounting,
auditing, and financial reporting standards, practices, and requirements
applicable to foreign banks may differ from those applicable to United States
banks. Foreign banks generally are not subject to examination by any United
States government agency or instrumentality. Also, commercial banks located in
some foreign countries combine commercial banking and diversified securities
activities, thus increasing the risks of their operations.
Corporate Debt Securities. Corporate debt securities of domestic and foreign
issuers include corporate bonds, debentures, notes, commercial paper, medium-
term notes, variable rate notes, and other similar corporate debt instruments.
The funds will invest only in those securities that are rated at least "BBB" by
S&P or "Baa" by Moody's or determined by FAI or the Money Managers to be of
similar creditworthiness. Bonds rated in these categories are generally
described as investment-grade obligations.
Index Notes, Currency Exchange-Related Securities, and Similar Securities. Each
fund may purchase notes whose principal amount and/or interest payments may vary
in response to the change (if any) in specified exchange rates, commodities
prices, or stock index levels. Currency-indexed obligations are securities
whose purchase price and interest and principal payments are denominated in a
foreign currency. The amount of principal payable by the issuer at maturity
varies according to the change (if any) in the exchange rate between two
specified currencies during the period from the instrument's issuance date to
its maturity date. A fund may hedge the currency in which the obligation is
denominated (or effect cross-hedges against other currencies) against a decline
in the US dollar value of the investment. Each fund may also purchase principal
exchange rate-linked securities and performance-indexed commercial paper. Each
fund will purchase such indexed obligations to generate current income or for
hedging purposes and will not speculate in such obligations.
Other Foreign Currency Exchange-Related Securities. Securities may be
denominated in the currency of one nation although issued by a governmental
entity, corporation, or financial institution of another nation. For example, a
fund may invest in a British pound sterling-denominated obligation issued by a
United States corporation.
April 28, 2000 35
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Policy Implementation and Risks continued
Primary Risks. Such investments involve credit risks associated with the
issuer and currency risks associated with the currency in which the
obligation is denominated. A fund's decision to invest in any foreign
currency exchange-related securities is based on the same general criteria
applicable to debt securities, including the fund's minimum ratings and
investment quality criteria, with the additional element of foreign
currency exchange rate exposure added to FAI's or the Money Manager's
analysis of interest rates, issuer risk, and other factors.
Foreign Government and International and Supranational Agency Debt Securities.
Obligations of foreign governmental entities include those issued or guaranteed
by foreign governmental entities with taxing powers and those issued or
guaranteed by international or supranational entities. These obligations may or
may not be supported by the full faith and credit of a foreign government or
several foreign governments. Examples of international and supranational
entities include the International Bank for Reconstruction and Development
("World Bank"), the European Steel and Coal Community, the Asian Development
Bank, the European Bank for Reconstruction and Development, and the Inter-
American Development Bank. The governmental shareholders usually make initial
capital contributions to the supranational entity and in many cases are
committed to make additional capital contributions if the supranational entity
is unable to repay its borrowings.
Loan Participations. A loan participation is an interest in a loan to a US
corporation (the "corporate borrower") which is administered and sold by an
intermediary bank. The borrower in the underlying loan will be deemed to be the
issuer of the participation interest except to the extent the fund derives its
rights from the intermediary bank which sold the loan participation. Such loans
must be to issuers in whose obligations a fund may invest. Any participation
purchased by a fund must be sold by an intermediary bank in the United States
with assets exceeding $1 billion.
Primary Risks. Because the bank issuing a loan participation does not
guarantee the participation in any way, the participation is subject to the
credit risks associated with the underlying corporate borrower. In
addition, it may be necessary, under the terms of the loan participation,
for a fund to assert its rights against the underlying corporate borrower
through the issuing bank, in the event that the underlying corporate
borrower should fail to pay principal and interest when due. Thus, the
fund could be subject to delays, expenses, and risks which are greater than
those which would have been involved if the fund had purchased a direct
obligation of the borrower. Moreover, under the terms of the loan
participation, the fund may be regarded as a creditor of the issuing bank
(rather than of the underlying corporate borrower), so that the fund also
may be subject to the risk that the issuing bank may become insolvent.
Further, in the event of the bankruptcy or insolvency of the corporate
borrower, the loan participation might be subject to certain defenses that
can be asserted by a borrower as a result of improper conduct by the
issuing bank. The secondary market, if any, for these loan participation
interests is limited, and any such participation purchased by a fund will
be treated as illiquid until the board of directors determines that a
liquid market exists for such participations. Loan participations will be
valued at their fair market value as determined by procedures approved by
the board of directors.
Lower-Rated Debt Securities. Each fund may own debt securities of all grades,
including both rated and unrated securities, provided however that not more than
5% of the Short-Term Fund and not more than 10% of the other funds may be
invested in securities that are rated below investment grade. Money Managers of
these funds will be obligated to liquidate, in a prudent and orderly manner,
debt securities whose ratings fall below investment grade if the result of such
downgrades is that these limitations are exceeded. "Investment grade" means a
rating of:
1. for securities, "BBB" or better by S&P or "Baa" or better by Moody's,
2. for bank obligations, "B" or better by Thomson Bankwatch,
3. for commercial paper, "A-1" or better by S&P or "Prime-1" or better by
Moody's, and
4. for foreign bank obligations, similar ratings by IBCA Ltd.
36 TIP Statement of Additional Information
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Policy Implementation and Risks continued
See Appendix B for a description of security ratings.
Primary Risks. In addition to the risk of default, the market values of
lower-rated debt securities tend to reflect individual corporate
developments (or, in the case of lower-rated securities of foreign
governments, governmental developments) to a greater extent than do higher-
rated securities, which react primarily to fluctuations in the general
level of interest rates, and lower-rated securities tend to be more
sensitive to general economic conditions than are higher-rated securities.
Mortgage-Backed Debt Securities. Mortgage-backed securities are securities
which represent ownership interests in, or are debt obligations secured entirely
or primarily by, "pools" of residential or commercial mortgage loans or other
mortgage-backed securities (the "Underlying Assets"). The two most common forms
are:
1. mortgage pass-throughs, which represent ownership interests in the Underlying
Assets. Principal repayments and interest on the underlying mortgage loans
are distributed monthly to holders.
2. collateralized mortgage obligations (CMO's), which represent debt obligations
secured by the Underlying Assets.
Principal repayments and interest payments on the underlying mortgage loans, and
any reinvestment income thereon, provide the funds to pay interest and
principal.
Certain mortgaged-backed securities represent an undivided fractional interest
in the entirety of the Underlying Assets (or in a substantial portion of the
Underlying Assets, with additional interests junior to that of the mortgage-
backed security) and thus have payment terms that closely resemble the payment
terms of the Underlying Assets.
In addition, many mortgage-backed securities are issued in multiple classes.
Each class, often referred to as a "tranche," is issued at a specific fixed or
floating coupon rate and has a stated maturity or final distribution date.
Principal prepayments on the Underlying Assets may cause the security to be
retired substantially earlier than their stated maturities or final distribution
dates. Interest is paid or accrues on all or most classes on a periodic basis,
typically monthly or quarterly. The principal of and interest on the Underlying
Assets may be allocated among the several classes in many different ways. In a
relatively common structure, payments of principal (including any principal
prepayments) on the Underlying Assets are applied to the classes in the order of
their respective stated maturities so that no payment of principal will be made
on any class until all other classes having an earlier stated maturity have been
paid in full.
Mortgage-backed securities are typically backed by a pool of Underlying Assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors on Underlying Assets to make payments, such
securities may contain elements of credit support. Such credit support falls
into two categories: (1) liquidity protection and (2) protection against losses
resulting from ultimate default by an obligor on the Underlying Assets.
Liquidity protection refers to the provision of advances, usually by the entity
administering the Underlying Assets, to ensure that the receipt of payments on
the Underlying Assets occurs in a timely fashion. Protection against losses
resulting from ultimate default ensures ultimate payment of obligations on at
least a portion of the assets in the pool. Such protection may be provided
through guarantees, insurance policies, or letters of credit obtained by the
issuer or sponsor from third parties, through various means of structuring the
transaction, or through a combination of such approaches. A fund will not pay
any additional fees for such credit support, although the existence of credit
support may increase the price of a security.
Governmental, government-related, and private entities may create new types of
mortgage-backed securities offering asset pass-through and asset-collateralized
investments in addition to those described above. As such new types of
mortgage-related securities are developed and offered to investors, each fund
will, consistent with its investment objectives, policies, and quality
standards, consider whether such investments are appropriate.
April 28, 2000 37
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Policy Implementation and Risks continued
The duration of a mortgage-backed security, for purposes of a fund's average
duration restrictions, is computed based upon the expected average life of that
security.
Primary Risks. Prepayments on asset-backed debt securities usually
increase with falling interest rates and decrease with rising interest
rates; furthermore, prepayment rates are influenced by a variety of
economic and social factors. In general, the collateral supporting non-
mortgage asset-backed securities is of shorter maturity than mortgage loans
and is less likely to experience substantial prepayments. In addition to
prepayment risk, the obligors of the Underlying Assets may default on their
payments, creating delays or loss of principal.
Non-mortgage asset-backed securities involve certain risks not present in
mortgage-backed securities. Most important, these securities do not have
the benefit of a security interest in Underlying Assets. Credit card
receivables are generally unsecured, and the debtors are entitled to the
protection of a number of state and federal consumer credit laws, many of
which give such debtors the right to set off certain amounts owed on the
credit cards, thereby reducing the balance due. Most issuers of automobile
receivables permit the servicers to retain possession of the underlying
obligations. If the servicer were to sell these obligations to another
party, there is a risk that the purchaser would acquire an interest
superior to that of the holders of the related automobile receivables. In
addition, because of the large number of vehicles involved in a typical
debt issue, and technical requirements under state laws, the trustee for
the holders of the automobile receivables may not have an effective
security interest in all of the obligations backing such receivables.
Therefore, there is a possibility that recoveries on repossessed collateral
may not, in some cases, be available to support payments on these
securities.
Some forms of asset-backed securities are relatively new forms of
investments. Although each fund will only invest in asset-backed securities
believed to be liquid, because the market experience in certain of these
securities is limited, the market's ability to sustain liquidity through
all phases of a market cycle may not have been tested.
Municipal Debt Securities. Municipal debt securities may include such
instruments as tax anticipation notes, revenue anticipation notes, and bond
anticipation notes. Municipal notes are issued by state and local governments
and public authorities as interim financing in anticipation of tax collections,
revenue receipts, or bond sales. Municipal bonds, which may be issued to raise
money for various public purposes, include general obligation bonds and revenue
bonds. General obligation bonds are backed by the taxing power of the issuing
municipality and are considered the safest type of bonds. Revenue bonds are
backed by the revenues of a project or facility such as the tolls from a toll
bridge. "Private activity" bonds, including industrial development revenue
bonds, are a specific type of revenue bond backed by the credit and security of
a private user. Revenue bonds are typically considered to have more potential
risk than general obligation bonds.
Municipal obligations can have floating, variable, or fixed rates. Floating and
variable rate obligations generally entail less interest rate risk than fixed
rate obligations. Variable and floating rate obligations usually carry rights
that permit a fund to sell them at par value plus accrued interest upon short
notice. The issuers or financial intermediaries providing rights to sell may
support their ability to purchase the obligations by obtaining credit with
liquidity supports. These may include lines of credit and letters of credit,
which will ordinarily be irrevocable, both of which are issued by domestic banks
or foreign banks which have a branch, agency, or subsidiary in the United
States. When considering whether an obligation meets a fund's quality
standards, FAI and the Money Managers will look at the creditworthiness of the
party providing the right to sell as well as the quality of the obligation
itself.
The interest on private activity bonds is an item of tax preference for purposes
of the federal alternative minimum tax. Fund distributions which are derived
from interest on municipal securities are taxable to members in the same manner
as distributions derived from interest on taxable debt securities.
38 TIP Statement of Additional Information
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Policy Implementation and Risks continued
Securities Denominated in Multi-National Currency Units or More than One
Currency. An illustration of a multi-national currency unit is the Euro, whose
value is based on a "basket" consisting of specified amounts of European
currencies. The specific amounts of currencies comprising the Euro may be
adjusted by the Council of Ministers of the European Union to reflect changes in
relative values of the underlying currencies. FAI and the Money Managers do not
believe that such adjustments will adversely affect holders of Euro-denominated
obligations or the marketability of such securities. European supranational
entities, in particular, issue Euro-denominated obligations.
US Treasury and US Government Agency Securities. US government securities
include instruments issued by the US Treasury, including bills, notes, and
bonds. These instruments are direct obligations of the US government and, as
such, are backed by the full faith and credit of the United States. They differ
primarily in their interest rates, maturities, and issuance dates. Other US
government securities include securities issued by instrumentalities of the US
government, such as the Government National Mortgage Association ("GNMA"), which
are also backed by the full faith and credit of the United States. US
government Agency Securities are instruments issued by instrumentalities
established or sponsored by the US government, such as the Student Loan
Marketing Association ("SLMA"), the Federal National Mortgage Association
("FNMA"), and the Federal Home Loan Mortgage Corporation ("FHLMC"). While these
securities are issued, in general, under the authority of an Act of Congress,
the US government is not obligated to provide financial support to the issuing
instrumentalities.
Variable Amount Master Demand Notes. Variable amount master demand notes permit
the investment of fluctuating amounts at varying rates of interest pursuant to a
direct arrangement between a fund (as lender) and the borrower. These notes are
not transferable, nor are they rated ordinarily by either Moody's or S&P.
Zero Coupon Securities and Custodial Receipts. In addition to securities issued
directly by the US Treasury, zero coupon securities include US Treasury bonds or
notes whose unmatured interest coupons and receipts for their principal have
been separated by their holder, typically a custodian bank or investment
brokerage firm. Once "stripped" or separated, the principal and coupons are
sold separately. The principal, or "corpus," is sold at a deep discount because
the buyer receives only the right to receive a future fixed payment and does not
receive any rights to periodic interest payments. The coupons may be sold
separately or grouped with other coupons with like maturity dates and sold in a
bundled form. Purchasers of stripped obligations acquire, in effect, discount
obligations that are economically identical to the zero coupon securities that
the Treasury sells itself.
A number of securities firms and banks have stripped the interest coupons and
receipts and then resold them in custodial receipt programs with a number of
different names, including "Treasury Income Growth Receipts" ("TIGRS") and
"Certificate of Accrual on Treasuries" ("CATS"). The underlying US Treasury
bonds and notes themselves are held in book-entry form at the Federal Reserve
Bank or, in the case of bearer securities (i.e., unregistered securities which
are owned ostensibly by the bearer or holder thereof), in trust on behalf of the
owners thereof. Counsels to the underwriters have issued the opinion that, for
Federal tax and securities law purposes, purchasers of such certificates will
most likely be deemed the beneficial holders of the underlying US Treasury
securities.
Recently, the US Treasury has facilitated transfer of ownership of zero coupon
securities by accounting separately for the beneficial ownership of particular
interest coupon and corpus payments on Treasury securities through the Federal
Reserve book-entry recordkeeping system. The Federal Reserve program as
established by the Treasury Department is known as "Separate Trading of
Registered Interest and Principal of Securities" ("STRIPS"). Under the STRIPS
program, a purchaser's beneficial ownership of zero coupon securities is
recorded directly in the book-entry recordkeeping system in lieu of holding
certificates or other evidences of ownership of the underlying US Treasury
securities.
April 28, 2000 39
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Policy Implementation and Risks continued
Derivative Securities
Futures Contracts. Each fund may enter into contracts for the purchase or sale
for future delivery (a "futures contract") of fixed income securities or foreign
currencies or based on financial indices including any index of common stocks,
US government securities, foreign government securities, or corporate debt
securities. A fund may enter into futures contracts that are based on debt
securities that are backed by the full faith and credit of the US government,
such as long-term US Treasury bonds, Treasury notes, GNMA-modified pass-through
mortgage-backed securities, and three-month US Treasury bills. Each fund also
may enter into futures contracts based on securities that would be eligible
investments for such fund and denominated in currencies other than the US
dollar.
US futures contracts have been designed by exchanges which have been designated
as "contracts markets" by the CFTC and must be executed through a futures
commission merchant or brokerage firm which is a member of the relevant contract
market. Futures contracts trade on a number of exchange markets and, through
their clearing corporations, the exchanges guarantee performance of the
contracts as between the clearing members of the exchange.
Futures contracts may be used as both hedging and income-enhancement strategies.
As an example of a hedging transaction, a Money Manager holding a portfolio of
equity securities and anticipating a near-term market decline might sell S&P 500
futures to obtain prompt protection pending an orderly portfolio liquidation.
If the decline occurs, gains on the futures contract will offset at least in
part the loss on the portfolio; if the Money Manager is wrong and the market
rises, the loss on the futures contract will offset gains on the portfolio.
Although futures contracts by their terms call for actual delivery or
acquisition of the underlying asset, in most cases the contractual obligation is
fulfilled before the date of the contract by entering into an offsetting futures
contract with delivery in the same month. Such a transaction, which is effected
through a member of an exchange, cancels the obligation to make or take delivery
of the securities or currency. Since all transactions in the futures market are
made, offset, or fulfilled through a clearinghouse associated with the exchange
on which the contracts are traded, a fund will incur brokerage fees when it
purchases or sells futures contracts.
At the time a futures contract is purchased or sold, the fund must allocate cash
or securities as a deposit payment ("initial margin"). It is expected that the
initial margin on US exchanges may range from approximately 3% to approximately
15% of the value of the securities or commodities underlying the contract.
Under certain circumstances, however, such as periods of high volatility, the
fund may be required by an exchange to increase the level of its initial margin
payment. It is also possible that initial margin requirements may be increased
in the future by regulators. An outstanding futures contract is valued daily
and the payment in cash of "variation margin" will be required, a process known
as "marking to the market." Each day the fund will be required to provide (or
will be entitled to receive) variation margin in an amount equal to any decline
(in the case of a long futures position) or increase (in the case of a short
futures position) in the contract's value since the preceding day.
Primary Risks. Futures contracts entail special risks. Among other
things, the ordinary spreads between values in the cash and futures
markets, due to differences in the character of these markets, are subject
to distortions related to (1) investors' obligations to meet additional
variation margin requirements, (2) decisions to make or take delivery
rather than to enter into offsetting transactions, and (3) the difference
between margin requirements in the securities markets and margin deposit
requirements in the futures market. The possibility of such distortions
means that a correct forecast of general market, foreign exchange rate, or
interest rate trends still may not result in a successful transaction.
40 TIP Statement of Additional Information
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Policy Implementation and Risks continued
If predictions about the general direction of securities market movements,
foreign exchange rates, or interest rates are incorrect, a fund's overall
performance would be poorer than if it had not entered into any such
contracts or purchased or written options thereon. For example, if a fund
had hedged against the possibility of an increase in interest rates that
would adversely affect the price of debt securities held in its portfolio
and interest rates decreased instead, the fund would lose part or all of
the benefit of the increased value of its assets that it had hedged because
it would have offsetting losses in its futures positions. In addition,
particularly in such situations, if the fund has insufficient cash, it may
have to sell assets from its portfolio to meet daily variation margin
requirements. Any such sale of assets may or may not be at increased
prices reflecting the rising market. Consequently, the fund may have to
sell assets at a time when it may be disadvantageous to do so.
A fund's ability to establish and close out positions in futures contracts
and options on futures contracts depends on the existence of a liquid
market. Although a fund typically will purchase or sell only those futures
contracts and options thereon for which there appears to be a liquid
market, there is no assurance that a liquid market on an exchange will
exist for any particular futures contract or option thereon at any future
date. If it is not possible to effect a closing transaction in a contract
at a satisfactory price, the fund would have to make or take delivery under
the futures contract or, in the case of a purchased option, exercise the
option. In the case of a futures contract that a fund has sold and is
unable to close out, the fund would be required to maintain margin deposits
on the futures contract and to make variation margin payments until the
contract is closed.
Under certain circumstances, exchanges may establish daily limits in the
amount that the price of a futures contract or related option contract may
vary up or down from the previous day's settlement price. Once the daily
limit has been reached in a particular contract, no trades may be made that
day at a price beyond that limit. The daily limit governs only price
movements during a particular trading day and therefore does not limit
potential losses because the limit may prevent the liquidation of
unfavorable positions. This situation could potentially persist for
several consecutive trading days.
Risks of Foreign Currency Futures Contracts. Buyers and sellers of foreign
currency futures contracts are subject to the same risks that apply to
futures generally. In addition, there are risks associated with foreign
currency futures contracts similar to those associated with forward
contracts on foreign currencies. Further, settlement of a foreign currency
futures contract must occur within the country issuing the underlying
currency. Thus, a fund must accept or make delivery of the underlying
foreign currency in accordance with any US or foreign restrictions or
regulations regarding the maintenance of foreign banking arrangements by US
residents and may be required to pay any fees, taxes, or charges associated
with such delivery which are assessed in the country of the underlying
currency.
Options on Futures Contracts. The purchase of a put or call on a futures
contract is similar in some respects to the purchase of a put or call on an
individual security or currency. Depending on the option's price compared to
either the price of the futures contract upon which it is based or the price of
the underlying asset, it may or may not be less risky than ownership of the
futures contract or the underlying assets. A fund may purchase options on
futures contracts for the same purposes as futures contracts themselves, i.e.,
as a hedging or income-enhancement strategy.
Writing a call option on a futures contract constitutes a partial hedge against
declining prices of the underlying asset which is deliverable upon exercise of
the futures contract. If the futures price at expiration of the option is below
the exercise price, a fund will retain the full amount of the option premium,
which provides a partial hedge against any decline in the fund's portfolio
holdings.
April 28, 2000 41
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Policy Implementation and Risks continued
Writing a put option on a futures contract constitutes a partial hedge against
increasing prices of the underlying asset which is deliverable upon exercise of
the futures contract. If the futures price at expiration of the option is
higher than the exercise price, the fund will retain the full amount of the
option premium, which provides a partial hedge against any increase in the price
of securities the fund intends to purchase. If a put or call option a fund has
written is exercised, the fund will incur a loss that will be reduced by the
amount of the premium it receives. Depending on the degree of correlation
between changes in the value of its portfolio securities and changes in the
value of its futures positions, a fund's losses from existing options on futures
may to some extent be reduced or increased by changes in the value of portfolio
securities.
Restrictions on the Use of Futures Contracts and Options on Futures Contracts.
CFTC regulations applicable to the funds require that all of a fund's positions
in futures and options on futures constitute bona fide hedging transactions,
except that a transaction need not constitute a bona fide hedging transaction
and may be entered into for other purposes if, immediately thereafter, the sum
of the amount of initial margin deposits on the fund's existing futures
positions and premiums paid for related options does not exceed 5% of the value
of the fund's total assets.
Primary Risks. The amount of risk a fund assumes when it purchases an
option on a futures contract is the premium paid for the option plus
related transaction costs. In addition to correlation risk, the purchase
of an option also entails the risk that changes in the value of the
underlying futures contract will not be fully reflected in the value of the
option purchased.
Options on foreign currency futures contracts may involve additional
liquidity risk. Trading options on foreign currency futures contracts is
relatively new. The ability to establish and close out positions in such
options is subject to the maintenance of a liquid secondary market.
Therefore, a fund will not purchase or write options on foreign currency
futures contracts unless and until, in FAI's or the Money Manager's
opinion, the market for such options has developed sufficiently that the
risks of such options are not greater than the risks of the underlying
foreign currency futures contracts. Compared to the purchase or sale of
foreign currency futures contracts, the purchase of call or put options
thereon involves less potential market risk to the fund because the maximum
amount at risk is the premium paid for the option (plus transaction costs).
However, there may be circumstances when a position in options on foreign
currency futures contracts would result in a loss whereas a position in the
underlying futures contract would not, such as when there is no movement in
the price of the underlying currency or futures contract.
Options on Foreign Currencies. Each fund may purchase and sell (or write) put
and call options on foreign currencies to protect against a decline in the US
dollar-equivalent value of its portfolio securities or payments due thereon or a
rise in the US dollar-equivalent cost of securities that it intends to purchase.
A foreign currency put option grants the holder the right, but not the
obligation, to sell at a future date a specified amount of a foreign currency at
a predetermined price. Conversely, a foreign currency call option grants the
holder the right, but not the obligation, to purchase at a future date a
specified amount of a foreign currency at a predetermined price.
Instead of purchasing a put option when it anticipates a decline in the dollar
value of foreign securities due to adverse fluctuations in exchange rates, a
fund could write a call option on the relevant currency. If the expected
decline occurs, it is likely that the option will not be exercised, and the
decrease in value of portfolio securities will be offset by the amount of the
premium received.
Similarly, instead of purchasing a call option to hedge against an anticipated
increase in the dollar cost of foreign securities to be acquired, a fund could
write a put option on the relevant currency. If exchange rates move as
expected, the put will expire unexercised, and the fund will have hedged such
increased costs up to the amount of the premium.
42 TIP Statement of Additional Information
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Policy Implementation and Risks continued
Primary Risks. As in the case of other types of options, the benefit to a
fund from the purchase of foreign currency options will be reduced by the
amount of the premium and related transaction costs. In addition, where
currency exchange rates do not move in the direction or to the extent
anticipated, a fund could sustain losses on transactions in foreign
currency options that would require them to forego a portion or all of the
benefits of advantageous changes in such rates.
The writing of a foreign currency option constitutes only a partial hedge
up to the amount of the premium and only if exchange rates move in the
expected direction. If this movement does not occur, the option may be
exercised and the fund would be required to purchase or sell the underlying
currency at a loss which may not be fully offset by the amount of the
premium. Through the writing of options on foreign currencies, a fund also
may be required to forego all or a portion of the benefits that might
otherwise have been obtained from favorable movements in exchange rates.
Options on Securities. The funds may purchase and sell both exchange-traded and
OTC options. Currently, although many options on equity securities and
currencies are exchange-traded, options on debt securities are primarily traded
in the over-the-counter market.
Exchange-traded options in the United States are issued by a clearing
organization affiliated with the exchange on which the option is listed. This
clearing organization, in effect, guarantees every exchange-traded option
transaction. In contrast, over-the-counter options are contracts between a fund
and its counterparty with no clearing organization guarantee. Thus, when the
fund purchases OTC options, it relies on the dealer from which it purchased the
OTC option to make or take delivery of the securities underlying the option.
The writer of an exchange-traded option that wishes to terminate its obligation
may do so by a "closing purchase transaction," i.e., buying an option of the
same series as the option previously written. Options of the same series are
options on the same underlying security or currency with the same expiration
date and exercise price. Likewise, the holder of an option may liquidate a
position by a "closing sale transaction," i.e., selling an option of the same
series as the option previously purchased. In general, an OTC option may be
closed out prior to expiration only by entering into an offsetting transaction
with the same dealer.
A fund's transactions in options on securities and securities indices are
governed by the rules and regulations of the respective exchanges, boards of
trade, or other trading facilities on which the options are traded.
The funds will write only "covered" options. An option is covered if the fund
owns an offsetting position in the underlying security or maintains cash, US
government securities, or other liquid high-grade debt obligations with a value
sufficient at all times to cover its obligations.
Primary Risks. The value of an option reflects, among other things, the
current market price of the underlying currency or security, the time
remaining until expiration, the relationship of the exercise price to the
market price, the historical price volatility of the underlying currency or
security, and interest rates. Successful use of options depends in part on
the ability of FAI or the Money Manager to forecast future market
conditions. Options purchased by a fund that expire unexercised have no
value, and therefore a loss will be realized in the amount of the premium
paid plus related transaction costs.
The writer of a call option is obligated, upon its exercise, to sell the
underlying securities or currency to the purchaser at the exercise price,
thus losing the potential for gain on the underlying securities or currency
in excess of the exercise price of the option during the period that the
option is open. The writer of a put option is obligated, upon its
exercise, to purchase the underlying securities or currency underlying the
option at the exercise price. A writer might, therefore, be obligated to
purchase the underlying securities or currency for more than their current
market price. Any losses are partially offset by the premium, which the
writer retains regardless of whether the option is exercised.
April 28, 2000 43
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Policy Implementation and Risks continued
A fund's activities in the options markets may result in higher portfolio
turnover rates and additional brokerage costs. However, commissions and
transaction costs of such hedging activities may be less than those
associated with purchases and sales of the underlying securities or foreign
currencies.
Risks of Exchange-Traded Options. A closing purchase or a closing sale
transaction on an exchange-traded option can be made only where a secondary
market exists for an option of the same series. For a number of reasons, a
secondary market may not exist for options held by a fund, or trading in
such options might be limited or halted by the exchange, thus making it
impossible to effect closing transactions in particular options the fund
owns. As a result, the fund would have to exercise the options in order to
realize any profit. If the fund is unable to effect a closing purchase
transaction in a secondary market in an option which the fund has written,
it will not be able to sell the underlying security or currency until the
option expires or deliver the underlying security or currency upon exercise
or otherwise cover its position.
Risks of OTC Options. Exchange-traded options generally have a continuous
liquid market, whereas OTC options may not have one. A fund usually will
be able to realize the value of an OTC option it has purchased only by
exercising it or reselling it to the dealer who issued it. Similarly, when
the fund writes an OTC option, it generally will be able to close it out
prior to expiration only by entering into a closing purchase transaction
with the same dealer. Although a fund will enter into OTC options only
with dealers who agree to enter into and who are expected to be capable of
entering into closing transactions with the fund, there can be no assurance
that the fund will be able to liquidate an OTC option at a favorable price
at any time prior to expiration. Until the fund is able to effect a
closing purchase transaction in a covered OTC call option the fund has
written, it will not be able to liquidate securities used as cover until
the option expires or is exercised or different cover is substituted. The
inability to enter into a closing purchase transaction may result in
material losses to the fund, for example, by limiting its ability to sell
the underlying security while the option is outstanding. This may impair
the fund's ability to sell a portfolio security at a time when such a sale
might be advantageous. In addition, if the counterparty becomes insolvent,
the fund may be unable to liquidate an OTC option. Failure by the dealer
to take delivery of the underlying securities would result in the loss of
the premium paid by the fund as well as the loss of the expected benefit of
the transaction. The funds will only purchase options from dealers
determined to be creditworthy.
Risks of Foreign Currency Options. There is no systematic reporting of
last sale information for foreign currencies or any regulatory requirement
that quotations available through dealers or other market sources be firm
or revised on a timely basis. Quotation information available is
representative of very large transactions in the interbank market and thus
may not reflect relatively smaller transactions (i.e., less than $1
million) where rates may be less favorable. The interbank market in
foreign currencies is a global, around-the-clock market. To the extent
that the US options markets are closed while the markets for the underlying
currencies remain open, significant price and rate movements may take place
in the underlying markets which cannot be reflected in the options market
until they reopen. Foreign currency transactions occurring in the
interbank market involve substantially larger amounts than those that may
be involved in the use of foreign currency options. Investors may be at a
disadvantage by having to deal in an odd lot market (usually consisting of
transactions of less than $1 million) for the underlying foreign currencies
at prices that are less favorable than for round lots.
Interest Rate and Currency Swaps. An interest rate swap is an agreement to
exchange the interest generated by a fixed income instrument held by a fund for
the interest generated by a fixed income instrument held by a counterparty, such
as an exchange of fixed rate payments for floating rate payments. Currency
swaps involve the exchange of respective rights to make or receive payments in
specified currencies. The value of the positions underlying such transactions
may not represent more than 15% of a fund's assets. The fund will maintain a
segregated account in the amount of the accrued excess, if any, of its
obligations over its entitlements with respect to each swap.
44 TIP Statement of Additional Information
<PAGE>
Policy Implementation and Risks continued
Primary Risks. Swaps are available only from a limited number of
counterparties and involve counterparty credit risk.
When-Issued and Forward Commitment Securities. Each fund may purchase
securities on a "when-issued" basis and may purchase or sell securities on a
"forward commitment" basis in order to hedge against anticipated changes in
interest rates and prices. In such transactions, instruments are bought with
payment and delivery taking place in the future but no later than 120 days after
the trade date. No income accrues prior to delivery. At the time a fund enters
into such a transaction, it must establish a segregated account consisting of
acceptable assets equal to the value of the when-issued or forward commitment
securities. When a forward commitment purchase is made to close a forward
commitment sale, or vice versa, the difference between the two may be netted for
segregation purposes until settlement date.
Forward commitments, or delayed deliveries, are deemed to be outside the normal
corporate settlement structure.
Primary Risks. The value of the security on the delivery date may be less
than its purchase price, representing a loss for the fund. These
transactions also involve counterparty risk. If the other party fails to
perform or becomes insolvent, any accrued profits may not be available to
a fund.
Synthetic Securities. The Bond and Short-Term Funds may create synthetic
securities by combining investments in securities denominated in a given
currency with forward contracts in order to achieve desired credit and currency
exposures. To construct a synthetic security, a fund enters into a forward
contract for the purchase of a given currency (the "Purchase Currency") at a
future date against payment in another currency (the "Sale Currency").
Simultaneously, the fund purchases a security denominated in the Sale Currency
with a maturity date and amount payable at maturity that coincides with the
delivery date and amount of the forward contract. The overall effect of these
transactions is similar to the purchase of a security denominated in the
Purchase Currency. The forward contract may increase or decrease the return on
the investment in the security depending on exchange rate movements between the
purchase and maturity dates.
Primary Risks. The primary risks associated with synthetic securities
arise from:
1. the fluctuation of the exchange rates between the Purchase and Sale
Currencies between purchase and maturity dates,
2. the matching of the principal and interest from the security with the
related forward contract, and
3. the credit risks associated with the issuer of the security and the
forward contract counterparties.
In addition, to the extent a synthetic security is unwound prior to the
maturity of the security, the fund is exposed to market risk with respect
to the value of the security and currency risk with respect to the forward
contract.
Other Instruments
Convertible Securities. A convertible security is a fixed income security (a
bond or preferred stock) which may be converted at a stated price into a certain
quantity of the common stock of the same or a different issuer. Through their
conversion feature, these securities provide an opportunity to participate in
advances in the price of the common stock into which the security may be
converted.
Primary Risks. A convertible security entails market risk in that its
market value depends in part on the price of the underlying common stock.
Convertible securities also entail greater credit risk than the issuer's
non-convertible senior debt securities to which they are usually
subordinated.
April 28, 2000 45
<PAGE>
Policy Implementation and Risks continued
Illiquid and Restricted Securities. Illiquid assets are investments that are
difficult to sell at the price at which such assets are valued by the fund
within seven days of the date of the decision to sell them. They may include:
1. over-the-counter options,
2. repurchase agreements, time deposits, and dollar roll transactions maturing
in more than seven days,
3. loan participations,
4. securities without readily available market quotations, including interests
in private commingled investment vehicles in which a fund might invest, and
5. certain restricted securities.
Primary Risks. Due to the absence of an organized market for such
securities, the market value of illiquid securities used in calculating
fund net asset values for purchases and redemptions can diverge
substantially from their true value. Illiquid securities are generally
subject to legal or contractual restrictions on resale, and their forced
liquidation to meet redemption requests could produce large losses.
The staff of the SEC has taken the position that purchased OTC options and the
assets used as cover for written OTC options are illiquid securities.
Therefore, each fund's investment policy states that typically it will not
purchase or sell OTC options if, as a result of such transaction, the sum of:
1. the market value of OTC options currently outstanding held by the fund,
2. the market value of the underlying securities covered by OTC call options
currently outstanding sold by the fund, and
3. margin deposits on the fund's existing OTC options on futures contracts
exceed 15% of the net assets of the fund, taken at market value, together
with all other assets of the fund that are illiquid or are not otherwise
readily marketable.
This policy as to OTC options is not a fundamental policy of the funds and may
be amended by the directors of TIP without the approval of TIP's or a fund's
members. However, TIP will not change or modify this policy prior to a change
or modification by the SEC staff of its position.
Securities Denominated in Multi-National Currency Units or More than One
Currency. Each fund may invest in securities denominated in a multi-national
currency unit, such as the Euro, which is a "basket" consisting of specified
amounts of the currencies of certain member states of the European Union. Each
fund may also invest in securities denominated in the currency of one nation
although issued by a governmental entity, corporation, or financial institution
of another nation.
Commingled Investment Vehicles. The funds may, subject to limitations, invest a
portion of their assets in securities issued by other commingled investment
vehicles whose expected returns are, in the judgment of FAI's directors,
superior to those of Money Managers that the funds might employ directly.
Other Registered Investment Companies. A fund may invest in the shares of
another registered investment company. The funds will make such purchases in
the open market and only when no commission or profit beyond the customary
broker's commission results. As a shareholder in a registered investment
company, the fund will bear its ratable share of that investment company's
expenses, including its advisory and administration fees. The funds will not
purchase shares of open-end companies without having any duplicative
management fees waived.
46 TIP Statement of Additional Information
<PAGE>
Policy Implementation and Risks continued
Closed-End Investment Companies. Investments in closed end funds may involve
the payment of premiums above the net asset value of the issuers' portfolio
securities. These are subject to limitations under the 1940 Act and are
constrained by market availability (e.g., these investment companies are often
"closed end" companies that do not offer to redeem their shares directly).
The funds do not intend to invest in such investment companies unless, in the
judgment of FAI's directors, the potential benefits of such investments
justify the payment of any applicable premium or sales charge. For instance,
due to restrictions on direct investment by foreign entities in certain
emerging market countries, purchasing shares of other investment companies may
be the most practical or only manner in which the funds can invest in these
markets.
Private Investment Funds. FAI may invest a portion of a fund's assets in
securities issued by private investment funds. For example, FAI might elect
to invest a portion of a fund's assets in an investment partnership whose
manager FAI believes is especially skillful, but which is closed to new
separate accounts, is unwilling to manage assets directly on a fund's behalf,
or whose services can be purchased indirectly at a lower cost by investment in
securities issued by an existing partnership or other commingled investment
vehicle. As an investor in such a fund, a fund would bear its ratable share
of expenses and would be subject to its share of the management and
performance fees charged by such entity. Investment by a fund in the
securities of a private investment company is not subject to the 3% limitation
imposed on shares held by a fund in other registered investment companies but
is subject to the 15% limitation on illiquid securities.
Fund Transactions
The debt securities in which TIP invests are traded primarily in the over-the-
counter market by dealers who usually are acting as principals for their own
accounts. On occasion, securities may be purchased directly from the issuer.
The cost of securities purchased from underwriters includes an underwriting
commission or concession. Debt securities are traded on a net basis and
normally do not involve either brokerage commissions or transfer taxes. The
cost of executing transactions consists primarily of dealer spreads. In the
markets in which a fund buys and sells its assets and depending upon the size of
the transactions it executes, the spread between a security's bid and ask price
is typically below /1//32 of 1% of the value of the transaction, and often is
much less. The spread is not included in the expenses of a fund and therefore
is not subject to the expense cap; nevertheless, the incurrence of this spread,
ignoring the other intended positive effects of the transaction, will decrease
the total return of the fund. However, a fund will buy one asset and sell
another only if FAI or the Money Managers believe it is advantageous to do so
after considering the effects of the additional custodial charges and the spread
on the fund's total return.
Since costs associated with transactions in foreign securities are usually
higher than costs associated with transactions in domestic securities, the
funds' operating expense ratios can be expected to be higher than those of an
investment company investing exclusively in domestic securities.
The selection of a broker or dealer to execute portfolio transactions is usually
made by a Money Manager. In executing portfolio transactions and selecting
brokers or dealers, the principal objective is to seek the best overall terms
available to the fund, subject to specific directions from TIP or FAI.
Securities ordinarily are purchased in their primary markets, and a Money
Manager will consider all factors it deems relevant in assessing the best
overall terms available for any transaction, including:
1. the breadth of the market in the security,
2. the price of the security,
3. the financial condition and execution capability of the broker or dealer, and
4. the reasonableness of the commission, if any (for the specific transaction
and on a continuing basis).
April 28, 2000 47
<PAGE>
Fund Transactions continued
In addition, when selecting brokers or dealers and seeking the best overall
terms available, FAI and the Money Managers are authorized to consider the
"brokerage and research services" (as defined in Section 28(e) of the Securities
Exchange Act of 1934) provided to the funds, FAI, or to the Money Manager. FAI
and the Money Managers are authorized to cause the funds to pay a commission to
a broker or dealer who provides such brokerage and research services which is in
excess of the commission another broker or dealer would have charged for
effecting the transaction. TIP, FAI, or the Money Manager, as appropriate, must
determine in good faith that such commission is reasonable in relation to the
value of the brokerage and research services provided. Reasonableness will be
viewed in terms of that particular transaction or in terms of all the accounts
over which FAI or the Money Manager exercises investment discretion.
The funds paid brokerage commissions as follows:
<TABLE>
<S> <C> <C> <C>
1/1/99-12/31/99 1/1/98-12/31/98 1/1/97-12/31/97
- ---------------------------------------------------------------------------------------------------------------------
TIFF Multi-Asset Fund $ 629,767 $ 871,810 $ 1,062,969
- ---------------------------------------------------------------------------------------------------------------------
TIFF International Equity Fund $ 760,841 $ 364,681 $ 351,419
- ---------------------------------------------------------------------------------------------------------------------
TIFF Emerging Markets Fund $ 273,708 $ 268,489 $ 376,009
- ---------------------------------------------------------------------------------------------------------------------
TIFF U.S. Equity Fund $ 615,968 $ 678,711 $ 355,548
- ---------------------------------------------------------------------------------------------------------------------
TIFF Short-Term Fund $ 3,254 - -
- ---------------------------------------------------------------------------------------------------------------------
TIFF Bond Fund $ 19,142 - -
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Tax Considerations
The following summary of tax consequences does not purport to be complete. It
is based on US federal tax laws and regulations in effect on the date of this
Statement of Additional Information, which are subject to change by legislative
or administrative action.
Qualification as a Regulated Investment Company. Each fund intends to qualify
annually and elect to be treated as a regulated investment company ("RIC") under
the Internal Revenue Code of 1986, as amended (the "Code"). To qualify as a
RIC, a fund must, among other things:
1. derive at least 90% of its gross income each taxable year from dividends,
interest, payments with respect to securities loans and gains from the sale
or other disposition of securities or foreign currencies, or other income
(including gains from options, futures, or forward contracts) derived from
its business of investing in securities or foreign currencies (the
"Qualifying Income Requirement");
2. diversify its holdings so that, at the end of each quarter of the fund's
taxable year:
(a) at least 50% of the market value of the fund's assets is represented by
cash and cash items (including receivables), US government securities,
securities of other RICs, and other securities, with such other securities
of any one issuer limited to an amount not greater than 5% of the value of
the fund's total assets and not greater than 10% of the outstanding voting
securities of such issuer and
(b) not more than 25% of the value of the fund's total assets is invested in
the securities of any one issuer (other than US government securities or
the securities of other RICs); and
48 TIP Statement of Additional Information
<PAGE>
Tax Considerations continued
3. distribute at least 90% of its investment company taxable income (which
includes, among other items, interest and net short-term capital gains in
excess of net long-term capital losses) and its net tax-exempt interest
income, if any.
The US Treasury Department has authority to promulgate regulations pursuant to
which gains from foreign currency (and options, futures, and forward contracts
on foreign currency) not directly related to a RIC's principal business of
investing in stocks and securities would not be treated as qualifying income for
purposes of the Qualifying Income Requirement. To date, such regulations have
not been promulgated.
If, for any taxable year, a fund does not qualify as a RIC, all of its taxable
income will be taxed to the fund at corporate rates. For each taxable year that
the fund qualifies as a RIC, it generally will not be subject to federal income
tax on that part of its investment company taxable income and net capital gains
(the excess of net long-term capital gain over net short-term capital loss) it
distributes to its members. In addition, to avoid a non-deductible 4% federal
excise tax, the fund must distribute during each calendar year at least 98% of
its ordinary income (not taking into account any capital gains or losses),
determined on a calendar year basis, at least 98% of its capital gains in excess
of capital losses, determined in general on an October 31 year-end basis, and
any undistributed amounts from previous years. Each fund intends to distribute
all of its net income and gains by automatically reinvesting such income and
gains in additional shares of the fund unless a member requests such
distributions to be paid in cash. Each fund will monitor its compliance with all
of the rules set forth in the preceding paragraph.
Tax Treatment of Distributions. Dividends paid out of the fund's investment
company taxable income will be taxable to the fund's members as ordinary income.
If a portion of a fund's income consists of dividends paid by US corporations, a
portion of the dividends paid by the fund may be eligible for the corporate
dividends-received deduction (assuming that the deduction is otherwise allowable
in computing a member's federal income tax liability). Distributions of any
net capital gains designated by the fund as capital gain dividends will be
taxable to the members as long-term capital gains, regardless of how long they
have held their fund shares, and are not eligible for the corporate dividends-
received deduction. Members receiving distributions in the form of additional
shares, rather than cash, will have a cash basis in each such share equal to the
net asset value of a share of the fund on the reinvestment date. A distribution
of an amount in excess of a fund's current and accumulated earnings and profits
will be treated by a member as a return of capital which is applied against and
reduces the member's basis in its fund shares. To the extent that the amount of
any such distribution exceeds the member's basis in its fund shares, the excess
will be treated as gain from a sale or exchange of the shares. A distribution
will be treated as paid on December 31 of the current calendar year if it is
declared by a fund in October, November, or December with a record date in such
a month and paid by the fund during January of the following calendar year.
Such distributions will be taxable to members in the calendar year in which the
distributions are declared, rather than in the calendar year in which the
distributions are received. Each fund will inform members of the amount and tax
status of all amounts treated as distributed to them not later than 60 days
after the close of each calendar year.
Tax Treatment of Share Sales. Upon the sale or other disposition of shares of a
fund or upon receipt of a distribution in complete liquidation of a fund, a
member usually will realize a capital gain or loss which will be long term or
short term, depending upon the member's holding period for the shares. Any loss
realized on the sale or exchange will be disallowed to the extent the shares
disposed of are replaced (including shares acquired pursuant to a dividend
reinvestment plan) within a period of 61 days beginning 30 days before and
ending 30 days after disposition of the shares. In such a case, the basis of
the shares acquired will be adjusted to reflect the disallowed loss. Any loss
realized by the member on a disposition of fund shares held by the member for
six months or less will be treated as a long-term capital loss to the extent of
any distributions of net capital gains deemed received by the member with
respect to such shares.
April 28, 2000 49
<PAGE>
Tax Considerations continued
Tax Treatment of Zero Coupon Securities. Investments by a fund in zero coupon
securities will result in income to the fund equal to a portion of the excess of
the face value of the securities over their issue price (the "original issue
discount") each year that the securities are held. This is the case even though
the fund receives no cash interest payments. This income is included in
determining the amount of income which the fund must distribute to maintain its
status as a RIC and to avoid the payment of federal income tax and the 4% excise
tax.
Tax Treatment of Hedging Transactions. The taxation of equity options and over-
the-counter options on debt securities is governed by the Code section 1234.
Option Sales. The premium received by a fund for selling a put or call option
is not included in income at the time of receipt. If the option expires, the
premium is a short-term capital gain to the fund. If the fund enters into a
closing transaction, the difference between the amount paid to close out its
position and the premium received is a short-term capital gain or loss. If a
call option written by a fund is exercised, thereby requiring the fund to sell
the underlying security, the premium will increase the amount realized upon the
sale of such security and any resulting gain or loss will be a capital gain or
loss and will be long term or short term depending upon the holding period of
the security.
Option Purchases. With respect to a put or call option purchased by a fund, if
the option is sold, any resulting gain or loss will be a capital gain or loss
and will be long term or short term, depending upon the holding period of the
option. If the option expires, the resulting loss is a capital loss and is long
term or short term, depending upon the holding period of the option. If the
option is exercised, the premium, in the case of a call option, is added to the
basis of the purchased security and, in the case of a put option, reduces the
amount realized on the underlying security in determining gain or loss.
Certain options, futures, and forward contracts in which a fund may invest are
"section 1256 contracts." Gains and losses on section 1256 contracts are
usually treated as 60% long-term and 40% short-term capital gains or losses
("60/40 treatment"), regardless of the fund's actual holding period for the
contract. Also, a section 1256 contract held by a fund at the end of each
taxable year (and generally, for the purposes of the 4% excise tax, on October
31 of each year) must be treated as if the contract had been sold at its fair
market value on that day ("mark to market treatment"), and any deemed gain or
loss on the contract is subject to 60/40 treatment. Foreign currency gains or
losses (discussed below) arising from section 1256 contracts may, however, be
treated as ordinary income or loss.
A fund's hedging transactions may result in "straddles" for federal income tax
purposes. The straddle rules may affect the character of gains or losses
realized by the fund. In addition, losses realized by a fund on positions that
are part of a straddle may be deferred under the straddle rules rather than
being taken into account in calculating the taxable income for the tax year in
which such losses are realized. Further, a fund may be required to capitalize,
rather than deduct currently, any interest expense on indebtedness incurred to
purchase or carry any positions that are part of a straddle. Because only a few
regulations pertaining to the straddle rules have been implemented, the tax
consequences to the funds for engaging in hedging transactions are not entirely
clear. Hedging transactions may increase the amount of short-term capital gain
realized by the funds which is taxed as ordinary income when distributed to
members.
A fund may make one or more of the elections available under the Code that are
applicable to straddles. If a fund makes any of the elections, the amount,
character, and timing of the recognition of gains or losses from the affected
straddle positions will be determined under rules that vary according to the
election(s) made. The rules applicable under some of the elections may
accelerate the recognition of gains or losses from the affected straddle
positions. As a result, the amount of fund income distributed to members and
taxed to them as ordinary income or long-term capital gains may be greater or
lesser as compared to the amount distributed by a fund that did not engage in
such hedging transactions.
50 TIP Statement of Additional Information
<PAGE>
Tax Considerations continued
Tax Treatment of Short Sales. A fund will not realize gain or loss on the short
sale of a security until it closes the transaction by delivering the borrowed
security to the lender. Pursuant to Code section 1233, all or a portion of any
gain arising from a short sale may be treated as short-term capital gain,
regardless of the period for which the fund held the security used to close the
short sale.
Constructive Sales. Under certain circumstances, a fund may recognize gain from
a constructive sale of an "appreciated financial position" it holds if it enters
into a short sale, forward contract, or other transaction that substantially
reduces the risk of loss with respect to the appreciated position. In that
event, the fund would be treated as if it had sold and immediately repurchased
the property and would be taxed on any gain (but not loss) from the constructive
sale. The character of gain from a constructive sale would depend upon the
fund's holding period in the property. Loss from a constructive sale would be
recognized when the property was subsequently disposed of, and its character
would depend on the fund's holding period and the application of various loss
deferral provisions of the Code. Constructive sale treatment does not apply to
transactions closed in the 90-day period ending with the 30th day after the
close of the taxable year if certain conditions are met.
Tax Treatment of Partnership Investments. The current position of the Internal
Revenue Service generally is to treat a RIC, i.e., each fund, as owning its
proportionate share of the income and assets of any partnership in which it is a
partner in applying the Qualifying Income Requirement and the asset
diversification requirements set forth above for RICs. These requirements may
limit the extent to which the funds may invest in partnerships, especially in
the case of partnerships which do not primarily invest in a diversified
portfolio of stocks and securities.
Tax Treatment of Foreign Currency-Related Transactions. Gains or losses
attributable to fluctuations in exchange rates which occur between the time a
fund accrues receivables or payables denominated in a foreign currency and the
time the fund actually collects such receivables or pays such payables typically
are treated as ordinary income or ordinary loss. Similarly, on disposition of
certain options, futures, and forward contracts and on disposition of debt
securities denominated in a foreign currency, gains or losses attributable to
fluctuations in the value of the foreign currency between the date of
acquisition of the security or contract and the date of disposition also are
treated as ordinary gain or loss. These gains or losses, referred to under the
Code as "section 988" gains or losses, may increase or decrease the amount of a
fund's investment company taxable income to be distributed to members as
ordinary income.
Tax Treatment of Passive Foreign Investment Companies. If a fund invests in
stock of certain foreign investment companies, the fund may be subject to US
federal income taxation on a portion of any "excess distribution" with respect
to, or gain from the disposition of, such stock. The tax would be determined by
allocating on a pro rata basis such distribution or gain to each day of the
fund's holding period for the stock. The distribution or gain so allocated to
any tax year of the fund, other than the tax year of the excess distribution or
disposition, would be taxed to the fund at the highest ordinary income rate in
effect for such year, and the tax would be further increased by an interest
charge to reflect the value of the tax deferral deemed to have resulted from the
ownership of the foreign company's stock. Any amount of distribution or gain
allocated to the tax year of the distribution or disposition would be included
in the fund's investment company taxable income and, accordingly, would not be
taxable to the fund to the extent distributed by the fund as a dividend to its
members.
In lieu of being taxable in the manner described above, each fund may be able to
make an election to include annually in income its pro rata share of the
ordinary earnings and net capital gain of any foreign investment company in
which it invests, regardless of whether it actually received any distributions
from the foreign company. These amounts would be included in the fund's
investment company taxable income and net capital gain which, to the extent
distributed by the fund as ordinary or capital gain dividends, as the case may
be, would not be taxable to the fund. In order to make this election, a fund
would be required to obtain certain annual information from the foreign
investment companies in which it invests, which in many cases may be difficult
to obtain. Alternatively, a fund may be able to elect to mark to market the
fund's PFIC shares at the end of each taxable year, with the result that
unrealized gains would be treated as though they were realized and reported as
ordinary income. Any mark-to-market losses and any loss from an actual
disposition of PFIC shares would be deductible as ordinary losses to the extent
of any net mark-to-market gains included in income in prior years.
April 28, 2000 51
<PAGE>
Tax Considerations continued
Foreign Withholding Taxes. Fund income received from sources within foreign
countries may be subject to withholding and other taxes imposed by such
countries. If more than 50% of the value of a fund's total assets at the close
of its tax year consists of securities of foreign corporations, the fund will be
eligible and may elect to "pass through" to the fund's members the amount of
foreign taxes paid by the fund. Pursuant to this election, a member will be
required to include in gross income (in addition to dividends actually received)
its pro rata share of the foreign taxes paid by the fund and may be entitled
either to deduct its pro rata share of the foreign taxes in computing its
taxable income or to use the amount as a foreign tax credit against its US
federal income tax liability, subject to limitations. Each member will be
notified within 60 days after the close of the fund's tax year whether the
foreign taxes paid by the fund will "pass through" for that year. With the
possible exceptions of the Multi-Asset, International Equity, and Emerging
Markets Funds, it is not anticipated that the funds will be eligible to make
this "pass-through" election. If a fund is not eligible to make the election to
"pass through" to its members its foreign taxes, the foreign taxes it pays will
reduce its investment company taxable income, and distributions by the fund will
be treated as US source income.
Generally, a credit for foreign taxes is subject to the limitation that it may
not exceed the member's US tax attributable to its foreign source taxable
income. For this purpose, if the pass-through election is made, the source of
the fund's income flows through to its members. With respect to the funds,
gains from the sale of securities will be treated as derived from US sources,
and certain currency fluctuation gains (including fluctuation gains from foreign
currency-denominated debt securities, receivables, and payables) will be treated
as ordinary income derived from US sources. The limitation on the foreign tax
credit is applied separately to foreign source passive income (as defined for
purposes of the foreign tax credit), including the foreign source passive income
passed through by the funds. members who are not liable for federal income
taxes other than the excise tax applicable to the net investment income of
private foundations will not be affected by any such "pass through" of foreign
tax credits.
Debt-Financed Shares. If a member that is exempt from federal income taxation
under Code section 501(a) incurs indebtedness in connection with, or as a result
of, its acquisition of fund shares, the shares may be treated as "debt-financed
property" under the Code. In such event, part of all of any income or gain
derived from the member's investment in those shares could constitute "unrelated
business taxable income." Unrelated business taxable income in excess of $1000
in any year is taxable and will require a member to file a federal income tax
return on Form 990-T.
Backup Withholding. A fund may be required to withhold US federal income tax at
the rate of 31% of all amounts distributed or deemed to be distributed as a
result of the automatic reinvestment by the fund of its income and gains in
additional shares of the fund, and all redemption payments made to members who:
1. fail to provide the fund with their correct taxpayer identification numbers,
2. fail to make required certifications, or
3. who have been notified by the Internal Revenue Service that they are subject
to backup withholding.
Backup withholding is not an additional tax. Any amounts withheld will be
credited against a member's US federal income tax liability. Corporate members
and certain other members (including organizations exempt from federal income
taxation under Code section 501(a)) are exempt from such backup withholding.
Other Tax Considerations. A fund may be subject to state, local, or foreign
taxes in any jurisdiction in which the fund may be deemed to be doing business.
In addition, members of a fund may be subject to state, local, or foreign taxes
on distributions from the fund. In many states, fund distributions which are
derived from interest on certain US government obligations may be exempt from
taxation. Members should consult their own tax advisors concerning the
particular tax consequences to them of an investment in the funds.
52 TIP Statement of Additional Information
<PAGE>
Member Information
Member Account Records. Investors Bank & Trust Company ("IBT"), TIP's Transfer
Agent, maintains an account for each member upon which the registration and
transfer of shares are recorded. Any transfers are reflected by bookkeeping
entry, without physical delivery. Certificates representing shares of a
particular fund normally will not be issued to members. Written confirmations
of purchases or redemptions are mailed to each member. Members also receive via
mail monthly account statements, which reflect shares purchased as a result of a
reinvestment of fund distributions.
Requests That Must Be in Writing. IBT will require that a member provide
requests in writing accompanied by a valid signature guarantee when changing
certain information in an account, including wiring instructions. TIP, FAI,
Investors Capital, and IBT will not be responsible for confirming the validity
of written or telephonic requests.
Initial Investment. Foundations seeking to invest through TIP are asked to
complete an Account Application. The completed Application is submitted to FAI
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 may ask a member
foundation to verify or supplement the information in the Account Application
that is on file.
Member Voting Rights and Procedures. Each member has one vote in director
elections and on other matters submitted to members for their vote for each
dollar of net asset value held by the member. Matters to be acted upon
affecting a particular fund, including approval of the advisory and manager
agreements with FAI and the Money Managers, respectively, and the submission of
changes of fundamental investment policies of a fund, will require the
affirmative vote of a majority of the members of such fund. The election of
TIP's board of directors and the approval of TIP's independent public
accountants are voted upon by members on a TIP-wide basis. TIP is not required
to hold annual member meetings. Member approval will be sought only for certain
changes in TIP's or a fund's operation and for the election of directors under
certain circumstances. Members may remove directors at a special meeting. A
special meeting of TIP shall be called by the directors upon written request of
members owning at least 10% of TIP's outstanding shares.
Calculation of Performance Data
Yield. A fund's yield quotation is based on all investment income (including
dividends and interest) per share during a particular 30-day (or one month)
period less expenses accrued during the period ("net investment income"). It is
computed by dividing net investment income by the maximum offering price per
share on the last day of the period, according to the following formula
prescribed by the SEC:
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.
April 28, 2000 53
<PAGE>
Calculation of Performance Data continued
The funds' yields, as defined above, for the 30-day period ended December 31,
1999, were as follows:
U.S Equity Fund 0.8%
Bond Fund 5.8%
Short-Term Fund 5.6%
Total Return. Quotations of average annual total return are expressed in terms
of the average annual compounded rate of return of a hypothetical investment in
a fund over periods of 1, 5, and 10 years, or the life of the fund, calculated
pursuant to the following formula as prescribed by the SEC:
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, 1999, are as
follows:
<TABLE>
<CAPTION>
12 Months 12 Months 12 Months Annualized
Ended Ended Ended since Inception
12/31/99 12/31/98 12/31/97 Inception Date
<S> <C> <C> <C> <C> <C>
Multi-Asset Fund 22.65% 0.22% 5.51% 11.74% 3/31/1995
International Equity Fund 37.40% 3.03% 0.91% 11.51% 5/31/1994
Emerging Markets Fund 75.49% -33.38% -0.40% 0.31% 5/31/1994
U.S. Equity Fund 18.89% 11.85% 33.01% 21.99% 5/31/1994
Bond Fund -0.45% 7.31% 9.35% 6.74% 5/31/1994
Short-Term Fund 4.93% 5.59% 5.30% 5.50% 5/31/1994
</TABLE>
Market and Manager Comparisons. TIP may also, from time to time, compare its
funds' returns and expense ratios to relevant market indices and manager or
mutual fund averages, such as those reported by Morningstar, Lipper Analytical
Services, Valueline, or other similar services.
Determination of Net Asset Value
Business Days. Currently, there are eleven holidays during the year which are
not Business Days: New Year's Day, Martin Luther King's Birthday, Presidents'
Day, Good Friday, Memorial Day, Fourth of July, Labor Day, Columbus Day,
Veterans' Day, Thanksgiving, and Christmas. TIP will not accept purchase or
redemption orders on these holidays.
Equity Funds. The net asset value per share is determined by dividing the total
market value of each fund's investments and other assets, less any liabilities,
by the total outstanding shares of the fund. Net asset value per
54 TIP Statement of Additional Information
<PAGE>
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 such exchange is open for
business.
April 28, 2000 55
<PAGE>
Determination of Net Asset Value continued
Bond and Short-Term Funds. The net asset value per share of each fund is
determined by adding the market values of all the assets of the fund,
subtracting all of the fund's liabilities, dividing by the number of shares
outstanding, and adjusting to the nearest cent. The net asset value is
calculated by TIP's Accounting Agent as of 4:00 p.m. Eastern time on each
Business Day.
Calculating an Individual Security's Value. Securities listed on a US
securities exchange for which market quotations are available are valued at the
last quoted sale price on the day the valuation is made. Price information on
listed securities is taken from the exchange where the securities are primarily
traded. Securities listed on a foreign exchange are valued at the latest quoted
sales price available before the time at which such securities are valued. For
purposes of calculating net asset value per share, all assets and liabilities
initially expressed in foreign currencies (except for the Royal currencies of
the United Kingdom, Ireland, Euros, Australia, and New Zealand) are converted
into US dollars at the bid price of such currencies against US dollars as
provided by an independent pricing supplier. The Royal currencies are converted
at the ask price. All fund securities for which over-the-counter market
quotations are readily available (including asset-backed securities) are valued
at the latest bid price. Deposits and repurchase agreements are valued at their
cost plus accrued interest unless FAI or the Money Manager whose segment of a
fund owns them determines in good faith, under procedures established by and
under the general supervision of TIP's board of directors, that such value does
not approximate the fair value of such assets. Positions (e.g., futures and
options) listed or traded on an exchange are valued at their last sale price on
that exchange or, if there were no sales that day for a particular position, at
the closing bid price. Unlisted securities and listed US securities not traded
on the valuation date for which market quotations are readily available are
valued not exceeding the ask prices nor less than the bid prices. The value of
other assets is determined in good faith by FAI (or the Money Manager whose
segment of the fund owns them) at fair value under procedures established by and
under the general supervision of TIP's board of directors.
Additional Service Providers
Service Provider Selection Criteria. TIP and FAI rely heavily on outside
service providers to perform most functions their directors deem may be
delegated. TIP's fund administrator, custodian, transfer agent, independent
accountant, and legal counsel were selected based on the following criteria:
1. corporate goals and cultures that are consistent with TIP's mission,
2. qualified, well-trained, motivated personnel at all levels of the
organization,
3. a demonstrated commitment to providing high quality services at competitive
prices, and
4. a demonstrated mastery of the regulatory environment in which they and their
clients operate.
Custodian, Fund Accounting Agent, Transfer Agent, Registrar, and Distribution
Disbursing Agent. Investors Bank & Trust Company, 200 Clarendon Street, Boston,
MA 02116, serves as the Custodian of the funds' assets as well as their
accounting agent, transfer agent, registrar, and dividend disbursing agent. As
Custodian, IBT may employ sub-custodians outside the United States which are
approved by TIP's board of directors.
Legal Counsel. Dechert Price & Rhoads, 1775 Eye Street, N.W., Washington, DC
20006-2401, is TIP's legal counsel, for which it is compensated directly by TIP.
Independent Accountants. PricewaterhouseCoopers LLP, 1177 Avenue of the
Americas, New York, NY 10036, serves as TIP's independent auditor. Members
receive semi-annual unaudited financial statements and annual audited financial
statements. Members may also receive additional reports concerning the funds or
their Money Managers from FAI.
56 TIP Statement of Additional Information
<PAGE>
Financial Statements
The funds' audited Financial Statements, including the Financial Highlights, for
the period ended December 31, 1999 appearing in the Annual Report to
Shareholders and the report thereon of PricewaterhouseCoopers LLP, independent
auditors, appearing therein are hereby incorporated by reference in this
Statement of Additional Information. The Annual Report to Shareholders will be
delivered to shareholders upon request.
April 28, 2000 57
<PAGE>
Appendix A
Description of Indices
<PAGE>
Description of Indices
Overview. This Appendix describes the various indices referenced in this
Prospectus and Statement of Additional Information. The indices described below
will be used to gauge the performance of individual Funds and individual Money
Managers, with certain Money Managers' fees tied directly to the Money Managers'
returns relative to the returns produced by their respective indices
(hereinafter referred to as "benchmarks"). The following information with
respect to each index has been supplied by the respective preparer of the index
or has been obtained from other publicly available information.
Explanation of How Indices Will Be Used. The table below denotes the indices
relevant to each Fund and to those Money Managers whose compensation will be
tied to their relative performance. As shown, in some cases the Money Managers
have comparative indices different than the overall benchmark of the Funds that
employ them. In all such cases, however, the securities included in the Money
Managers' benchmarks are subsets of the securities included in the relevant
Fund's performance benchmark. For example, the Lehman Government/Corporate Bond
Index is a subset of the Lehman Aggregate Bond Index.
<TABLE>
<CAPTION>
Fund / Money Manager Index
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
TIFF Multi-Asset Fund Inflation + 5% and Constructed Index (described on pages C-2 - C-3)
Aronson + Partners S&P 500 Index
Canyon Capital Management, LP 91-day Treasury bills plus 5% per annum
Delaware International Advisers Ltd. MSCI EAFE Index
Farallon Capital Management, LLC 91-day Treasury bills plus 5% per annum
Harding, Loevner Management, LP MSCI All Country World Free Index
Lone Pine Capital LLC 91-day Treasury bills plus 5% per annum
Oechsle International Advisors, LLC MSCI All Country World Free ex US Index
Seix Investment Advisors, Inc. Lehman Aggregate Bond Index
Wellington Management Company, LLP 75% Energy sector of MSCI World Stock Index; 20% Metals & Mining
sector of MSCI World Stock Index; 5% Paper & Forest Products sector
of MSCI World Stock Index
TIFF International Equity Fund MSCI All Country World ex US Index
Delaware International Advisers Ltd. MSCI EAFE Index
Everest Capital Inc. MSCI Emerging Markets Free Index
Harding, Loevner Management, LP MSCI All Country World Free ex US Index
Marathon Asset Management, Ltd. MSCI All Country World Free ex US Index
Oechsle International Advisors, LLC MSCI All Country World Free ex US Index
TIFF Emerging Markets Fund MSCI Emerging Markets Free Index
City of London Investment Management Co., Ltd. MSCI Emerging Markets Free Index
Emerging Markets Management MSCI Emerging Markets Free Index
Everest Capital Inc. MSCI Emerging Markets Free Index
Explorador Capital Management, LLC MSCI Emerging Markets Free Index
Lazard Asset Management MSCI Emerging Markets Free Index
<CAPTION>
Table continued on next page
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
Table continued from previous page
Fund / Money Manager Index
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
TIFF U.S. Equity Fund Wilshire 5000 Stock Index
Aronson + Partners - Large Cap S&P 500 Stock Index
Martingale Asset Management, LP Customized for TIFF U.S. Equity Fund
Palo Alto Investors Russell 2000 Stock Index
Shapiro Capital Management Company, Inc. Russell 2000 Index
Westport Asset Management, Inc. Russell 2000 Stock Index
TIFF Bond Fund Lehman Brothers Aggregate Bond Index
Atlantic Asset Management Partners, LLC Lehman Government/Corporate Bond Index
Seix Investment Advisors, Inc. Lehman Government/Corporate Bond Index
Smith Breeden Associates, Inc. Lehman Mortgage Backed Securities Index
TIFF Short-Term Fund Merrill Lynch 182-Day Treasury Bill Index
Fischer Francis Trees & Watts, Inc. Merrill Lynch 182-Day Treasury Bill Index
* TIP employs stock index futures to ensure that assets allocated to this Money Manager's "market neutral" portfolio will
participate fully in general stock market movements.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The intent of performance-based fee arrangements entailing benchmarks that are
narrower than the overall benchmark for the Fund employing such arrangements is
to compensate managers fairly based on their performance relative to benchmarks
that reflect adequately their particular focus and investment disciplines. For
example, although the Bond Fund's overall benchmark is the Lehman Aggregate Bond
Index, the Fund's mortgage-backed securities specialist may invest substantially
all of its segment of the Fund in such securities, and it is both fairer to this
Money Manager and in the Fund's best interests to tie this Money Manager's fees
to its performance relative to the mortgage-backed securities component of the
Lehman Aggregate Bond Index rather than to the entire Index. Although
compensating managers based on their performance relative to performance
benchmarks that are narrower than those of the Funds that employ them may mean
that some managers will receive relatively high fees even if the Funds that
employ them underperform their overall benchmarks, careful structuring of fee
arrangements and careful allocation of assets among Money Managers can reduce
the probabilities that a given Fund will fail to meet its performance objective.
As noted in the section of this Prospectus entitled Investment Objectives,
Policies and Restrictions, each Fund seeks to produce total returns net of all
expenses that exceed those of its performance benchmark.
Explanation of "Capitalization Weighting." Several of the indices described
below are "capitalization weighted." Capitalization weighting is a method of
weighting each component security in an index by its market value (also commonly
referred to as "capitalization") so that it will influence the index in
proportion to its respective size. The price of any stock multiplied by the
number of shares outstanding gives the current market value for that particular
issue. This market value determines the relative importance of the security.
Market values for individual stocks are added together to obtain their group
market value. With respect to fixed income indices, the term "capitalization
weighting" is seldom used, but the method used to prepare such indices resembles
capitalization weighting in the sense that each issue's weighting in the index
reflects the total outstanding market value of that issue as of the measurement
date. This method is sometimes referred to as "market value weighting."
TIFF Multi-Asset Fund Benchmark. The Multi-Asset Fund's primary objective is to
produce an inflation-adjusted return of 5% or more over the long term. To
facilitate assessment of active strategies employed by the Fund, the Fund also
measures its performance against a constructed index comprising 25% Wilshire
5000; 25% MSCI All Country World Free ex US; 20% 3-month Treasury bill plus 5%
per annum; 10% inflation-hedging index; and 20% Lehman Aggregate Bond Index.
The inflation-hedging index has two components: a 5% allocation to
A-2
<PAGE>
resource-related stocks, comprising 75% MSCI Energy, 20% Metals & Mining, and 5%
MSCI Paper & Forest Products, and a 5% allocation to Inflation-Linked Bonds.
Foreign Common Stock Indices
Morgan Stanley Capital International All Country World Free Stock Index. The
MSCI All Country World Free Index is a capitalization-weighted index intended to
portray the total return produced by a representative group of all domestically
listed stocks in each component country. As of December 31, 1999, the MSCI All
Country World Free Index consisted of 2,192 companies traded on stock markets in
47 countries. The weighting of the Index by country is indicated in the exhibit
entitled MSCI Country Weights. Unlike certain other broad-based indices, the
number of stocks included in the MSCI All Country World Free Index is not fixed
and may vary to enable the Index to continue to reflect the primary home markets
of the constituent countries. Changes in the Index will be announced when made.
When available, TIFF uses the "Free" versions of MSCI indices, which means the
specified index is free of foreign ownership limits or legal restrictions at the
security and country level.
MSCI All Country World Free ex US Stock Index. Similar to the MSCI All Country
World Free Stock Index, the MSCI All Country World Free ex US Stock Index is a
capitalization-weighted index intended to portray the total return produced by a
representative group of all domestically listed stocks in each component
country. As of December 31, 1999, the MSCI All Country World Free ex US Index
consisted of 1,868 companies traded on stock markets in 46 countries. The MSCI
All Country World Free ex US is used as the performance benchmark for the
International Equity Fund because, in the opinion of TIP's Directors, it
represents the universe of non-US stocks in which a properly diversified group
of active international equity managers of the type FAI seeks to assemble
invest.
MSCI Europe, Australia and Far East Index (EAFE). The MSCI EAFE Index is
composed of a sample of companies representative of the market structure of 20
European and Pacific Basin countries and 38 industries worldwide. As of
December 31, 1999, the EAFE Index comprised 967 companies, and represented
approximately 87% of the MSCI All Country World Free ex US Index.
MSCI Emerging Markets Free Index. The MSCI Emerging Markets Free Index is a
market capitalization weighted stock index composed of a sample of companies
representative of the market structure of Asian, Latin American, and European
emerging markets which are open to foreign investment. The Index commenced on
January 1, 1988, and includes 25 countries, representing approximately 60% of
the capitalization of each underlying market. As of December 31, 1999, the
Index comprised 828 companies, and represented approximately 9.5% of the MSCI
All Country World Free ex US Index.
US Common Stock Indices
Russell 2000 Stock Index. The Russell 2000 Stock Index is a capitalization-
weighted index that consists of the smallest 2,000 companies in the Russell 3000
Index, which is composed of 3,000 large US companies, as determined by market
capitalization. The Russell 3000 Index represents approximately 98% of the
investable US equity market. The companies in the Russell 2000 Index represent
approximately 8% of the Russell 3000 Index total market capitalization, with an
average capitalization of $526 million as of the latest reconstitution. The
largest company in the index had an approximate market capitalization of $1.3
billion. The market capitalization of each security is adjusted for private
holdings and cross-ownership to determine its weight in the Index. This method
counts only the "investable" portion of the universe, i.e., that segment in
A-3
<PAGE>
which investors can freely transact shares. Only common stocks belonging to
corporations domiciled in the US and its territories are eligible for inclusion
in the Russell indices.
S&P 500 Stock Index. The S&P 500 Stock Index is a capitalization-weighted index
intended to portray the total return produced by a representative group of US
common stocks. Construction of the index proceeds from industry groups to the
whole. Currently there are four groups: 400 Industrials, 40 Utilities, 20
Transportation, and 40 Financial. Since some industries are characterized by
companies of relatively small stock capitalization, the index does not comprise
the 500 largest US publicly traded companies. Component stocks are chosen
solely with the aim of achieving a distribution by broad industry groupings that
approximates the distribution of these groupings in the New York Stock Exchange
common stock population, taken as the assumed model for the composition of the
total market. Each stock added to the index must represent a viable enterprise
and must be representative of the industry group to which it is assigned. lts
market price movements must, in general, be responsive to changes in industry
affairs. The formula adopted by Standard & Poors is generally defined as a
"base-weighted aggregate" expressed in relatives with the average value for the
base period (1941-43) equal to 10. These group values are expressed as a
relative, or index number, to the base period (1941-43) market value.
Wilshire 5000 Stock Index. The Wilshire 5000 Stock Index is a capitalization-
weighted index which consists of all US common stocks that trade on a regular
basis on either the New York or American Stock Exchange or on the Nasdaq over-
the-counter market. More than 7,000 stocks are included in the Wilshire 5000
Index. These stocks include the large-capitalization stocks that comprise the
S&P 500 Index (with the exception of Royal Dutch and Unilever, N.V., which trade
on the New York Stock Exchange as ADRs) as well as the medium- and small-
capitalization companies that comprise the Wilshire 4500 Index. The Wilshire
5000 is used as the performance benchmark for the U.S. Equity Fund because, in
the opinion of TIP's Directors, it represents the universe of stocks in which
most active domestic equity managers invest and is representative of the
performance of publicly traded domestic equities most institutional investors
purchase. The capitalization of the Index is approximately 63% NYSE, 1% AMEX,
and 36% Nasdaq.
Bond Indices
Lehman Brothers Aggregate Bond Index. This Index measures the total investment
return (capital change plus income) provided by a universe of fixed income
securities, weighted by the market value outstanding of each security. The
Index encompasses four classes of investment grade fixed income securities in
the United States: US Treasury and agency securities, corporate debt
obligations, mortgage-backed securities, and asset-backed securities. As of
December 31, 1999, these four classes represented the following proportions of
the Index's total market value:
US Treasury and Agency Securities 42%
Corporate Debt Securities 22%
Mortgage-Backed Securities 34%
Asset-Backed Securities 1%
Commercial Mortgage-Backed Securities 1%
As of December 31, 1999, approximately 5,500 issues (including bonds, notes,
debentures, and mortgage issues) were included in the Index, representing more
than $5.4 trillion in market value. The securities included in the Index
generally meet the following criteria, as defined by Lehman Brothers: an
effective maturity of not less than one year; an outstanding market value of at
least $100 million for US Government issues and $25 million for all other
issues; and investment grade quality -- i.e., rated a minimum of Baa by Moody's
Investors Service, Inc. or rated a minimum BBB by Standard & Poors Corporation.
Price, coupon, and total return are
A-4
<PAGE>
reported for all sectors on a month-end to month-end basis. All returns are
market value weighted inclusive of accrued interest.
On December 31, 1999, the Index's effective weighted average maturity and
duration were 8.86 years and 4.92 years, respectively, and the weighted average
quality of issues comprising the Index was Aaa1 (using credit ratings of Moody's
Investor Service, Inc.).
Lehman Brothers Government/Corporate Index. This Index, a subset representing
approximately 63% of the Lehman Brothers Aggregate Bond Index, comprises the
Government and Corporate Bond Indices. The Government Bond Index comprises (1)
all public obligations of the US Treasury, excluding flower bonds and foreign
targeted issues, (2) all publicly issued debt of US Government agencies and
quasi-federal corporations, and (3) corporate debt guaranteed by the US
Government. The Corporate Bond Index includes (1) all publicly issued, fixed-
rate, non-convertible investment grade domestic corporate debt, and (2) Yankee
bonds, which are dollar-denominated SEC registered public, non-convertible debt
issued or guaranteed by foreign sovereign governments, municipalities or
governmental agencies, or international agencies.
Lehman Brothers Mortgage-Backed Securities Index. This Index is also a subset
of the Lehman Brothers Aggregate Bond Index, representing approximately 34% of
the Aggregate Index. This Index comprises all fixed-rate securities backed by
mortgage pools of the GNMA, FHLMC, and FNMA. Graduated Payment Mortgages (GPMs)
are included, but Graduated Equity Mortgages (GEMs) are not included.
A-5
<PAGE>
Short-Term Indices
Merrill Lynch 91-day Treasury Bill Index. The Merrill Lynch 91-Day Treasury
Bill Index is a 3-month constant maturity total rate of return index. This
calculation includes a daily mark-to-market of the portfolio, and upon the
issuance of a "new" Treasury bill, the "old" Treasury bill is sold and the gain
or loss is included in the portfolio return.
Merrill Lynch 182-day Treasury Bill Index. The Merrill Lynch 182-Day Treasury
Bill Index is a 6-month constant maturity total rate of return index. This
calculation includes a daily mark-to-market of the portfolio, and upon the
issuance of a "new" Treasury bill, the "old" Treasury bill is sold and the gain
or loss is included in the portfolio return.
A-6
<PAGE>
MSCI Country Weights
As of December 31, 1999
<TABLE>
<CAPTION>
MSCI MSCI MSCI
All Country All Country MSCI Emerging
Index: World Free World Free ex US EAFE Markets Free
Benchmark for: Certain MAF TIFF International Certain IEF TIFF Emerging
Managers Equity Fund Managers Markets Fund
<S> <C> <C> <C> <C>
Europe 30.9% 57.7% 66.6%
Austria 0.1% 0.2% 0.2%
Belgium 0.4% 0.8% 0.9%
Denmark 0.4% 0.7% 0.8%
Finland 1.4% 2.6% 3.0%
France 4.8% 8.9% 10.3%
Germany 4.9% 9.1% 10.5%
Ireland 0.2% 0.4% 0.4%
Italy 2.0% 3.7% 4.2%
Netherlands 2.4% 4.5% 5.2%
Norway 0.2% 0.3% 0.4%
Portugal 0.2% 0.4% 0.5%
Spain 1.2% 2.3% 2.7%
Sweden 1.2% 2.3% 2.7%
Switzerland 2.6% 4.9% 5.7%
United Kingdom 8.9% 16.6% 19.2%
Pacific 15.5% 29.0% 33.4%
Australia 1.1% 2.1% 2.5%
Hong Kong 1.1% 2.0% 2.3%
Japan 12.7% 23.8% 27.4%
New Zealand 0.1% 0.1% 0.2%
Singapore Free 0.5% 0.9% 1.1%
North America 48.5% 3.8%
Canada 2.0% 3.8%
United States 46.5%
Emerging Markets 5.1% 9.5% 100.0%
Argentina 0.1% 0.2% 2.1%
Brazil Free 0.5% 0.9% 9.9%
Chile 0.2% 0.3% 3.5%
China Free 0.0% 0.0% 0.4%
Colombia 0.0% 0.0% 0.4%
Czech Republic 0.0% 0.1% 0.6%
Greece 0.3% 0.6% 6.5%
Hungary 0.1% 0.1% 1.2%
India 0.4% 0.8% 8.4%
Indonesia Free 0.1% 0.2% 1.7%
Israel 0.2% 0.4% 4.1%
Jordan 0.0% 0.0% 0.1%
Korea 0.7% 1.3% 13.9%
Malaysia
Mexico
Mexico Free 0.6% 1.1% 11.6%
Pakistan 0.0% 0.0% 0.4%
Peru 0.0% 0.1% 0.7%
Philippines Free
Philippines Free 0.1% 0.1% 1.2%
Poland 0.1% 0.1% 1.3%
Russia 0.1% 0.2% 2.5%
South Africa 0.5% 1.0% 10.8%
Sri Lanka 0.0% 0.0% 0.0%
Taiwan 0.6% 1.0% 11.0%
Thailand Free 0.2% 0.3% 3.0%
Turkey 0.2% 0.4% 4.1%
Venezuela 0.0% 0.1% 0.6%
Total 100.0% 100.0% 100.0% 100.0%
</TABLE>
* Taiwan is included in the Emerging Markets Free, the ACWF, and the ACWFxUS
Indices at 50% of its market capitalization.
Source: Morgan Stanley Capital International Perspective, December 1999.
Note: Numbers may not add to totals due to rounding.
A-7
<PAGE>
Appendix B
Quality Rating Descriptions
<PAGE>
Quality Rating Descriptions
Standard & Poors Corporation
AAA. Bonds rated AAA are highest grade debt obligations. This rating indicates
an extremely strong capacity to pay principal and interest.
AA. Bonds rated AA also qualify as high-quality obligations. Their capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only by a small degree.
A. Bonds rated A have a strong capacity to pay principal and interest, although
they are more susceptible to the adverse effects of changes in circumstances and
economic conditions.
BBB. Bonds rated BBB are regarded as having adequate capacity to pay interest
or principal. Although these bonds normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and principal.
BB and Lower. Bonds rated BB, B, CCC, CC, and C are regarded, on balance, as
predominately speculative with respect to the issuer's capacity to pay interest
and principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While
such bonds may have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
The ratings AA to C may be modified by the addition of a plus or minus sign to
show relative standing within the major rating categories. Municipal notes
issued since July 29, 1984 are designated "SP-1," "SP-2," or "SP-3." The
designation SP-1 indicates a very strong capacity to pay principal and interest.
A plus sign is added to those issues determined to possess overwhelming safety
characteristics.
A-1. Standard & Poors Commercial Paper ratings are current assessments of the
likelihood of timely payments of debts having original maturity of no more than
365 days. The A-1 designation indicates that the degree of safety regarding
timely payment is very strong.
A-2. The capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1.
Moody's Investors Service, Inc.
Aaa. Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or exceptionally stable margin and
principal is secure. While the various protective elements are likely to
change, foreseeable changes are most unlikely to impair the fundamentally strong
position of such issues.
Aa. Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group, they comprise what are generally known as high grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in Aaa securities, or because fluctuations of protective elements
may be of greater amplitude, or because there may be other elements present that
make the long-term risks appear somewhat larger than the Aaa securities.
A. Bonds rated A possess many favorable investment attributes and may be
considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present that
suggest a susceptibility to impairment sometime in the future.
B-1
<PAGE>
Baa. Baa rated bonds are considered medium-grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present, but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba. Bonds which are rated Ba are judged to have speculative elements because
their future cannot be considered as well assured. Uncertainty of position
characterizes bonds in this class, because the protection of interest and
principal payments may be very moderate and not well safeguarded.
B and Lower. Bonds which are rated B generally lack characteristics of a
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the security over any long period of time may be
small. Bonds which are rated Caa are of poor standing. Such securities may be
in default of there may be present elements of danger with respect to principal
or interest. Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings. Bonds which are rated C are the lowest rated class of
bonds and issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Moody's applies the numerical modifiers 1, 2, and 3 in each generic rating
classification from Aa through C in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
Moody's ratings for state, municipal and other short-term obligations are
designated Moody's Investment Grade ("MIG"). This distinction is in recognition
of the differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower are uppermost in importance in short-
term borrowing, while various factors of great importance in long-term borrowing
risk are of lesser importance in the short run.
MIG-1. Notes bearing this designation are of the best quality, enjoying strong
protection, whether from established cash flows of funds for their servicing or
from established and broad-based access to the market for refinancing, or both.
MIG-2. Notes bearing this designation are of favorable quality, with all
security elements accounted for, but lacking the undeniable strength of the
previous grade. Market access for refinancing, in particular, is likely to be
less well established.
P-1. Moody's Commercial Paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months. The designation "Prime-1" or "P-1" indicates the highest
quality repayment capacity of the rated issue.
P-2. Issuers have a strong capacity for repayment of short-term promissory
obligations.
Thomson Bankwatch, Inc.
A. The company issuing the debt obligation possesses an exceptionally strong
balance sheet and earnings record, translating into an excellent reputation and
unquestioned access to its natural money markets. If weakness or vulnerability
exists in any aspect of the company's business, it is entirely mitigated by the
strengths of the organization.
A/B. The company issuing the debt obligation is very solid financially with a
favorable track record and no readily apparent weakness. Its overall risk
profile, while low, is not quite as favorable as that of companies in the
highest rating category.
IBCA Limited
B-2
<PAGE>
A1. Short-term obligations rated A1 are supported by a very strong capacity for
timely repayment. A plus sign is added to those issues determined to possess
the highest capacity for timely payment.
B-3
<PAGE>
Inquiries
Requests for the Prospectus, SAI, and Annual or Semi-Annual
Reports as well as other inquiries concerning TIP may be made
by contacting FAI at:
Foundation Advisers, Inc.
2405 Ivy Road
Charlottesville, VA 22903
Phone: 804-817-8200
Fax: 804-817-8231
E-mail: [email protected]
Website: www.tiff.org
58 TIP Statement of Additional Information
<PAGE>
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 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).
1
<PAGE>
(d7) 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).
(d8) 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).
(d9) 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).
(d10) 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).
(d11) 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).
(d12) 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).
(d13) 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).
(d14) 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).
(d15) 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).
(d16) 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).
2
<PAGE>
(d17) 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).
(d18) 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).
(d19) 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).
(d20) 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).
(d21) 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).
(d22) 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).
(d23) 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).
(d24) 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).
(d25) Money Manager Agreement, dated July 1, 1997, between the
3
<PAGE>
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).
(d26) Money Manager Agreement, dated December 24, 1998, between
the Registrant (TIFF U.S. Equity Fund) and Aronson +
Partners (previously filed as Exhibit (d)(52) to Post-
Effective Amendment No. 8 to Registrant's Registration
Statement on Form N1-A).
(d27) Money Manager Agreement, dated September , 1998, between the
Registrant (TIFF U.S. Equity Fund and TIFF Multi-Asset Fund)
and Martingale Asset Management, L.P., (previously filed as
Exhibit (d)(54) to Post-Effective Amendment No. 8 to
Registrant's Registration Statement on Form N1-A).
(d28) Money Manager Agreement, dated January 4, 2000, between the
Registrant (TIFF U.S. Equity Fund and TIFF Multi-Asset Fund)
and Oechsle International Advisors, LLC. is filed herein.
(e) Distribution Agreement, dated January 1, 2000, between
Registrant, First Fund Distributors, Inc. and Investors Bank
& Trust is filed herein.
(f) Not Applicable.
(g) Custodian Agreement, dated February 10, 1994, between the
Registrant and Investors Bank & Trust Company. (previously
filed as Exhibit No. (8) to Pre-Effective Amendment No. 3 to
Registrant's Registration Statement on N-1A).
(g1) Amendment No. 1 to the Amended and Restated Custodian
Agreement between TIFF Investment Program, Inc. and
Investors Bank & Trust Company dated March 14, 1997
(previously filed as Exhibit (8a) to Post-Effective
Amendment No. 6 to Registrant's Registration Statement on
Form N1-A).
(g2) Delegation Agreement, dated May 12, 1998 between the
Registrant and Investors Bank & Trust Company(previously
filed as Exhibit (g)(2) to Post-Effective Amendment No. 8 to
Registrant's Registration Statement on Form N1-A).
(g3) Amendment to Custodian Agreement, between the Registrant and
Investors Bank & Trust Company dated May 29, 1998
(previously filed as Exhibit (g)(3) to Post-Effective
Amendment No. 8 to Registrant's Registration Statement on
Form N1-A).
(h) Transfer Agency and Service Agreement, dated February 10,
1994, between the Registrant and Investors Bank & Trust
Company. (previously filed as Exhibit No. (9a) to Pre-
Effective Amendment No. 3 to Registrant's Registration
Statement on N-1A).
4
<PAGE>
(h1) Administration Agreement, dated May 29, 1998, between the
Registrant and Investors Capital Services, Inc., (previously
filed as Exhibit (h)(3) to Post-Effective Amendment No. 8 to
Registrant's Registration Statement on Form N1-A).
(h2) Code of Ethics of TIFF Investment Program, Inc. and
Foundation Advisers, Inc. is filed herein.
(h3) Code of Ethics of Aronson + Partners is filed herein.
(h4) Code of Ethics of Atlantic Asset Management, LLC is filed
herein.
(h5) Code of Ethics of Delaware International Advisers Ltd. is
filed herein.
(h6) Code of Ethics of Emerging Markets Management, LLC is filed
herein.
(h7) Code of Ethics of Fischer Francis Trees & Watts, Inc. is
filed herein.
(h8) Code of Ethics of Harding, Loevner Management, LP is filed
herein.
(h9) Code of Ethics of Lazard Asset Management is filed herein.
(h10) Code of Ethics of Marathon Asset Management, Ltd. is filed
herein.
(h11) Code of Ethics of Martingale Asset Management, L.P. is
filed herein.
(h12) Code of Ethics of Oechsle International Advisors, LLC is
filed herein.
(h13) Code of Ethics of Palo Alto Investors is filed herein.
(h14) Code of Ethics of Seix Investment Advisors, Inc. is filed
herein.
(h15) Code of Ethics of Shapiro Capital Management Co., Inc. is
filed herein.
(h16) Code of Ethics of Smith Breeden Associates, Inc. is filed
herein.
(h17) Code of Ethics of Wellington Management Company, LLP is
filed herein.
(h18) Code of Ethics of Westport Asset Management, Inc. is filed
herein.
(i) Opinion and Consent of Counsel. (previously filed as Exhibit
No. (10) to Pre-Effective Amendment No. 3 to Registrant's
Registration Statement on N-1A).
(j) Consent of the Independent Auditor is filed herein.
(k) Not Applicable.
5
<PAGE>
(l) Purchase Agreement, dated March 29, 1994, for Initial
Capital between Registrant and The John D. and Catherine T.
MacArthur Foundation. (previously filed as Exhibit No. (13)
to Pre-Effective Amendment No. 3 to Registrant's
Registration Statement on N-1A).
(m) Not Applicable.
(n) Not Applicable.
(o) 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.
- ----------------------------------------------------
6
<PAGE>
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, First Fund Distributors, Inc. currently acts
as distributor to the following funds:
Advisors Series Trust
Brandes Investment Funds
Fleming Capital Mutual Fund Group, Inc.
Fremont Mutual Funds, Inc.
Guiness Flight Investment Funds
Jurika & Voyles Fund Group
Kayne Anderson Mutual Funds
Masters' Select Investment Trust
O'Shaughnessy Funds, Inc.
PIC Investment Trust
Professionally Managed Portfolios
Puget Sound Alternative Investment Series Trust
The Purisima Funds
Rainier Investment Management Mutual Funds
RNC Mutual Fund Group, Inc.
(b) For each Director or officer of First Fund Distributors, Inc.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Name and Principal Positions & Offices with Positions & Offices
Business Address Distributor with Registrant
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Robert H. Wadsworth President & Treasurer None
4455 Camelback Road
Suite 261-E
Phoenix, AZ 85018
- ------------------------------------------------------------------------------------------
Steven J. Pagglioli Vice President & Secretary None
4455 Camelback Road
Suite 261-E
Phoenix, AZ 85018
- ------------------------------------------------------------------------------------------
Eric M. Banhazl Vice President None
4455 Camelback Road
Suite 261-E
Phoenix, AZ 85018
- ------------------------------------------------------------------------------------------
</TABLE>
(c) Not applicable.
7
<PAGE>
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
8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirement for effectiveness of this registration statement under rule 485(b)
under the Securities Act of 1933 and has duly caused this registration statement
to be signed on its behalf by the undersigned, duly authorized, in the City of
Charlottesville and the Commonwealth of Virginia on the 28th day of April, 2000.
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 * /s/ William F. Nichols
- -------------------------------------- --------------------------------------
David A. Salem, President and Director William F. Nichols, Director
/s/ Esther Cash * /s/ Sheryl L. Johns
- -------------------------------------- --------------------------------------
Esther Cash, Principal Financial Officer Sheryl L. Johns, Director
*/s/ John E. Craig * /s/ Fred B. Renwick
- -------------------------------------- --------------------------------------
John E. Craig, Director Fred B. Renwick, Director
*By: * /s/ Esther Cash
-----------------------------
Esther Cash, Attorney-in-Fact
Date: April 28, 2000
--------------
9
<PAGE>
EXHIBIT INDEX
Exhibit No.
- -----------
(d28) Money Manager Agreement, dated January 4, 2000, between the
Registrant (TIFF U.S. Equity Fund and TIFF Multi-Asset Fund) and
Oechsle International Advisors, LLC.
(e3) Distribution Agreement, dated January 1, 2000, between Registrant
and First Fund Distributors, Inc.
(h2) Code of Ethics of TIFF Investment Program, Inc. and Foundation
Advisers, Inc.
(h3) Code of Ethics of Aronson + Partners
(h4) Code of Ethics of Atlantic Asset Management, LLC
(h5) Code of Ethics of Delaware International Advisers Ltd.
(h6) Code of Ethics of Emerging Markets Management, LLC
(h7) Code of Ethics of Fischer Francis Trees & Watts, Inc.
(h8) Code of Ethics of Harding, Loevner Management, LP
(h9) Code of Ethics of Lazard Asset Management
(h10) Code of Ethics of Marathon Asset Management, Ltd.
(h11) Code of Ethics of Martingale Asset Management, L.P.
(h12) Code of Ethics of Oechsle International Advisors, LLC
(h13) Code of Ethics of Palo Alto Investors
(h14) Code of Ethics of Seix Investment Advisors, Inc.
(h15) Code of Ethics of Shapiro Capital Management Co., Inc.
(h16) Code of Ethics of Smith Breeden Associates, Inc.
(h17) Code of Ethics of Wellington Management Company, LLP
(h18) Code of Ethics of Westport Asset Management, Inc.
(j) Consent of the Independent Auditors
10
<PAGE>
Money Manager Agreement
This Agreement is between the TIFF Investment Program, Inc. ("TIP"), a
Maryland Corporation, for its TIFF International 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 Oechsle
International Advisors, L.L.C. (hereafter, the "Manager") and is effective as of
January 4, 2000 (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 grant the Manager authority to:
<PAGE>
(i) Acquire (by purchase, exchange, subscription, or
otherwise), hold and dispose (by sale, exchange or
otherwise) investments and other investments;
(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 full 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 reasonably
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
2
<PAGE>
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 shall only 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.
(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.
3
<PAGE>
(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 weekly 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
4
<PAGE>
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. Soft Dollar Arrangements
Brokers or dealers may be selected who provide brokerage and/or research
services to the Managed Assets and/or other accounts over which the Manager or
its affiliates exercise investment discretion. Brokers or dealers who execute
portfolio transactions on behalf of the Managed Assets may receive commissions,
which are in excess of the amount of commissions, which other brokers or dealers
would have charged for effecting such transactions. In order to cause the
Managed Assets to pay such higher commissions, the Manager must determine in
good faith that such commissions are reasonable in relation to the value of the
brokerage and/or research services provided by such executing brokers or dealers
viewed in terms of a particular transaction or the Manager's overall
responsibilities to the Managed Assets and the accounts of its other advisory
clients. The Manager understands that TIP is not responsible for any violations
of the rules and regulations associated with soft dollar arrangements by the
Manager.
8. 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.
9. 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.
10. Representations
5
<PAGE>
(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.
11. 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).
12. 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.
13. Notices
6
<PAGE>
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 Oechsle International Advisors, L.L.C.
Manager: One International Place
Boston, MA 02110
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.
TIFF Investment Program, Inc. Oechsle International Advisors, L.L.C.
By: /s/ Esther Cash By: /s/ S. Dewey Keesler
--------------- --------------------
Title: Vice President Title: Managing Director
7
<PAGE>
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:
TIFF Multi-Asset Fund
Fee = 40+ [ 0.1 x (Excess Return - 200)]; subject to Floor of 20
b.p., Cap of 60 b.p.
TIFF International Equity Fund
Fee = 60 + [ 0.133 x (Excess Return - 300)]; subject to Floor of 20
b.p., Cap of 100 b.p.
The performance fee for each of the Funds shall be computed separately, each 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 Funds' assets
allocated to Manager.
"Minimum Fee" shall mean, with respect to any full calendar month, the
result obtained by multiplying the average daily value of the net assets (gross
of expenses) of Managed Assets during such month by 1/12th of the "floor rate"
set forth in this Agreement.
"Performance Adjusted Fee," with respect to a calendar month subsequent
to the Transitional Period, shall mean the result obtained by multiplying the
average daily value of the net assets of the Managed Assets during the
performance measurement period by 1/12th of the Performance Fee Rate determined
in accordance with the formula set forth above where the performance measurement
period is the one-year period beginning on the first day of the thirteenth month
prior to such month and ending on the last day of the second month prior to such
month.
8
<PAGE>
"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 Fund 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 Funds 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 Funds on or about the tenth day of the month following the month in which
the Manager ceased to render services hereunder.
9
<PAGE>
DISTRIBUTION AGREEMENT
This Agreement made as of the 1st day of January, 2000 by and among
TIFF INVESTMENT PROGRAM, INC. a Maryland corporation (the "Fund"), INVESTORS
BANK & TRUST COMPANY, a Massachusetts Trust Company (the "Bank") and FIRST
FUND DISTRIBUTORS, INC., a Delaware corporation (the "Distributor").
W I T N E S S E T H:
-------------------
WHEREAS, the Fund is registered as an open-end management
investment company under the Investment Company Act of 1940 (the "1940 Act");
and it is in the interest of the Fund to offer its shares for sale
continuously;
WHEREAS, the Fund offers six series of shares of common stock and
may offer additional series in the future (each, a "series" and collectively,
the "series"), which will have been registered under the Securities Act of
1933 (the "1933 Act");
WHEREAS, the Bank is an affiliate of the Fund's Administrator;
WHEREAS, the Distributor is registered as a broker-dealer under the
Securities Exchange Act of 1934 (the "1934 Act") and is a member in good
standing of the National Association of Securities Dealers, Inc. (the
"NASD"); and
WHEREAS, the Fund, the Bank and the Distributor wish to enter into
an agreement with each other with respect to the continuous offering of the
shares of each existing and future series (the "Shares") of the Fund;
NOW, THEREFORE, the parties agree as follows:
1. Appointment of Distributor. The Fund hereby appoints the
--------------------------
Distributor as exclusive agent to sell and to arrange for the sale of the
Shares, on the terms and for the period set forth in this Agreement, and the
Distributor hereby accepts such appointment and agrees to act hereunder directly
and/or through the Fund's transfer agent in the manner set forth in the
Prospectuses (as defined below). This appointment applies to each existing
series of Shares as well as any future series, provided that (i) the Fund does
not object to the Distributor in writing on any basis and (ii) the Distributor
does not object to the Fund and the Bank in writing on the basis of the
capabilities of the Distributor. In return for the services to be performed by
the Distributor hereunder, the Distributor shall be paid in the manner agreed to
by the parties hereto. It is understood and agreed that the services of the
Distributor hereunder are not exclusive, and the Distributor may act as
principal underwriter for the shares of any other registered investment company.
<PAGE>
2. Services and Duties of the Distributor.
---------------------------------------
(a) The Distributor agrees to sell the Shares, as agent for
the Fund, from time to time during the term of this Agreement upon the terms
described in a Prospectus. As used in this Agreement, the term "Prospectus"
shall mean a prospectus and statement of additional information included as part
of the Fund's Registration Statement, as such prospectus and statement of
additional information may be amended or supplemented from time to time, and the
term "Registration Statement" shall mean the Registration Statement filed from
time to time by the Fund with the Securities and Exchange Commission ("SEC") and
currently effective under the 1933 Act and the 1940 Act, as such Registration
Statement is amended by any amendments thereto at the time in effect. The
Distributor shall not be obligated to sell any certain number of Shares.
(b) Upon commencement of operations of any series, the
Distributor will hold itself available to receive orders, satisfactory to the
Distributor, for the purchase of the Shares and will accept such orders and will
transmit such orders and funds received by it in payment for such Shares as are
s accepted to the Fund's transfer agent or custodian, as appropriate, as
promptly as practicable. Purchase orders shall be deemed accepted and shall be
effective at the time and in the manner set forth in the series' Prospectuses.
The Distributor shall not make any short sales of Shares.
(c) The offering price of the Shares shall be the net asset
value per tare of the Shares, plus the sales charge, if any (determined as set
forth in the Prospectuses). The Fund shall furnish the Distributor, with all
possible promptness, an advice of each computation of net asset value and
offering price.
(d) The Distributor shall have the right, with the prior
written agreement of the Fund, to enter into selected dealer agreements with
securities dealers of its choice ("selected dealers") for the sale of Shares.
Shares sold to selected dealers shall be for resale by such dealers only at the
offering price of the Shares as set forth in the Prospectuses. The Distributor
shall offer and sell Shares only to such selected dealers as are members in good
standing of the NASD, unless such dealers are not eligible for membership in the
NASD.
3. Representations and Warranties of the Distributor.
-------------------------------------------------
(a) The Distributor is a corporation duly organized, validly
existing and in good standing under the laws of the state of Delaware awl has
full power and authority, corporate and otherwise, to consummate the
transactions contemplated by this Agreement. The Distributor is duly qualified
to carry out its business, and is in good standing, in any state where such
qualification is required for the Distributor to carry out its duties under this
Agreement.
<PAGE>
(b) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will violate any
provision of the Certificate of lncorporation or By-Laws of the Distributor.
(c) The Distributor is registered as a broker-dealer under the
1934 Act and is a member of the NASD.
4. Duties of the Fund.
------------------
(a) Maintenance of Federal Registration. The Fund shall, at
-----------------------------------
its expense, take, from time to time, all necessary action and such steps,
including payment of the related filing fees, as may be necessary to register
and maintain registration of a sufficient number of Shares under the 1933 Act.
The Fund agrees to file from time to time such amendments, reports and other
documents as maybe necessary in order that there maybe no untrue statement of a
material fact in a Registration Statement or Prospectus, or necessary in order
that there may be no omission to state a material fact in the Registration
Statement or Prospectus which omission would make the statements therein
misleading.
(b) Maintenance of "Blue Sky" Qualifications. The Fund shall,
----------------------------------------
at its expense, use its best efforts to qualify and maintain the qualification
of an appropriate number of Shares for sale under the securities laws of such
states as the Distributor and the Fund may approve, and, if necessary or
appropriate in connection therewith, to qualify and maintain the qualification
of the Fund or the series as a broker or dealer in such states; provided that
the Fund shall not be required to amend its Articles of Incorporation or By-Laws
to comply with the laws of any state, to maintain an office in any state, to
change the terms of the offering of the Shares in any state from the terms set
forth in the Prospectuses, to qualify as a foreign Fund in any state or to
consent to service of process in any state other than with respect to claims
arising out of the offering and sale of the Shares. The Distributor shall
furnish such information and other material relating to its affairs and
activities as may be reasonably required by the Fund or its series in connection
with such qualifications.
(c) Copies of Reports and Prospectuses. The Fund shall, at its
----------------------------------
expense, keep the Distributor fully informed with regard to its affairs and in
connection therewith shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of Shares, including such
reasonable number of copies of Prospectuses and annual and interim reports as
the Distributor may request and shall cooperate fully in the efforts of the
Distributor to sell and arrange for the sale of the Shares and in the
performance of the Distributor under this Agreement.
5. Expenses. Expenses connected with the Fund shall be allocable
--------
between the Fund and the Distributor as follows:
(a) The Distributor shall furnish, at its expense and without
cost to
<PAGE>
the Fund, the services of personnel to the extent that such services are
required to carry out its obligations under this Agreement.
(b) The Fund assumes and shall pay or cause to be paid all
other expenses of the Fund, including, without limitation: the fees of the
Fund's investment adviser; the charges and expenses of any registrar, any
custodian or depository appointed by the Fund for the safekeeping of its cash,
portfolio securities and other property, and any stock transfer, dividend or
accounting agent or agents appointed by the Fund; the fees of any Fund
administrator; brokers' commissions chargeable to the Fund in connection with
portfolio securities transactions to which the Fund is a party, any fee paid
pursuant to any distribution plan, if and when adopted by the Fund pursuant to
Rule 12b-1 under the 1940 Act; all taxes, including securities issuance and
initial transfer taxes, and corporate fees payable by the Fund to federal, state
or other governmental agencies; all costs and expenses in connection with the
organization of the Fund and the series and the registration of the Shares with
the SEC and under state securities laws and in connection with maintenance of
registration of the Fund, series and the Shares with the SEC and various states
and other jurisdictions (including filing fees and legal fees and disbursements
of counsel); the expenses of printing, including printing setup charges, and
distributing Prospectuses of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and Directors' meetings and of
preparing, printing and mailing of proxy statements and reports to shareholders;
fees and travel expenses of Directors who are not interested persons (as such
term is defined in the 1940 Act) of the Fund ("Non-Interested Directors") or
members of any advisory board or committee established by the Non-Interested
Directors; all expenses incident to the payment of any dividend, distribution,
withdrawal or redemption, whether in Shares or in cash; charges and expenses of
any outside service used for pricing of the Fund's Shares; charges and expenses
of legal counsel to the Fund and to the Non-Interested Directors, and of
independent accountants to the Fund, in connection with any mailer relating to
the Fund; membership dues paid by the Fund to industry associations; interest
payable on Fund borrowings; postage; insurance premiums on property or personnel
(including officers and directors) of the Fund which inure to its benefit;
extraordinary expenses of the Fund (including, but not limited to, legal claims
and liabilities and litigation costs and any indemnification related thereto);
and all other charges and costs of the Fund's operation unless otherwise.
6. Conformity with Applicable Law and Rules. The Distributor agrees
----------------------------------------
that in selling Shares hereunder it shall conform in all respects with the laws
of the United States and of any state in which Shares maybe offered, and with
applicable rules and regulations of the NASD.
7. Independent Contractor. In performing its duties hereunder, the
----------------------
Distributor shall be an independent contractor and neither the Distributor, nor
any of its officers, directors, employees, or representatives is or shall be an
employee of the Fund in the performance of the Distributor's duties hereunder.
The Distributor shall be responsible for its own conduct and the employment,
control, and conduct of its agents and employees and for injury to such agents
or employees or to others through its agents or employees. The
<PAGE>
Distributor assumes full responsibility for its agents and employees under
applicable statutes and agrees to pay all employee taxes thereunder.
8. Indemnification.
---------------
(a) Indemnification of Fund. The Distributor agrees to
-----------------------
indemnify and hold harmless the Fund and each of its present or former
Directors, officers, employees, representatives and each person, if any, who
controls or previously controlled the Fund within the meaning of Section 15 of
the 1933 Act against any and all losses, liabilities, damages, claims or
expenses (including the reasonable costs of investigating or defending any
alleged loss, liability, damage, claims or expense and reasonable legal counsel
fees incurred in connection therewith) to which the Fund or any such person may
become subject under the 1933 Act, under any other statute, at common law, or
otherwise, arising out of the acquisition of any Shares by any person which (i)
may be based upon any wrongful act by the Distributor or any of the
Distributor's directors, officers, employees or representatives (including,
without limiting the forgoing, any wrongful or unauthorized sales activities of
the Distributor or any of its registered representatives, as defined under the
By-Laws of the NASD, including any failure to conform with any requirement of
any state or federal law relating to the sale of Shares), or (ii) may be based
upon any untrue statement or alleged untrue statement of a material fact
contained in a Registration Statement, Prospectus, shareholder report or other
information covering Shares filed or made public by the Fund or any amendment
thereof or supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading if such statement or omission was made in
reliance upon and in conformity with information furnished to the Fund by the
Distributor. The Distributor shall also indemnify and hold harmless the Fund,
its officers and directors and control persons from any liability to the Fund or
to the holders of Shares by reason of the Distributor's willful misfeasance, bad
faith or gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under this Agreement. In no
case (i) is the Distributor's indemnity in favor of the Fund, or any person
indemnified to be deemed to protect the Fund or such indemnified person against
any liability to which the Fund or such person would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence in the performance
of the Fund's or such person's duties or by reason of reckless disregard of the
Fund's or such person's obligations and duties under this Agreement or (ii) is
the Distributor to be liable under its indemnity agreement contained in this
Paragraph with respect to any claim made against the Fund or any person
indemnified unless the Fund or such person, as the case may be, shall have
notified the Distributor in writing of the claim within a reasonable time after
the summons or other first written notification giving information of the nature
of the claim shall have been served upon the Fund or upon such person (or after
the Fund or such person shall have received notice of such service on any
designated agent). However, failure to notify the Distributor of any such claim
shall not relieve the Distributor from any liability which the Distributor may
have to the Fund or any person against whom such action is brought otherwise
than on account of the Distributor's indemnity agreement contained in this
Paragraph.
<PAGE>
The Distributor shall be entitled to participate, at its own
expense, in the defense, or, if the Distributor so elects, to assume the defense
of any suit brought to enforce any such claim, but, if the Distributor elects to
assume the defense, such defense shall be conducted by legal counsel chosen by
the Distributor and satisfactory to the Fund, and to the persons indemnified as
defendant or defendants, in the suit. In the event that the Distributor elects
to assume the defense of any such suit and retain such legal counsel, the Fund,
and the persons indemnified, as defendant or defendants in the suit, shall bear
the fees and expenses of any additional legal counsel retained by them. If the
Distributor does not elect to assume the defense of any such suit, the
Distributor will reimburse the Fund and the persons indemnified defendant or
defendants in such suit for the reasonable fees and expenses of any legal
counsel retained by them and will provide advances for payment of the reasonable
expenses incurred by them in connection with the matters as to which it or they
axe seeking indemnification in the matter and to the fullest extent permissible
by law. The Distributor agrees to promptly notify the Fund of the commencement
of any litigation of proceedings against it or any of its officers, employees or
representatives in connection with the issue or sale of any Shares.
(b) Indemnification of the Distributor. The Fund agrees to
----------------------------------
indemnify and hold harmless the Distributor and each of its present or former
directors, officers, employees, representatives and each person, if any, who
controls or previously controlled the Distributor within the meaning of Section
15 of the 1933 Act against any and all losses, liabilities, damages, claims or
expenses (including the reasonable costs of investigating or defending any
alleged loss, liability, damage, claim or expense and reasonable legal counsel
fees incurred in connection therewith) to which the Distributor or any such
person may become subject under the 1933 Act, under any other statute, at common
law, or otherwise, arising out of the acquisition of any Shares by any person
which (i) may be based upon any wrongful act by the Fund or any of the Fund's
Directors, officers, employees or representatives (including, without limiting
the foregoing, any wrongful or unauthorized sales activities of the Fund, as
defined under the By-Laws of the NASD, including any failure to conform with any
requirement of any state or federal law relating to the sale of Shares), or (ii)
may be based upon any untrue statement or alleged untrue statement of a material
fact contained in a Registration Statement, Prospectus, shareholder report or
other information covering Shares filed or made public by the Fund or any
amendment thereof or supplement thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading unless such statement or omission was made
in reliance upon and in conformity with information furnished to the Fund by the
Distributor. The Fund shall also indemnify and hold harmless the Distributor,
its officers and directors and control persons from any liability to the Fund or
to the holders of Shares by reason of the Fund's willful misfeasance, bad faith
or gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under this Agreement. In no
case (i) is the Fund's indemnity in favor of the Distributor, or any person
indemnified to be deemed to protect the Distributor or such indemnified person
against any liability to which the Distributor or such person would otherwise be
subject by reason of willful misfeasance,
<PAGE>
bad faith, or gross negligence in the performance of such person's duties or by
reason of reckless disregard of such person's obligations and duties under this
Agreement or (ii) is the Fund to be liable under their indemnity agreement
contained in this Paragraph with respect to any claim made against Distributor,
or person indemnified unless the Distributor, or such person, as the case may
be, shall have notified the Fund in writing of the claim within a reasonable
time after the summons or other first written notification giving information of
the nature of the claim shall have been served upon the Distributor or upon such
person (or after the Distributor or such person shall have received notice of
such service on any designated agent). However, failure to notify the Fund of
any such claim shall not relieve the Fund from any liability which the Fund may
have to the Distributor or any person against whom such action is brought
otherwise than on account of the Fund's indemnity agreement contained in this
Paragraph.
The Fund shall be entitled to participate, at its own expense,
in the defense, or, if the Fund so elects, to assume the defense of any suit
brought to enforce any such claim, but if the Fund elects to assume the defense,
such defense shall be conducted by legal counsel chosen by the Fund and
satisfactory to the Distributor and to the persons indemnified as defendant or
defendants, in the suit. In the event that the Fund elects to assume the defense
of any such suit and retain such legal counsel, the Distributor, the persons
indemnified as defendant or defendants in the suit, shall bear the fees and
expenses of any additional legal counsel retained by them. If the Fund does not
elect to assume the defense of any such suit, the Fund will reimburse the
Distributor and the persons indemnified as defendant or defendants in such suit
for the reasonable fees and expenses of any legal counsel retained by them and
will provide advances for payment of the reasonable expenses incurred by them in
connection with the matters as to which it or they are seeking indemnification
in the matter and to the fullest extent permissible by law. The Fund agrees to
promptly notify the Distributor of the commencement of any litigation or
proceedings against it or any of its Directors, officers, employees or
representatives in connection with the issue or sale of any Shares.
9. Authorized Representations. The Distributor is not
--------------------------
authorized by the Fund to give on behalf of the Fund any information or to make
any representations in connection with the sale of Shares other than the
information and representations contained in a Registration Statement or
Prospectus filed with the SEC under the 1933 Act and/or the 1940 Act, covering
Shares, as such Registration Statement and Prospectus maybe amended or
supplemented from time to time, or contained in shareholder reports or other
material that may be prepared by or on behalf of the Fund for the Distributor's
use. No person other than the Distributor is authorized to act as principal
underwriter (as such term is defined in the 1940 Act) for the Fund.
10. Term of Agreement. The term of this Agreement shall begin
-----------------
on the date first above written, and unless sooner terminated as hereinafter
provided, this Agreement shall remain in effect for a period of two years from
the date first above written. Thereafter, this Agreement shall continue in
effect from year to year, subject to the termination provisions and all other
terms and conditions thereof, so long as such continuation shall be
<PAGE>
specifically approved at least annually by (i) the Board of Directors of the
Fund or by vote of a majority of the outstanding voting securities of each sales
of the Fund and, (ii) by the vote, cast in person at a meeting called for the
purpose of voting on such approval, of a majority of the Directors of the Fund
who are not parties to this Agreement or interested persons of any such party.
The Distributor shall furnish to the Fund, promptly upon its request, such
information as may reasonably be necessary to evaluate the terms of this
Agreement or any extension, renewal or amendment hereof.
11. Amendment or Assignment of Agreement. This Agreement may
------------------------------------
not be amended or assigned except as permitted by the 1940 Act, and this
Agreement shall automatically and immediately terminate in the event of its
assignment.
12. Termination of Agreement.
------------------------
by the Fund, the Bank or the Distributor, without the payment of any penalty,
upon 60 days' prior notice in writing to the other parties; provided, that in
the case of termination by the Fund such action shall have been authorized by
resolution of a majority of the Directors of the Fund who are not parties to
this Agreement or interested persons of any such party, or by vote of a majority
of the outstanding voting securities of each series of the Fund.
13. Miscellaneous. The captions in this Agreement are included
-------------
for convenience of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
This Agreement may be executed simultaneously 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.
Nothing herein contained shall be deemed to require the Fund
to take any action contrary to its Articles of Incorporation or By-Laws, or any
applicable statutory or regulatory requirement to which it is subject or by
which it is bound, or to relieve or deprive the Board of Directors of the Fund
of responsibility for and control of the conduct of the affairs of the Fund.
14. Definition of Terms. Any question of interpretation of any
-------------------
term or provision of this Agreement having a counterpart in or otherwise derived
from a term or provision of the 1940 Act shall be resolved by reference to such
term or provision of the 1940 Act and to interpretation thereof, if any, by the
United States courts or, in the absence of any controlling decision of any such
court, by rules, regulations or orders of the SEC validly issued pursuant to the
1940 Act. Specifically, the terms "vote of a majority of the outstanding voting
securities," "interested persons," "assignment," and "affiliated person," as
used in Paragraphs 8, 9 and 10 hereof, shall have the meanings assigned to them
by Section 2(a) of the 1940 Act. In addition, where the effect of a requirement
of the 1940 Act reflected in any provision of this Agreement is relaxed by a
rule, regulation or order of the SEC, whether of special or of general
application, such provision shall be deemed to incorporate the effect of such
rule, regulation or order.
<PAGE>
15. Compliance with Securities Laws. The Fund represents that
-------------------------------
it is registered as an open-end management investment company under the 1940
Act, and agrees that it will materially comply with all the provisions of the
1940 Act and of the rules and regulations thereunder. The Fund and the
Distributor each agree to comply with all of the applicable terms and provisions
of the 1940 Act, the 1933 Act and, subject to the provisions of Section 4(d),
all applicable "Blue Sky" laws. The Distributor agrees to comply with all of the
applicable terms and provisions of the 1934 Act.
16. Confidentiality. The Distributor agrees on behalf of
---------------
itself and its directors, officers and employees to treat confidentially and as
proprietary information of the Fund all records and other information relative
to the Fund and its prior, present or potential shareholders, and not to use
such records and information for any purpose other than performance of its
responsibilities hereunder, except after prior notification to and approval in
writing by the Fund, which approval shall not be unreasonably withheld when
requested to divulge such information by duly constituted authorities and may
not be withheld when the Distributor would be exposed to civil or criminal
contempt proceedings for failure to comply, and the Distributor shall disclose
all such records and information to the Fund's investment adviser and other
service providers upon request.
17. Notices. Any notice required to be given pursuant to this
-------
Agreement shall be deemed duly given if delivered or mailed by registered mail,
postage prepaid, to the Distributor at 4455 E. Camelback Road, Suite 261-E,
Phoenix, Arizona, 85018; to the Bank at 200 Clarendon Street, Boston, MA 02116,
Attn: Susan Mosher, Director, Mutual Fund Administration, with a copy to Andrew
Josef; Assistant General Counsel; or to the Fund at The Investment Fund for
Foundations, 2405 Ivy Road, Charlottesville, VA 22903, Attn: Esther Cash.
18. Governing Law. This Agreement shall be governed and
-------------
construed in accordance with the laws of the State of New York, without regard
to its conflict of laws provisions.
[Remainder of Page Intentionally Left Blank]
--------------------------------------------
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers designated below on the date first
written above.
TIFF INVESTMENT PROGRAM, INC
By: /s/ William E. Vastardis
------------------------
Name: William E. Vastardis
Title: Treasurer
INVESTORS BANK & TRUST COMPANY, solely for
purposes of Sections 10 and 14 hereof
By: /s/ Andrew M. Nesvet
--------------------
Name: Andrew M. Nesvet
Title: Senior Director
FIRST FUND DISTRIBUTORS, INC
By: /s/ Robert H. Wadsworth
-----------------------
Name: Robert H. Wadsworth
Title: President
<PAGE>
FEE SCHEDULE
TO
DISTRIBUTION AGREEMENT
AMONG
TIFF INVESTMENT PROGRAM, INC., INVESTORS BANK & TRUST COMPANY
AND
FIRST FUND DISTRIBUTORS, INC.
DATED JANUARY 1, 2000
(THE "AGREEMENT")
First Fund Distributors, Inc. (the "Distributor"), as distributor to TIFF
Investment Program, Inc., (the `Fund"), shall be entitled to compensation for
its services under the Agreement from Investors Bank & Trust Company (the
`Bank"), as administrator to the Fund, as follows:
The Distributor shall receive compensation in the amount of $25,000 per annum,
to be paid no less frequently than monthly, payable in arrears by the Bank. In
addition, the Distributor will be entitled to reimbursement of reasonable
out-of-pocket expenses incurred (including but not limited to NASD filing fees
incurred pursuant to this Agreement) within 10 days of delivery of a valid
invoice.
TIFF INVESTMENT PROGRAM, INC
By: /s/ William E. Vastardis
------------------------
Name: William E. Vastardis
Title: Treasurer
INVESTORS BANK & TRUST COMPANY, solely for
purposes of Sections 10 and 14 hereof
By: /s/ Andrew M. Nesvet
--------------------
Name: Andrew M. Nesvet
Title: Senior Director
FIRST FUND DISTRIBUTORS, INC
By: /s/ Robert H. Wadsworth
-----------------------
Name: Robert H. Wadsworth
Title: President
<PAGE>
CODE OF ETHICS
TIFF INVESTMENT PROGRAM, INC.
FOUNDATION ADVISERS, INC.
July 1997
<PAGE>
Introduction
This Code of Ethics (the "Code") sets forth the policies and procedures
applicable to Directors, officers, and employees (a "Covered Person) of TIFF
Investment Program, Inc. ("TIP") and Foundation Advisers, Inc. ("FAI") regarding
business ethics, confidentiality and trading in securities. These policies and
procedures are mandatory and are designed to protect the business interests of
TIP and FAI. This Code of Ethics is supplemental to the policies and procedures
in the FAI Supervisory Procedure Manual, previously approved by its governing
body as a broker-dealer, the National Association of Securities Dealers. This
Code of Ethics is adopted pursuant to Section 15(f) of the Securities Exchange
Act of 1934, Section 204A of the Investment Advisers Act of 1940, Rule 17j-1 of
the Investment Company Act of 1940, and recommendations contained in the
Investment Company Institute's "Report of the Advisory Group on Personal
Investing" dated May 9, 1994.
Each Covered Person is required to read and understand the policies and
procedures contained in this Code of Ethics. If you have any questions, please
do not hesitate to contact a senior officer of TIP or FAI. Failure to comply
with these policies and procedures may subject an employee to civil and criminal
liabilities, penalties or fines, imprisonment, legal prohibition against further
employment in the securities industry and dismissal from employment for cause.
In the event of dismissal for cause, an employee may lose certain benefits from
TIP or FAI and/or under applicable unemployment insurance laws. TIP or FAI, as
the case may be, shall investigate any matter for which the facts suggest that
the Code of Ethics has been violated.
All questions concerning the interpretation or application of the policies
and procedures set forth in this Code of Ethics should be addressed to the
Director of Compliance, David A. Salem, or his designated compliance officer,
currently Esther Cash. All Covered Persons are encouraged to seek advice from
counsel with respect to any action or transaction which may violate this Code of
Ethics and to refrain from any action or transaction which might lead to the
appearance of a violation.
I. CONFIDENTIALITY
Confidential information is known by virtually every Covered Person. No
confidential information should be used by any Covered Person for any direct or
indirect personal benefit during the term of such person's relationship with TIP
or FAI and after such relationship has ended. This restriction applies
regardless of the source of such information and includes trading securities on
the basis of such confidential information or advising others to trade on such
basis.
When Is Information "Confidential"? In general, any information received
-----------------------------------
from any source (whether in the course of employment or otherwise) that a
Covered Person does not know to have been publicly disseminated should be
assumed by such Covered Person to be non-public, confidential information. A
Covered Person should not regard information as having been "publicly
disseminated" unless he or she can point to some fact or event demonstrating
that the information is generally available: for example, disclosure of the
information in a press release, in daily newspaper or in public disclosure
documents such as prospectuses.
2
<PAGE>
Confidential information may be related to TIP or FAI, its employees,
vendors, or other business or governmental entities. Examples of confidential
information include information concerning; the i) securities transactions any
TIP Fund before they are executed, or ii) policies of managers of TIP derived
from confidential communications
Procedures Regarding Confidential Information. Confidential information
----------------------------------------------
should never be disclosed to any outsider (including any relative of a Covered
Person). Caution is to be taken against making even casual remarks which might
disclose information of a confidential nature or allow the appearance of such
disclosure. This applies not only during work and in public places but also at
home and in all outside social contacts. Care should be exercised in discussing
confidential matters in elevators, at restaurants or in other places where
outsiders may be present or where unauthorized personnel could obtain
confidential information they should not have. Unnecessary copying of
confidential documents should be avoided and documents containing confidential
information should not be displayed in elevators or left in conference rooms, on
desks or in other locations where they may be seen by outsiders or by
unauthorized personnel.
Trade Secrets. All computer programs, investment methods and
-------------
techniques, trade secrets and other confidential information developed, created
or obtained by or with the assistance of any Covered Person during his or her
relationship with TIP or FAI is the property of TIP or FAI and no Covered Person
has or may exercise any ownership or other rights or interest in any such
property or information. A Covered Person may not use any trade secrets,
property or confidential information during the course of any future employment.
Upon termination of a Covered Person's relationship with the TIP or FAI, such
Covered Person should return to the FAI all confidential information and trade
secrets.
II. POLICIES GOVERNING BUSINESS ETHICS AND POSSIBLE CONFLICTS OF INTEREST
The purpose of these policies is to ensure that the interest of TIP and
FAI, and those of foundations investing in TIP, come before what might, in any
circumstances, be construed as a Covered Person's own individual interest or
benefit outside TIP or FAI. Article II shall not apply to disinterested
directors of the Fund.
Conflict of interest, the potential for conflict, or even the appearance of
such conflict is to be avoided. A Covered Person's decisions about the best
interests of TIP and investors in TIP should not be compromised or appear to be
compromised by his or her investments or other interests. Questions of proper
business ethics and conflicts of interest are often difficult to discern and to
resolve. If there is any question, a Covered Person should consult a senior
officer of TIP or FAI for an interpretation of a situation before he or she
acts.
Outside Activity. Covered Persons are encouraged to engage in worthy
-----------------
activities for their community or personal development. Such activities,
however, should not be allowed to impair the working efficiency or
responsibilities of the individual. Covered Persons may from time to time be
asked to serve as directors, advisors, or in other forms of participation in
other companies or organizations. Because such commitments can involve
substantial responsibilities and potential conflicts of interest or the
3
<PAGE>
appearance of such conflicts, Covered Persons should not accept such positions
without the prior approval of a senior officer of TIP or FAI.
Personal Finance. In addition to the limitations regarding investment in
----------------
securities (see the following section), Covered Persons are prohibited from
having a direct or indirect interest or investment in any dealer, broker or
other current or prospective supplier of goods or services to TIP or FAI from
which the Covered Person might materially benefit or appear to benefit as a
consequence of TIP or FAI's activities with the entity. One gauge of
materiality would arise if TIP or FAI's current or future activities with a
given entity might materially affect the economic prospects of that entity.
Generally, Covered Persons are expected to conduct their personal finances,
tax returns and investments in a prudent manner to avoid potential embarrassment
for TIP or FAI, as well as the potential for impairment of productivity because
of emotional factors.
Gifts and Entertainment. No Covered Person should accept a substantial
-----------------------
gift ($100 or more) or excessive entertainment from any dealer or broker,
customer or vendor, or from any person or company seeking favor or business with
TIP or FAI. The existence of this policy can be cited as the reason for
refusing such gifts or entertainment. The above standards for the acceptance of
substantial gifts or excessive entertainment apply with equal force to gifts and
entertainment of others by Covered Persons, especially personnel of brokers and
dealers.
Acceptance of even nominal gifts and modest entertainment from dealers or
brokers or others seeking favor from a Covered Person or the Group should be
discouraged where possible. A gift is more than nominal and entertainment is
more than modest if it might in any way influence the recipient, or appear to
others that the recipient might be influenced in the conduct of any business
with the donor.
III. POLICIES REGARDING TRANSACTIONS IN PUBLICLY TRADED SECURITIES
This Article applies to all "Access Persons" of TIP and FAI. "Access
Persons" means any director, officer, general partner, or Advisory Person of
TIP. Advisory Person" of TIP means (i) any employee of TIP or FAI or any
company in a control relationship with TIP (including, without limitation,
employees of Money Managers for TIP) who, in connection with such employee's
functions or duties for TIP, makes, participates in, or obtains information
regarding the purchase or sale of a security by TIP, makes or participates in
making of any recommendations with respect to such purchases or sales, or whose
principal duties or function relates to the determination of recommendations to
be made to the investment company, and (ii) any natural person in a control
relationship to TIP (including, without limitation, any employee of a Money
Manger of TIP) who obtains information concerning recommendations made to TIP
with regard to the purchase or sale of a security.
The Director of Compliance has determined that Access Persons have two
different levels of access to the security holdings of TIP which is commensurate
with their different responsibilities to TIP. Level One access code designation
pertains to an Access Person who has daily access to the security holdings of
TIP. Level Two access code designation pertains to an Access Person who does not
have access to the security holdings of TIP on a daily basis, however, such
Access Person does have access to security holdings within the 15 day period
prior to or after TIP's fiscal quarter end. The Director of
4
<PAGE>
Compliance is responsible for designating different access codes for all Access
Persons.
5
<PAGE>
Access Persons, excepting directors who are not "interested persons" of the
Fund, have different reporting requirements. Access Persons who are assigned
Level One access codes must report their security purchases to the Director of
Compliance before purchasing securities for their accounts. Level I Access
Persons shall describe each intended transaction on a form and submit it for
pre-approval by the Director of Compliance or his designated subordinate.
Approval or disapproval will be given as quickly as possible. The form is
available from the Director of Compliance and should be filled out to identify
the security, amount and type of transaction. Access Persons who are assigned
Level Two access codes do not have to pre-approve their security purchases,
however, they must always report their security purchases on a quarterly basis.
All Access Persons shall comply with the rules and regulations provided for
herein according to the compliance reporting chart outlined in Appendix A.
All Access Persons are required to arrange with the banks, brokers or
dealers which will effect transactions covered by this policy to have
confirmations or notices of all such Access Person's security transactions sent
to the following address: Foundation Advisers, Inc., 2405 Ivy Road,
Charlottesville, Virginia 22903; Attn: Esther L. Cash, Compliance Officer. In
addition, all Access Persons shall within thirty days of their commencement of
employment with TIP or FAI disclose in writing to the Director of Compliance all
of their Security holdings in which they have any direct or indirect Beneficial
Ownership.
Excepting directors who are not "interested persons" of the Fund, every
Access Person shall file a report with the Director of Compliance not later than
10 days after the end of the calendar quarter in which the transaction to which
the report relates was effected, listing all transactions in any security in
which such Access Person has, or by reason of such transaction acquired, any
direct or indirect "Beneficial ownership" in a security (such report shall not
be construed as an admission by the person making such report that he or she has
acquired any direct or indirect beneficial ownership in the security to which
the report relates). All reports filed under this Article shall contain the
following information:
1. The date of the transaction, the title and the number of shares, and
principal amount of each security involved;
2. The nature of the transaction (i.e., purchase, sale or any other type of
acquisition or disposition);
3. The price at which the transaction was effected; and
4. The name of the broker, dealer or bank with or through whom the transaction
was effected.
Notwithstanding the provisions of this Article, no Access Person shall
be required to make a report with respect to the following:
1. Transactions effected for any account over which such person does not
have any direct or indirect influence or control:
2. Transactions in securities issued by the government of the United States,
bankers' acceptances, bank certificates of deposit, commercial paper, and
shares of registered open end investment companies;
6
<PAGE>
3. If such person is not an "interested person" of the Fund within the
meaning; of Section 2(a) (19) of the Act and would be required to make such
a report solely by reason of being a director of the Fund, except where
such director knew or, in the ordinary course of fulfilling his official
duties as a director of the Fund, should have known that during the 15-day
period immediately preceding or after the date of the transaction in a
security by the director, such security is or was purchased or sold by the
Fund or such purchase or sale by the Fund is or was considered by the Fund
or its investment advisor;
4. Purchases or sales which are non-volitional on the part of the Access
Person, such as Securities acquired as a result of a spin-off of an entity
from a company whose Securities are owned by an Access Person, or the
involuntary sale of Securities due to a merger or as the result of a
company exercising a call provision on its outstanding debt;
5. Purchases which are part of an automatic dividend reinvestment plan;
6. Purchases effected upon the exercise of rights issued by an issuer pro rata
to all holders of a class of its Securities, to the extent such rights were
acquired from such issuer, and sales of such rights so acquired;
7. Where a report made would duplicate the information recorded pursuant to
Rules 204-2(a)(12) or 204-2(a)(13) under the Investment Advisors Act of
1940 (the "Rules") (a copy of which is available from the Director of
Compliance). This exception specifically applies to all Money Managers of
TIP who are registered investment advisers and who have their own
compliance requirements pursuant to these Rules;
8. Purchases or sales of securities which are not eligible for purchase or
sale by TIP; and
9. Purchases or sales which receive the prior approval of the Director of
Compliance or his or her designee because they are only remotely
potentially harmful to TIP, because they would be very unlikely to affect a
highly institutional market, or because they clearly are not related
economically to the securities to be purchased, sold or held by TIP.
The Director of Compliance shall identify all Access Persons who are under
duty to make such reports and shall inform such persons of such duty. Further,
the Director of Compliance shall be responsible for reviewing the reports filed
pursuant to this Article III of the Code of Ethics, reporting to TIP's President
any violation or apparent violation of this Code of Ethics and confirming with
Access Persons at least annually that reports required hereby have been filed.
On an annual basis, all Access Persons are required to certify in writing
that they have read and understand the Code of Ethics and recognize that they
are subject thereto. In addition, all such persons are required to certify
annually that they have complied with the requirements of the Code and that they
have reported all personal securities transactions required to be reported
pursuant to the Code. If any Access Person has any questions pertaining to
their responsibilities under the Code, they should discuss them with the
Director of Compliance prior to completing their annual certification statement.
7
<PAGE>
The following definitions apply to this article:
(i) a security is "being considered for purchase or sale" when a
recommendation to purchase or sell a security has been made and
communicated and, with respect to the person making the recommendation,
when such person seriously considers making such recommendation.
(ii) "Control" shall have the meaning set forth in Section 2(a)(9) of the
Investment Company Act.
(iii) "Purchase or sale of a security" includes, inter alia, the writing of
an option to purchase or sell a security.
(iv) "Security" shall have the meaning set forth in Section 2(a)(36) of
the Investment Company Act, except that it shall not include shares of
registered open-end investment companies, securities issued by the
Government of the United States, short term debt securities which are
"government securities" with the meaning of Section 2(a)(16) of the
Investment Company Act, bankers acceptances, bank certificates of deposit,
commercial paper, and such other money market instruments as may be
designated by the Board of Directors of TIP.
IV. RECORDS
The Director of Compliance or his designated compliance officer shall
preserve in an easily accessible place:
1. This Code of Ethics and any Code of Ethics which has been superseded
by this Code of Ethics
2. A list of persons who, within the preceding five years, were required
to make reports pursuant to this Code of Ethics
3. A copy of each report made pursuant to this Code of Ethics within the
preceding five years; and
4. A record of any violation of this Code of Ethics and any action taken
thereon within the preceding five years.
8
<PAGE>
Code of Ethics
Annual Compliance Certificate
I, _____________________________, certify that I have received and read a copy
of the Code of Ethics (the "Code") of The Tiff Investment Program, Inc. and
Foundation Advisers, Inc. and agree to be bound by the Code. I further certify
that no breach of this Code has occurred or is occurring and understand that any
such breach of the Code is grounds for immediate dismissal for cause. I also
certify that I have met all the reporting requirements of the Code.
__________________ _________________________________
Date Signature
9
<PAGE>
Proposed Transactions in Securities*
Employee: _____________________________
<TABLE>
<CAPTION>
(P)urchase Expected Par Security Broker/
or (S)ell Date Value Description Price Dealer
- ------------ --------- ----- ----------- ----- ------
<S> <C> <C> <C> <C> <C>
</TABLE>
Covered Person Signature: _________________________ Date: _________________
Approved by: __________________________
Director of Compliance
Confirmation Received: _____
* Note: Purchases and sales of securities of large, public mutual funds need
not be reported.
10
<PAGE>
Quarterly Summary of
Transactions*
Employee: _____________________________
<TABLE>
<CAPTION>
(P)urchase Expected Par Security Broker/
or (S)ell Date Value Description Price Dealer
- ------------ -------- ------- ----------- ----- ------
<S> <C> <C> <C> <C> <C>
</TABLE>
Covered Person Signature: __________________________ Date:_________________
Approved by: __________________________
Director of Compliance
Confirmation Received: _____
. Note: Purchases and sales of securities of large, public mutual funds need not
be reported.
11
<PAGE>
APPENDIX A
TIFF INVESTMENT PROGRAM, INC.
FOUNDATION ADVISERS, INC.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Covered Persons Level I Access Persons/1/ Level II Access Persons/1/
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
David A. Salem X
- -------------------------------------------------------------------------------------------------------------------
Esther L. Cash X
- -------------------------------------------------------------------------------------------------------------------
Meredith A. Shuwall X
- -------------------------------------------------------------------------------------------------------------------
Christine F. Riley X
- -------------------------------------------------------------------------------------------------------------------
Kerri C. White X
- -------------------------------------------------------------------------------------------------------------------
Robert F. Seaner X
- -------------------------------------------------------------------------------------------------------------------
Elizabeth B. Davis X
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
___________________________________
/1/ Level I Access Persons are required to obtain the approval of the Director
of Compliance prior to effecting any personal security transactions. All Access
Persons, except directors who are not "interested persons" of the Fund, are
required to provide to the Director of Compliance the following: a) reports of
all personal security transactions within 10 days of fiscal quarter end; b) the
names of all brokerage accounts held by such person; and c) duplicate confirms
of all personal security transactions. The report on personal security
transactions shall include all securities except securities issued by the
government of the United States, bankers' acceptances, bank certificates of
deposit, commercial paper, and shares of registered open end investment
companies.
12
<PAGE>
CODE OF ETHICS
While affirming its confidence in the integrity and good faith of all of its
employees, partners and associates, Aronson+Partners (the "Adviser") recognizes
that certain of its personnel have or may have knowledge of present or future
portfolio transactions and, in certain instances, the power to influence
portfolio transactions made by or for its Advisory Clients, and that if such
individuals engage in personal transactions in Securities that are eligible for
investment by Advisory Clients, these individuals could be in a position where
their personal interests may conflict with the interests of the Advisory
Clients.
In view of the foregoing and of the provisions of Rule 17j-1 under the
Investment Company Act of 1940, as amended (the "1940 Act"), the Adviser has
determined to adopt this Code of Ethics to specify and prohibit certain types of
transactions deemed to create actual conflicts of interest, the potential for
conflicts, or the appearance of conflicts, and to establish reporting
requirements and enforcement procedures.
I. Statement of General Principles
In recognition of the trust and confidence placed in the Adviser by its Advisory
Clients and to give effect to the Adviser's belief that its operations should be
directed to the benefit of its Advisory Clients, the Adviser hereby adopts the
following general principles to guide the actions of its employees, partners,
and associates:
(1) The interests of the Advisory Clients are paramount. All of the
Adviser's personnel must conduct themselves and their operations to give maximum
effect to this tenet by assiduously placing the interests of the Advisory
Clients before their own.
(2) All personal transactions in Securities by the Adviser's personnel
must be accomplished so as to avoid even the appearance of a conflict of
interest on the part of such personnel with the interests of any Advisory
Client.
(3) All of the Adviser's personnel must avoid actions or activities that
allow (or appear to allow) a person to profit or benefit from his or her
position with respect to an Advisory Client, or that otherwise bring into
question the person's independence or judgment.
II. Definitions
(1) "Access Person" shall mean (i) each associate or partner of the
Adviser, (ii) each employee of the Adviser (or of any company in a control
relationship to the Adviser) who, in connection with his or her regular
functions or duties, makes, participates in, or obtains information regarding
the purchase or sale of a Security by an Advisory Client, or whose functions
relate to the making of any recommendations with respect to such purchases or
sales, and (iii) any natural person in a control
<PAGE>
relationship to the Adviser who obtains information concerning recommendations
made by the Adviser with respect to the purchase or sale of a Security by an
Advisory Client.
2
<PAGE>
(2) "Advisory Client" means any individual, group of individuals,
partnership, trust or company, including, without limit, a Fund for whom the
Adviser acts as investment adviser or sub-adviser.
(3) "Beneficial Ownership" of a Security is to be determined in the same
manner as it is for purposes of Section 16 of the Securities Exchange Act of
1934. This means that a person should generally consider himself or herself the
beneficial owner of any Securities in which he or she has a direct or indirect
pecuniary interest. In addition, a person should consider himself or herself
the beneficial owner of Securities held by (i) his or her spouse or minor
children, (ii) a relative who shares his or her home, or (iii) other persons by
reason of any contract, arrangement, understanding, or relationship that
provides him or her with sole or shared voting or investment power over the
Securities held by such person.
(4) "Control" shall have the same meaning as that set forth in Section
2(a)(9) of the 1940 Act. Section 2(a)(9) provides that "control" means the
power to exercise a controlling influence over the management or policies of a
company, unless such power is solely the result of an official position with
such company. Ownership of 25% or more of a company's outstanding voting
securities is presumed to give the holder of such Securities control over the
company. This is a rebuttable presumption, and it may be countered by the facts
and circumstances of a given situation.
(5) "Fund" means an investment company registered under the 1940 Act for
which the Adviser acts as adviser or sub-adviser.
(6) "Investment Personnel" means all Access Persons who, with respect to
an Advisory Client, occupy the position of account or portfolio manager (or who
serve on an investment committee that carries out the investment management
function), all Access Persons who provide or supply information and/or advice to
any such manager (or committee), or who execute or help execute any such
manager's (or committee's) decisions, and all Access Persons who, in connection
with their regular functions, obtain contemporaneous information regarding the
purchase or sale of a Security by or for an Advisory Client.
(7) An Access Person's "Personal Account" means any Securities Account in
which such Access Person has direct or indirect Beneficial Ownership.
(8) "Purchase or sale of a Security" includes, among other things, the
writing of an option to purchase or sell a Security.
(9) "Security" shall have the same meaning as that set forth in Section
2(a)(36) of the 1940 Act, except that it shall not include securities issued by
the Government of the United States or an agency thereof, bankers' acceptances,
bank certificates of deposit, commercial paper, and shares of registered open-
end mutual funds.
<PAGE>
(10) A "Security held or to be acquired" by an Advisory Client means any
Security which, within the most recent 15 days, (i) is or has been held by an
Advisory Client or (ii) is being or has been considered by the Adviser for
purchase by an Advisory Client.
(11) A Security is "being purchased or sold" by an Advisory Client from
the time when a recommendation has been communicated to the person who places
the buy and sell orders for an Advisory Client until the time when such program
has been fully completed or terminated.
(12) The designated "Review Officer" is Theodore R. Aronson.
III. Prohibited Purchases and Sales of Securities
(1) No Access Person shall, in connection with the purchase or sale,
directly or indirectly, by such person of a Security held or to be acquired by
any Advisory Client:
(A) employ any device, scheme, or artifice to defraud such Advisory
Client;
(B) make to such Advisory Client any untrue statement of a material
fact or omit to state to such Advisory Client a material fact necessary in order
to make the statements made, in light of the circumstances under which they are
made, not misleading;
(C) engage in any act, practice or course of business that would
operate as a fraud or deceit upon such Advisory Client; or
(D) engage in any manipulative practice with respect to such
Advisory Client.
(2) Subject to Sections IV(3) and IV(4) of this Code, no Access Person may
purchase or sell, directly or indirectly, any Security in which he or she had or
by reason of such transaction acquired any Beneficial Ownership, within 24 hours
(7 days, in the case of Investment Personnel) before or after the time that the
same (or a related) Security is being purchased or sold by any Advisory Client.
Any profits realized on trades within these proscribed periods will be
disgorged.
(3) No Investment Personnel may acquire Securities as part of an initial
public offering.
(4) No Access Person shall purchase a Security offered in a private
placement without the specific, prior written approval of the Adviser's
designated Review Officer.
4
<PAGE>
(5) No Access Person shall profit from the purchase and sale, or sale and
purchase, of the same (or equivalent) Security within a 60 day period. Profit
due to any such short-term trades will be disgorged. Exceptions to this policy
are permitted only with the approval of Theodore R. Aronson and then only in the
case of emergency or extraordinary circumstances.
5
<PAGE>
IV. Policy Statement on Insider Trading
The Adviser forbids any partner, associate or employee from trading,
either personally or on behalf of others, including accounts managed by the
Adviser, on material nonpublic information or communicating material nonpublic
information to others in violation of the law. This conduct is frequently
referred to as "insider trading." The Adviser's policy applies to every partner,
associate, and employee and extends to activities within and outside their
duties at the Adviser. Any questions regarding the Adviser's policy and
procedures should be referred to the Review Officer.
The term "insider trading" is not defined in the federal securities laws,
but generally is used to refer to the use of material nonpublic information to
trade in securities (whether or not one is an "insider") or to communications of
material nonpublic information to others.
While the law concerning insider trading is not static, it is generally
understood that the law prohibits:
1) trading by an insider, while in possession of material nonpublic
information, or
2) trading by a non-insider, while in possession of material
nonpublic information, where the information either was disclosed
to the non-insider in violation of an insider's duty to keep it
confidential or was misappropriated, or
3) communicating material nonpublic information to others.
The concept of "insider" is broad. It includes partners, associates, and
employees of a company. In addition, a person can be a "temporary insider" if he
or she enters into a special confidential relationship in the conduct of a
company's affairs and as a result is given access to information solely for the
company's purposes. A temporary insider can include, among others, a company's
attorneys, accountants, consultants, bank lending officers, and the employees of
such organizations. In addition, the Adviser may become a temporary insider of a
company it advises or for which it performs other services. For that to occur,
the company must expect the Adviser to keep the disclosed nonpublic information
confidential and the relationship must at least imply such a duty before the
Adviser will be considered an insider.
Trading on inside information is not a basis for liability unless the
information is material. "Material information" generally is defined as
information for which there is a substantial likelihood that a reasonable
investor would consider it important in making his or her investment decisions,
or information that is reasonably certain to have a substantial effect on the
price of a company's securities. Information that partners, associates, and
employees should consider material includes, but is not
6
<PAGE>
limited to: dividend changes, earnings estimates, changes in previously released
earnings estimates, significant merger or acquisition proposals or agreements,
major litigation, liquidation problems, and extraordinary management
developments.
Information is nonpublic until it has been effectively communicated to the
marketplace. One must be able to point to some fact to show that the
information is generally public. For example, information found in a report
filed with the SEC, or appearing in Dow Jones, Reuters Economic Services, The
Wall Street Journal, or other publications of general circulation would be
considered public.
Before trading for yourself or others in the securities of a company about
which you may have potential inside information, ask yourself the following
questions:
i. Is the information material? Is this information that an
investor would consider important in making his or her investment
decisions? Is this information that would substantially effect
the market price of the securities if generally disclosed?
ii. Is the information nonpublic? To whom has this information been
provided? Has the information been effectively communicated to
the marketplace?
If, after consideration of the above, you believe the information is material
and nonpublic, or if you have questions as to whether the information is
material and nonpublic, you should take the following steps.
i. Report the matter immediately to the Review Officer.
ii. Do not purchase or sell the securities on behalf of yourself or
others.
iii. Do not communicate the information inside or outside the Adviser,
other than to the Review Officer.
iv. After the Review Officer has reviewed the issue, you will be
instructed to continue the prohibitions against trading and
communication, or you will be allowed to trade and communicate
the information.
Information in your possession that you identify as material and nonpublic
may not be communicated to anyone, including persons within the Adviser, except
as provided above. In addition, care should be taken so that such information
is secure.
7
<PAGE>
For example, files containing material nonpublic information should be sealed;
access to computer files containing material nonpublic information should be
restricted.
The role of the Review Officer is critical to the implementation and
maintenance of the Adviser's policy and procedures against insider trading. The
Adviser's Supervisory Procedures can be divided into two classifications --
prevention of insider trading and detection of insider trading.
8
<PAGE>
To prevent insider trading, the Adviser will:
i. Provide, on a regular basis, an educational program to
familiarize partners, associates, and employees with the
Adviser's policy and procedures, and
ii. when it has been determined that a partner, associate or employee
of the Adviser has material nonpublic information,
1. implement measures to prevent dissemination of such
information, and
2. if necessary, restrict partners, associates, and employees
from trading the securities.
To detect insider trading, the Review Officer will:
i. review the trading activity reports filed by each partner,
associate, and employee, and
ii. review the trading activity of accounts managed by the Adviser.
V. Preclearance of Transactions
(1) Except as provided in Section V(3), each Access Person must pre-clear
each proposed transaction in Securities with the Review Officer prior to
proceeding with the transaction. No transaction in Securities shall be effected
without the prior written approval of the Review Officer. In determining
whether to grant such clearance, the Review Officer shall refer to Section V(4),
below. Preclearance of a Securities transaction is valid for 48 hours.
(2) In determining whether to grant approval for the purchase of a
Security offered in a private placement, the Review Officer shall take into
account, among other factors, whether the investment opportunity should be
reserved for an Advisory Client, and whether the opportunity is being offered to
the Access Person by virtue of his or her position with the Adviser.
(3) The preclearance requirements of Section V(1) shall not apply to the
following transactions:
(A) Purchases or sales over which the Access Person has no direct
or indirect influence or control.
9
<PAGE>
(B) Purchases or sales that are non-volitional on the part of the
Access Person, including purchases or sales upon exercise of puts or calls
written by the Access Person and sales from a margin account pursuant to a bona
fide margin call.
(C) Purchases that are part of an automatic dividend reinvestment
plan.
(D) Purchases effected upon the exercise of rights issued by an
issuer pro rata to all holders of a class of its Securities, to the extent such
--- ----
rights were acquired from such issuer, and sales of such rights so acquired.
(4) The following transactions shall be entitled to clearance by the
Review Officer:
(A) Transactions which appear upon reasonable inquiry and
investigation to present no reasonable likelihood of harm to any Advisory Client
and which are otherwise in accordance with Rule l7j-l. Such transactions would
normally include purchases or sales of up to 1,000 shares of a Security that is
being considered for purchase or sale by an Advisory Client (but not then being
purchased or sold) if the issuer has a market capitalization of over $1 billion.
(B) Purchases or sales of Securities that are not eligible for
purchase or sale by any Advisory Client as determined by reference to the 1940
Act and blue sky laws and regulations thereunder, the investment objectives and
policies and investment restrictions of the Advisory Client and any undertakings
made to regulatory authorities.
(C) Transactions that the partners of the Adviser, as a group and
after consideration of all the facts and circumstances, determine to be in
accordance with Section III and to present no reasonable likelihood of harm to
an Advisory Client.
VI. Additional Restrictions and Requirements
(1) No Access Person shall accept or receive any gift of more than de
minimis value from any person or entity that does business with or on behalf of
the Adviser or an Advisory Client.
(2) No Investment Personnel shall accept a position as a director,
trustee or general partner of a publicly-traded company or partnership unless
the acceptance of such position has been approved by Theodore R. Aronson as
consistent with the interests of the Advisory Clients.
(3) Each Access Person must direct each brokerage firm or bank at which
the Access Person maintains a Securities account to promptly send duplicate
copies of such person's account statement and brokerage confirmations promptly
to the Review Officer. Compliance with this provision can be effected by the
Access Person
10
<PAGE>
providing duplicate copies of all such statements and confirmations directly to
the Review Officer within two business days of receipt by the Access Person.
(4) Each Access Person must provide to the Review Officer a complete
listing of all Securities owned by such person as of December 31, 1997, and
thereafter must submit a revised list of such holdings to the Review Officer as
of December 31 of each subsequent year. The initial listing must be submitted
no later than March 31, 1998 (or within 10 days of the date upon which such
person first became an Access Person of the Adviser).
VII. Reporting Obligation
(1) The Adviser shall create and thereafter maintain a list of all Access
Persons.
(2) Each Access Person shall report all transactions in Securities in
which the person has, or by reason of such transaction acquires, any direct or
indirect beneficial ownership. Reports shall be filed with the Review Officer
each quarter. The Review Officer shall submit confidential quarterly reports
with respect to his or her own personal Securities transactions to a partner
designated to receive his or her reports ("Alternate Review Officer"), who shall
act in all respects in the manner prescribed herein for the Review Officer.
(3) Every report shall be made not later than 10 days after the end of the
calendar quarter in which the transaction to which the report relates was
effected, and shall contain the following information:
(A) The date of the transaction, the title and the number of shares,
and the principal amount of each security involved;
(B) The nature of the transaction (i.e., purchase, sale, or any
other type of acquisition or disposition);
(C) The price at which the transaction was effected;
(D) The name of the broker, dealer, or bank with or through whom the
transaction was effected; and
(E) The date the report was signed.
(4) Any such report may contain a statement that the report shall not be
construed as an admission by the person making such report that he or she has
any direct or indirect Beneficial Ownership in the Security to which the report
relates.
(5) Every Access Person shall report the name of any publicly-traded
company (or any company anticipating a public offering of its equity Securities)
and the total
11
<PAGE>
number of its shares beneficially owned by him or her if such total ownership is
more than 1/2 of 1% of the company's outstanding shares.
(6) Every Access Person who owns Securities acquired in a private
placement shall disclose such ownership to Theodore R. Aronson if such person is
involved in any subsequent consideration of an investment in the issuer by an
Advisory Client. The Adviser's decision to recommend the purchase of such
issuer's Securities to any Advisory Client will be subject to independent review
by Investment Personnel with no personal interest in the issuer.
(7) In the event no reportable transactions occurred during the quarter,
the report should be so noted and returned signed and dated.
12
<PAGE>
(8) Every Access Person shall certify annually that he or she:
(A) has read and understands this Code;
(B) recognizes that he or she is subject to the Code;
(C) has complied with the Code; and
(D) has disclosed and reported all personal Securities transactions
required to be disclosed or reported.
VIII. Review and Enforcement
(1) The Review Officer shall compare all reported personal Securities
transactions with completed portfolio transactions of the Access Persons and a
list of Securities being considered for purchase or sale by the Adviser to
determine whether a violation of this Code may have occurred. Before making any
determination that a violation has been committed by any person, the Review
Officer shall give such person an opportunity to supply additional explanatory
material.
(2) If the Review Officer determines that a violation of this Code may
have occurred, he or she shall submit his or her written determination, together
with the confidential monthly report and any additional explanatory material
provided by the individual, to our attorneys, Drinker, Biddle & Reath, who shall
make an independent determination as to whether a violation has occurred.
(3) If Drinker, Biddle & Reath finds that a violation has occurred,
Theodore R. Aronson shall impose upon the individual such sanctions as he or she
deems appropriate.
(4) No person shall participate in a determination of whether he or she
has committed a violation of this Code or of the imposition of any sanction
against himself. If a Securities transaction of Theodore R. Aronson is under
consideration, Martha E. Ortiz shall act in all respects in the manner
prescribed herein for Theodore R. Aronson.
IX. Records
The Adviser shall maintain records in the manner and to the extent set forth
below, which records shall be available for examination by representatives of
the Securities and Exchange Commission.
(1) A copy of this Code and any other code which is, or at any time within
the past five years has been, in effect shall be preserved in an easily
accessible place;
13
<PAGE>
(2) A record of any violation of this Code, and of any action taken as a
result of such violation, shall be preserved in an easily accessible place for a
period of not less than five years following the end of the fiscal year in which
the violation occurs;
(3) A copy of each report made by an Access Person pursuant to this Code
shall be preserved for a period of not less than five years from the end of the
fiscal year in which it is made, the first two years in an easily accessible
place; and
(4) A list of all persons who are, or within the past five years have
been, required to make reports pursuant to this Code shall be maintained in an
easily accessible place.
X. Miscellaneous
(1) All reports of Securities transactions and any other information filed
with the Adviser pursuant to this Code shall be treated as confidential.
(2) The Adviser may from time to time adopt such interpretations of this
Code as it deems appropriate.
(3) The Review Officer of the Adviser shall report to the Adviser and to
the Board of Trustees of each Advisory Client at least annually as to the
operation of this Code and shall address in any such report the need (if any)
for further changes or modifications to this Code.
Adopted this 20th day of February, 1996 (amended, Section IV, on January 15,
1999).
14
<PAGE>
Atlantic Asset Management, L.L.C.
Code of Ethics and Personal Trading Compliance
Section 270.17-j of the Investment Company Act of 1940 requires that each
investment advisor adopt a written code of ethics and adopt provisions that
prevent access persons from engaging in activities that would serve to defraud
the investment company or its clients.
As such, AAM has adopted the Code of Ethics and Standards of Professional
Conduct developed by the Association of Investment Management and Research. We
are aware that potential conflicts of interest may arise in any investment
advisory organization. We believe that following these guidelines will serve to
minimize any potential conflict of interest. At all times and under all
circumstance AAM and its employees will place the interests of our clients
first.
Attached is the Code of Ethics that has been adopted by AAM. Please read and
retain a copy. All investment personnel are expected to be familiar with the
requirements of the Code of Ethics and adhere strictly to them.
Personal Trading Policy:
These reporting procedures for personal trading have been adopted to avoid any
conflicts of interest in trading personal security accounts, to prohibit
employees from carrying out any transactions that would place their interests
above any AAM client and to prevent any trading on inside information that could
arise.
All access persons (persons with access to intended security transactions made
by the firm) must obtain prior approval from the Compliance Officer for any
------------------------------------------------------
personal securities transactions or opening an account (see exemptions).
Brokerage firms should be notified of your employment with AAM and duplicate
trade confirms and account statements should be sent to AAM's Compliance
Officer. This applies to all accounts where you have a "beneficial interest"/1/.
AAM will provide a letter for brokers requesting the necessary information. This
must be done for all new accounts and any existing account. If an access person
chooses to not have duplicate account statements and confirms sent to AAM, then
all trades must be reported on the quarterly transaction reports and a complete
list of holdings must be submitted annually.
The following is a list of securities and transactions which are excluded from
this reporting policy:
. U.S. Treasury securities issued
. Bankers acceptances, bank certificates of deposit, time deposits
. Commercial paper
. Repurchase agreements
. Shares of open-end investment companies
. Accounts where the employee does not exercise any discretion or investment
authority
___________________________
/1/ "Covered accounts" is generally defined when a person is regarded as having
benefit ownership or interest of securities held in the name of: a husband, wife
or a minor child; a relative (including in-laws, step-children, or step-parent)
sharing the same house; anyone else if the person obtains benefits substantially
equivalent to ownership of the securities; or can obtain ownership of the
securities immediately or at some future time.
Amended March 1, 2000
<PAGE>
Code of Ethics and Personal Trading Compliance
Page Two
Also in conjunction with section 270.17-j of the Investment Company Act of 1940
every access person shall complete and return to AAM's Compliance Officer a
transactions summary report within 10 days after the end of the quarter. A
sample is attached.
The Amended Rule 17j-1 requires that within 10 days of becoming an access
person, the employee must provide an initial holdings report listing all
securities beneficially owned by the access person. Annually, a complete
holdings report must be submitted to the Compliance Officer by each access
person.
The Amended Rule 17j-1 also requires any "investment personnel"2 to obtain pre-
approval and review by the Compliance Officer of any investment in an Initial
Public Offering (IPO) or private placement (including securities issued under
Rule 144A).
Please indicate by signing below that you have received and acknowledge AAM's
Code of Ethics and indicate your willingness to comply with the practices set
forth herein.
_______________________________ __________________
Signature Date
__________________________
/2/ "Investment personnel" is defined in Rule 17j-1 to include portfolio
managers and other employees of the fund or its investment adviser who
participate in making investment recommendations to the fund as well as persons
in a control relationship to the fund who obtain information about investment
recommendations made to the fund.
Amended March 1, 2000
<PAGE>
Atlantic Asset Management, L.L.C.
Statement of Security Holdings
For the quarter ended 3/31/00
Please use this form to report all securities which you, your immediate family
or other members of your immediate household, any trust, estate or account for
which you, your spouse or child is the beneficial owner or a fiduciary, or any
transaction in which you have a beneficial interest.
Transactions in the following types of securities need not be reported:
Securities issued or guaranteed by the US government or its agencies or
instrumentalities, bankers acceptances, bank CD's and time deposits, commercial
paper, repurchase agreements and shares of registered open-end investment
companies.
[_] None
[_] New account established (summarize below)
[_] All my personal financial transactions which
involve buying or selling securities not
excluded above are summarized below or on the
attached beneficial interest statement
[_] A copy of all my financial statements
involving the transactions described above
are sent directly to AAM's compliance office
Transaction Summary:
- --------------------
<TABLE>
<CAPTION>
Security Type of Broker/Dealer
Date Security Type Transaction Par Value Price Executed Acct #
- ---- --------- ---- ------------ --------- ----- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
New Account Summary:
- --------------------
Are Transactions Have Duplicate Statements
Date Broker Listed Above? Been Requested For AAM?
- ---- ------ ------------- -----------------------
</TABLE>
I certify that the information supplied by me on this form is true and complete
to the best of my knowledge.
_______________________________
Printed Name
_______________________________ ____________________
Signature Date
Amended March 1, 2000
<PAGE>
Delaware Investments
Code Of Ethics
________________________________________
[GRAPHIC APPEARS HERE]
<PAGE>
CODE OF ETHICS
--------------
DELAWARE MANAGEMENT BUSINESS TRUST
DELAWARE DISTRIBUTORS, L.P.
DELAWARE SERVICE COMPANY, INC.
DELAWARE MANAGEMENT TRUST COMPANY
DELAWARE INTERNATIONAL ADVISERS LTD.
DELAWARE CAPITAL MANAGEMENT, INC.
DELAWARE INVESTMENT RETIREMENT SERVICES, INC.
CREDO
- -----
It is the duty of all employees, officers and directors to conduct themselves
with integrity, and at all times to place the interests of the shareholders
first. In the interest of this credo all personal securities transactions will
be conducted consistent with the Code of Ethics and in such a manner as to avoid
any actual or potential conflict of interest or any abuse of an individual's
position of trust and responsibility. The fundamental standard of this Code is
that personnel should not take any inappropriate advantage of their positions.
The Securities and Exchange Commission has adopted Rule 17j-1 under the
Investment Company Act of 1940. This Rule makes it unlawful for certain persons,
including any employee, officer or director of the Fund, in connection with the
purchase or sale by such person of a security held or to be acquired/1/ by the
Fund:
(1) To employ any device, scheme or artifice to defraud the Fund;
(2) To make to the Fund any untrue statement of a material fact or omit to
state to the Fund a material fact necessary in order to make the statements
made, in light of the circumstances in which they are made, not misleading;
(3) To engage in any act, practice or course of business that operates or
would operate as a fraud or deceit upon the Fund; or
(4) To engage in any manipulative practice with respect to the Fund.
__________________
/1/ A security is deemed to be "held or to be acquired" if within the most
recent fifteen days it (i) is or had been held by the Fund or (ii) is being or
had been considered by the Fund or its investment adviser for purchase by the
Fund.
2
<PAGE>
The Rule also requires that the Fund and Delaware Management Business Trust
shall adopt a written code of ethics containing provisions reasonably necessary
to prevent persons from engaging in acts in violation of the above standard and
shall use reasonable diligence and institution procedures reasonably necessary
to prevent violations of the Code.
This Code of Ethics is being adopted by Delaware Management Business Trust
("DMBT") Delaware Management Business Trust ("DMST"), Delaware Distributors,
L.P., Delaware Service Company, Inc., Delaware management Trust Company,
Delaware International Advisers Ltd. ("International") and Delaware Capital
Management, Inc. ("DCM"), Delaware Investment Retirement Services, Inc.
("DIRSI"), (collectively "Delaware") in compliance with the requirement of Rule
17j-1 and to effect its purposes, the purposes of the Credo set forth above, and
the recommendations of the Investment Company Institute's Advisory Group on
Personal Investing.
DEFINITIONS
- -----------
"Affiliated Person" means any employee of the Funds or any subsidiary of
Delaware Management Holdings, Inc. and any other person so designated by the
Compliance Department.
"Access person" means any director, officer, general partner or advisory person
of the Fund and shall include all Interested Directors, Portfolio Mangers, other
Investment Personnel and all Advisory Persons.
"Advisory person" mean (i) any employee, officer or interested director of
Delaware, who in connection with his/her regular functions or duties, normally
makes, participates in, or obtains current information regarding the purchase or
sale of a security by the Fund, or whose functions relate to the making of any
recommendations with respect to such purchases or sales and (ii) any natural
person in a control relationship to any such company who regularly obtains
current information concerning recommendations made with regard to the purchase
or sale of a security by the Fund.
"Investment personnel" means portfolio managers, securities analysts and
traders, and those personnel who provide information and advice to a portfolio
manager or who help execute the portfolio manager's decisions.
A security is being "considered for purchase or sale" or is "being purchased or
sold" when a recommendation to purchase or sell the security has been made and
communicated to the Order Room and with respect to the person making the
recommendation, when such person seriously considers making or when such person
knows or should know that another Advisory Person is seriously considering such
a recommendation.
"Beneficial ownership" shall be as defined in Section 16 or the Securities
Exchange Act of 1934 and the rules and regulations thereunder. Generally
speaking, a person who, directly or indirectly, through any contract,
arrangement understanding, relationship or otherwise, has or shares a direct or
indirect pecuniary interest in a security, is a "beneficial owner" of the
security. For instance:
- A person is normally regarded as the beneficial owner of securities held
by members of his or her immediate family sharing the same household;
and
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- Ownership of derivative securities such as options, warrants or
convertible securities which confer the right to acquire the underlying
security at a fixed price constitutes beneficial ownership of the
underlying security itself.
"Control" shall mean investment discretion in whole or in part of an account
regardless of beneficial ownership. Such as an account for which a person has
power of attorney or authority to effect transactions.
"Security" shall have the meaning as set forth in Section 2(a)(36) of the
Investment Company Act of 1940, except that it shall not include securities
issued or guaranteed by the government of the United States or by any of it's
federal agencies, bankers' acceptances, bank certificates of deposit, commercial
paper and shares of open-end registered investment companies.
The purchase, sale or exercise of a derivative security shall constitute the
purchase or sale of the underlying security. However, the purchase or sale of
the debt instrument of an issuer which does not give the holder the right to
purchase the issuer's stock at a fixed price, does not constitute a purchase or
sale of the issuer's stock.
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PROHIBITED ACTIVITIES
---------------------
AFFILIATED PERSONS, ACCESS PERSONS, INVESTMENT PERSONNEL AND PORTFOLIO MANAGERS
- -------------------------------------------------------------------------------
The following restrictions apply to all Portfolio Managers, Investment
Personnel, Access Persons and Affiliated Persons. Access Persons include
Interested Directors of the Funds.
(a) No Affiliated or Access Person shall engage in any act, practice or course
of conduct, which would violate the provision of Rule 17j-1 set forth
above.
(b) No Affiliated or Access Person shall purchase or sell, directly or
indirectly, any security which to his/her knowledge is being actively
considered for purchase or sale by Delaware; except that this prohibition
shall not apply to:
(A) purchases or sales that are nonvolitional on the part of either the
Person or the Fund;
(B) purchases which are part of an automatic dividend reinvestment plan;
(C) purchases effected upon the exercise of rights issued by an issuer pro
rata to all holders of a class of its securities, to the extend such
rights were acquired from such issuer, and sales or such rights so
acquired;
(D) other purchases and sales specifically approved by the President or
Chief Executive Officer, with the advice of the General Counsel and
the Compliance officer and deemed appropriate because of unusual or
unforeseen circumstances. A list of securities excepted will be
maintained by the Compliance Department.
(c) No Affiliated or Access Person may execute a buy or sell order for an
account in which he or she has beneficial ownership or control until the
third trading day following the execution of a Delaware buy or sell order
in that same security.
(d) Despite any fault or impropriety, any Affiliated or Access Person who
executes a buy or sell for an account in which he/she has beneficial
ownership or control either (i) before the third trading day following the
execution of a Delaware order in the same security, or (ii) when there are
pending orders for a Delaware transaction as reflected on the Trader Order
Scan, shall forfeit any profits made (in the event of purchases) or loss
avoided (in the event of sales), whether realized or unrealized, in the
period from the date of the personal transaction to the end of the
proscribed trading period. Payment of the amount forfeited shall be made by
check or in cash to a charity of the person's choice and a copy of the
check or receipt must be forwarded to the Compliance Department.
(e) Each Affiliated or Access Person's personal transactions must be precleared
by using the Personal Transaction Preclearance Form. The form must be
submitted prior to entering any orders for personal transactions.
Preclearance is only valid for the day the form is submitted. If the order
is not executed the same day, the preclearance form must be resubmitted.
Regardless of preclearance, all transactions remain subject to the
provisions of (d) above.
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INVESTMENT PERSONNEL AND PORTFOLIO MANAGERS
- -------------------------------------------
The following additional restrictions apply to all Investment Personnel and
Portfolio Managers.
(a) All Investment Personnel are prohibited from purchasing any initial public
offering.
(b) All Investment Personnel are prohibited from purchasing any private
placement without express PRIOR written consent by the Compliance
Department. All private placement holdings are subject to disclosure to the
Compliance Department. Any Investment Person that holds a private placement
must receive permission from the Compliance or Legal Departments prior to
any participation by such person in Delaware's consideration of an
investment in the same issuer.
(c) Short term trading resulting in a profit is prohibited. All opening
positions must be held for a period of 60 days, in the aggregate, before
they can be closed at a profit. Any short term trading profits are subject
to the disgorgement procedures outlined above and at the maximum level of
profit obtained. The closing of positions at a loss is not prohibited.
(d) All Investment Personnel are prohibited from receiving anything of more
than ade minimis value from any person or entity that does business with or
on behalf of any fund or client. Things of value may include, but not be
limited to, travel expenses, special deals or incentives.
(e) All Investment Personnel require PRIOR written approval from the Legal or
Compliance Department before they may serve on the board of directors of
any public company.
PORTFOLIO MANAGERS
- ------------------
The following additional restrictions apply to Portfolio Managers
(a) No Portfolio Manager may execute a buy or sell order for an account for
which he/she has beneficial ownership within seven calendar days before or
after an investment company or separate account that he/she manages trades
in that security.
(b) Despite any fault or impropriety, any Portfolio Manager who executes a
personal transaction within seven calendar days before or after an
investment company or separate account that he/she manages trades in that
security, shall forfeit any profits made (in the event or purchases) or
loss avoided (in the event of sales), whether realized or unrealized, in
the period from the date of the personal transaction to the end of the
prescribed trading period. Payment of the amount forfeited shall be made by
check or in cash to a charity of the person's choice and a copy of the
check or receipt must be forwarded to the Compliance Department.
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REQUIRED REPORTS
AFFILIATED PERSONS, ACCESS PERSONS, INVESTMENT PERSONNEL, PORTFOLIO MANAGERS AND
- --------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
- -----------------------
The following reports are required to be made by all Affiliated Persons, Access
Persons, Investment Personnel and Portfolio Managers. Access Persons,
Investment Personnel and Portfolio Managers are Affiliated Persons by
definition.
(a) All Affiliated Persons must disclose brokerage relationships at employment
and at the time of opening any new account.
(b) All Affiliated Persons will direct their brokers to supply to the
Compliance Department, on a timely basis, duplicate copies of all
confirmation and statements for all securities accounts. (In the U.K., all
contract notes and periodic statements)
(c) Each quarter, no later than the tenth day after the end of the calendar
quarter, each Affiliated Person will submit to the Compliance Department a
personal transaction summary showing all transactions in securities in
accounts which such person has or acquires any direct or indirect
beneficial ownership. Each Director who is not an interested person shall
submit the quarterly reports only for transactions where at the time of the
transaction the director knew, or in the ordinary course of fulfilling his
official duties as a director should have known, that during the fifteen
day period immediately preceding the date of the transaction by the
director, such security was purchased or sold by the Fund or was being
considered for purchase or sale by the Fund.
Every report will contain the following information:
(i) the date of the transaction, the name and the number of shares
and the principal amount of each security involved;
(ii) the nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition);
(iii) the price at which the transaction was effected;
(iv) the name of the broker, dealer or bank effecting the transaction.
(d) If any security involved in a personal transaction is purchased or sold by
a Fund within fifteen days of the personal transaction, the Compliance
Department will request and the Affiliated person will provide additional
information relating to the circumstances surrounding the personal
transaction.
(e) All Affiliated Persons will certify annually that they have read and
complied with this Code of Ethics and all disclosure and reporting
requirements contained therein.
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INVESTMENT PERSONNEL AND PORTFOLIO MANAGERS
- -------------------------------------------
In addition to the above reporting requirements, all Investment Personnel, which
includes Portfolio Managers by definition, must disclose all personal securities
holdings on commencement of employment and thereafter on an annual basis.
ADMINISTRATIVE PROCEDURES
(a) The Legal Department of Delaware will identify all Affiliated Persons,
Access Persons, Investment Personnel and Portfolio Managers.
(b) The Legal Department shall promptly report to the President or Chief
Executive Officer of Delaware Management Business Trust any apparent
violations of the prohibitions or reporting requirements contained in this
Code of Ethics. Such chief Executive Officer or President, or both in
conjunction, will review the reports made and determine whether or not the
Code of Ethics has been violated and shall determine what sanctions, if
any, should be imposed.
When the Legal Department finds that a transaction otherwise reportable above
could not reasonably be found to have resulted in a fraud, deceit or
manipulative practice in violation of Rule 17j-1(a), it may, in it's discretion,
lodge a written memorandum of such finding in lieu of reporting the transaction.
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============================================================
STRATEGIC INVESTMENT PARTNERS, INC.
STRATEGIC INVESTMENT MANAGEMENT
STRATEGIC INVESTMENT MANAGEMENT INTL.
EMERGING MARKETS INVESTORS CORPORATION
EMERGING MARKETS MANAGEMENT, L.L.C.
Amended as of December 2, 1999
============================================================
JOINT CODE OF ETHICS
Strategic Investment Partners, Inc. ("SIP"), Strategic Investment
Management ("SIM"), Strategic Investment Management International ("SIMI"),
Emerging Markets Investors Corporation ("EMI") and Emerging Markets Management,
L.L.C. ("EMM") (collectively, the "Companies") are committed to providing
investment advice with the utmost professional integrity. In addition, as
investment advisers, the Companies (as composed of their respective employees)
legally are considered fiduciaries of their clients' accounts. This means that
all employees of the Companies owe their clients undivided loyalty and must
conduct their personal affairs in such a manner as to avoid: (1) serving their
own personal interests ahead of the clients' interests; (2) taking advantage of
their respective positions; and (3) engaging in any activity that conflicts with
the interest of any client.
Because the Companies are affiliated with each other and share certain
personnel and resources, the Boards of Directors of the Companies have adopted
this Joint Code of Ethics which is designed primarily to help avoid any
potential conflicts that may arise when employees of the Companies trade for
their personal securities accounts. The Code sets forth guidelines and
restrictions for personal securities trading, including an absolute prohibition
against trading on the basis of "inside" (i.e., material, non-public)
information.
Adherence to this Code of Ethics is a condition of your employment. Please
direct any questions to the General Counsel, Lourdes M. Lopez-Isa or, in her
absence, to another member of the Compliance Committee (defined herein).
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December 2, 1999
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I. Definitions
"Employee" as used in this Code, includes any director of any of the
Companies who is involved in the day-to-day management of any of the Companies,
or any officer, senior adviser or other employee (including interns and other
temporary employees) of one or more of the Companies. This Code recognizes,
however, that different Employees have different responsibilities, different
levels of control over investment decision-making for Client accounts, and
different levels of access to information about investment decision-making and
implementation. In general, those with greater control and greater access face
greater potentials for conflicts of interest in their personal investment
activities and have more direct duties to Clients. For these purposes, the
definition of "Employee" is further divided into Investment Personnel and
Management Personnel.
"Investment Personnel" includes any director of any of the Companies who is
involved in the day-to-day management of any of the Companies, all portfolio
managers, all other Employees such as analysts, who provide information and
advice to one or more portfolio managers, all those who execute the portfolio
managers' decisions (i.e., traders and settlement personnel), and certain
additional Employees who have regular access to such information. For your
convenience, a list of Employees who are considered Investment Personnel is
attached as Exhibit A to this Code; however, the mere fact that an Employee's
name is not on this list will not excuse that Employee from compliance with the
provisions of this Code that apply to Investment Personnel if he or she falls
within the above definition.
"Management Personnel" includes any Employee who is in a position to
control investment decisions on behalf of a Client and certain supervisory
employees. For your convenience, a list of Employees who are considered
Management Personnel is attached as Exhibit B to this Code; however, the mere
fact that an Employee's name is not on this list will not excuse that Employee
from compliance with the provisions of this Code that apply to Management
Personnel if he or she falls within the above definition.
"Client" means any managed account for which any of the Companies serves as
investment adviser. Because of the affiliation between the Companies, a Client
of any one of the Companies shall be considered a Client of all of the Companies
for purposes of this Code.
"Covered Account" means: (1) any Securities account registered to an
Employee or a Relative; (2) any account or Securities transaction in which an
Employee or Relative has any direct or indirect "Beneficial Ownership" interest;
(3) any account of an Investment Club in which the Employee or Relative
participates; and (4) and any account for which the Employee or Relative has the
ability to make investment decisions, regardless of whether the Employee or
Relative has a Beneficial Ownership interest in that account. "Covered Account"
may include, for example, an Employee's or Relative's personal account; any
joint or tenant-in-common account in which an Employee or Relative is a
participant; any account for which an Employee or Relative acts as trustee,
executor or custodian; or any account of any entity controlled directly or
indirectly by an Employee or Relative. However, Covered Account does not
include a Securities account over which the Employee or Relative has no direct
influence or control.
"Relative" means any relative of an Employee living in the Employee's
household.
"Beneficial Ownership" shall be interpreted in the same manner as it would
be in determining whether a person is subject to the provisions of Section 16 of
the Securities Exchange Act of 1934 and the rules and regulations thereunder,
except that the determination of
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December 2, 1999
2
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direct or indirect Beneficial Ownership shall apply to all Securities which an
Employee or Relative has or acquires through decisions within his or her
control. In general, a person is considered to have "Beneficial Ownership" of a
Security - regardless of who is the registered owner--if the person enjoys
economic benefits which are substantially equivalent to ownership through
decisions within his or her direct or indirect control. This would include, for
example:
1. Securities which a person holds for his or her own benefit either
in bearer form, registered in his or her own name or otherwise
regardless of whether the Securities are owned individually or
jointly;
2. Securities held in the name of his or her spouse and minor
children;
3. Securities held by a trustee, executor or administrator or by
custodians, brokers or relatives;
4. Securities owned by a partnership of which the person is a
general partner;
5. Securities held by a corporation which can be regarded as a
personal holding company of a person; and
6. Securities recently purchased by a person and awaiting transfer
into his or her name.
"Investment Club" shall mean a group of people who pool their assets in
order to make joint investment decisions (except that Investment Club does not
include professionally-managed investment companies). The requirements of this
Code of Ethics shall apply to the entire pooled vehicle - not just to the
Employee's share of the pooled vehicle. Thus, for example, an Employee who
participates in an Investment Club is required to preclear and report the trades
of the entire pooled vehicle.
"Security" shall mean any: note; stock; treasury stock; bond; debenture;
evidence of indebtedness; certificate of interest or participation in any
profit-sharing agreement; transferable share; investment contract; certificate
of deposit for a security; depository receipt; put, call, straddle, option,
future or privilege on any security or on any group or index of securities
(including any interest therein or based on the value thereof); put, call,
straddle, option or privilege entered into on a securities exchange relating to
foreign currency; or, in general, any interest or instrument commonly known as a
"security," or any certificate of interest or participation in, temporary or
interim certificate for, receipt for, guarantee of, or warrant or right to
subscribe to or purchase, any of the foregoing. "Security" includes any
interest in any vehicle managed by the Companies or an affiliate. "Security"
shall not include: bankers' acceptances; U.S. bank certificates of deposit;
commercial paper; securities issued by the Government of the United States; and
shares of U.S. registered open-end investment companies (except for shares of
country funds or funds for which the Companies or any of their affiliates act as
adviser or subadviser).
"Emerging Markets Security" includes any Security of an issuer in Asia
(except for Japan), Latin America (including Central and South America and the
Caribbean), Europe (except for Austria, Belgium, Denmark, Finland, France,
Germany, Ireland, Italy, Liechtenstein, Luxembourg, Monaco, the Netherlands,
Norway, Spain, Sweden, Switzerland and the United Kingdom), the Middle East or
Africa, or any other Security that would be eligible for purchase or sale on
behalf of a Client of EMI or EMM.
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December 2, 1999
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A Security is "being considered for purchase or sale" when a recommendation
to purchase or sell a Security has been made and communicated and, with respect
to the person making the recommendation, when such person seriously considers
making such a recommendation.
"Purchase or sale of a Security" includes among other things, the writing
of an option to purchase or sell, or the transfer or assignment of a Security.
The following persons comprise the "Compliance Committee" for purposes of
this Code: Hilda Ochoa, Mary Choksi, George Alvarez-Correa, Carol Grefenstette,
Felicia Morrow and Lourdes Lopez-Isa.
II. Guidelines for Personal Investing
A. Rules Applicable to All Employees
1. Securities Being Considered for Purchase or Sale
by a Client
An Employee may not purchase or sell, directly or indirectly for a Covered
Account, any Security that, at the time of such purchase or sale, is being
considered for purchase or sale for a Client account.
This prohibition is intended to prevent Employees from engaging in or
appearing to engage in "frontrunning" or "scalping": the buying or selling
of Securities in a Covered Account, prior to a Client, in order to benefit
from any price movement that may be caused by Client transactions. (If an
Employee unknowingly purchases or sells a Security for a Covered Account at
the same time that the Security is being considered for purchase or sale
for a Client account, it shall not constitute a violation of this Code;
however, the Employee may be required to disgorge any profits from such
purchase or sale.)
Where trades in a Client account are effected by a subadviser, this
prohibition shall apply only if the Employee has actual knowledge that the
Security is being considered for purchase or sale for a Client account by such
subadviser.
This exception takes into account that many Employees do not know or
have access to information regarding the Securities being considered for
purchase or sale by a subadviser. This exception also recognizes that it
would be impractical (if not impossible) for the Companies to maintain
accurate and current lists of any Securities being considered for purchase
for any Client account by all of the subadvisers to Client accounts.
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December 2, 1999
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2. Blackout Periods for Trading in the Same Security as a Client and
Ban on Short - Term Trading
Management Personnel may not buy or sell a Security for a Covered Account
within (7) calendar days before or after any Client account which that
Management Personnel manages trades in that Security.
Where trades in a Client account are effected by a subadviser, this
prohibition shall apply only if the Employee has actual knowledge that the
Security is being considered for purchase or sale for a Client account by
such subadviser.
In addition, Investment Personnel may not profit from the purchase and
sale, or sale and purchase, of the same (or equivalent) Security within 60
calendar days.
The blackout period after a Client account trades is designed to allow
dissipation of the market effect of the Client's trade before the Employee
trades. The blackout period before a Client account trades and the ban on
short-term trading profits are aimed at preventing the appearance that an
Employee purchased or sold a Security for a Covered Account with the
knowledge that the Security was being considered for purchase or sale for a
Client account and to discourage active trading which may not inure to the
benefit of Clients.
3. Prohibition Against Trading in Emerging Markets Securities
An Employee may not purchase or sell any Emerging Markets Security for
a Covered Account; except that an Employee may, subject to all of the
requirements of this Code of Ethics, purchase or sell Emerging Markets
Securities that are (1) private equities (i.e., Securities that are not offered
to the public and that are purchased or sold in a privately negotiated, off-
exchange transactions) or (2) shares of an open-end or closed-end investment
company that has a global or regional emerging markets investment mandate (but
not a country fund).
This prohibition recognizes the greater likelihood of a potential
conflict of interest given the fact that Emerging Markets Securities tend
to be more illiquid than the Securities of established markets. Because
the vast majority of Securities purchased or acquired on behalf of Client
accounts are Emerging Markets Securities, the prohibition on Employee
transactions in Emerging Market Securities significantly reduces the
potential for conflicts of interest and the possible appearance of
impropriety in connection with Employees' personal Securities transactions.
4. Restriction on Purchases During IPOs
Investment Personnel may not purchase Securities in an initial public
offering ("IPO").
The purchase of an IPO by Investment Personnel poses at least two
potential conflicts of interest: First, the opportunity to invest in an
IPO often is highly sought after and available only to a limited number of
investors. Consequently, an opportunity to participate in a "hot issue" or
other attractive IPO is not likely to be viewed as a random event. It also
may create the impression that future investment decisions for Clients were
pursued as a form of "compensation" for the opportunity to participate in
the IPO instead of because they were in the best interests of Clients.
Second, any short-term profits
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December 2, 1999
5
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earned by Investment Personnel in an IPO may create at least the appearance
that an investment opportunity that should have been available to clients
was diverted to the personal benefit of Investment Personnel. Restricting
the purchase of a Security in an IPO will help reduce these potential
conflicts.
5. Prior Approval of Personal Securities Transactions
Each Employee is required to obtain written approval from Michael Duffy, or
in his absence, from a member of the Compliance Committee, before directly or
indirectly buying or selling any Security for a Covered Account.
This procedure is intended to help prevent an inadvertent violation of
the prohibition against trading in Securities being considered for purchase
or sale by a Client account, the blackout period, the ban on insider
trading and other provisions of this Code.
To request approval for a transaction, an Employee must submit a Trade
Authorization Request, attached to this Code as Exhibit C to Michael Duffy or,
in his absence, to a member of the Compliance Committee. As part of this
approval process, the Employee shall provide notification of any personal
conflict of interest relationship that may involve Clients and/or the Companies,
such as the existence of any economic relationship between his or her
transactions and a Security held or to be acquired by the Companies on behalf of
any Client.
Unless the Security is being considered for purchase or sale by a
Client account, the Security is subject to a blackout period, the Companies
may have inside information regarding the Security, or the proposed
transaction potentially conflicts with another provision of this Code, the
request ordinarily will be approved promptly.
The prior review of acquisitions of a Security in a private placement will
take into account, among other factors: (1) whether the investment opportunity
should be reserved for a Client account; and (2) whether the investment
opportunity is being offered to an Employee by virtue of his or her position
with one or more of the Companies.
Members of the financial press have suggested that emerging companies
offer investment personnel the opportunity to participate in private
placements in order to get those investment personnel to invest client
assets in the company when it later undertakes an IPO. This produces a
direct conflict since the client's investment may result in an increase in
the value of the company's securities and, thus, an increase in the value
of the employee's personal holdings. The Companies recognize that some
private placements will not raise such conflicts, however, and that a
complete prohibition could restrict legitimate investment opportunities.
Further, any Employee who has acquired beneficial ownership of an issuer
through a private placement must disclose that interest to the General Counsel
prior to participating in any decision to recommend or to cause any Client to
invest in any Securities of that same issuer.
This obligation is not extinguished by any subsequent sale of the
Securities acquired by the Employee in the private placement or by the fact
that the Securities are subsequently registered under the Securities Act of
1933. Once this disclosure is made, a review of the investment decision on
behalf of the Client will be undertaken by Employees with no interest in
that particular issuer.
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B. Exempt Transactions
The following transactions are specifically exempted from the requirements
set forth in Section II.A.2 through Section II.A.5 :
1. purchases and sales of up to $25,000 of Securities listed on a
United States securities exchange (excluding Emerging Markets
Securities and shares of funds for which the Companies serve as
adviser or subadviser) within any six month period; provided,
however, that:
. the six-month period is a "rolling period," (i.e., the limit
is applicable between any two dates which are six months
apart);
. transactions in options, other than options on commodities,
will be included for purposes of calculating whether the
$25,000 limit has been exceeded. Such transactions will be
measured by the value of the Securities underlying the
options; and
. Employees comply with the prohibitions on Insider Trading and
the reporting requirements imposed by this Code; **
2. purchases or sales of exchange traded Securities (excluding
Emerging Markets Securities and shares of funds for which the
Companies serve as adviser or subadviser) of companies having a
market capitalization in excess of $500 million;**
3. purchases or sales of U.S. exchange-traded futures contracts and
options on futures contracts (including, but not limited to S&P
500 futures, currency futures and other types of futures regulated
by the U.S. Commodity Futures Trading Commission, but excluding
futures and options on stocks); **
The following transactions are specifically exempted from the requirements set
forth in Section II.A.1 through II.A.5:
4. purchases, sales, transfers or assignments that are non-volitional
on the part of either the Employee, Relative or the Company;
5. purchases which are part of an automatic dividend reinvestment
plan;
6. purchases effected upon the exercise of rights issued by an issuer
pro rata to all holders of a class of its Securities, to the
extent such rights were acquired from such issuer, and sales of
such rights so acquired; or
7. purchases or sales of Securities issued by any U.S. State or
municipality or any multinational organization (such as the World
Bank) and OECD government bonds (excluding Emerging Markets
Securities).
** Note: The exemptions set forth in paragraphs 1, 2, and 3 immediately above
shall not apply to Employees who are Vanguard Access Persons. A list of
Employees who are considered Vanguard Access Persons is set forth in Exhibit B
to this Code.
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December 2, 1999
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III. Other Requirements and Restrictions
A. Insider Trading Prohibition
Employees are strictly prohibited from trading either for a Covered
Account or the account of any other person (including a Client) on the basis of
material, non-public information, or communicating material, non-public
information to others in violation of the law.
In the course of their duties for the Companies, Employees may acquire
"material, non-public information," also referred to as "inside
information," regarding a company or its securities. Material, non-public
information is any information that may influence an investment decision
relating to a security, or that may affect an analysis of the value of a
security, and that is not generally available to the public. Trading on
the basis of material, non-public information - regardless of whether it
is for a Client or for a Covered Account -- is a violation of the federal
securities laws, punishable by imprisonment and severe fines.
The Boards of the Companies have adopted an "Insider Trading Policy"
that describes more fully what constitutes "insider trading" and the
legal penalties for engaging in it. That policy is attached to this Code
as Exhibit D. Employees should refer to the Insider Trading Policy (as
well as this Code) whenever any question arises regarding what to do if
an Employee believes he or she may have material, non-public information.
B. Director or Officer Affiliation
The Companies may not invest, on behalf of a Client, in a Security of an
issuer if any director of the Companies involved in the day-to-day management of
the Companies has any current affiliation with such issuer (i.e., control or
ownership interest greater than 5%) unless:
1. the investment committee has had no prior non-public
communications with the affiliated director or officer
concerning either the issuer or the purchase of the Security;
and
2. following the purchase of any such Security, the affiliated
director or officer shall not participate in any discussions,
or have any other communications, with the investment committee
or non-affiliated directors concerning the issuer or the
purchase, sale or holding of any of its Securities;
AND
---
3. the affiliation is disclosed in the relevant Company's Form ADV
and a blanket consent to purchase and sell such Security is
obtained from the Client.
This prohibition is not intended to apply to investments in vehicles managed or
sponsored by the Companies or any of their affiliates.
================================================================================
December 2, 1999
8
<PAGE>
================================================================================
C. Gifts
Employees may not seek or accept anything of value, either directly or
indirectly, from broker-dealers or other persons providing services to a Client
and/or the Companies.
For the purposes of this provision, the following benefits, favors
or gifts from broker-dealers or other persons providing services to a Client
and/or the Employee or Companies will not be considered to be in violation of
this Code:
. an occasional meal;
. an occasional ticket to a sporting event, the theater or
comparable entertainment, for which the Companies or the Employee
will reimburse the host;
. a holiday gift of fruit or other foods, provided, however, that
such gift is made available to all members of the recipient's
department; or
. any situation in which the cost of returning an occasional gift
would exceed its value or where the occasional benefit, favor or
gift is of insignificant value (i.e., less than $100).
D. Confidentiality of Client Information
An Employee may not disclose to any person (including another Employee) the
Securities activities engaged in or contemplated for any Client account, except
to the extent that such disclosure is necessary to, and within the scope of, the
performance of such Employee's duties.
Each Employee is expected to sign a confidentiality agreement with
the Companies and renew the agreement annually thereafter. This prohibition
is designed to help prevent the disclosure of "inside information" to
persons outside the Companies and to minimize the opportunity for actual or
apparent violations of this Code by Employees.
E. Service as Director
An Employee may not serve on the Board of Directors of any publicly traded
company without prior authorization of the General Counsel.
Any such authorization will be based on a determination that the
Board service would not be inconsistent with the interests of the Companies
and their Clients.
IV. Exceptions
There may be some circumstances where exceptions to these restrictions will
be allowed upon request by an Employee. Any such requests will be fully
documented and reviewed on a case-by-case basis by the Compliance Committee.
Such request will be granted only upon a determination by the Compliance
Committee that the proposed purchase or sale of a Security does not create any
actual or apparent conflicts with the interest of any Client.
V. Employee Reporting and Confidentiality of Records
================================================================================
December 2, 1999
9
<PAGE>
================================================================================
A. Confidentiality of Records
All statements of holdings, duplicate trade confirmations, duplicate
account statements, and reports required by this Code (as described below) will
be held in the strictest confidence by Carol Grefenstette and the General
Counsel or her designee, except that Carol Grefenstette or the General Counsel
may provide access to any of those materials to the other members of the
Compliance Committee and/or the Companies Boards of Directors in order to
resolve questions regarding compliance with this Code. Carol Grefenstette or
the General Counsel also may provide regulatory authorities access to those
materials where required to do so under applicable laws, regulations, or orders
of such authorities.
B. Disclosure of Personal Holdings
Within 10 days of commencement of employment and annually thereafter by
January 10 of each year, all Employees must submit to the General Counsel (or,
in the case of the Directors, to Carol Grefenstette) information on all
Securities in Covered Accounts using the Disclosure of Personal Holdings Form
attached as Exhibit E.
C. Annual Certification
Each Employee also shall certify annually that:
. he or she has read and understands the Code of Ethics and
recognizes that he or she is subject thereto;
. he or she has complied with the requirements of the Code of
Ethics; and
. he or she has reported all personal Securities transactions
required to be reported under this Code.
The Annual Certification shall be made on the form attached as Exhibit
F.
D. Duplicate Copies of Broker Confirmations
Each Employee must instruct each broker, bank, or other financial
institution in which the Employee has a Covered Account to send to the General
Counsel or her designee duplicate copies of confirmations of all transactions in
such Covered Account(s).
The transactions reported on the broker confirmations will be reviewed
and compared against approved Trade Authorization Requests, and are
intended to allow the Companies to ensure the effectiveness of their
compliance efforts. In the event that an Employee participates in a direct
purchase or dividend reinvestment program designed to facilitate investment
in Securities of one or more companies and the bank or other institution
that administers the program does not provide transaction-specific
confirmations, the Employee must submit to the General Counsel a copy of
each account statement received from such bank or other institution within
10 days of receipt.
================================================================================
December 2, 1999
10
<PAGE>
================================================================================
E. Quarterly Reports
Each Employee must submit quarterly information on any transactions for a
Covered Account using the Quarterly Report of Securities Transactions Form
attached as Exhibit G.
Employees are required to report all transactions in a Covered
Account, including purchases or sales of shares of any mutual funds for
which the Company or any its affiliates is adviser or subadviser. Any such
report may contain a statement that the report shall not be construed as an
admission by the person making such report that he or she has any direct or
indirect Beneficial Ownership in the Security to which the report relates.
(The definition of Beneficial Ownership in this Code does not necessarily
apply for purposes of other securities laws or for purposes of estate or
income tax reporting or liability.)
These disclosures will help ensure that confirmations for all
transactions are being sent to the General Counsel or her designee. They
also will capture certain investments (e.g., private placements) that are
not reflected in traditional broker-dealer accounts.
VI. Compliance Procedures and Sanctions
The General Counsel and the other members of the Compliance Committee will
oversee compliance with this Code.
A. Prevention of Violations
To prevent violations of this Code and of the Insider Trading Policy:
Michael Duffy or, in his absence, a member of the Compliance
Committee, will accept and review Trade Authorization Requests and either
grant or deny such requests promptly.
The General Counsel or her designee will:
. Answer questions regarding this Code and the Insider Trading Policy;
. Review all trading activity reports filed by each Employee and
coordinate the review with Michael Duffy and the members of the
Compliance Committee as may be appropriate;
. Promptly, upon learning of a significant violation of this Code or of
the Insider Trading Policy, prepare a written report to the other
members of the Compliance Committee providing full details and
recommendations for further action.
The Compliance Committee will:
. Resolve issues of whether information received by an Employee is
material and non-public;
================================================================================
December 2, 1999
11
<PAGE>
================================================================================
. Review on a regular basis and update as necessary this Code and
the Insider Trading Policy; and
. Upon a determination that an Employee has violated this Code or
the Insider Trading Policy, determine appropriate sanctions and
take any action necessary to prevent further violations.
B. Sanctions
Upon discovering a violation of this Code, the Compliance Committee may
impose such sanctions as it deems appropriate, including, but not limited to:
requiring the Employee to disgorge any profits realized as a result of the
violation; prohibiting the Employee from selling any Security the purchase of
which constituted a violation of this Code for a period of six (6) months after
such purchase; placing a letter of censure in the Employee's personnel file; or
suspension or termination of the Employee. Any profits required to be disgorged
shall be paid over to the affected Client(s) or to a charitable organization of
the Companies' choosing.
C. Review by the Boards of Directors
The General Counsel shall prepare an annual report relating to this Code of
Ethics to the Companies' Boards of Directors. Such annual report shall:
. Summarize existing procedures concerning personal investing and any
changes in the procedures made during the past year.
. Identify any violations requiring significant remedial action during
the past year; and
. Identify any recommended changes in the existing restrictions or
procedures based upon the Company's experience under its Code of
Ethics, evolving industry practices or developments in applicable laws
or regulations.
================================================================================
December 2, 1999
12
<PAGE>
================================================================================
ACKNOWLEDGEMENT
I hereby acknowledge receipt of the Companies' Code of Ethics and Insider
Trading Policy and I certify that I have read and agree to abide by these
documents. I also confirm that I have instructed all brokerage houses where I
maintain a Covered Account to supply duplicate copies of my confirmation
statements to the General Counsel or her designee. I hereby certify that I have
never been found civilly liable for or criminally guilty of insider trading and
that no legal proceedings alleging that I have violated the law on insider
trading are now pending or, to my knowledge, threatened by any person or
authority.
Date: _______________ Name: ___________________________________
Signature: ______________________________
================================================================================
December 2, 1999
13
<PAGE>
================================================================================
EXHIBIT A
LIST OF "INVESTMENT PERSONNEL"
The following Employees are considered Investment Personnel for purposes of the
Companies' Code of Ethics:
Adriano, Christopher Peixoto, Clecius
Alvarez-Correa, George Rose, Kendall
Beauchamp, Laura Schultz, Karin
Bendickson, Eric Schwanbeck, Mark
Bhattacharjee, Arindam Schwartz, Louis
Bielinski, Agnes Siri, Ken
Bonello, Laurie Sullivan, Judith
Choksi, Mary Trofimenko, Peter
Cidrof, Dobrinka van Agtmael, Antoine
Cooper, Leisa Watson, Jerry
Danielski, Paige Wilson, Geoff
DiTieri, John Wise, Yvonne
Duffy, Michael Worsley, William
Fitzgerald, Lorna Zucosky, Thomas
Fortlage, Kurt
Franz, Katy NOTE: "Investment Personnel" also
Gabriel, K. Georg includes any intern or other temporary
Gardner, Danny employee hired by one or more of the
Gonzales-Burdin, Dianna Companies.
Grefenstette, Carol
Grossfield, Kenneth
Gurevich, Vladimir
Gutierrez, Aida
Guzman, Katiana
Holloway, Georgette
Horn, Martin
Jarvis, Mark
Kinton, Sandee
Kramer, Paul
Laxa, John
Lopez-Isa, Lourdes
Lun, Rita
Machata, Justin
Menichella, Danielle
Minovi, Babak
Morrow, Felicia
Murray, Tina
Nicolau, Demetris
Niepold, John
Ochoa, Hilda
Odumosu, Adenike
================================================================================
December 2, 1999
14
<PAGE>
================================================================================
EXHIBIT B
LIST OF "MANAGEMENT PERSONNEL"
The following Employees are considered Management Personnel for purposes of the
Companies' Code of Ethics:
Alvarez-Correa, George Paul Kramer
Bendickson, Eric Lopez-Isa, Lourdes
Bhattacharjee, Arindam Minovi, Babak
Bonello, Laurie Morrow, Felicia
Choksi, Mary Nicolaou, Demetris
Cidrof, Dobrinka Niepold, John
Duffy, Michael Ochoa, Hilda
Franz, Karen Rose, Kendall
Gabriel, K. Georg Schwanbeck, Mark
Gonzales-Burdin, Dianna Trofimenko, Peter
Grefenstette, Carol van Agtmael, Antoine
Grossfield, Kenneth Zucosky, Thomas
Horn, Martin
LIST OF "VANGUARD ACCESS PERSONS"
Bendickson, Eric
Choksi, Mary
Duffy, Michael
Grefenstette, Carol
Grossfield, Kenneth
Gurevich, Vladimir
Lopez-Isa, Lourdes
Wilson, Geoff
================================================================================
April 20, 2000
15
<PAGE>
EXHIBIT C
TRADE AUTHORIZATION REQUEST
Name: _______________________
Date: ________________________
Transaction Information
. Please check one: Purchase ______ Sale _______
. Company Name: ___________________________
. Security:__________________________________
. Amount: _____________ Approximate Price Per Share: __________
. Recommended by (if applicable): _____________________________
Account Information
. Please check one: Cash _______ Margin ________
. Account Name: _____________________________
. Account Number: ____________________________
Employee Representation and Signature
To the best of my knowledge, the above-described transaction is consistent
with the Companies' Code of Ethics and Insider Trading Policy.
__________________________________________ _______________
Employee Signature Date
Authorized By:
Name: ____________________________________ Date: _________
Signature: _______________________________
This authorization is valid until the close of the business day following the
date of approval.
================================================================================
April 20, 2000
16
<PAGE>
================================================================================
EXHIBIT D
INSIDER TRADING POLICY
I. General Principles
It is the policy of the Companies that no Employee may: (i) trade for any
account (including, but not limited to, a Covered Account or the account of any
Client) on the basis of material non-public information, or (ii) communicate
material non-public information to others in violation of the law - conduct that
is commonly called "insider trading." This policy extends to activities both
within and outside of an Employee's respective duties with the Companies. Each
Employee must read this policy statement and acknowledge his or her
understanding of it. Terms used in this policy but not defined will have the
same meanings given them in the Companies' Joint Code of Ethics.
The elements of insider trading and the penalties for it are discussed
below. If, after reviewing this policy statement, you have any questions, you
should consult the General Counsel or, in her absence, the Compliance Officer.
II. Definition of Material Non-Public Information
Only information that is both "material" and "non-public" falls within the
prohibition against insider trading.
A. Meaning of "Material"
Information is "material" if it is likely to be viewed by a reasonable
investor as important in making a decision to buy, hold, or sell a security or
if its disclosure is likely to have an effect on the value of a security.
Information may be material even if it relates to speculative or contingent
events. Information that is material to a decision to trade a security also is
likely to be material to a decision to trade related derivatives.
B. Meaning of "Non-Public"
Information should be considered "non-public" when it has not been
disseminated publicly by means such as a press release carried over a major news
service, an article in a major news publication, materials communicated to
potential investors or customers, materials available from public disclosure
services, or a public filing made with a regulatory agency.
C. Examples
Material, non-public information can come from Employees as well as from
persons outside the Companies. Examples of information that, depending on the
circumstances, may be material and non-public include, without limitation:
. undisclosed financial information (e.g., company earnings
information or estimates, fund performance, a change in dividend
policy, liquidity problems or changed projections, significant
litigation or developments for which reserves might be taken);
================================================================================
April 20, 2000
17
<PAGE>
================================================================================
. undisclosed operating developments (e.g., new products or natural
resource discoveries, changes in business operations or
extraordinary management developments, large increases or
decreases in orders, or potential governmental or regulatory
developments);
. proposed business activities (e.g., mergers, acquisitions, sales
or divestitures of substantial assets, restructuring, other
market-sensitive transactions involving a fund or company, major
investments, refinancing or extraordinary borrowings or, in
certain circumstances, the mere retention of an investment bank);
. a forthcoming change in rating by a well-known research analyst;
. undisclosed events or problems that could affect the NAV or
performance of a fund; and
. even a pending order or decision to purchase or sell securities
by a fund or Client.
Material, non-public information may include "tips" received directly or
indirectly from corporate insiders whether or not in the context of a Client
relationship.
However, information disclosed by an issuer to an Employee because a Client
is a major shareholder or because an Analyst or Portfolio Manager has asked for
it generally will not be considered material non-public information unless there
is any reason to believe that the information: (i) would not be furnished to
other shareholders, analysts or other portfolio managers who asked for it; (ii)
was otherwise disclosed improperly or without the authorization of the issuer;
or (iii) was provided with the expectation that it would be maintained in
confidence. Observations or judgments about a company made by a portfolio
manager or analyst based on a company visit generally will not be considered
material non-public information unless such observations or judgments are based
on information of the kind outlined in (i), (ii) or (iii) above.
D. Special Considerations for Emerging Markets Information
The Companies are aware that, unlike in the U.S. and other developed
markets where most material information regarding a company is routinely
disseminated to the public, the bulk of material information regarding companies
in many emerging markets may not be disseminated regularly to the public. In
many cases, such information is not disseminated to the public either because it
is not local practice (or companies are not legally required) to make routine
company information widely available and/or there are few or no vehicles or
channels (e.g., financial publications such as The Wall Street Journal)
available to disseminate such information. The Companies take the position that
the mere fact that material information about an emerging markets company is not
regularly disseminated to the public does not necessarily mean that Employees
are prohibited from trading on such information for Client accounts. However,
Employees are required to take the following steps to determine whether it is
appropriate to trade on the basis of such information:
. An Employee with material information regarding an emerging
markets company should make a reasonable effort to determine
whether such information has been disseminated to the public. If
the information has been
================================================================================
April 20, 2000
18
<PAGE>
================================================================================
made available in at least one publication of general circulation
or another widely available document, the Employee generally may
trade on the basis of such information without further analysis.
. If the Employee determines that such information has not been
disseminated widely, the Employee should determine why such
information has not been publicly disseminated. If the
information has not been disseminated or made available to the
general public solely because it is not required by law or by
local practice or because there are few means of distributing
such information widely, the Employee generally made trade on
such information provided that the information: (i) would be
furnished to other shareholders, analysts or portfolio managers
who asked for it; (ii) was not disclosed improperly or without
the authorization of the issuer; and (iii) was not provided with
the expectation that it would be maintained in confidence. If the
information has not been disseminated to the public for reasons
other than the ones set forth above, or if the information does
not meet the requirements of (i), (ii) and (iii), the Employee
may not trade on the basis of such information.
. If the Employee has any doubts about why the information was not
disseminated publicly or about whether the information meets the
requirements of (i), (ii) and (iii) above, the Employee should
consult with the General Counsel or, in her absence, with
theCompliance Officer before trading on the basis of such
information or communicating such information to another Employee
or person outside the Companies (please refer to the procedures
in Section IV below).
III. Penalties for Insider Trading
The legal penalties for trading on or communicating material non-public
information are severe. An Employee (and in some cases the Companies) can be
subject to some or all of the penalties below, even if the Employee or the
Companies do not benefit from the violation. Penalties include:
. civil injunctions;
. damages in a civil suit as much as three times the amount of
actual damages suffered by other buyers or sellers;
. disgorgement of profits;
. jail sentences;
. fines for the person who committed the violation of up to three
times the profit gained or loss avoided; and/or
. prohibition from employment in the securities industry.
In addition, any violation of this Policy can be expected to result in
serious disciplinary measures by the Companies, including termination of
employment.
IV. Procedures to Implement the Insider Trading Policy
================================================================================
April 20, 2000
19
<PAGE>
================================================================================
The following procedures are intended to help Employees avoid insider
trading and to aid the Companies in preventing, detecting and punishing insider
trading. Every Employee of the Companies must follow these procedures or risk
the penalties described in Section III above. If you have any questions about
these procedures, you should consult the General Counsel or, in her absence,
theCompliance Officer.
A. Identifying Insider Information
Any time you think that you may have inside information about a company,
before you can place any trade in that company's securities, either for a
Covered Account or for others (including a Client) and before you advise anyone
to trade in that company's securities, ask yourself the following questions:
. Is the information material? Is this information that an investor
would consider important in making his or her investment
decisions? Is it information that would substantially affect the
market price of the securities if it were generally disclosed?
. Is the information nonpublic? To whom has this information been
provided? Has it been effectively communicated to the marketplace
by appearing in publications of general circulation? (For
emerging markets information only: If applicable, why hasn't this
information been disseminated widely?)
If after asking these questions (and considering the explanations of
material non-public information in Part II of this Policy), you believe that the
information is material and non-public, or if you have questions as to whether
the information is material and non-public, you should take the following steps:
. Report the matter immediately to the General Counsel or, in her
absence, to the Compliance Officer.
. Do not purchase or sell the securities on behalf of a Covered
Account or others (including a Client).
. Do not communicate the information inside or outside the
Companies, other than to the General Counsel or, in her absence,
to the Compliance Officer.
.
After the General Counsel, or, in her absence, the Compliance
Officer has reviewed the issue, you will be instructed to
continue the prohibition against trading and communication, or
you will be allowed to trade and communicate the information.
B. Prevention of Insider Trading
To prevent insider trading the Compliance Committee will:
. Resolve issues of whether information received by an Employee is
material and non-public;
. Review on a regular basis and update as necessary this Policy;
===============================================================================
April 20, 2000
20
<PAGE>
================================================================================
. When it has been determined that an Employee has material non-
public information:
. Implement measures to prevent the dissemination of such
information; and
. If necessary, restrict Employees from trading in the relevant
security.
C. Detection of Insider Trading
To detect insider trading, the General Counsel or her designee will, on a
quarterly basis:
. Review all Quarterly Reports of Securities Transactions filed by each
Employee within a reasonable period of time after submission;
. If necessary, coordinate the review of such reports with other members
of the Compliance Committee; and
. Be available to answer questions regarding or arising under this
Policy.
In addition, upon learning of a significant violation of this Policy, the
General Counsel will prepare a report to the Compliance Committee providing full
details and recommendations for further action.
D. Recordkeeping
The General Counsel will maintain the following materials:
. A copy of this Policy; and
. A record of any violation of this Policy for the most recent five (5)
years and a record of actions taken in response.
================================================================================
April 20, 2000
21
<PAGE>
================================================================================
EXHIBIT E
DISCLOSURE OF PERSONAL HOLDINGS
This form is to be submitted by all Employees within 10 days of
commencement of employment and annually thereafter (within 10 days of the end of
the year).
I hereby certify that the following is a complete list of the Securities in
which I have a direct or indirect beneficial ownership:
<TABLE>
<CAPTION>
Security Date Cost No. of Brokerage
(Full Name) Acquired* Shares Account
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
* If a Security was acquired after January 1, 1995, you must list the month, day
and year it was acquired; otherwise, you may indicate simply that the Security
was acquired "pre-1995."
Date: _______________ Name: _________________________________
Signature: ____________________________
================================================================================
April 20, 2000
22
<PAGE>
================================================================================
EXHIBIT F
ANNUAL CERTIFICATION
I hereby certify that I have read and complied with the Companies' Code of
Ethics and Insider Trading Policy for the year ending December 31, ______ (or
for such time as I have been employed by the Companies, if less than one year).
I also confirm that, during this period, I instructed all brokerage houses where
I maintained any Covered Account to supply duplicate copies of my confirmation
statements to the Companies, Attn: General Counsel; and that I reported all
personal Securities transactions required to be reported under the Companies'
Code of Ethics.
Date: _______________ Name: _________________________________
Signature: ____________________________
================================================================================
April 20, 2000
23
<PAGE>
================================================================================
EXHIBIT G
QUARTERLY REPORT OF SECURITIES TRANSACTIONS
The following is a record of all Securities transactions during the quarter
ended ___________ in any Covered Account. (This form is to be submitted to the
General Counsel or her designee by all Employees no later than 10 days after the
end of every calendar quarter.)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Name/ Number of Date of Price at Is the Market Purchase Broker-Dealer
Description Shares or Trans- Which Capitalization or Sale or Bank
of Security Principal action Effected of Company on
Amount Date of
Purchase/Sale
Over or Under
$500 million)?
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
</TABLE>
I hereby certify that I did not purchase any Emerging Markets Security (other
than as permitted by Section II.A.3 of the Code of Ethics) and that I did not
purchase any Security in an initial public offering during the quarter covered
by this report.
Date: _______________ Name: _________________________________
Signature: ____________________________
================================================================================
April 20, 2000
24
<PAGE>
FFTW
CODE OF ETHICS
<PAGE>
Covering
--------
CHARTER ATLANTIC CORPORATION
FISCHER FRANCIS TREES & WATTS, INC.
FISCHER FRANCIS TREES & WATTS
CHARTER ATLANTIC SECURITIES CORPORATION
FFTW FUNDS, INC.
FISCHER FRANCIS TREES & WATTS (SINGAPORE), PTE. LTD.
FISCHER FRANCIS TREES & WATTS KABUSHIKI KAISHA
i
<PAGE>
CONTENTS
- --------
I. INTRODUCTION
II. CONFIDENTIALITY
III. TRADING GUIDELINES FOR ACCOUNTS UNDER INVESTMENT MANAGEMENT BY THE FIRMS
IV. POLICIES GOVERNING BUSINESS ETHICS AND POSSIBLE CONFLICTS OF INTEREST
V. STANDARDS OF CONDUCT
VI. OBLIGATIONS OF DISINTERESTED DIRECTORS OF THE FUND
VII. RECORDKEEPING REQUIREMENTS
Attachments:
1. Certificate of Receipt
2. Annual Compliance Certificate
3. Proposed Transactions
4. Quarterly Summary of Securities Transaction Form and New Account Form
5. Annual / New Covered Person Transaction Report
ii
<PAGE>
CODE OF ETHICS
--------------
I. INTRODUCTION
------------
This Code of Ethics sets forth the policies and procedures of FFTW Funds, Inc.
(the "Fund"), Fischer Francis Trees & Watts, Inc. ("FFTW"), and its affiliated
companies/1/ (each a "Firm" and, collectively, the "Group") regarding business
ethics, confidentiality and trading in securities. These policies and procedures
are mandatory and are designed to protect the business interests of the Firm and
their respective clients. This Code of Ethics is adopted pursuant to Section
15(f) of the Securities Exchange Act of 1934, Section 204A of the Investment
Advisers Act of 1940 and Rule 17j-1 under the Investment Company Act of 1940.
The provisions of this Code of Ethics apply to "Covered Persons." The term
"Covered Persons" generally includes any director, officer or employee of any
Firm. The term also includes any employee or officer of Investors Capital
Corporation or Investors Bank and Trust Company who, as part of his or her
regular duties, is involved with providing administrative services to the Fund.
The term does not include the "disinterested directors" of the Fund,/2/ although
---
those directors are subject to certain requirements, as set forth in Section V
of this Code.
Each Covered Person is required to read and understand the policies and
procedures contained in this Code of Ethics and sign the Certification attached
hereto on page A-1. Failure to comply with these policies and procedures may
subject an employee to civil and criminal liabilities, penalties or fines,
imprisonment, legal prohibition against further employment in the securities
industry and dismissal from employment for cause. In the event of dismissal for
cause, an employee may lose certain benefits from his or her Firm and/or
applicable unemployment insurance laws. The relevant Firm will investigate any
matter for which the facts suggest that the Code of Ethics may have been
violated.
All questions concerning the interpretation or application of the policies and
procedures set forth in this Code of Ethics should be addressed to a senior
officer of the relevant Firm. All Covered Persons are encouraged to seek advice
from legal counsel with respect
________________
/1/ Affiliates of FFTW currently include Charter Atlantic Corporation ("CAC"),
Fischer Francis Trees & Watts, a UK partnership ("FFTW UK"), Charter Atlantic
Securities Corporation ("CASCO"), Fischer Francis Trees & Watts (Singapore),
PTE. LTD. ("FFTW Singapore") and Fischer Francis Trees & Watts Kabushiki Kaisha
("FFTW KK").
/2/ Disinterested directors means directors of the Fund who are not officers,
employees or otherwise "Interested Persons" of FFTW as that term is defined in
Section 2(a)(19) of the Investment Company Act.
1
<PAGE>
to any action or transaction which may violate this Code of Ethics and to
refrain from any action or transaction which might lead to the appearance of a
violation.
The details set out in this Code of Ethics are in addition to those set out in
the Firm's Compliance Manuals, which Covered Persons are also required to read
and observe.
II. CONFIDENTIALITY
---------------
Prohibition on Trading. Confidential information is known by virtually every
- ----------------------
Covered Person. No confidential information should be used by any Covered
Person for any direct or indirect personal benefit during the term of such
person's relationship with his or her Firm and after such relationship has
ended. This restriction applies regardless of the source of such information
and includes trading securities on the basis of such confidential information or
advising others to trade on such basis.
When is Information "Confidential"? In general, any information received from
- ----------------------------------
any source (whether in the course of employment or otherwise) that a Covered
Person does not know to have been publicly disseminated should be assumed by
such Covered Person to be non-public, confidential information. A Covered
Person should not regard information as having been "publicly disseminated"
unless he or she can point to some fact or event demonstrating that the
information is generally available; for example, disclosure of the information
in a press release, in daily newspapers or in public disclosure documents such
as prospectuses or annual reports. If a Covered Person is unclear whether
information is confidential, he or she should consult a senior officer of the
relevant Firm.
Confidential information may be related to the Group, its clients, its employees
or other business or governmental entities. Examples of confidential
information include information concerning the (i) securities transactions of a
client or of any member of the Group before they are executed, (ii) policies of
clients that are not publicly known and (iii) the operations or condition of any
client.
Procedures Regarding Confidential Information. Confidential information should
- ---------------------------------------------
never be disclosed to any outsider (including any relative of a Covered Person).
Caution is to be taken against making even casual remarks which might disclose
information of a confidential nature or allow the appearance of such disclosure.
This applies not only during work and in public places but also at home and in
all outside social contacts. Care should be exercised in discussing
confidential matters in elevators, at restaurants or in other places where
outsiders may be present or where unauthorized personnel could obtain
confidential
2
<PAGE>
information they should not have. Unnecessary copying of confidential documents
should be avoided and documents containing confidential information should not
be displayed in elevators or left in conference rooms, on desks or in other
locations where they may be seen by outsiders or by unauthorized personnel.
Extra or unnecessary documents containing confidential information should be
promptly destroyed.
Trade Secrets. All computer programs, investment methods and techniques, trade
- -------------
secrets and other confidential information developed, created or obtained by or
with the assistance of any Covered Person during his or her relationship with
his or her Firm is the property of the Firm and no Covered Person has or may
exercise any ownership or other rights or interest in any such property or
information. A Covered Person may not use any trade secrets, property or
confidential information during the course of any future employment. Upon
termination of a Covered Person's relationship with the Firm, such Covered
Person should return to the Firm all confidential information and trade secrets.
III. TRADING GUIDELINES FOR ACCOUNTS UNDER INVESTMENT MANAGEMENT BY THE FIRMS
------------------------------------------------------------------------
Establishment of Guidelines. Guidelines with respect to the investment policies
- ---------------------------
for each account under investment management (each such account and each
investment company registered with the SEC to which one of the Firms acts as an
investment advisor is hereinafter referred to as a "Managed Account") shall be
determined with each client. Such guidelines shall reflect the investment
objectives and the risk preferences of the particular client. The guidelines
shall specify among other considerations the type of fixed-income securities and
related derivatives which are eligible for purchase and their credit quality
which, except when there are specific reasons to the contrary agreed to with the
client, will be of "investment grade." In addition, the guidelines may specify
permitted or prohibited counterparties or both. All purchases and sales on
behalf of any Managed Account shall comply with the guidelines for that Managed
Account.
No Favoritism. No Managed Account shall be favored with respect to the
- -------------
selection of securities, sale of securities, or timing of purchase or sale of
securities over any other Managed Account. The method of allocating block
purchases is discussed below.
Transactions With Other Managed Accounts. No securities shall be sold to or
- ----------------------------------------
purchased from one Managed Account by another Managed Account, and no securities
shall be sold to or purchased from any of the Firms by any Managed Account.
Selection of Dealers. All securities purchased and sold for Managed Accounts
- --------------------
shall be purchased from and sold to established securities dealers, which shall
be selected in a manner consistent with seeking to obtain best execution of all
securities transactions for
3
<PAGE>
each Managed Account . No concessions on prices shall be made to any dealer by
reason of services performed or goods supplied or offered to be performed or
supplied.
Employees of FFTW UK should also comply with the restrictions on entering into
soft commission agreements with brokers, set out in FFTW UK's Compliance
Manual.
Block Purchases. If at any time it is decided that the same securities should
- ---------------
be purchased or sold for one or more Managed Accounts in accordance with their
respective investment guidelines, such securities shall, to the extent possible,
be purchased or sold as a block, and such securities or the proceeds allocated
to the respective Managed Accounts at the price paid per unit allocated. If the
aggregate amount of securities purchased or sold is for reasons of price or
availability less than the initial amount desired, the actual amount of
securities purchased or sold, to the degree it is feasible, shall be allocated
among the Managed Accounts in approximate proportion to the initial amounts
designated for such Managed Account, unless it is determined by a senior officer
of the Firm that it is in the best interests of such managed Accounts to have a
different allocation. Any such determination shall be documented and a copy
sent to the Chief Risk Oversight Officer or his or her delegee.
If the same securities have been selected for purchase and sale by one of the
Firms at the same time and at the same or comparable prices to those selected
for the Managed Accounts, such securities shall be purchased or sold to the
extent feasible as a block on behalf of one of the Firms and the Managed
Accounts. To the extent that only a lesser amount of such securities can be
transacted at the price desired, then, unless the Chief Risk Oversight Officer
of the Firm or his or her delegee otherwise agrees, the Managed Accounts shall
be allocated their full portion and the amount sold or purchased by the Firms
shall be reduced accordingly. Each aggregated transaction and the corresponding
allocations shall be simultaneously entered on a trade ticket, which shall be
time stamped.
Prohibition Against Trading Based Upon Confidential Information. No
- ---------------------------------------------------------------
transactions may be executed by or on behalf of any Managed Account or member of
the Group based upon any confidential information (including information
concerning prospective securities transactions of any other Managed Account)
although, subject to the policies outlined above, similar transactions may be
executed for such accounts at the same time.
IV. POLICIES GOVERNING BUSINESS ETHICS AND POSSIBLE CONFLICTS OF INTEREST
---------------------------------------------------------------------
The purpose of these policies is to ensure that the interest of the Firms'
clients, and those of the Firms in general, come before what might, in any
circumstances, be construed as a Covered Person's own individual interest or
benefit outside the Group. In the case of
4
<PAGE>
FFTW UK, it may be necessary in certain circumstances, to disclose the existence
of the conflict to the relevant client; please refer to FFTW UK's Compliance
Manual.
Conflict of interest, the potential for conflict, or even the appearance of such
conflict is to be avoided. A Covered Person's decisions about the best
interests of the clients should not be compromised or appear to be compromised
by his or her investments or other interests. Questions of proper business
ethics and conflicts of interest are often difficult to discern and to resolve.
If there is any question, a Covered Person should consult a senior officer of
- -----------------------------------------------------------------------------
the relevant Firm for an interpretation of a situation before he or she acts.
- -----------------
Outside Activity. Covered Persons are encouraged to engage in worthy activities
- ----------------
for their community or personal development. Such activities, however, should
not be allowed to impair the working efficiency or responsibilities of the
individual. Covered Persons may from time to time be asked to serve as
directors, advisors, or in other forms of participation in other companies or
organizations. Because such commitments can involve substantial
responsibilities and potential conflicts of interest or the appearance of such
conflicts, Covered Persons should not accept such positions without the prior
approval of a senior officer of the relevant Firm.
Personal Finance. In addition to the limitations regarding investment in fixed-
- ----------------
income securities (see the following Section V), Covered Persons are prohibited
(other than by ownership of publicly traded securities) from having a direct or
indirect interest or investment in any dealer, broker or other current or
prospective supplier of goods or services from which the Covered Person might
materially benefit or appear to benefit as a consequence of the Group's
activities with the entity. One gauge of materiality would arise if the Group's
current or future activities with a given entity might materially affect the
economic prospects of that entity. If there is any question, a Covered Person
should consult a senior officer of the relevant Firm.
Generally, Covered Persons are expected to conduct their personal finances and
investments in a prudent manner. Obviously, there would be a potential danger
to the Group, as well as an impairment of productivity because of emotional
factors, if a Covered Person were ever to become financially embarrassed.
Gifts and Entertainment. No Covered Person should offer, give, solicit or
- -----------------------
accept a gift or entertainment from any person which is likely to significantly
conflict with the Group's duties to its customers. Naturally, every effort
should be made to refuse as gracefully as possible. The existence of this
policy can be cited as the reason for refusing such gifts or entertainment.
Acceptance of even nominal gifts and modest entertainment from dealers or
brokers or others seeking favor from a Covered Person or the Group should be
discouraged where
5
<PAGE>
possible. A gift is more than nominal and entertainment is more than modest if
it might in any way influence the recipient, or appear to others that the
recipient might be influenced in the conduct of any business with the donor.
6
<PAGE>
V. STANDARDS OF CONDUCT
--------------------
A. General Standards. In connection with the purchase or sale, directly
-----------------
or indirectly, of a "security held or to be acquired" by a Managed Account, a
Covered Person shall not:
1. employ any device, scheme or artifice to defraud such Managed
Account;
2. make to such Managed Account any untrue statement of a material
fact or omit to state to such Managed account a material fact
necessary in order to make the statements made, in light of the
circumstances under which they are made, not misleading;
3. engage in any act, practice, or course of business which operates
or would operate as a fraud or deceit upon such Managed Account;
or,
4. engage in any manipulative practice with respect to such Managed
Account.
B. Pre-Approval of Trades in Fixed-Income Securities, Initial Public
-----------------------------------------------------------------
Offerings and Private Placements./3/ Each Covered Person must obtain pre-
- --------------------------------
approval, pursuant to the procedures set forth below for the following
transactions:
1. For transactions in fixed-income securities and related
derivative transactions, including foreign exchange; or
2. For securities issued by clients of the Group that such Covered
Person purchases or sells for his own account or for an account in which a
Covered Person has a Beneficial Ownership;/4/ or
________________
/3/ IPO means an offering of equity or debt securities registered under the
Securities Act of an issuer not previously subject to reporting requirements.
The pre-approval requirement includes transactions in any option to purchase or
sell an IPO or private placement security or transactions in any convertible
security linked to an IPO or private placement security.
/4/ Generally, a Covered Person will be regarded as having beneficial ownership
of securities held in his or her name, or in the name of any of the following
persons, unless the Covered Person does not have any direct or indirect
------
influence or control over the account in question: (1) his or her spouse or
minor child; (2) a relative sharing the same house; (3) anyone else, if the
Covered Person: (a) obtains benefits substantially
7
<PAGE>
3. For the acquisition of Beneficial Ownership in any fixed
income or equity securities in an Initial Public Offering ("IPO") or private
placement.
The pre-approval requirements do not apply to investments in public open
ended mutual funds of either equity or fixed-income securities.
C. Procedure for Pre-Approval. Each transaction requiring pre-approval
--------------------------
should be described on the appropriate form attached hereto on page A-3 and
submitted for approval to the Chief Risk Oversight Officer or his or her
delegee. The required form is available from the Chief Risk Oversight Officer or
his or her delegee and should be filled out to identify the security, amount and
type of transaction.
Approval or disapproval will be given as quickly as possible and will be
based on the determination by the Chief Risk Oversight Officer or his or her
delegee that the transaction requiring pre-approval by the Covered Person does
not present a material conflict of interest between the Fund investors and the
Covered Person. Records of such pre-approval determinations, will be maintained
by the Chief Risk Oversight Officer or his or her delegee pursuant to Article
VII.
D. Required Reports Of Securities Transactions And Holdings
--------------------------------------------------------
General Requirements. Each Covered Person shall report to the Chief
--------------------
Risk Oversight Officer or his or her delegee by completing the
following reports on the appropriate form, which forms are attached
hereto on pages A-4 and A-5, transactions and holdings in any
------
security/5/ by such Covered Person, including any Beneficial
--------
Ownership.
Initial reporting of securities holdings. Each Covered Person shall
----------------------------------------
make an initial report of the following information not later than ten
days after the Covered Person becomes a Covered Person:
1. The title, number of shares and principal amount of each
security in which the Covered Person had any Beneficial
Ownership when the person became a Covered Person;
________________________________________________________________________________
equivalent to ownership of the securities; or (b) can obtain ownership of the
securities immediately or at some future time. If anyone has questions regarding
this policy concerning relatives of a Covered Person, he or she should discuss
the situation with a senior officer of the relevant firm.
/5/ "Transactions and holdings in any security" shall include transactions and
holdings in any option to purchase or sell a security or transactions and
holdings in any convertible security.
8
<PAGE>
2. The name of any broker, dealer or bank with whom the Covered
Person maintained an account in which any securities were
held for the Beneficial Ownership of the Covered Person as
of the date the person became a Covered Person; and
3. The date that the report was submitted by the Covered
Person.
Quarterly reporting. Each Covered Person shall make a quarterly
-------------------
report of the following information not later than ten days after the
end of the calendar quarter in which the transaction to which the
report relates.
Quarterly Reporting of Securities Transactions. With respect to
----------------------------------------------
any securities transactions in which the Covered Person had
Beneficial Ownership, such reports shall contain the following
information:
1. The date of the transaction, the title, the interest
rate and maturity date (if applicable), the number of
shares and principal amount of each security involved;
2. The nature of the transaction (i.e., purchase, sale or
any other type of acquisition or disposition);
3. The price at which the transaction was effected;
4. The name of any broker, dealer or bank with whom the
transaction was effected; and
5. The date that the report was submitted by the Covered
Person.
If no purchases, sales or other transactions were effected in the
quarter in question, the Covered Person should check the
appropriate box on the form.
Quarterly reporting of new accounts. With respect to any new
-----------------------------------
account established by a Covered Person in which any securities were
held during the quarter for the Beneficial Ownership of the Covered
Person, the reports shall contain the following information:
9
<PAGE>
1. The name of any broker, dealer or bank with which the
Covered Person established the account;
2. the date the account was established; and
3. The date that the report was submitted by the Covered
Person.
If no new securities accounts were established in the
quarter in question, the Covered Person should check the
appropriate box on the form.
Annual reporting of securities holdings. Each Covered Person shall
---------------------------------------
sign the Annual Certification report form, attached hereto on page A-
2, and make an Annual Report of the following information not later
than ten days after the end of the calendar year for which the report
relates (which must be current as of a date no more than 30 days
before the report is submitted).
1. The title, number of shares and principal amount of
each security in which the Covered Person had any
Beneficial Ownership;
2. The name of any broker, dealer or bank with whom the
Covered Person maintains an account in which any
securities were held for the Beneficial Ownership of
the Covered Person; and
3. The date that the report was submitted.
E. Exceptions to Reporting Requirements. No reporting by a Covered Person
------------------------------------
shall be required with respect to transactions in public open ended mutual
funds.
F. Responsibility for Administration of the Code. The Chief Risk
---------------------------------------------
Oversight Officer or his or her delegee shall be responsible for the
administration of this Code of Ethics and shall take all steps necessary to
implement the provisions of the Code, including the following:
1. Review of Reports Filed. Reviewing all reports filed under the
Code, determining whether all required reports have been filed and
obtaining from Covered Persons copies of any overdue reports that have
not yet been filed.
10
<PAGE>
2. Remedial Actions and Sanctions for Violations of the Code.
Determining whether the conduct of a Covered Person has violated any
Remedial Actions and Sanctions for Violations of the Code. Determining
whether the conduct of a Covered Person has violated any provision of
the Code and, after consultation with other members of management of
the Firm as necessary, deciding on the appropriate action to be taken
in response to such violations.
3. Annual Reports to the Fund's Board of Directors. Preparing and
providing to the Board of Directors of the Fund, no less frequently
than annually, a written report to the Board describing any issues that
have arisen under Article V of this Code of Ethics (Standards of
Conduct -- Personal Securities Activities) since the last such report
to the Board, including, but not limited to, information about material
violations of Article V by Covered Persons and remedial actions taken
and sanctions imposed in response to those violations.
VI. OBLIGATIONS OF DISINTERESTED DIRECTORS OF THE FUND.
--------------------------------------------------
A. Obligation to Avoid the Disclosure or Misuse of Confidential
------------------------------------------------------------
Information. To the extent that a disinterested director of the Fund should
- -----------
learn of any confidential information, that director should conduct himself or
herself in accordance with the terms of Article I of this Code.
B. Applicability of General Standards Relating to Personal Securities
------------------------------------------------------------------
Activities. Each disinterested director shall be deemed to be a Covered Person
- ----------
solely for purposes of Article V, Section A of this Code relating to purchases
or sales of securities held or to be acquired by the Fund.
C. Reporting of Trades Where Director has Actual Knowledge of Fund
---------------------------------------------------------------
Holdings. If a disinterested director learns or, in the ordinary course of
- --------
fulfilling his or her official duties as a Fund director, should have known,
that during the 15 day period immediately before or after the director's
transaction in a security, the Fund purchased or sold the same security, or the
Fund or FFTW considered purchasing or selling the same security, then the
director shall prepare and file with the Fund a quarterly transaction report in
accordance with Article V, Section D of this Code of Ethics.
11
<PAGE>
VII. RECORDKEEPING REQUIREMENTS.
--------------------------
The Chief Risk Oversight Officer or his or her Delegee shall preserve in an
easily accessible place for five years:
A. This Code of Ethics and any prior versions;
B. A list of persons who were required to make reports pursuant to this
Code of Ethics, or who are or were responsible for reviewing these reports;
C. A copy of each report made pursuant to this Code of Ethics;
D. A record of any violation of this Code of Ethics and any action taken
thereon;
E. A record of any decision to approve the acquisition by Covered Persons
of IPO or private placement securities under Article III of this Code of Ethics;
and
F. A copy of each annual certification report made pursuant to Rule 17j-
1(c)(2)(ii).
G. The Chief Risk Oversight Officer or his or her Delegee is responsible
for maintaining records in a manner to safeguard their confidentiality. Each
Covered Person's records will be accessible only to the Covered Person, the
Chief Risk Oversight Officer or his or her Delegee and senior management of the
firm.
12
<PAGE>
Code of Ethics
Certificate of Receipt
I________________________________ certify that I have received and reviewed a
copy of the Code of Ethics (the "Code") of FFTW Funds, Inc. and the related
members of the Group and that I understand the requirements therein and agree to
be bound by its terms.
______________________________ ______________________________
Date Signature of Covered Person
A-1
<PAGE>
Code of Ethics
Annual Compliance Certificate
2000
I________________________________certify that I have received and read a copy of
the Code of Ethics (the "Code") of Charter Atlantic Corporation and the related
members of the Group and agree to be bound by the Code. I further certify that
no breach of this Code has occurred or is occurring and understand that any such
breach of the Code is grounds for immediate dismissal for cause. I also certify
that I have met all the reporting requirements of the Code.
__________________________________ __________________________________
Date Signature of Covered Person
A-2
<PAGE>
PROPOSED TRANSACTIONS IN
FIXED-INCOME SECURITIES
CLIENT SECURITIES
INITIAL PUBLIC OFFERINGS OR
PRIVATE PLACEMENTS
Employee:
Purchase or Sell (circle one)
Number of Shares/
Expected ----------------
execution date Dealer/Broker Par Amount Security description
- -------------- ------------ ---------- --------------------
Covered Person's signature: __________________________
Approved by: _____________________________
Stephen C. Francis
A-3
<PAGE>
SUMMARY OF PERSONAL INVESTMENT TRANSACTIONS
Quarter Ending _______, 2000
Name (please print): ________________________________
<TABLE>
<S> <C> <C>
Please check as applicable (refer to note below): [_] No transactions to report. [_] Transactions to report as follows:
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
Number of Shares/
Date Par Amount Name /Security Description Price Dealer
Broker/Bank
<S> <C> <C> <C> <C> <C>
FIXED INCOME SECURITIES
- ----------------------------------------------------------------------------------------------------------------------------------
Purchases
- ----------------------------------------------------------------------------------------------------------------------------------
Sales
- ----------------------------------------------------------------------------------------------------------------------------------
EQUITY SECURITIES
- ----------------------------------------------------------------------------------------------------------------------------------
Purchases
- ----------------------------------------------------------------------------------------------------------------------------------
Sales
- ----------------------------------------------------------------------------------------------------------------------------------
OTHER TRANSACTIONS
- ----------------------------------------------------------------------------------------------------------------------------------
Purchases
- ----------------------------------------------------------------------------------------------------------------------------------
Sales
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Has a new account been opened during the past quarter? Yes ____ No ____
If the answer to the question above is yes, please indicate the following:
Name of Broker:________________________ Date Account Established: ___________
Signature: ____________________________ Date: _____________________________
*Shares of mutual funds are not included
A-5
<PAGE>
Report of Securities Holdings
-----------------------------
Name (please print) _____________________________________
Security Number of Shares Broker/Dealer Bank
- -------- ---------------- ------------------
Check here if _____ Initial Report
_____ Annual Report
Signature: ____________________________________ Date: _______________________
*Mutual fund shares do not need to be included
A-6
<PAGE>
HARDING, LOEVNER MANAGEMENT, L.P.
HARDING, LOEVNER FUNDS, INC.
CODE OF ETHICS
--------------
I. INTRODUCTION
------------
High ethical standards are an essential ingredient not only for the success of
Harding, Loevner Management, L.P., HLM Holdings, Inc. and Harding, Loevner
Funds, Inc. (which are hereinafter referred to as the "Firm" collectively), but
also to maintain the confidence of investors. There is a long-standing
recognition of the conflicts of interest that potentially arise in connection
with the personal trading activities of investment personnel. Federal and state
securities laws govern the conduct of individuals associated with investment
advisers and registered investment companies. Such entities are required to
adopt a Code of Ethics containing provisions designed to prevent improper
personal trading by their personnel.
Further, the Firm has a fiduciary duty to its clients and registered investment
company shareholders (which are hereinafter referred to as "clients"
collectively) which requires employees to act solely for the benefit of clients.
Our own long-term business interests are best served by adherence to the
principle that clients' interests come first. It is in the best interests of
this Firm as a professional advisory organization to avoid potential conflicts
of interests, or even the appearance of such conflicts.
Because of the nature of our business, employees may be exposed to information
which constitutes "inside information" or material, non-public information.
Federal securities law proscribes the use of such information for financial
benefit.
Our goal is to impose as few restrictions as possible consistent with protecting
the Firm, our clients and you from the damage that could result from a violation
of the securities laws or from real or apparent conflicts on interests. While
it is impossible to define all situations which might pose such a risk, this
Code of Ethics is designed to address those circumstances where such risks are
likely to arise.
Adherence to the Code of Ethics and the related restrictions on personal
investing is considered a basic condition of employment by the Firm. If you
have any doubt as to the propriety of any activity, you should consult with a
member of the Compliance Committee.
1
<PAGE>
II. APPLICABILITY OF CODE OF ETHICS
-------------------------------
This Code of Ethics shall apply to employees, officers and directors of the Firm
who meet the definition of "access persons" as defined by the Investment Company
Act. "Access person" is defined by the Act as any person "who, in connection
with his regular duties or function makes, participates in, or obtains
information regarding the purchase or sale of a security by a registered
investment company, or whose function relates to the making of any
recommendations with respect to such purchases or sales".
This definition includes those directors, officers, portfolio managers,
analysts, traders, portfolio accountants and others who, because of the nature
of their duties, possess information regarding the securities that client
accounts will purchase or sell. A list of all "access persons" will be
maintained by the Compliance Committee, and the Committee will advise such
persons of their special responsibilities by providing them with a copy of this
Code of Ethics.
Directors of registered companies are not regarded as access persons solely by
reason of being a director of such investment company, except where such
director knew or, in the ordinary course of fulfilling his official duties as a
director of the registered investment company, should have known that during the
15-day period immediately preceding or after the date of the transaction in a
security by the director such security is or was purchased or sold by such
investment company or such purchase or sale by such investment company is or was
considered by the investment company or its investment adviser.
III. THE INVESTMENT ADVISORS ACT AND THE INVESTMENT
----------------------------------------------
COMPANY ACT
-----------
Section 206 of the Investment Advisors Act prohibits "any transaction, practice,
or course of business which operates as a fraud or deceit upon my client or
prospective client". The Investment Company Act includes similar prohibitions
for the protection of mutual fund investors; the actual text of Rule 17j-1,
pursuant to which this Code of Ethics is adopted, is attached as Exhibit A. All
"access persons" are required to familiarize themselves with this Code of
Ethics, including the Rule, and to so acknowledge by executing the
Acknowledgment Form (attached) upon commencement of employment, and annually
thereafter.
IV. RESTRICTIONS ON PERSONAL INVESTING ACTIVITIES
---------------------------------------------
Personal investment activities of all "access persons" employed by this Firm
must remain within the parameters set forth below. "Personal investment
activities" are those involving any securities in which the access person has a
"beneficial interest", as defined in Exhibit B.
(a) Prohibition on Acquiring Securities in an Initial Public Offering
-----------------------------------------------------------------
("IPO") Within 30 days of the Initial Offering. In some cases, the opportunity
- ----------------------------------------------
to invest in an IPO is highly sought after and these opportunities are often
available only to a limited number of investors. Purchase of IPO's by
investment personnel pose two potential conflicts of interest. First, an
opportunity for investment personnel to participate in a "hot issue" or other
attractive IPO is not likely to be viewed as a random event. It may also create
the impression that future investment decisions for clients were pursued for
reasons other than because they were in the best interest of the clients.
Second, the realization of any short-term profits may create at least the
appearance that an investment opportunity that should have been available to
clients was diverted to the personal benefit of an individual employee. The
Firm believes that restricting the purchase of a security in an IPO to after 30
days of the offering will reduce these potential conflicts.
2
<PAGE>
(b) Prior Approval for Participation in any Private Placement. Press
---------------------------------------------------------
accounts have alleged that emerging companies court portfolio managers through
private placements in order to encourage managers to have their clients invest
in the company when it later undertakes an IPO. This produces a direct conflict
since the client's investment may result in an increase in value of the
company's securities and thus an increase in value of the employee's personal
holdings. The Firm recognizes that most private placements will not raise such
conflicts and a complete ban on such investments would restrict many legitimate
investment opportunities. Therefore, acquisitions of securities in a private
placement will be subject to a process of prior review. Further, any "access
person" who takes a position in a private placement is under an affirmative
obligation to disclose that position if the employee plays a material role in a
client's investment decision regarding the same issuer. Once this disclosure is
made, a review of the client's investment decision will be undertaken by
investment personnel with no personal interest in that particular issuer. This
process will accommodate personal investments but provide scrutiny where there
is a potential conflict.
(c) Blackout Periods For Trading in the Same Security as a Client. All
-------------------------------------------------------------
"access persons" are prohibited from buying or selling a security within seven
(7) calendar days before and after any client trades in that security. The
blackout period before a client trades is aimed at preventing "front running".
The blackout period after a client trades is designed to allow dissipation of
the market effect of the client's trade before the "access person" trades.
There may be some circumstances where exceptions to this restriction will
be allowed. Any such requests will be reviewed on an individual basis by the
Compliance Committee.
3
<PAGE>
(d) Pre-Clearance of Personal Securities Transactions. "Access persons"
-------------------------------------------------
will be required to pre-clear personal securities transactions, including
purchases, sales and gifts, through those individuals designated by the
Compliance Committee. This procedure is intended to prevent an unwitting
violation of the Blackout Period. To obtain pre-clearance, an "access person"
should direct a request by e-mail to David Loevner or, in his absence, Daniel
Harding or Simon Hallett or, in their absence, Patrice Singleton, indicating the
details of the proposed trade, including security, quantity, buying or selling,
and the broker to be used. Unless the security is currently subject to a
Blackout Period, or the proposed transaction potentially conflicts with another
provision of the Code of Ethics, the request will be promptly approved by return
e-mail. Approvals are valid for ten (10) days. If the proposed transaction has
not been acted upon within the 10 day time frame, a new request for approval
must be submitted. A hard copy of the request and approval will be placed in
the employee's compliance file.
(e) Duplicate Copies of Broker's Confirmations To Firm. All "access
--------------------------------------------------
persons" are required to direct their brokers to supply duplicate copies of
confirmations of all personal securities transactions to the Firm. The
transactions reported on the Brokers Confirmations will be reviewed and compared
against approved pre-clearance reports, and will allow the Firm to ensure the
effectiveness of its compliance efforts.
(f) Disclosure of Personal Holdings and Quarterly Transactions. Upon
----------------------------------------------------------
commencement of employment, all "access persons" are required to submit
information on their personal securities holdings, substantially in the form of
the Disclosure of Personal Holdings Form (attached). This Disclosure is to be
updated as of January 1st of each year that any "access person" is employed by
the Firm. This Disclosure will ensure that confirmations for all transactions
are being sent to the Firm. It will also capture certain investments (i.e.
private placements) that would not be reflected in traditional broker-dealer
accounts.
Statements listing all reportable securities transactions during the preceding
calendar quarter must be submitted by all "access persons" on a Personal
Trading Activity form on or before the 7th day of January, April, July and
October.
(g) Exempted Transactions. The following transactions are specifically
---------------------
exempted from coverage by this Code of Ethics:
(i) Transactions in securities issued by the Government of the
United States.
(ii) Transactions in shares of open-ended investment companies.
(iii) Transactions involving bank certificates of deposit.
(iv) Transactions effected in any account over which the "access
person" has no direct or indirect influence or control (i.e., blind
trust, discretionary account or Trust managed by a third party).
(v) Transactions which are part of an automatic dividend
reinvestment plan.
V. OTHER RESTRICTIONS
------------------
(a) Duty of Confidentiality. All "access persons" must keep confidential
-----------------------
information concerning a decision to purchase or sell a security on behalf of
clients during the entire period from the time a security is determined to be
the probable subject of an investment decision until the later of (i) the
completion of the buying or selling program for client accounts
4
<PAGE>
or (ii) a determination that the security is no longer the probable subject of
an investment decision. Advance information concerning investment decisions (or
probable investment decisions) must not be disclosed except in the necessary and
proper discharge of one's responsibilities to the Firm and its clients.
(b) Service as a Director. All "access persons" are prohibited from
---------------------
serving on the boards of directors of any publicly traded company absent prior
authorization. Authorization will be based upon a determination that the board
service would be consistent with the interests of the Firm and its clients.
This restriction does not apply to service on the board of any not-for-profit
corporation or organization.
(c) Gifts. All "access persons" are prohibited from accepting or giving
-----
any gift of more than de minimis value from any individual doing business with
or on behalf of a client to which the Firm acts as adviser. For the purposes of
this Code of Ethics "de minimis value" is defined as $150.00. Business meals
and entertainment are excluded from the definition of "gift".
VI. INSIDER TRADING POLICY
----------------------
Court and SEC administrative decisions interpreting the anti fraud provisions of
the federal securities laws generally make it unlawful for any person to trade
securities for themselves or their clients while in possession of material
nonpublic information or selectively to disclose such information to others who
may trade. Violation of these provisions may result in civil and criminal
penalties, including fines and jail sentences, as well as dismissal by the Firm.
Although there are exceptions to these prohibitions, these exceptions are
limited.
"Nonpublic" information is any information that has not been disclosed generally
to the marketplace. Information received about the company that is not yet in
general circulation should be considered nonpublic. Similarly, information
received about another company in circumstances indicating that it is not yet in
general circulation should be considered nonpublic. As a general rule, one
should be able to point to some fact to show that the information is widely
available; for example its publication in The Wall Street Journal or in other
major news publications. Even after XYZ has released information to the press
and the information has been reported, at least 24 hours must be allowed for the
general marketplace to learn of and evaluate that information before you trade
in XYZ securities.
"Material" information is any information about a company or the market for the
company's securities that is likely to be considered important by reasonable
investors, including reasonable speculative investors, in determining whether to
trade. Information that affects the price of the company's securities is likely
to be deemed material.
While it is not possible to identify in advance all information that will be
deemed to be material, some illustrations of such information would include
earnings, dividend actions, mergers and acquisitions, major discoveries, major
new products, significant advances in research, major personnel changes, labor
negotiations, price changes or major marketing changes, government
investigations, or significant litigation.
Material nonpublic information might be inadvertently disclosed to you by a
company director, officer, or employee. It also might be disclosed to you by
persons with business relationships with the company, such as its investment
banker. In such a case, you should immediately report the facts to a member of
the Compliance Committee for a decision regarding appropriate steps.
In addition, whenever you receive information about a company, you should
refrain from trading while in possession of that information unless you first
determine that the information is either public, non-material, or both. You
should also refrain from disclosing the information to others,
5
<PAGE>
such as family, relatives, business, or social acquaintances, who do not need to
know it for legitimate business reasons. If you have any questions at all as to
whether the information is material and nonpublic, you must resolve the question
or questions before trading, recommending trading, or divulging the information.
If any doubt at all remains, you should consult a member of the Compliance
Committee.
If there is any unresolved question in your mind as to the applicability or
interpretation of these standards or the propriety of any trading or disclosure,
the issue should be discussed with a member of the Compliance Committee prior to
trading or disclosure of the information.
6
<PAGE>
VII. OVERSIGHT OF CODE OF ETHICS
---------------------------
A Compliance Committee, comprising David R. Loevner and Daniel D. Harding, will
oversee compliance with this Code of Ethics. Patrice Singleton will be
responsible for collecting reports and maintaining the records of the Committee.
The Compliance Committee shall review all reports made to it and upon
determining that a violation of this Code of Ethics has occurred, may impose
such sanctions or remedial action as it deems appropriate. These sanctions may
include, among other things, suspension or termination of employment with the
Firm.
VIII. RECORDKEEPING
-------------
The Firm will maintain the following records and make them available to the SEC:
(1) A copy of the current Code of Ethics and prior versions within
the past five years.
(2) A record of any violation of the Code of Ethics, and of any
action taken as a result of the violation in the last five years.
(3) A copy of each Personal Trading Activity report made by an access
person in the last five years
(4) A list of all persons who are, or within the past five years have
been required to make reports.
7
<PAGE>
Exhibit A
Text of Rule 17j-1 of The Investment Company Act
------------------------------------------------
The purpose of this Code of Ethics is to provide consistent with the Investment
Company Act and more specifically Rule 17j-1 which reads as follows:
(a) It shall be unlawful for any affiliated person of or principal
underwriter for a registered investment company, or any affiliated person of any
investment adviser of or principal underwriter for a registered investment
company in connection with the purchase or sale, directly or indirectly, by such
person of a security held or to be acquired, as defined in this section, by such
registered investment company --
(1) To employ any device, scheme or artifice to defraud such
registered investment company;
(2) To make to such registered investment company any untrue statement
of a material fact or omit to state to such registered investment
company a material fact necessary in order to make the statements
made, in light of the circumstances under which they are made, not
misleading;
(3) To engage in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon any such
registered investment company; or
(4) To engage in any manipulative practice with respect to such
registered investment company.
8
<PAGE>
Exhibit B
Definition of "Beneficial Interest"
For purposes of this Code of Ethics, persons associated with Harding, Loevner
Management, L.P. will be deemed to have a beneficial interest in securities
owned directly (including ownership through a nominee) and, in addition,
securities which are:
(a) held in the name of another person, if by reason of any contract,
understanding, relationship, agreement or other arrangement the reporting
person obtains benefits substantially equivalent to those of ownership
(e.g., the ability to exercise a controlling influence over the purchase,
sale or voting of such securities or the application of the income derived
from such securities to maintain a common home or to meet expenses which
the reporting person otherwise would meet from other sources);
(b) held in the name of (i) a spouse and minor children or (ii) any
relative, including any relative of the reporting person's spouse, who
shares the same home as the reporting person, absent special circumstances
indicating that the reporting person does not obtain benefits substantially
equivalent to those of ownership;
(c) held in trust for the benefit of any of the persons described in
paragraph (b) above;
(d) held in the name of a spouse, minor children, or other person, even
though benefits substantially equivalent to ownership are not obtained, if
the reporting person can vest or revest title in himself at once or at some
future time;
(e) held by any partnership, closely-held corporation, trust or estate, to
the extent of the reporting person's interest therein; or
(f) held by the reporting person as trustee where either such person or
members of his immediate family have a vested interest in the outcome or
corpus of the trust, or as a settlor of a revocable trust.
9
<PAGE>
Acknowledgment
(for "Access persons")
I hereby acknowledge receipt of the Firm's Code of Ethics and certify that
I have read it and agree to abide by it. I also confirm that I have instructed
all brokerage houses where I maintain an account to supply duplicate copies of
my confirmation statements to Harding, Loevner Management, L.P., Attn:
Compliance Officer. I hereby certify that I have never been found civilly
liable for or criminally guilty of insider trading and that no legal proceedings
alleging that I have violated the law on insider trading are now pending or, to
my knowledge, threatened by any person or authority.
Date: _________ ______________________
(Signature)
______________________
(Print Name)
10
<PAGE>
Acknowledgment
(for non- "Access persons")
I hereby acknowledge receipt of the Firm's Code of Ethics and certify that
I have read it. Although I am not subject to the compliance procedures, I do
agree to adhere to the Code's high ethical standards and related restrictions
placed on personal investing.
Date:__________ ______________________
(Signature)
______________________
(Print Name)
11
<PAGE>
Revised 09/27/99
LAZARD ASSET MANAGEMENT
A Division of
Lazard Freres & Co. LLC. ("Lazard")
Code of Ethics
Set forth below is Lazard's policy on personal securities transactions. As a
general rule, Lazard personnel are reminded that the interests of Lazard clients
take priority over the investment desires of Lazard personnel. All Lazard
personnel must conduct themselves in a manner consistent with Lazard's
requirements as set forth in this Code of Ethics and the respective Codes of
Ethics of The Lazard Funds, Inc. and Lazard Retirement Series, Inc. as well as
the Compliance Manual of Lazard Freres & Co. LLC ("LF&Co" or the "Firm") then in
effect. Please review this Code of Ethics carefully and contact the Compliance
Department if there are any questions.
Personal Securities Accounts Covered
- ------------------------------------
The restrictions set forth below apply to trading for all "Personal Securities
Accounts." These include:
- - Accounts in the Managing Director's or employee's name or accounts in which
the Managing Director or employee or any Related Person has a direct or
indirect beneficial interest other than an account which is managed by
another manager, or by other Lazard portfolio managers, for a fee;
- - Accounts in the name of the Managing Director's or employee's spouse;
- - Accounts in the name of children under the age of 21, whether or not living
with the Managing Director or employee, and relatives or other individuals
living with the Managing Director or employee or for whose support the
Managing Director or employee is wholly or partially responsible (together
with the Managing Director's or employee's spouse, "Related Persons");
- - Accounts in which the Managing Director or employee or any Related Person
directly or indirectly controls, participates in, or has the right to control
or participate in, investment decisions, except for trades where the Managing
Director or employee or Related Person does not provide input.
Restrictions
- ------------
The following restrictions apply to trading for Personal Securities Accounts of
Lazard personnel, all of which are subject to certain de minimus provisions and
may be waived upon consent of Lazard's or; to the extent applicable, LF&Co's,
compliance personnel:
1. No transactions for a Personal Securities Account may be made in a security
that is on the Restricted List;
2. No security may be purchased or sold for a Personal Securities Account:
(a) if the security is currently being considered for purchase or sale for
an Lazard client; or
Page 1
<PAGE>
(b) if the security is being purchased or sold for an Lazard client on that
day or has been purchased or sold for an Lazard client within the
immediately preceding 7 calendar day period;
3. No purchase and sale, or sale and purchase, of a security for a Personal
Securities Account may occur within any 60-day period without prior approval
of Norman Eig, Herb Gullquist or Bill Butterly;
4. No transaction for a Personal Securities Account may be made in securities
offered pursuant to a public offering. Securities offered pursuant to a
private placement may not be purchased for Personal Securities Accounts
without the approval of Norman Eig, Herb Gullquist or Bill Butterly;
5 No transaction for a Personal Securities Account may be made in "deal" or
"rumor" securities, which are defined as securities of companies that are
the subject of reports or rumors of actual or anticipated extraordinary
corporate transactions or other corporate events;
6. Absent approval from the appropriate compliance personnel, Managing
Directors and employees are prohibited from engaging in the trading of
options or futures and from engaging in speculative trading as opposed to
investment activity. When such approval is given and Managing Directors and
employees effect opening transactions in options, the resulting closing
transaction will be considered effected on the day that the opening
transaction was effected for compliance purposes. The Managing Director or
employee must wait 60 days from the date of the opening transaction before
effecting the closing transaction. Managing Directors and employees are
prohibited from engaging in short sales of any security.
7. No transaction may be made in violation of the Material Non-Public
Information Policies and Procedures as outlined in Chapter X of LF&Co's
Compliance Manual; and
8. All transactions for Personal Securities Accounts must be approved by a
Managing Director of Lazard, preferably the Managing Director to whom the
employee reports, and pre-cleared by Don Klein and Bill Butterly, or their
respective representatives. These approvals should be written on the trade
ticket. In addition, each Managing Director or employee should complete and
deliver to Bill Butterly, prior to the transaction, the attached personal
securities transaction form. The procedure for pre-clearing a personnel
trade is explained in greater detail below.
Exemptions
- ----------
The restrictions and prohibitions contained in this Code shall not apply
to:
(a) Purchases or sales of securities which receive the prior approval of
either Norman Eig or Herbert W. Gullquist and Bill Butterly (the
approving officer having no personal interest in such purchases or
sales) because
Page 2
<PAGE>
such purchases or sales are not likely to have any economic impact on
any client account managed or advised by Lazard
(b) Any securities transaction, or series of related transactions during
any 30-day period, involving 500 shares or less in the aggregate of
any security, if the issuer has a market capitalization (outstanding
shares multiplied by the current price per share) greater than US $1
billion ("de minimus exemption"). This provision does not provide an
exemption from the 60-day holding period.
Other Items
- -----------
1. Lazard personnel may not serve on the board of directors of any corporation
(other than a not-for-profit corporation or a related Lazard entity) without
the prior approval of Norman Eig or Herb Gullquist;
2. All Lazard personnel must complete quarterly Personal Security Account
transaction reports. By law, these reports must be returned to Compliance
-----------------------------------------------------
by the tenth day following the end of the quarter. To ensure strict
-------------------------------------------------
compliance with these requirements, the forms should be returned by the
seventh day following the end of the quarter; and
3. Each Lazard Managing Director and employee must annually certify compliance
with the Lazard Code of Ethics with respect to all Personal Securities
Accounts.
Securities Covered
- ------------------
Lazard's policies and procedures regarding personal securities trading set forth
herein apply to transactions involving all equity and debt securities, including
common and preferred stock, investment and non-investment grade debt securities,
investments convertible into or exchangeable for stock or debt securities, or
any derivative instrument relating to any such security or securities index,
including options, warrants and futures, or any interest in a partnership or
other entity that invests in any of the foregoing. Investments in mutual funds,
----------------------------
certificates of deposit and federal government obligations are not covered by
- -----------------------------------------------------------------------------
these policies and procedures. Any other exception to personal securities
- ------------------------------
trading policies and procedures must be approved.
Transaction Approval Procedures
- -------------------------------
Internal Accounts
- -----------------
To pre-clear a transaction being made in a Personal Securities Account held at
the Firm (an "Internal Account"), Lazard personnel must:
1. Electronically complete and "sign" a "New Equity Order" or "New Bond Order"
trade ticket located in the Firm's Lotus-Notes e-mail application under the
heading "Employee Trades." The ticket should be directed to the employee's
Page 3
<PAGE>
supervising Managing Director, or, in the absence of the supervising
Managing Director, to another Lazard Managing Director or one of the Lazard
Directors designated in the database.
2. Upon review of the ticket by the designated supervisor, the employee should
receive an automatic e-mail notification informing her/him that the trade
has been approved or rejected.
3. Following the supervisor's approval, the ticket is transmitted to the
Compliance Department where it is processed and, if approved, is routed to
the trading desk for execution, provided the employee had selected the
"Direct Execution" button when completing the ticket.
The cut-off time for receipt of supervisor-approved tickets in the Compliance
Department is 9.30 a.m. each trading day. Any ticket received after this time
will be processed for execution the next trading day. It is the responsibility
of each employee to ensure that tickets sent to a supervisor for approval
receive the supervisor's timely attention.
NOTE
- ----
In completing a new ticket, if the employee de-selects the "Direct Execution"
button, the ticket will be returned to her/him after Compliance approval for
submission to the trading desk. In such case, the trade must be submitted
within 2 days or it will expire and be null and void.
To assist each employee with monitoring the status of a trade ticket submitted
for approval, the system is designed to generate an e-mail notification to the
employee every time the ticket is reviewed or acted upon by the supervisor,
compliance department or the trading desk. Additionally, every supervisor's
assistant is set up to receive a summary of the each approval request sent to
the supervisor so that in the absence of the supervisor, the assistant would
advise the employee to re-rout the trade to another supervisor. For more
details on the set-up and use of the Employee Trades database, please contact
David Osunkwo at ext. 6065.
Outside Accounts
- ----------------
Lazard personnel may not maintain a securities or commodities account (including
a foreign securities account) at any other broker or dealer or bank (an "Outside
Account") without the prior written consent of the Firm. Where such consent is
given, employees must provide the Firm with the name of the broker-dealer firm
with whom they carry their personal accounts and must request that the broker-
dealer send to Lazard, to the attention of both Donald Klein and Bill Butterly,
---- ---
copies of monthly account statements and all trade confirmations. These same
principles apply to establishing an account at another brokerage house where the
employee has control over the trading in that account (such as a discretionary
account, a nominee account, an account for a general or limited partnership, a
trust account), or an account of a corporation where trading is controlled or
influenced by the Lazard employee. If you already have an Outside Account,
please notify Bill Butterly as soon as possible to facilitate the distribution
and review of your monthly account statements and trade confirmations.
Page 4
<PAGE>
Managing Directors and employees are required to report promptly to Donald Klein
and Bill Butterly any change in status or location of any account in which they
have a beneficial interest as defined above. With respect to a trust account of
which a Managing Director or employee or member of his immediate family is a
beneficiary, the Firm policy requires that the Firm receive duplicate
confirmations and monthly account statements for each such account. Similarly,
Managing Directors and employees are required to report private securities and
commodities transactions effected by or for (i) themselves, (ii) spouses and
unemancipated family members, (iii) accounts over which the employee has control
as described above, or (iv) accounts of which the employee or a member of his
family is a beneficiary, or (v) accounts of family members including accounts of
in-laws where introduced or carried by an employee or Managing Director's member
organization. Deviations from the foregoing policies will be permitted only
with the prior written approval of an appropriate individual with compliance
responsibilities.
To pre-clear a transaction being made in an outside account, Lazard personnel
must follow the "Transaction Approval Procedures" relating to Internal Accounts.
NOTE:
Once a Managing Director or employee receives approval, the Lazard personnel
must transmit appropriate trade instructions to their outside broker within two
days, or the approval will become null and void.
Page 5
<PAGE>
MARATHON ASSET MANAGEMENT LIMITED
CODE OF ETHICS
INTRODUCTION
- ------------
Set forth below is the Code of Ethics ("Code") of Marathon Asset Management
Limited ("Marathon"). The Code applies to every person "associated" with
Marathon ("Associated Person"), which means every officer, director and employee
of Marathon, as well as any person directly or indirectly controlling or
controlled by Marathon. The Code governs conflicts of interest in personal
securities transactions that typically arise when an Associated Person invests
in securities that are held or are to be acquired by the funds or other accounts
for which Marathon acts as the investment adviser ("managed accounts").
The effective date of this Code is December 22, 1999.
Every Associated Person must read, acknowledge receipt and understanding of, and
retain this Code. Any questions regarding the Code should be referred to the
Compliance Officer.
PROHIBITED CONDUCT
- ------------------
Conflicts of Interest
- ---------------------
All Associated Persons are prohibited from engaging in, or recommending, any
securities transaction which places or appears to place their own interests
above that of any managed account. Similarly, all Associated Persons are
prohibited from recommending securities transactions by any managed account
without disclosing his or her interest, if any, in such securities or the issuer
thereof, including without limitation:
a) any direct or indirect beneficial ownership of any securities of
such issuer;
b) any contemplated transaction by such person in such securities;
c) any position with such issuer or its affiliates; and
d) any present or proposed business relationship between such issuer
or its affiliates and such person or any party in which such person
has a significant interest.
Contd.....
<PAGE>
Confidentiality
- ---------------
All Associated Persons are prohibited from divulging the current portfolio
positions, and current and anticipated portfolio transactions, programs and
studies of Marathon or any managed account to anyone unless it is properly
within his or her duties to do so.
Inducements
- -----------
Subject to certain common-sense limits and exceptions, no Associated Person may
accept gifts or benefits in any form from third parties.
For the purposes of this provision, the following gifts or benefits from third
parties will not be considered to be in violation of this requirement:
(i) an occasional meal;
(ii) an occasional ticket to a sporting event, the theatre or comparable
entertainment;
(iii) a holiday gift (food, wine etc.) with an estimated value of no more than
(Pounds)50.
The Compliance Officer must be notified immediately should any Associated Person
receive or be offered any gift or benefit.
Insider Dealing
- ---------------
All Associated Persons are prohibited from engaging in any securities
transaction, for their own benefit or the benefit of others, including managed
accounts, while in possession of "unpublished, price-sensitive" information
concerning such securities.
"Price-Sensitive" information means information for which there is a substantial
likelihood that a reasonable investor would consider it important in making his
or her investment decisions, or information that is reasonably certain to have a
material effect on the price of a company's securities.
Information that should be considered Price-Sensitive includes, but is not
limited to, dividend changes, earnings estimates, changes in previously released
earnings estimates, significant expansion or curtailment of operations, a
significant increase or decline in orders, significant new products or
discoveries, extraordinary borrowing, purchase or sale of substantial assets,
significant merger or acquisition proposals or agreements, major litigation,
liquidity problems, and extraordinary management developments.
Contd.....
<PAGE>
Price-Sensitive information does not have to relate to a company's business.
For example, information about the contents of a forthcoming newspaper or
magazine article that is expected to affect the price of a security should be
considered material. Similarly, information concerning significant transactions
which Marathon intends to execute on behalf of managed accounts could be Price-
Sensitive information and is prohibited from being communicated.
Information is "Unpublished" until it has been effectively communicated to the
marketplace. One must be able to point to some fact to show that the
information is generally public. For example, information appearing in The
Financial Times, The Wall Street Journal or other publications of general
circulation would be considered public as would information released to a
recognised Stock Exchange or announced by a company at a presentation.
All Associated Persons are prohibited from communicating unpublished, price-
sensitive information concerning any security to others unless it is properly
within his or her duties to do so. In addition, care should be taken so that
such information is secure. For example files containing unpublished, price-
sensitive information should be sealed and access to computer files containing
such information should be restricted.
Any violation of this Code can be expected to result in serious sanctions by
Marathon, including dismissal of the persons involved, as well as possible
prosecution by the relevant authorities.
Appointment to other Boards
- ---------------------------
No Associated Person shall serve on the board of directors of any company
without prior authorisation of the Board of Directors of Marathon. Any such
authorisation shall be based upon a determination that the appointment would be
consistent with the interests of Marathon.
PROCEDURES FOR CLEARANCE OF PERSONAL SECURITIES TRANSACTIONS
- ------------------------------------------------------------
The following procedures have been established to aid Associated Persons in
avoiding conflicts of interest and insider dealing, and to aid Marathon in
preventing, detecting and imposing sanctions against such conduct. These
procedures apply to all transactions over which an Associated Person has
discretion, including but not limited to, transactions by self-managed PEPs,
ISAs, pension plans and trusts. The requirements in respect of obtaining consent
apply equally to Connected Persons. A full definition of Connected Persons is
included within Marathon's Compliance Manual but would typically include
spouses, partners and minor children.
The concept of Associated Persons and their Connected Parties is consistent with
the idea of Access persons under US regulation. Marathon is a small company and
information about investment strategy and forthcoming trades is quickly
disseminated. As such, with the exception of non-executive directors, all
Marathon personnel and their Connected Parties are considered to be Access
persons. Non-executives who do not participate in the day to day operation or
management of the business are considered to be Associated Persons, but not
Access persons.
<PAGE>
Every Associated Person must follow these procedures or risk serious sanctions,
including dismissal, substantial personal liability and criminal penalties. If
you have any questions about these procedures you should consult the Compliance
Officer. Interpretative issues which arise under these procedures shall be
decided by, and are subject to the discretion of, the Compliance Officer.
1. Employees or their connected persons wishing to deal for their own account
must FIRST obtain the written consent of a Director or the Compliance
Officer. In the first instance the individual should seek the consent of
the investment director responsible for that particular geographical area.
A Consent Form has been specifically devised for the purpose and should be
used for all trades (see Exhibit D). The Compliance Officer will keep a
record of all consents granted. The consent will be valid for one day.
Thereafter, the employee must seek a further consent.
Non-executive directors (provided that they have no direct involvement in
the day to day running of the business) have a general consent to effect
personal transactions and pre-clearance is not required.
If Clients are dealing in a given Security on the requested day no dealings
will be allowed in that Security until the Client's transactions are
completed.
To prevent frontrunning, consent will not be given for purchases if it is
known, or may reasonably be expected, that clients will purchase the same
stock within the next seven days. In the event that clients do purchase the
same stock within seven days (ie, through previously unforeseeable
circumstances), the purchaser shall be prohibited from selling that
security for a period of six months from the date of the trade. Any profits
realised from a sale of such security within the prescribed six months
shall be subject to disgorgement.
Consent will not be given for sales where there have been purchases of the
same stock for clients in the preceding seven days. Should such a sale take
place, the seller shall disgorge any profits realised between the date of
his sale and the date of the purchase by our clients.
Consent will not be given for sales if it is known, or may reasonably be
expected, that there will be sales of the same stock for any clients within
the next seven days. Again any profits realised on transactions in breach
of this rule will be subject to disgorgement.
All disgorged profits will be surrendered to Marathon and paid over to one
or more charities chosen by the Board of Directors.
2. The Compliance Officer must be notified of all transactions effected by
Access persons as soon as practically possible.
<PAGE>
3. Copies of contract notes for all personal deals by Access persons must be
lodged with the Compliance Officer.
4. A minimum holding period of sixty days is required for personal
investments, other than short dated instruments (e.g. options, futures).
Any proposed sale within this time frame will only be allowed in
exceptional circumstances and will require written consent from a Director
or the Compliance Officer. Any profit realised on short term trades made
without consent shall be subject to disgorgement.
Exempted Transactions
- ---------------------
The requirement to obtain prior clearance for personal securities transactions
shall not apply to:
1. Purchases or sales effected in any account over which the Associated Person
has no direct or indirect influence or control;
2. Purchases or sales which are non-volitional on the part of the
Associated Person;
3. Purchases which are part of an automatic dividend reinvestment plan;
4. Purchases effected upon the exercise of rights issued by an issuer pro rata
to all holders of a class of its securities, to the extent that such rights
were acquired from such issuer, and sales of such rights, so acquired.
REPORTING PROCEDURES
- --------------------
1. Every Associated Person shall disclose all of their personal securities
holdings upon commencement of employment and thereafter on an annual basis
as of December 31st. The disclosure will be limited to the names of all
securities held. The report shall be made on the form attached as Exhibit
A.
2. Every Associated Person shall certify upon commencement of employment and
thereafter on an annual basis as of December 31st that:
(i) they have read and understood the code and recognise that they are
subject thereto;
(ii) they have complied with the requirements of the code; and
(iii) they have reported all personal securities transactions required to
be reported pursuant to the requirements of the Code.
The annual report shall be made on the form attached as Exhibit B.
<PAGE>
3. Every Associated Person shall submit a report no later than ten days (or as
soon as possible in the event of their absence) after the end of each
calendar quarter, of all the securities transactions they have effected in
that quarter. The report shall contain the following information:
(i) the date of the transaction and the name of the shares transacted;
(ii) the nature of the transaction (ie. purchase or sale); and
(iii) the total value of the transaction.
The report shall be made on the form attached as Exhibit C.
4. These reporting requirements will not apply to non-executive directors of
the company. Non-executive directors are required to provide a list, on an
annual basis, of personal transactions undertaken. This list must include
the name of the security, the date, and the nature of the transaction (buy
or sell). The list should be accompanied by an appropriate declaration of
completeness.
<PAGE>
EXHIBIT A
MARATHON ASSET MANAGEMENT LTD
Statement of Personal Securities Holdings as at 31 December 1999
------------------
I certify that at the above date I held shares in the following companies:
_________________________________ _________________________________
_________________________________ _________________________________
_________________________________ _________________________________
_________________________________ _________________________________
_________________________________ _________________________________
_________________________________ _________________________________
_________________________________ _________________________________
_________________________________ _________________________________
_________________________________ _________________________________
_________________________________ _________________________________
_________________________________ _________________________________
_________________________________ _________________________________
_________________________________ _________________________________
Date:____________________________ Name:____________________________
Signature:_______________________
<PAGE>
MARATHON ASSET MANAGEMENT LTD
ACKNOWLEDGEMENT OF CODE OF ETHICS
I acknowledge that:
(i) I have read and understood the Code of Ethics (dated 22 December 1999)
and recognise that I am subject thereto;
(ii) I have complied with the requirements of the Code;
(iii) I have reported all personal securities transactions required to be
reported pursuant to the requirements of the Code of Ethics; and
(iv) I have reported all gifts and benefits offered to me or received by me
from third parties to the Compliance Officer.
Employee Name:
Employee Signature:
Date:
<PAGE>
MARATHON ASSET MANAGEMENT LIMITED Exhibit C
Securities Transaction Report for the quarter ended: 31 December 1999
----------------
To the Compliance Officer, Marathon Asset Management Limited
During the quarter referred to above, I effected the following securities
transactions:
- -------------------------------------------------------------------------------
SECURITY DATE OF (Pounds) AMOUNT OF NATURE OF
TRANSACTION TRANSACTION TRANSACTION
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
I confirm that this constitutes the complete list of transactions with respect
to which I had direct control or influence.
Date:_________________________ Name:______________________
Signature:_________________
<PAGE>
STATEMENT OF POLICY ON PERSONAL SECURITIES TRANSACTIONS
AND CODE OF ETHICS
MARTINGALE ASSET MANAGEMENT, L.P.
Revised April 2000
I. Introduction
------------
A primary duty of all directors, officers and certain employees (defined
below as "advisory persons") of Martingale Asset Management, L.P. (the
"Adviser") when dealing with investment advisory clients, is to conduct
themselves in conformance with the highest ethical standards. Thus, no advisory
person of the Adviser shall engage in any activity that could result in an
actual, potential or perceived conflict of interest, and must avoid any action
which may be perceived as a breach of trust.
This Statement of Policy on Personal Securities Transactions and Code of
Ethics ("Code of Ethics") sets forth the policies concerning the purchase or
sale of securities by advisory persons of the Adviser. It further sets forth
the procedures to be used to report the purchase or sale of any securities by
such person. This Code of Ethics is designed to ensure compliance with the
requirements of Section 204A and 204 of the Investment Advisers Act of 1940, as
amended (the "Advisers Act"), and Rule 204-2(a)(12) thereunder, as well as
Section 17(j) of the Investment Company Act of 1940 (the "1940 Act") and Rule
17j-1 (the "Rule") thereunder. In addition, this Code of Ethics is designed to
provide a program for detecting and preventing insider trading by advisory
persons of the Adviser.
Section 17(j) of the 1940 Act makes it unlawful for an affiliated person of
a registered investment company to engage in transactions in securities which
are also held or are to be acquired by a registered investment company if such
transactions are in contravention of rules adopted by the Securities and
Exchange Commission to prevent fraudulent, deceptive, or manipulative practices.
Section 17(j) broadly prohibits any such affiliate from engaging in any type of
manipulative, deceptive, or fraudulent practice with respect to the investment
company and, furtherance of that prohibition, requires each adviser to a
registered investment company to adopt a written code of ethics containing
provisions reasonably necessary to prevent "advisory persons" from engaging in
conduct prohibited by the Rule. The Rule also requires that reasonable
diligence be used and procedures instituted to prevent violations of such code
of ethics.
A copy of this Code of Ethics shall be circulated to each advisory person
by the designated compliance officer of the Adviser listed on Exhibit A together
---------
with an acknowledgment of receipt which shall be signed and returned to a
designated compliance officer by each advisory person. The designated
compliance officer is charged with responsibility for ensuring that the
requirements of this Code of Ethics are adhered to by all advisory persons.
<PAGE>
This Code of Ethics is not intended to cover all possible areas of
potential liability under the Advisers Act or 1940 Act or under the federal
securities law in general. Persons covered by this Code, therefore, are advised
to seek advice before engaging in any transactions involving securities held or
under consideration for purchase or sale by the Adviser.
In addition, the Securities Exchange Act of 1934 may impose fiduciary
obligations and trading restrictions on advisory persons in certain situations.
It is expected that advisory persons will be sensitive to these areas of
potential conflict, even though this Code of Ethics does not address
specifically these other areas of fiduciary responsibility.
Definitions
- -----------
1. "Advisory person" mean any officer, director or employee involved in
the advisory process, including portfolio managers, traders, employees whose
duties or functions involve them in the investment process, and any employee who
obtains information concerning the investment decisions that are being made for
an advisory client, and any affiliated or control person of the Adviser. For
purposes of this Code of Ethics, advisory persons also include members of such
person's immediate family (i.e., husband, wife, children and who are directly or
indirectly dependents of an advisory person), accounts in which an advisory
person or members of his or her family has a beneficial interest or over which
an advisory person has investment control or exercises investment discretion
(e.g., a trust account).
- -----
2. "Advisory client" means any individual, group of individuals,
partnership, trust or company, including a registered investment company for
whom the Adviser acts as investment adviser.
3. A security is "being considered for purchase or sale" when a
recommendation to purchase or sell a security has been communicated and, with
respect to the person making the recommendation, when such person seriously
considers making such a recommendation.
4. "Beneficial ownership" shall be interpreted in the same manner as it
would be in determining whether a person is subject to the provisions of Section
16 of the Securities Exchange Act of 1934 and the rules and regulations
thereunder, except that the determination of direct or indirect beneficial
ownership shall apply to all securities which an advisory person has or
acquires.
5. "Cash compensation" means any discount, concession, fee, service fee,
commission, asset-based sales charge, loan, override or cash employee benefit
received in connection with the offering of the Adviser's services.
6. "Control" means the power to exercise a controlling influence over the
management or policies of the Adviser.
-2-
<PAGE>
7. "Hot-issue" is defined as securities of a public offering which trade
at a premium in the secondary market whenever such secondary market begins.
8. "Non-cash compensation" means any form of compensation received in
connection with the offering of the Adviser's services that is not cash
compensation, including but not limited to merchandise, gifts and prizes, travel
expenses, meals and lodging.
9. The "purchase or sale" of a security includes the writing of an option
to purchase or sell a security.
10. "Security" shall have the meaning set forth in Section 2(a)(36) of the
1940 Act except that it shall not include shares of registered open-end
investment companies, securities issued by the Government of the United States
(including Government agencies), short term debt securities which are
"government securities" within the meaning of Section 2(a)(16) of the 1940 Act,
banker acceptances, bank certificates of deposit and commercial paper
("Government Securities").
Pre-Approval
- ------------
All purchases and sales (including short sales) of individual Securities
(defined above to exclude Government Securities and other items) must be pre-
approved before an order is placed. Options transactions also require pre-
approval. Approval must be given by one of the persons listed on Exhibit A.
---------
Approval must be obtained in writing (or, in unusual circumstances, promptly
confirmed in writing), initialed by one of the persons listed on Exhibit A, and,
---------
once approved, orders must be executed within one business day of the approval
-----------------------
date. As necessary, before giving approval, the person providing approval will
consult (on a "no name" basis) with the appropriate trader to determine whether
the proposed purchase or sale in any way conflicts with any trading being
carried out on behalf of an advisory client. Advisory persons seeking approval
to acquire or dispose of individual securities should allow sufficient time for
this review and approval process. Records of each approval, and the rational
supporting each such approval, shall be maintained for at least five years after
the end of the fiscal year in which such approval is granted.
Prohibited Purchase and Sales
- -----------------------------
No approval will be given for proposed transactions that violate the
following rules, subject to the limited exception given below. No advisory
person shall purchase or sell (including short sales and options), directly or
indirectly, any security in which he or she has, or by such transaction
acquires, any direct or indirect beneficial ownership, which security at the
time of such purchase or sale:
(1) is being purchased or sold for the account of an advisory client; or
-3-
<PAGE>
(2) was purchased or sold for the account of an advisory client within
seven days before and seven days after the date of such purchase or
sale. Any profits realized during this proscribed period shall be
disgorged.
Additionally, no advisory person shall engage in a transaction, directly or
indirectly, that involves an opportunity that an advisory client could utilize,
unless one of the persons indicated in Exhibit A has confirmed, on behalf of the
---------
Adviser, that the account of the advisory clients do not wish to take advantage
of the opportunity and approves such transaction.
---
These restrictions shall continue to apply until the recommendation has
been rejected or any authorization to buy or sell has been completed or
canceled. Knowledge of any such consideration, intention, recommendation or
purchase or sale is always a matter of strictest confidence.
These restrictions shall not apply to purchase or sales of securities which
receive the prior approval of a person indicated in Exhibit A where that person,
---------
in his or her discretion, has determined that such purchases or sales are only
remotely potentially harmful to any advisory client, where they would be very
unlikely to affect a highly institutional market or where they are clearly not
related economically to the securities to be purchased, sold or held by the
account of an advisory client.
Additional Investment Policies
- ------------------------------
1. Investment Through Mutual Funds Encouraged. All advisory persons are
------------------------------------------
encouraged to make personal investments exclusively through mutual funds, and to
limit their investments in individual securities to mutual funds or to
Government Securities. No prior approval is needed to make such investments.
2. No Trading. All individual security positions are expected to be taken
----------
for investment purposes. Securities trading as distinct from investment is
discouraged. If an advisory person desires to sell a position he or she has
held for less than six months (or desires to re-acquire a recently liquidated
position), the approval request must include an explanation of the reason for
the transaction (mutual funds and Government Securities excepted).
3. Ownership Reports and New Employees. Advisory persons who are new
-----------------------------------
employees of the Adviser shall submit a schedule of current security holdings
within ten days of the date their employment commences, which shall include:
(i) the name, number of shares and cost basis of all securities owned by such
access person and (ii) any securities account such access person maintains with
a broker dealer or bank, and shall subsequently follow this Code of Ethics in
receiving approvals to liquidate or add to their security positions.
4. Private Placements and IPOs. Investments in private placements,
---------------------------
initial public offerings ("IPOs") and other individual securities that are not
generally available to the public may present conflicts of interest even though
such securities may not be currently eligible for acquisition by some or all of
the accounts of advisory clients. Prior approval must be obtained
-4-
<PAGE>
before buying or selling such investments, as with any other individual security
transaction. In addition, with respect to private placements, the approval
request must indicate that the investment is being purchased (or liquidated) on
terms that are substantially the same to the terms available to other similarly
situated private investors, and that the advisory person does not have any
specific knowledge of an imminent public offering or any material nonpublic
information about the issuer. It is expected that any investment in a private
placement, IPO or similar security will be held for at least six months. If the
security subsequently becomes eligible for investment by an account of an
advisory client and is, in fact, purchased by such account, any advisory person
who owns the security will be expected to continue to hold such security for at
least six months following its eligibility.
5. Private Investment Partnerships. Just as investments through mutual
-------------------------------
funds are encouraged and investments in individual securities are discouraged in
order to minimize potential conflicts of interest and/or the appearance of any
conflict of interest, the Adviser likewise encourages advisory persons to effect
their venture investments through venture limited partnerships rather than
individual private placements. Although venture limited partnerships are
preferred over individual private placements, venture limited partnerships
nevertheless can present potential conflicts. Accordingly, while pre-approval
is not required to participate in a venture limited partnership, an advisory
person will be expected to report any transaction involving a venture limited
partnership within 10 days of the investment to one of the persons on Exhibit A.
---------
6. No Directorships. No advisory person may serve on the board of
----------------
directors for any private or public operating company without prior written
approval from one of the persons on Exhibit A. Such directorships are generally
---------
discouraged because of their potential for creating conflicts of interest.
Advisory persons should also restrict their activities on committees (e.g.,
----
advisory committees or shareholder/creditor committees). This restriction is
necessary because of the potential conflict of interest involved and the
potential impediment created for the advisory clients. Advisory persons serving
on board or committees of operating companies may obtain material nonpublic
information in connection with their directorship or position on a committee
that would effectively preclude the investment freedom that would otherwise be
available to the advisory clients.
7. No Special Favors. It goes without saying that no advisory person
-----------------
may purchase or sell securities on the basis of material nonpublic information
or in reciprocity for allocating brokerage, buying securities in an account of
an advisory client, or any other business dealings with a third party.
Information on or advisory to personal investments as a favor for doing business
--------
on behalf of the advisory clients -- regardless of what form the favor takes --
is strictly prohibited. The appearance of "special favor" is also sufficient to
----------
make a personal transaction prohibited under these guidelines.
-5-
<PAGE>
8. Non-Cash Compensation. No advisory person shall directly or indirectly
---------------------
accept or make payments or offers of payments of any non-cash compensation
except as provided below:
(a) gifts that do not exceed an annual amount per advisory person or
other person of $100 and are not preconditioned on achievement of
a sales target;
(b) an occasional meal, a ticket to a sporting event or theater or
comparable entertainment which is neither so frequent nor so
extensive as to raise any question of impropriety and is not
preconditioned on achievement of a sales target;
(c) payment or reimbursement in connection with meetings held for the
purpose of training or education of advisory persons or other
persons provided that:
(i) advisory persons obtain the Adviser's approval to attend
the meeting and attendance by advisory persons is not
preconditioned on the achievement of a sales target or any
other incentives pursuant to a non-cash compensation
arrangement;
(ii) the location is appropriate for the purpose of the meeting;
(iii) the payment or reimbursement is not applied to the
expenses of guests of the advisory person or other person;
and
(iv) the payment or reimbursements not preconditioned on the
achievement of a sales target.
9. No Hot-Issues. No advisory person may purchase or receive a hot issue
-------------
in any of his or her accounts, including any accounts in which the advisory
person has a beneficial interest.
Annual Reporting
- ----------------
Each advisory person shall submit to the designated compliance officer, not
later than ten days after the end of each calendar year, an annual report that
discloses:
(i) The name, number of shares and principal amount of all securities
owned by such access persons; and
(ii) any securities account maintained by such access person with a
broker dealer or bank.
-6-
<PAGE>
Quarterly Reporting
- -------------------
1. Subject to the exceptions set forth below, every advisory person
shall report to the designated compliance officer the information described in
subsection 2 below with respect to transactions in any security in which such
advisory person has, or by reason of such transaction acquires, any direct or
indirect beneficial ownership in the securities.
2. Every report shall be made not later than 10 days after the end of
the calendar quarter in which the transaction to which the report relates was
effected and shall be on the Form attached hereto as Exhibit B or on a form that
---------
contains substantially the same information (i.e., a brokerage confirmation
----
statement) and shall contain the following information:
(a) the date of the transaction, the title and the number of
shares, and the principal amount of each security involved;
(b) the nature of the transaction (i.e., purchase, sale or any
----
other type of acquisition or disposition);
(c) the price at which the transaction was effected; and
(d) the name of the broker, dealer or bank with or through which
the transaction was effected.
3. Any such report may contain a statement that making such report
should not be construed as an admission that an advisory person has any direct
or indirect beneficial ownership in the security to which the report relates.
4. If such access person established a securities account during the
prior quarter, such report must disclose the name of the broker dealer or bank
with which the account was established and the date on which the account was
established.
5. Copies of bank statements or broker's advice containing the
information specified in subsection 2 above may be attached to the report
instead of listing the transactions.
Exceptions to Reporting Requirements and Prohibited Sales and Purchases
- -----------------------------------------------------------------------
Notwithstanding any other provision of this Code, an advisory person
need not make a report with respect to transactions effected for any account
over which such person does not have any direct or indirect influence; and
The reporting provisions and prohibitions on sales and purchases
contained in this Code also shall not apply to:
(a) purchases or sales of securities which are non-volitional on
the part of either the advisory person (e.g., receipt of
----
gifts);
-7-
<PAGE>
(b) purchases of securities which are part of an automatic
dividend reinvestment plan; and
(c) purchases of securities effected upon the exercise of rights
issued by an issuer pro rata to all holders of a class of
its securities, to the extent such rights were acquired from
such issuer, and the sales of such rights so acquired.
Review by Designated Compliance Officer
- ---------------------------------------
The designated compliance officer shall compare all reports of
personal securities transactions with completed and contemplated portfolio
transactions of advisory client to determine whether a violation of the Code of
Ethics may have occurred. No person shall review his or her own report. Before
making any determination that a violation has been committed by any person, the
designated compliance officer shall give such person an opportunity to supply
additional explanatory material.
If the designated compliance officer determines that a violation of
the Code of Ethics has or may have occurred, he or she shall submit his or her
written determination, together with the transaction report, if any, and any
additional explanatory material provided by the individual, to the President or,
if the President shall be the designated compliance officer, the Chairman, who
shall make an independent determination of whether a violation has occurred.
If it is determined that a material violation has occurred, a report
of the violation shall be made to such persons as required by law. If a
securities transaction of the designated compliance officer is under
consideration, the Chairman shall act in all respects in the manner prescribed
herein for the designated compliance officer.
Oversight by Governing Board
- ----------------------------
This Code of Ethics, as revised, has been approved by the Adviser's
governing board. Any material change to this Code of Ethics shall be approved by
such board within six months of such change.
The designated compliance officer shall provide a written report to
the Adviser's governing board no less frequently than annually that (i)
describes any material issues regarding this Code of Ethics and any material
violations thereof and (ii) certifies to such board that the Adviser has adopted
procedures reasonably necessary to prevent advisory persons from violating this
Code of Ethics.
Confidentiality
- ---------------
All reports of securities transactions and any other information filed
pursuant to this Code of Ethics shall be treated as confidential, but are
subject to review as provided herein and by personnel of the Securities and
Exchange Commission.
-8-
<PAGE>
Annual Certification
- --------------------
Each advisory person shall re-certify annually his or her familiarity
with this Code of Ethics and other procedures and shall certify compliance with
these guidelines and procedures.
-9-
<PAGE>
EXHIBIT A
---------
Persons Designated to Give Approval of Transactions:
Patricia J. O'Connor
Arnold S. Wood
Alan J. Strassman
William E. Jacques
Designated Compliance Officer:
Patricia J. O'Connor
<PAGE>
PERSONAL SECURITY TRANSACTION REPORT
Person for whom
Report is being made:___________________________ Quarter Ending __________, 20
____ Please check if a brokerage statement or brokerage trade confirmation(s)
has been submitted directly to the compliance officer by your brokerage
firm for any security transactions in this period.
____ Please check if a brokerage statement or brokerage trade confirmation(s)
has been attached to this report in lieu of completing the report. (If
this box is checked, you need not complete the tables below; however, you
must still sign and date this report.)
There were NO securities transactions reportable by me during the above quarter,
except those listed below. Note: All transactions are reportable (regardless
----
of size) except purchases and sales of shares of registered open-end investment
companies, securities issued by the Government of the United States, short term
debt securities which are "government securities" within the meaning of Section
2(a)(16) of the 1940 Act, bankers acceptances, bank certificates of deposit and
commercial paper. Bank or brokers statements may be attached if desired instead
of listing the transactions. If necessary, continue on the reverse side. If
the transaction is not a sale or purchase, mark it with a cross and explain the
nature of each account in which the transaction took place, i.e., personal,
----
wife, children, charitable trust, etc.
PURCHASES
---------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Date Security Amount/No. of Price Broker Nature of Reviewing
Shares Account Officers Initials
- -----------------------------------------------------------------------------------------------
</TABLE>
SALES
-----
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Date Security Amount/No. of Price Broker Nature of Reviewing
Shares Account Officers Initials
- -----------------------------------------------------------------------------------------------
</TABLE>
Date:
Employee Signature:_______________
Transaction(s) approved (check one)? ___ Yes ___ No
Signature of compliance officer:_______________________
Name (please print):
<PAGE>
EXHIBIT B
- ---------
EXPLANATORY NOTES
- -----------------
This report must be filed quarterly by the 10th day of the month following the
end of the quarter and cover all accounts in which you have an interest, direct
or indirect. This includes any account in which you have "beneficial ownership"
(unless you have no interest or control over it) and non-client accounts over
which you act in an advisory or supervisory capacity.
( ) Tick if you wish to claim that the reporting of the account of the
securities transaction shall not be construed as an admission that you have any
direct or indirect beneficial ownership in such account or securities.
<PAGE>
GUIDELINES FOR PERSONAL TRADING
MARTINGALE ASSET MANAGEMENT, L.P.
Revised April 2000
These guidelines are designed to supplement the official Code of
Ethics and Trading Policies previously adopted by Martingale Asset Management,
L.P. ("the Adviser"), and should be read in conjunction with that Code of Ethics
and the Adviser's Trading Policies. The purpose of these guidelines (as well as
the Code of Ethics and Trading Policies) is to minimize conflicts of interest
(including the appearance of such conflicts).
These procedures are not intended to prohibit conscientious
professionals from making responsible personal investment decisions within the
boundaries reasonably necessary to protect fiduciary relationships owed to the
Adviser's clients (each an "advisory client"). To that end, these guidelines
are designed to encourage investment in a manner that is consistent with the
fiduciary relationship that exists between the Adviser and its advisory clients.
1. WHO IS COVERED. These guidelines apply to all officers, directors
--------------
and control persons of the Adviser. These guidelines also apply to all persons
involved in the advisory process, including portfolio managers, traders,
employees whose duties or functions involve them in the investment process, and
any employee who obtains information concerning the investment decisions that
are being made for the advisory clients, including affiliated persons of the
Adviser. All such persons shall be designated "advisory persons" for purposes
of these guidelines. These guidelines also apply to investments by members of
an advisory person's immediate family (i.e., husband, wife, children and who are
----
directly or indirectly dependents of an advisory person), accounts in which an
advisory person or members of his or her family has a beneficial interest or
over which an advisory person has investment control or exercises investment
discretion (e.g., a trust account).
----
2. INVESTMENT THROUGH MUTUAL FUNDS ENCOURAGED. All advisory persons
------------------------------------------
are encouraged to make personal investments exclusively through mutual funds,
and to limit their investments in individual securities to mutual funds or to
U.S. Government Securities, as that term in defined in the Code of Ethics. No
prior approval is needed to make such investments.
3. INDIVIDUAL SECURITIES REQUIRE PRE-APPROVAL. All purchases and
------------------------------------------
sales (including short sales) of individual Securities (defined in the Code of
Ethics to exclude Government Securities and other items) must be pre-approved
before an order is placed. Options transactions also require pre-approval.
Approval may be given by any of the persons listed in Exhibit A to the Code of
---------
Ethics. Approval must be obtained in writing (or, in unusual circumstances,
promptly confirmed in writing), initialed by one of the persons listed in
Exhibit A, and, once approved, orders must be executed within one business day
- --------- -----------------------
of the approval date. As necessary, before giving approval, the person
providing approval will consult (on a "no
<PAGE>
name" basis) with the appropriate trader to determine whether the proposed
purchase or sale in any way conflicts with any trading being contemplated or
carried out on behalf of an advisory client. Advisory persons seeking approval
to acquire or dispose of individual securities should allow sufficient time for
this review and approval process.
4. NO TRADING. All individual security positions are expected to be
----------
taken for investment purposes. Securities trading as distinct from investment
----------
is discouraged. If an advisory person desires to sell a position he or she has
held for less than six months (or desires to re-acquire a recently liquidated
position), the approval request must include an explanation of the reason for
the transaction (mutual funds and Government Securities excepted).
5. OWNERSHIP REPORTS AND NEW EMPLOYEES. Advisory persons who are new
-----------------------------------
employees of the Adviser shall submit a schedule of current security holdings
within ten days of the date their employment commences, which shall include (i)
the name, number of shares and principal for all securities owned by such access
person and (ii) any securities account such access person maintains with a
broker dealer or bank, and shall subsequently follow these guidelines in
receiving approvals to liquidate or add to their security positions.
6. PRIVATE PLACEMENTS AND IPOS. Investments in private placements
---------------------------
and other individual securities that are not generally available to the public
may present conflicts of interest even though such securities may not be
currently eligible for acquisition by some or all of the accounts of advisory
clients. Prior approval must be obtained before buying or selling such
investments, as with any other individual security transaction. In addition,
with respect to private placements, the approval request must indicate that the
investment is being purchased (or liquidated) on terms that are substantially
the same to the terms available to other similarly situated private investors,
and that the advisory person does not have any specific knowledge of an imminent
public offering or any material non-public information about the issuer. It is
expected that any investment in a private placement, IPO or similar security
will be held for at least six months. If the security subsequently becomes
eligible for investment by an account of an advisory client and is, in fact,
purchased by such account, any advisory person who owns the security will be
expected to continue to hold such security for at least six months following
its eligibility.
7. PRIVATE INVESTMENT PARTNERSHIPS. Just as investments through
-------------------------------
mutual funds are encouraged and investments in individual securities are
discouraged in order to minimize potential conflicts of interest and/or the
appearance of any conflict of interest, the Adviser likewise encourages advisory
persons to effect their venture investments through venture limited partnerships
rather than individual private placements. Although venture limited
partnerships are preferred over individual private placements, venture limited
partnerships nevertheless can present potential conflicts. Accordingly, while
pre-approval is not required to participate in a venture limited partnership, an
advisory person will be expected to report any transaction involving a venture
limited partnership within ten (10) days of the investment to any of the persons
listed on Exhibit A to the Code of Ethics.
---------
-2-
<PAGE>
8. NO DIRECTORSHIPS. No advisory person may serve on the board of
----------------
directors for any private or public operating company without prior written
approval from one of the persons listed on Exhibit A to the Code of Ethics.
---------
Such directorships are generally discouraged because of their potential for
creating conflicts of interest. Advisory persons should also restrict their
activities on committees (e.g., advisory committees or shareholder/creditor
----
committees). The restriction is necessary because of the potential conflict of
interest involved and the potential impediment created for the advisory clients.
Advisory persons serving on boards or committees of operating companies may
obtain material non-public information in connection with their directorship or
position on a committee that would effectively preclude the investment freedom
that would otherwise be available to the advisory clients.
9. NO SPECIAL FAVORS. It goes without saying that no advisory person
-----------------
may purchase or sell securities on the basis of material nonpublic information
or in reciprocity for allocating brokerage, buying securities in an account of
an advisory client, or any other business dealings with a third party.
Information on or advisory to personal investments as a favor for doing business
on behalf of the advisory clients-- regardless of what form the favor takes --
is strictly prohibited. The appearance of a "special favor" is also sufficient
----------
to make a personal transaction prohibited under these guidelines.
10. NON-CASH COMPENSATION. No advisory person shall directly or
---------------------
indirectly accept or make payments or offers of payments of any form of
compensation received in connection with the offering of the Adviser's services
that is not cash compensation, including but not limited to merchandise, gifts
and prizes, travel expenses, meals and lodging, except as provided below:
(a) gifts that do not exceed an annual amount per advisory person or
other person of $100 and are not preconditioned on achievement of
a sales target;
(b) an occasional meal, a ticket to a sporting event or theater or
comparable entertainment which is neither so frequent nor so
extensive as to raise any question of impropriety and is not
preconditioned on achievement of a sales target;
(c) payment or reimbursement in connection with meetings held for the
purpose of training or education of advisory persons or other
persons provided that:
(i) advisory persons obtain the Adviser's approval to attend the
meeting and attendance by advisory persons is not
preconditioned on the achievement of a sales target or any
other incentives pursuant to a non-cash compensation
arrangement;
(ii) the location is appropriate for the purpose of the meeting;
-3-
<PAGE>
(iii) the payment or reimbursement is not applied to the
expenses of guests of the advisory person or other person;
and
(iv) the payment or reimbursements not preconditioned on the
achievement of a sales target.
11. NO HOT ISSUES. No advisory person may purchase or receive
-------------
securities of a public offering which trade at a premium in the secondary market
whenever such secondary market begins in any of his or her accounts, including
any accounts in which the advisory person has a beneficial interest.
12. THESE ARE SUPPLEMENTAL PROCEDURES. All advisory persons also
---------------------------------
remain fully subject to the obligations imposed by the Code of Ethics and the
Adviser's trading policies as contained in the Compliance Manual. With respect
to reporting obligations, these reporting obligations, in brief, require that
all securities transactions be reported not later than 10 days after the end of
the calendar quarter in which the transactions was effected. The reports shall
contain the type of information typically included in a confirmation, namely
identification of the account, the title and amount of the security involved,
the date and nature of the transaction, price at which it was effected, and the
name of the broker, dealer or bank with or through whom the transaction was
effected.
13. EXCEPTIONS. Exceptions to the procedures and requirements
----------
contained in these guidelines will be permitted only in highly unusual
circumstances. Any exception must be documented and approved by any of the
persons listed on Exhibit A to the Code of Ethics.
---------
14. ANNUAL CERTIFICATION. Each advisory person shall re-certify
--------------------
annually his or her familiarity with these guidelines and other procedures and
shall certify compliance with these guidelines and procedures.
-4-
<PAGE>
ATTACHMENT 2
2/23/99
OECHSLE INTERNATIONAL ADVISORS, LLC
-----------------------------------
CODE OF ETHICS
--------------
The reputation of Oechsle International Advisors, LLC ("Oechsle") for integrity
and ethics is one of our most important assets. In order to safeguard this
reputation, we believe that it is essential not only to comply with relevant
federal and state laws and regulations, but also to maintain high standards of
personal and professional conduct. Oechsle's Code of Ethics (the "Code") is
designed to ensure that our conduct is at all times consistent with the highest
of ethical standards, with our fiduciary obligations to our clients, and with
industry and regulatory standards for investment managers.
The Code is based on the principle that the officers, directors, members, and
employees of Oechsle owe a fiduciary duty to our clients to:
. Always place the interests of our clients first.
. Conduct our personal securities transactions in a manner which does
not interfere with client transactions, create an actual or potential
conflict of interest with clients, or otherwise take unfair advantage
of our relationship with our clients.
. Avoid even the appearance of impropriety in our personal actions.
Persons covered by this Code must adhere to this general principle as well as
comply with the Code's specific provisions. It bears emphasis that although the
Code provides guidance with respect to many common situations, it cannot address
every possible circumstance that could give rise to a conflict of interest,
potential conflict, or an appearance of impropriety. Regardless of whether a
specific provision of the Code applies, each of us at Oechsle must conduct his
or her activities in accordance with the general principles embodied in the Code
and in such a way as to avoid any actual or potential conflict of interest or
any abuse of an individual's position of trust and responsibility. Please
remember that even if our clients are not harmed, we cannot take inappropriate
advantage of information we learn through our position as fiduciaries.
Technical compliance with the procedures incorporated in the Code will not
insulate from scrutiny trades which contravene an individual's duties to Oechsle
and its clients. Therefore, to protect yourself and Oechsle, please be alert
for any potential for conflicts of interest, and please consult the General
Counsel whenever questions arise concerning the application of the Code to a
particular situation.
<PAGE>
PERSONS COVERED BY THE CODE
The provisions and requirements of the Code apply to all officers, directors,
members, and employees of Oechsle and its subsidiaries ("Oechsle employees").
In addition, the provisions and requirements of the Code, including the rules
- -----------------------------------------------------------------------------
pertaining to pre-clearance of personal securities transactions, apply to all
- -----------------------------------------------------------------------------
members of any employee's "immediate family." Any family member who is
- ------------------------------------------------------------------------
presently living in your household, or to whose financial support you make a
- ----------------------------------------------------------------------------
significant contribution, is considered to be a member of your immediate family.
- --------------------------------------------------------------------------------
Please bear in mind that the Code applies to all securities accounts:
=====================================================================
(i) in which any Oechsle employee or his or her immediate family have any
direct or indirect beneficial interest (e.g., family trust); or
(ii) over which any Oechsle employee or his or her immediate family
exercise any investment authority; or
(iii) which receive any investment advice from any Oechsle employee or his
or her immediate family.
Please remember that the term "beneficial interest" includes more than ordinary
ownership. In general, you may be deemed to have beneficial ownership under any
of the following circumstances:
1. You have the power to sell or transfer the security, or you have the
power to direct the sale or transfer; or
2. You have the power to vote the security or the power to direct the
vote; or
3. You have an economic interest in the security; or
4. You have the right to acquire, within 60 days, the power to sell, the
power to vote, or an economic interest in the security.
You should consider yourself as having beneficial ownership of a security in the
following situations (which also apply to your immediate family):
1. The security is held by you, whether in bearer form, registered in
your name, or otherwise;
2. The security is held by others for your benefit, such as a security
held for you by a bank, custodian, broker, relative, executor,
administrator, agent, or any other person;
2
<PAGE>
3. The security is held by a trust of which you are the trustee, or in
which you have an economic interest, or where you participate in the
investment decisions or otherwise have direct or indirect influence
or control;
4. The security is held by a trust of which you are the settlor if you
have the power to revoke the trust without obtaining the consent of
all the beneficiaries;
5. The security is held by any partnership in which you are a general
partner, or with respect to which you have direct or indirect
influence or control;
6. The security is held in the name of another person if, by reason of
any contract, understanding, relationship, agreement, or other
arrangement, you obtain therefrom benefits substantially equivalent
to those of ownership;
7. The security is held in the name of another person, even though you
do not obtain therefrom benefits substantially equivalent to those of
ownership, if you can vest or revest title in yourself at any time.
Although persons who are not members of your "immediate family" are not required
to comply with the pre-clearance procedures contained in the Code, they also may
not take improper advantage of information that they may receive from you
regarding the activity or holdings of Oechsle clients. In addition, it would be
a violation of the Code, and, specifically of Oechsle's Insider Trading Policy,
for an Oechsle employee to arrange for a friend or relative to trade in a
security in which that Oechsle employee would be precluded from trading for his
or her own account, or for an Oechsle employee to give information about the
activity or holdings of Oechsle clients to any person for the purpose of
facilitating securities trading by that person.
GENERAL TERMS AND PROVISIONS
----------------------------
These provisions apply to all employees of Oechsle and its subsidiaries.
These provisions apply only to transactions in reportable securities.
A. Reportable Securities are all securities except:
--------------------- ---
(a) shares of registered, open-end investment companies (mutual funds) for
which Oechsle is not an advisor or sub-advisor;
(b) direct U.S. government obligations, such as Treasury bonds, notes, and
bills, and U.S. Savings Bonds;
(c) CDs, bankers' acceptances, and other money-market instruments;
(d) transactions in commodities and options and futures on commodities;
(e) investments in or by hedge funds and commingled funds managed by
Oechsle, in which Oechsle employees may have beneficial interests.
You do not need to report transfers of securities, stock splits, or other such
activity.
3
<PAGE>
Thus, reportable securities include, but are not limited to:
---------------------
(a) any type of equity or debt security (including, without limitation,
common and preferred stock and corporate and municipal bonds and debt
obligations issued by foreign governments);
(b) any rights relating to such a security, such as put and call options,
warrants, and convertible securities;
(c) ADRs;
(d) options and futures on security indexes.
B. Compliance Officer - the Oechsle officer assigned the responsibility of
------------------
administering this Code is the Compliance Officer, James Record, or in his
absence the General Counsel, Paula N. Drake.
C. Pre-Clearance - of all personal securities transactions in reportable
------------- --- -------------
securities is required for all Oechsle employees.
-----------
D. Brokerage Confirmations - copies of brokerage confirmations for each pre-
-----------------------
cleared transaction are required.
E. Blackout Periods - for certain designated periods surrounding client trades
----------------
or while a transaction is being actively considered for a client.
F. Excessive Short-term Trading - is discouraged and profits from such trading
----------------------------
may have to be disgorged.
G. Quarterly Reporting - of personal securities transactions.
-------------------
H. Annual Certification - that the employee has read and understood the Code.
--------------------
PRE-CLEARANCE
-------------
1. General Rule:
- -----------------
Oechsle requires written pre-clearance of personal trades in reportable
securities.
2. Procedures:
- --------------
The pre-clearance requirement is satisfied by completing the Personal Securities
Transaction Pre-Trading Authorization Form (see Exhibit A). Pre-clearance is
------------- ----------------
only effective for the specific trade date (or for the next available market
- ------------------------------------------
session if same-date is not practicable due to foreign market constraints) and
---
for a specific number of shares. Trading instructions given to brokers must be
- -------------------------------- ---------------------------------------------
for same day execution. You may not change the trade date, and you may not
- -----------------------
increase the size of your order, without obtaining a new pre-clearance. You
may, however, decrease the
4
<PAGE>
size of your trade without obtaining a new pre-clearance. Moreover, you need not
place an order for which you have obtained pre-clearance. If you choose not to
place that order, you must obtain a new pre-clearance if you change your mind
and wish to enter the order on a later date. In addition, you must inform the
Compliance Officer in writing if you decide not to execute a pre-cleared trade.
Generally, the date on which you initiate your trade instructions should be the
date on which the trade is actually executed. However, there are some
exceptions. For purposes of this Code, the trade date for a limit order or a
stop-loss order is the date on which you give the order to your broker, not the
date on which the order is finally executed in accordance with your
instructions. Therefore, if your limit or stop-loss order is entered with the
broker in accordance with the pre-clearance requirements and consistent with the
blackout period, the subsequent execution of that trade will satisfy the Code,
even if Oechsle subsequently enters trades for client accounts that are executed
on the same day as your order is executed.
Three signatures are required on the pre-clearance form:
1. The Compliance Officer or the General Counsel in the Boston office (in the
absence of the Compliance Officer), or the Compliance Officer of the
London office, in the case of that office.
2. The Trading Desk.
3. A Managing Principal.
As a general rule, no person may sign a pre-clearance form for himself or
herself. In order to ensure that all personal securities transactions are
conducted in accordance with the Code, the Compliance Officer of the Boston
office will retain copies of all pre-clearance forms in each employee's personal
securities transactions file.
The Compliance Officer and the Trading Desk will monitor trading in pre-cleared
securities among Oechsle clients to ensure that all applicable blackout periods
have been complied with and that there is otherwise no activity in such
securities that would raise questions regarding any conflicts or potential
conflicts.
Exemptions:
- -----------
A. Third Party Accounts. If an Oechsle employee nominally has beneficial
--------------------
ownership over a particular account, but does not exercise direct or
indirect influence or control over that account and provides no investment
advice with respect to the investment decisions made for the account, he or
she may apply to the General Counsel for a waiver from the pre-clearance
provisions of the Code. Waivers are not automatic, are made on a case-by-
case basis, and are conditioned, at a minimum, upon the following:
1. The Oechsle employee discloses to the General Counsel the existence of
the Third Party Account and allows the General Counsel to review, in
her discretion, the governing documents of such accounts.
5
<PAGE>
2. The Oechsle employee establishes to the satisfaction of the General
Counsel that he or she has no direct or indirect influence or control over
the Third Party Account or over investment decisions made for that
account.
3. The Oechsle employee completes the Brokerage Account Certification (see
---
Exhibit B) on an annual basis.
---------
4. The Oechsle employee does not disclose to any person with influence or
control over the Third Party Account any action that Oechsle may or may
not take, or has or has not taken, with respect to any security.
B. Stock Index Futures and Options. The pre-clearance requirements of the Code
-------------------------------
do not apply to purchases and sales of stock index options and stock index
futures. However, such transactions must be reported on the employee's
quarterly personal securities transactions report.
PROHIBITED TRANSACTIONS
-----------------------
The following categories of transactions may not be engaged in by Oechsle
---
employees:
1. Transactions in Conjunction with Oechsle Clients:
------------------------------------------------
A. No Oechsle employee shall cause an Oechsle client to either take or not take
any action for such employee's personal benefit (or the personal benefit of
anyone else) rather than for the benefit of the client. For example, an
employee would violate this Code by causing a portfolio to purchase a
security he or she owned for the purpose of supporting or increasing the
price of that security. Causing a portfolio to refrain from selling a
security in an attempt to protect a personal investment, such as an option
on that security, also would violate this Code.
B. No Oechsle Employee shall use knowledge of Oechsle client transactions to
profit by the market effect of those transactions.
C. No Oechsle employee may use futures or options to take positions in
securities which the Code would prohibit if the positions were taken
directly.
D. No Oechsle employee may purchase a security with knowledge that it is being
contemplated for purchase, or will be purchased, for an Oechsle client. No
Oechsle portfolio manager, analyst or trader may buy or sell a security
within seven calendar days on either side of a date on which the security is
bought or sold for the account of any Oechsle client. As an example, if such
an account purchases a particular security on Day 8, all portfolio managers,
analysts and traders would be precluded from purchasing or selling that
security for his or her own account(s) from Day 1 through Day 15.
6
<PAGE>
For all other Oechsle employees the blackout period is one day before and one
day after any trade by any Oechsle client.
If a previously-entered employee trade falls within the blackout period, the
employee must reverse the trade. Thus, for example, if an employee pre-clears a
trade and purchases the security on Day 1, and an Oechsle client purchases the
security on Day 2, the Oechsle employee must reverse the trade. If the trade
can be reversed prior to settlement, the employee should do so, with the cost of
reversal being borne by the employee. If the trade cannot be reversed prior to
settlement, the employee must engage in an offsetting transaction immediately.
If a loss results, the employee must bear the loss; if a profit results, the
employee must donate the profit to a charity of the employee's choice with
suitable evidence of such donation provided to the General Counsel, or forfeit
the profit to Oechsle.
Exemptions:
- ----------
A. Large Capitalization Stocks.
---------------------------
An Oechsle employee may purchase or sell shares of a security which is being
actively considered for purchase or sale, or which is being purchased or sold,
for Oechsle clients if, given the number of shares the employee is purchasing or
selling and the market capitalization (outstanding shares x current price per
share) of the issuer, the employee's trading could have no material impact on
the price of the security and if Oechsle were to trade in the security, such
trading could have no material impact on the price of the security. This
exemption is subject to prior written approval by the General Counsel, the
Trading Desk, and the Chief Operating Officer. You must specifically request
-----------------------------
this prior approval.
- -------------------
B Option Exercise by Others.
-------------------------
An Oechsle employee who has sold ("written") a put or call option in compliance
with the Code will not violate this or any other provision of the Code if the
put or call is exercised and the Oechsle employee must honor the contractual
commitment to purchase or sell the security, as the case may be.
C. Margin Calls.
------------
An Oechsle employee who maintains securities in a margin account with a broker-
dealer will not violate this provision of the Code if the securities are sold by
the broker-dealer pursuant to a bona fide margin call, provided, however, that
withdrawal of collateral by the employee was not a contributing factor to the
margin call.
D. Dividend Reinvestment.
---------------------
An Oechsle employee will not violate this provision of the Code by participating
in an automatic dividend reinvestment program offered by the issuer of a
publicly traded security.
7
<PAGE>
E. Client Small Investments.
------------------------
An Oechsle employee may engage in a transaction which would otherwise violate
this provision of the Code if (a) the client buying the security, or for whom
the security is being considered, is engaged in an ongoing investment program to
augment an existing position with relatively small regular increments of cash
--
flow, (b) the General Counsel, after consultation with investment personnel,
determines that neither the client's nor the employee's purchases will
materially affect the market price of the security, and (c) the General Counsel
gives prior consent to the transaction.
F. Gifts.
-----
Gifts of securities made to others, such as relatives or charities, are treated
as dispositions of beneficial ownership, and must be pre-cleared prior to
transfer of the securities. However, gifts of securities received, if non-
volitional on the Oechsle employees' part, need not be pre-cleared.
G. Acquisition and Exercise of Certain Rights.
------------------------------------------
The acquisition and exercise of rights that are offered pro rata to all
shareholders is not covered by the Code. Exercise of oversubscription rights,
however, does require pre-clearance.
H. Stock Index Futures and Stock Index Options.
-------------------------------------------
The purchase and sale of stock index futures and stock index options are not
subject to the blackout periods. However, such purchases and sales must be
reported in quarterly reports.
2. Public Offerings:
----------------
No Oechsle employee may purchase equity and equity-related securities in initial
public offerings, whether or not Oechsle client accounts participate in the
offering, except as described below. Oechsle employees may purchase securities
that were the subject of a recent public offering after the offering is
completed, and then only at the prevailing market prices and subject to the
usual pre-clearance procedures. Oechsle employees may not receive special
allocations of "hot issues" from brokers which receive Oechsle business.
8
<PAGE>
Exemptions:
- -----------
A. Oechsle employees are permitted to purchase equity and equity-related
securities in secondary offerings if Oechsle client accounts do not hold the
security and if no Oechsle portfolio manager wishes to participate in the
offering for client accounts.
B. Oechsle employees are permitted to purchase equity and equity-related
securities in rights offerings if the opportunity to purchase is extended
equally to all holders of the company's common stock and the offer is
extended to the employee as a holder of the company's common stock.
C. Oechsle employees are permitted to purchase equity and equity-related
securities in an offering if they are entitled to such purchase by virtue of
being a citizen or resident of a country who qualifies for privatization
issues made available to the public in general.
Any purchase of any security in a public offering, even if permitted under these
rules, must be pre-cleared in writing by the General Counsel.
3. Private Offerings:
-----------------
No Oechsle employee may purchase a security in a private offering without first
obtaining a pre-clearance from the General Counsel. The employee should
complete and submit to the General Counsel a checklist in the form attached as
Exhibit C hereto.
- ---------
Consideration of the prior approval request will take into account, among other
factors, whether the investment opportunity should be reserved for an Oechsle
client(s), and whether the opportunity is being offered to an individual as a
favor designed to influence that employee's judgment in the performance of his
or her job duties at Oechsle or as compensation for services of an investment
advisory nature rendered to the issuer. If approval is granted and the employee
has any material role in subsequent consideration by an Oechsle client of an
investment in the same, or a directly affiliated issuer, the employee must
disclose his or her interest in the private placement to the person making the
investment decision.
4. Short-term Trading:
------------------
Excessive short-term trading increases the risk of conflict of interest, may
over time adversely affect an Oechsle employee's investment judgment on behalf
of Oechsle clients, and may unduly occupy an Oechsle employee's time and
thoughts during working hours. Oechsle employees are hired and compensated on
the assumption that their personal investing will generally be on a long-term
basis.
Therefore, while this Code does not impose an absolute prohibition on short-term
trading, excessive short-term trading is prohibited. Whether the extent of
short-term trading by an employee is "excessive" will be determined on a case-
by-case basis, taking into account all
9
<PAGE>
relevant factors, including conditions prevailing in the securities markets and
the types of securities traded. Persons determined to be engaged in excessive
short-term trading will be subject to imposition of any or all of the sanctions
described at the end of this Code, including disgorgement of profits realized
from the short-term trade.
A short-term trade is any purchase and sale, or sale and purchase, of the same
(or equivalent) securities within 60 calendar days.
Exemptions:
- -----------
A. Option Exercise by Others.
-------------------------
An Oechsle employee who has sold ("written") a put or call option in compliance
with this Code will not have effected a short-term trade if the put or call is
exercised and the Oechsle employee must honor the contractual commitment to
purchase or sell the security, as the case may be, within 90 days of selling the
option.
B. Margin Calls. An Oechsle employee who maintains securities in a margin
------------
account with a broker-dealer will not have effected a short-term trade if the
securities are sold by the broker-dealer pursuant to a bona fide margin call,
provided, however, that withdrawal of collateral by the employee was not a
contributing factor to the margin call.
5. Transactions With or Involving Oechsle Clients:
----------------------------------------------
No Oechsle employee may knowingly initiate a purchase from or sell to an Oechsle
client any securities or other property, nor engage in any transaction to which
an Oechsle client is a party or with which any Oechsle client has a significant
relationship.
6. General Fiduciary Obligation to Clients; Disclosure of Personal Interest:
-------------------------------------------------------------------------
As noted above, Oechsle and its employees have a fiduciary responsibility to
Oechsle's clients. Therefore we must avoid any conduct that would be
detrimental to their interests. In order to fulfill our duty, Oechsle employees
must offer all investment opportunities to Oechsle's clients before taking
------
advantage of such opportunities. Therefore, before trading in any security that
is not covered by an Oechsle analyst, you should ensure that the appropriate
research analyst or portfolio manager is aware that you have identified a
security that you believe would be a good investment, and explain the basis for
your interest in the security. If, after receiving that information, the
analyst or portfolio manager does not wish to recommend the security for
investment by Oechsle clients, you are free to trade, after securing the
necessary pre-approvals. If the analyst or portfolio manger expresses an
interest in that security, however, you must refrain from trading in that
security until a decision has been made as to whether to purchase that security
for Oechsle clients and until any applicable blackout period has expired.
In addition, if one of your personal securities holdings could create a conflict
of interest, or even a potential conflict of interest, with the interest of an
Oechsle client, you must disclose that
10
<PAGE>
conflict or potential conflict to the appropriate analysts or portfolio managers
before participating in any decision that could affect the security you hold.
For example, if you are an analyst, and if you are recommending that Oechsle
should purchase for client accounts securities of any company whose securities
you hold personally, you must disclose the fact that you own the securities to
the portfolio manager(s) who will make that purchase decision before making your
recommendation. Similarly, if you are a portfolio manager and you want to
purchase for client accounts securities of any company whose securities you hold
personally, you must disclose the fact that you own the securities to someone
else involved in investment decisions before initiating the purchase. Please
------
bear in mind, that although not prohibited, as a general matter, Oechsle does
not expect that portfolio managers will hold the same securities as the Accounts
that they manage.
WAIVERS
-------
A written request for a waiver from the prohibited transaction rules may be
granted by the General Counsel after consultation with the applicable personnel,
upon a determination that the waiver is warranted to avoid undue hardship to the
employee and that none of the abuses or potential abuses that the Code is
designed to prevent would occur. Seeking waivers is not encouraged and waivers
will not be granted routinely.
REPORTING
---------
Each Oechsle employee is responsible for complying with the following
reporting requirements:
1. Copies of Confirmations:
-----------------------
Each Oechsle employee must instruct each broker-dealer with whom he or she
maintains an account, and with respect to all other accounts as to which the
employee is deemed to have beneficial ownership, to send promptly to the
Compliance Officer a copy of all transaction confirmations generated for the
account. For your convenience, a form letter for requesting such confirmations
to be sent to Oechsle is attached as part of Exhibit A.
Confirmations must include the account description, trade date, security
description, number of shares or principal amount of each security, the nature
of the transaction (e.g., purchase, sale, etc.), the total price, and the name
of the institution (e.g., broker, bank, etc.) effecting the transaction.
Each brokerage confirmation received by Oechsle is cross-checked against pre-
clearance forms and quarterly securities transaction reports submitted by each
employee. Copies of all confirmations and associated pre-clearance forms are
retained by the Compliance Officer in the employee's personal securities
transaction file.
In order to ensure that brokerage confirmations are received for all employee
brokerage accounts, all employees are required to complete a Brokerage Account
Form (see Exhibit B) and
-------------
11
<PAGE>
to submit an updated form (within 5 business days) whenever an account is added
or deleted. You and members of your immediate family must disclose promptly
every brokerage account that you maintain and every new brokerage account that
you open to the Compliance Officer. In addition, each employee is asked to
certify annually that the list of brokerage accounts that have been reported
previously remains complete and accurate.
2. Transaction Reports:
-------------------
Each Oechsle employee must file a Quarterly Securities Transaction Report (see
---
Exhibit D) with the Compliance Officer within 10 days after the end of each
- ---------
quarter, whether or not the employee entered into any personal securities
transactions during that quarter. Quarterly reports are required by the SEC for
all investment company managers and enable Oechsle to double-check that all
personal securities transactions have been appropriately pre-cleared and
reported to Oechsle.
3. Annual Acknowledgment:
---------------------
By February 28 of each year, every Oechsle employee must sign an acknowledgment
stating that he or she has reviewed, understood, and complied with the
provisions of this Code (see Exhibit E).
-------------
OTHER CONFLICTS OF INTEREST
---------------------------
1. Gifts or Other Preferential Treatment:
-------------------------------------
No Oechsle employee may seek or accept gifts, favors, preferential treatment, or
any special arrangement of material value from certain persons because of the
employee's association with Oechsle. This prohibition applies to anyone who
does business or is soliciting business with any Oechsle entity or Oechsle
client, as well as to any organization (such as any broker, dealer, or
investment adviser) engaged in the securities business.
This rule is intended to permit only the most proper type of customary business
amenities. Listed below are examples of items which would be permitted under
proper circumstances and which are prohibited under the intent of this rule.
These examples are illustrative and not all-inclusive. Notwithstanding these
examples, an Oechsle employee may not, under any circumstances, accept anything
which could lead to or create the appearance of any kind of conflict of
interest. For example, acceptance of any consideration is prohibited if it
would create the appearance of a "reward" or inducement for business conducted
with the person providing the consideration or his employer.
Among items not considered of "material value" which, under proper
circumstances, would be considered permissible are:
(a) Occasional lunches or dinners conducted for business purposes;
12
<PAGE>
(b) Occasional cocktail parties or similar social gatherings conducted for
business purposes;
(c) Occasional attendance at theater, sporting or other entertainment
events; and
(d) Small gifts, usually in the nature of reminder advertising, such as
pens, calendars, etc.
Among items of consideration of "material value" which are not permitted under
---
any circumstances are the following:
(a) Any gift over $250 in value, or any accumulation of gifts which in
aggregate exceeds $250 in value from one source in one calendar year;
(b) Entertainment of a recurring nature such as sporting events, theater,
golf games, etc.;
(c) The cost of transportation to a locality outside the Boston
metropolitan area, and lodging or meals while in another locality,
unless such attendance and reimbursement arrangements have been
approved in advance by the General Counsel;
(d) Personal loans to the Oechsle employee on terms more favorable than
those generally available for comparable credit standing and
collateral; and
(e) Preferential brokerage commissions or spreads or allocation of stock in
"hot issue" initial public offerings for the Oechsle employee's
personal trading account.
2. Directorships and Trusteeships in Outside Organizations:
-------------------------------------------------------
No Oechsle employee may accept a directorship in an unaffiliated company without
the prior notification and written approval of the General Counsel. Persons such
as portfolio managers and analysts whose primary responsibilities include
recommending and selecting securities for the accounts of Oechsle clients will
not be granted approval to accept directorships in companies which might qualify
for investment by any Oechsle clients. Approval will be based upon the
determination that the board service would not be inconsistent with the
interests of Oechsle's clients. If board service is authorized, appropriate
procedures will be implemented to ensure that confidential information is not
obtained or used by either the employee or Oechsle.
No Oechsle employee may accept a position as trustee, executor, custodian, or as
any other fiduciary, or as a private investment adviser or counselor for any
outside account, without the prior notification and written approval of the
General Counsel.
3. Providing Investment Advice to Others:
-------------------------------------
No Oechsle employee may provide investment advice to anyone or manage any
person's portfolio on a discretionary basis, other than for Oechsle clients or
members of the employee's immediate family. Thus, employees should not give
advice to anyone, other than immediate family members, concerning the purchase
or sale of any security. In particular, Oechsle employees may not provide
investment advice for compensation to anyone other than an Oechsle client,
unless the arrangement is disclosed and approved by Oechsle.
13
<PAGE>
4. Improper Use of Funds:
---------------------
No Oechsle employee may pay, or offer or commit to pay, any amount of
consideration which might be or appear to be a bribe, kickback, or other similar
improper use of funds.
5. General Anti-fraud Provision:
----------------------------
No Oechsle employee may violate the anti-fraud provisions of the federal
securities laws and the rules and regulations promulgated thereunder. This
provision covers a broad range of conduct, including, without limitation, the
following:
A. Affirmative Duty to Disclose. Oechsle employees who own a security, or who
----------------------------
have decided to effect a personal transaction in a security, have an
affirmative duty to disclose this information in the course of any
communication about that security when the purpose or reasonable consequence
of such communication is to influence an Oechsle client to buy, hold, or sell
that security. The disclosure of ownership should be part of the initial
communication but need not be repeated in the case of continuing
communications directed to a specific person.
B. Disclosure of Oechsle Information. No information regarding any Oechsle
---------------------------------
client account or actual or proposed securities trading activities of any
Oechsle client may be disclosed outside the Oechsle organization unless the
information has been publicly announced or reported. Oechsle research
information must not be disclosed unnecessarily and never for personal gain.
Information generally about Oechsle and Oechsle clients is confidential, and
should not be disclosed without a valid business purpose.
C. Use of Information. No Oechsle employee may use information from any source
------------------
in a manner contrary to the interest of, or in competition with, any Oechsle
client. In particular, an Oechsle employee may not invest in a company which
could reasonably be considered as a potential investment for Oechsle clients
and which has not been considered by Oechsle analysts until determining with
appropriate investment personnel that no portfolio managers have a current
interest in the company on behalf of an Oechsle client. This rule is not
intended to prohibit any Oechsle employees from uncovering and capitalizing
on new "investment ideas," but requires that Oechsle have the first right to
such ideas for its clients.
D. "Inside" Information and Insider Trading.
----------------------------------------
Neither Oechsle nor any Oechsle employee may utilize "inside" information
about any issuer of securities for personal benefit or the benefit of
clients. Inside information is material information not generally available
to the public. Information is considered "material" if there is a substantial
likelihood that a reasonable investor would consider it important in making
his or her investment decisions, or if it could reasonably be expected to
affect the price of a company's securities. It need not be so important that
it would have changed the investor's decision to buy or sell. Information
that has been disseminated in a
14
<PAGE>
way that makes it available to investors generally (e.g., national business
and financial news wire services, such as Dow Jones and Reuters; national
news services, such as New York Times; SEC reports; brokerage firm reports)
is considered to be public information. But, for example, information given
by a company director to an acquaintance of an impending takeover prior to a
public announcement would be "nonpublic."
No Oechsle employee may trade, either personally or on behalf of others, on
material, nonpublic information (insider trading), or communicate such
information to others who trade in violation of the law (tipping). Although the
pre-clearance, reporting, and trade restriction requirements of this Code apply
only to Oechsle employees and their immediate family members, the insider
trading and tipping restrictions reach beyond to prohibit Oechsle employees from
illegally profiting or from funneling illegal profits to any other person. They
also prohibit Oechsle from insider trading or tipping in client accounts.
No Oechsle employee may solicit inside information from any company, whether or
not Oechsle clients own stock of the company or Oechsle analysts follow the
company.
In addition, please note that the SEC has adopted a rule specifically
prohibiting trading while in possession of material information about a
prospective tender offer before it is publicly announced or trading during a
tender officer if in possession of information which one has reason to know is
not yet public.
Procedures to be Followed When Receiving Inside Information:
- -----------------------------------------------------------
Whenever an Oechsle employee receives information that he or she believes to be
material, nonpublic information, he or she should not trade on his or her own
behalf or on behalf of Oechsle clients in the securities to which the
information relates, tip the information to others, or recommend for purchase or
sale such securities, so long as the information remains nonpublic. In addition,
the employee should contact the General Counsel immediately and should refrain
from disclosing the information to anyone else, including persons within the
Oechsle organization, unless specifically advised to do so by the General
Counsel.
SANCTIONS
---------
Failure to comply with this Code may adversely affect an Oechsle employee's
performance evaluation, may require the employee to give up any benefit derived
from the violation, may require the employee to refrain from personal trading
for a period, and may lead to termination of employment in appropriate cases.
Penalties under the federal securities laws are also possible in certain
circumstances.
Sanctions may include:
- ---------
1. Caution: Administered by the General Counsel;
-------
2. Warning: Administered by the General Counsel;
-------
15
<PAGE>
3. Fine: Assessed by the General Counsel, the Chief Operating Officer,
----
and the Chief Investment Officer;
4. Dismissal: Determined by the Executive Committee;
---------
5. Civil referral to the SEC or other civil regulatory authorities:
---------------------------------------------------------------
Determined by the Executive Committee;
6. Criminal referral: Determined by the Executive Committee.
-----------------
Procedures:
- ----------
When potential violations of the Code come to the attention of the General
Counsel, she will investigate the matter. This investigation may include a
meeting with the employee. Upon completion of the investigation, if necessary,
the General Counsel may meet with senior management (the Chief Operating Officer
and/or the Chief Investment Officer) or other appropriate parties, and a
---
determination will be made as to whether any sanction should be imposed. The
employee will be informed of any sanction deemed to be appropriate. If the
employee believes that such sanction is unwarranted, the employee must provide
the General Counsel with a written explanation of such belief within 30 days of
being informed after such determination. The General Counsel will then arrange
for a review by senior management or other appropriate party and will advise the
employee as to whether the sanction will be imposed, modified, or withdrawn.
The employee will be given an opportunity to submit a written statement to
senior management and may be represented by counsel of his or her own choosing,
at his or her own expense, at his or her election.
The General Counsel will maintain a written record of all exceptions granted
from prohibited transactions under this Code.
16
<PAGE>
EXHIBIT A
PERSONAL SECURITIES TRANSACTION PRE-CLEARANCE FORM
NAME OF EMPLOYEE: ____________________________
ACCOUNT NAME AND NUMBER: ____________________________
DATE OF TRANSACTION: ____________________________
SECURITY NAME: ____________________________
SECURITY ID NUMBER (CUSIP/SEDOL): ____________________________
COUNTRY: _______________ TYPE OF SECURITY: ______________
NUMBER OF SHARES: ___________ PRICE: ___________________
BUY: ____________ SELL: _________________
IS THIS A LIMIT ORDER OR STOP-LOSS ORDER TRADE: YES / NO
------------
NAME/ADDRESS OF BROKER: ____________________________
____________________________
__________________________________________________________
I hereby certify that I am familiar with Oechsle's Code of Ethics, and that
this transaction complies in all material respects with Oechsle's policies. I
am not aware of any material, non-public information concerning this issuer or
the market for its securities, or any pending plans or consideration to purchase
these securities for Oechsle clients.
SIGNATURE: _________________________________ DATE: _______________
AUTHORIZATION
TRADING DESK: _________________________ DATE: ____________
MANAGING PRINCIPAL _____________________ DATE: ____________
COMPLIANCE OFFICER: ___________________ DATE: ____________
*If this pre-cleared trade is not executed, please write canceled across it and
submit a copy of this canceled form to the Compliance Officer.
17
<PAGE>
EXHIBIT A
PERSONAL SECURITIES TRANSACTION PRE-CLEARANCE FORM - (LONDON)
NAME OF EMPLOYEE: ____________________________
ACCOUNT NAME AND NUMBER: ____________________________
DATE OF TRANSACTION: ____________________________
SECURITY NAME: ____________________________
SECURITY ID NUMBER (CUSIP/SEDOL): ____________________________
COUNTRY: _______________ TYPE OF SECURITY: ______________
NUMBER OF SHARES: ___________ PRICE: ___________________
BUY: ____________ SELL: _________________
IS THIS A LIMIT ORDER OR STOP-LOSS ORDER TRADE: YES / NO
------------
NAME/ADDRESS OF BROKER: ____________________________
____________________________
__________________________________________________________
I hereby certify that I am familiar with Oechsle's Code of Ethics, and that
this transaction complies in all material respects with Oechsle's policies. I am
not aware of any material, non-public information concerning this issuer or the
market for its securities, or any pending plans or consideration to purchase
these securities for Oechsle clients.
SIGNATURE: ______________________________ DATE: _______________
AUTHORIZATION
TRADING DESK: ___________________________ DATE: ____________
MANAGING PRINCIPAL: ______________________ DATE: ____________
COMPLIANCE OFFICER: _____________________ DATE: ____________
*If this pre-cleared trade is not executed, please write canceled across it and
submit a copy of this canceled form to the Compliance Officer.
18
<PAGE>
EXHIBIT A
SAMPLE LETTER TO SEND TO YOUR BROKER
TO REQUEST DUPLICATE ACCOUNT INFORMATION
[Broker-Dealer Name]
[Broker-Dealer Address]
RE: Account Number(s)
Dear [Broker]:
Please send a duplicate copy of all trade confirmations (not the monthly
----
statements) relating to the account(s) listed above to:
James Record
Compliance Officer
Oechsle International Advisors, LLC
One International Place, 23/rd/ Floor
Boston, MA 02110
Very truly yours,
[Employee Name]
19
<PAGE>
EXHIBIT B
LIST OF BROKERAGE ACCOUNTS IN WHICH YOU HAVE DIRECT OR INDIRECT BENEFICIAL
OWNERSHIP*
Annual Certification
--------------------
<TABLE>
<CAPTION>
Name of
Broker Name Broker Address Account Number Account Holder Relationship
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
</TABLE>
Name of Employee___________________________________________________
(Print)
I certify that I have disclosed to Oechsle all brokerage accounts in which I
have a direct or indirect beneficial interest.
Signature___________________________________________________________
*Beneficial ownership is explained in the Code of Ethics.
20
<PAGE>
EXHIBIT C
PRIVATE PLACEMENT APPROVAL REQUEST
EMPLOYEE NAME: ___________________________ DATE: ______________
1. COMPANY NAME: ______________________________________
2. Business Operations Summary:
3. Who contacted you regarding this investment? _______________________
4. Which firm/company employs this individual? _______________________
5. Does this individual or firm have a relationship with Oechsle or Oechsle
clients? If so, please explain.
__________________________________________________________________________
6. What is the individual's role within the company? ____________________
7. What is your relationship to the individual? _________________________
8. What is the total amount of the private placement? ___________________
9. What is the value of your proposed investment? _______________________
10. Does this company have publicly traded securities?____________________
11. Is this investment suitable for Oechsle clients? Yes ______ No____
If not, please explain.
_________________________________________________________________
__________________________________________________________________
_____________________________________
Employee Signature
Approved _______ Disapproved ______
Managing Principal _______________________ Date: ______________
General Counsel Signature _______________ Date: ______________
21
<PAGE>
EXHIBIT D
QUARTERLY TRANSACTION REPORT
October 1 - December 31, XXXX
The following is a record of every transaction in which I had, or by reason of
which I acquired, any direct or indirect beneficial ownership in securities from
October 1 - December 31, XXXX excluding transactions which do not have to be
reported under Oechsle's Code of Ethics.
I had no securities transactions for the quarter: [__]
I had the following transactions:
<TABLE>
<CAPTION>
Account Trade Buy / # of Price Name and Description Broker/Dealer
Name / Date Sell shares (ID #) of Security
(Number)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
_______________________________ ________________________
Signature Date
____________________________
22
<PAGE>
Print Name
EXHIBIT E
OECHSLE INTERNATIONAL ADVISORS, LLC
CODE OF ETHICS
ANNUAL CERTIFICATION
I have received a copy of Oechsle International Advisors, LLC's Code of Ethics,
dated February 23, 1999, I have read it and understand it.
I understand that, as a condition of my employment, I am required to comply with
the Code of Ethics. I agree to comply with all provisions of the Code of Ethics,
including, but not limited to, those governing personal securities transactions.
I certify that to the best of my knowledge I have complied with the terms of the
Code of Ethics during the most recent calendar year.
I authorize Oechsle to furnish the information contained in any report of
securities transactions filed by me with the General Counsel or the Compliance
Officer to such federal, state, and self-regulatory authorities as may be
required by law or by applicable rules and regulations.
I certify that I have disclosed to Oechsle all brokerage accounts in which I
have a beneficial interest, and that I have authorized each such brokerage firm
to send directly to Oechsle duplicate copies of all transaction confirmations
for such accounts.
________________________________
Date
_________________________________
Name (Print)
__________________________________
Signature of Employee
23
<PAGE>
PALO ALTO INVESTORS
CODE OF ETHICS
Introduction
This Code of Ethics sets forth the policies and procedures applicable to all
officers, directors, employees and affiliates (defined herein as "Covered
Persons") of Palo Alto Investors ("PAI") regarding insider trading,
confidentiality and business ethics. These policies and procedures are mandatory
and are designed to avoid any possible conflict of interest in carrying out our
responsibilities to our clients and the general public. This Code of Ethics is
adopted pursuant to Section 15(f) of the Securities and Exchange Act of 1934,
Section 204A of the Investment Advisors Act of 1940, and Rule 17J-1 of the
Investment Company Act of 1940.
Each Covered Person is required to read and understand the policies and
procedures contained in this Code of Ethics. If you have any questions, contact
William L. Edwards or the Compliance Officer of PAI. Failure to comply with
these procedures and policies may subject a Covered Person to dismissal from
employment, possible civil and criminal liabilities, penalties or fines,
imprisonment, and/or legal prohibition against further employment in the
securities industry.
Each Covered Person must maintain trading records with PAI for all trading
accounts in which they might or do have a beneficial interest. It is the
responsibility of the Covered Person to ensure that all trading account records
are provided to the Compliance Officer at PAI.
I. INSIDER TRADING
The business of PAI includes obtaining and analyzing information about companies
and their securities to create the basis for profitable investing in securities.
It is, however, illegal under securities laws to use certain types of
information as the basis for trading decisions or recommendations.
Insider Trading.
- ----------------
The term "insider trading" is not defined in the federal securities laws, but
generally is used to refer to the use of material, nonpublic information to
trade in securities (whether or not one is an "insider") or to the communication
of material, nonpublic information to others. In general, the law prohibits:
. trading by an insider while in possession of material, nonpublic
information,
. trading by a non-insider, while in possession of material, nonpublic
information, where the information either was disclosed to the non-
insider in violation of an insider's duty to keep it confidential or
was misappropriated,
. tipping or communication of material, nonpublic information to others,
and
. knowingly assisting someone engaged in any of these activities.
What is "inside" information?
- ------------------------------
"Inside" information is generally defined as information about a company that is
both material and nonpublic (defined below). "Inside" information is
information that has as its source corporate insiders.
1
<PAGE>
Who is an "insider"?
- --------------------
An "Insider" of a corporation is generally its officers, directors, certain
employees, and controlling shareholders, and their close friends and relatives.
Individuals and entities outside a corporation who gain inside information in
the course of dealings with that corporation may be legally considered
"temporary" or "constructive" insiders of the corporation and thus be bound by
the same legal restrictions as traditional insiders (officers, directors and
employees of a company). For example, outside financial advisers, investment
bankers, lawyers or accountants retained to represent or assist the corporation
in major corporate transactions are insiders for purposes of insider trading
laws.
What is "material" information?
- -------------------------------
"Material" information is any information about a company or the market for the
company's securities that is likely to be considered important by reasonable
investors, including reasonable speculative investors, in determining whether to
trade. Information that affects the price of the company's securities is likely
to be deemed material.
Information on the following topics should be considered "material":
- forthcoming dividend declaration/omission
- corporate reorganizations/takeovers
- acquisition/loss of major contract
- event of default
- knowledge of forthcoming press coverage of positive/negative news
- substantial increases/decreases in earnings projections
- substantial mineral finds, regulatory approvals of product,
issuance/denial of patents
What is "nonpublic" information?
- --------------------------------
"Nonpublic" information is any information that has not been disclosed generally
to the marketplace. Information received about the company that is not yet in
general circulation should be considered nonpublic. Similarly, information
received about another company in circumstances indicating that is not yet in
general circulation should be considered nonpublic. As a general rule, one
should be able to point to some fact to show that the information is widely
available; for example, its publication in The Wall Street Journal or in other
major news publications. Even after XYZ has released information to the press
and the information has been reported, at least 24 hours must be allowed for the
general marketplace to learn of and evaluate that information before you trade
in XYZ company.
Procedures Regarding Insider Trading Policy.
- --------------------------------------------
If you receive material, nonpublic information that comes directly or indirectly
from any corporate insider (temporary or traditional) do not trade while in
possession of that information unless you first determine that the information
is either public, non-material or both. You should not disclose the information
to others, such as family, relatives, business, or social acquaintances, who do
not need to know if for legitimate business reasons. If you have any questions
at all as to whether the information is material and nonpublic, you must resolve
the question or questions before trading, recommending trading, or divulging the
information. If any doubts at all remain, you should consult the Compliance
Officer.
2
<PAGE>
Consequences for Trading on Inside Information.
- -----------------------------------------------
Enforcement and prohibition against insider trading is a high priority of the
SEC. Covered Persons who trade on inside information, or tip information to
others who trade, are subject to:
. a civil penalty of the greater of $1 million or up to three times the
profit gained or the loss avoided;
. a jail term of up to ten years and criminal fine of up to $1 million
for individuals and $2.5 million for firms, regardless of the profit
gained or loss avoided
A company or any supervisor who fails to take adequate steps to prevent insider
trading or tipping of inside information is subject to the same punishment as
stated above. Persons guilty of insider trading violations are also open to
private suits for damages by contemporaneous traders in the market.
Any violation by a Covered Person may result in dismissal, suspension without
pay, loss of pay or bonus, loss of severance benefits, demotion or other
sanctions, whether or not any such violation also constitutes a violation of
law. Furthermore, PAI may initiate or cooperate in civil or criminal
proceedings against any Covered Person relating to or arising from any such
violation. Any SEC investigation, even one that does not result in criminal or
civil prosecution can irreparably damage the reputation of PAI and the Covered
Person's career. It is essential to avoid even the appearance of impropriety.
II. CONFIDENTIAL INFORMATION
No confidential information should be used by any Covered Person for direct or
indirect personal benefit during the term of such person's relationship with PAI
and after such relationship has ended.
Client Information.
- -------------------
It is essential that our clients and potential clients know that the
confidential information they entrust to us will be handled with integrity and
discretion. All information about any of our clients and all information
received from clients should be presumed to be confidential.
PAI Information.
- ----------------
We must be careful to protect PAI's own confidential information concerning the
securities transactions of PAI before they are executed, or policies of managers
of PAI derived from confidential communications. All information relating to
PAI's activities, including actual trades for the firm or our clients, is
proprietary to PAI and must be kept confidential.
Procedures Regarding Confidential Information.
- ----------------------------------------------
Confidential information should never be disclosed to any outsider. Caution is
to be taken against making even casual remarks that might disclose confidential
information. Unnecessary copying of confidential documents should be avoided,
and documents containing confidential information should not be displayed where
unauthorized personnel may see them.
3
<PAGE>
At all times, all computer programs; investment, research and trading methods
and techniques; including all information used, produced by or with the
assistance of any employee or affiliate remain the property of PAI. No Covered
Person may exercise any ownership or other rights or interest in any such
property or information, or use such property or information during the course
of any future employment. PAI has the authorization to review and monitor all
employees, affiliates information and correspondence (including, but not limited
to, verbal, written, electronic communication) at any time.
III. POLICIES ON ETHICS AND POSSIBLE CONFLICTS OF INTEREST
Covered Persons should always act in accordance with the Credo of PAI: "The
Client Comes First."
Outside Activity.
- -----------------
Covered Persons are encouraged to engage in worthy activities for their
community or personal development. Such activities, however, should not be
allowed to impair the working efficiency or responsibilities of the individual.
Personal Finance.
- -----------------
Covered Persons are prohibited from having a direct or indirect interest in any
entity from which the covered Person might materially benefit or appear to
benefit as a result of PAI's activities with the entity. Furthermore, Covered
Persons are expected to conduct their personal finances, tax returns, and
investments in a manner that will reflect positively on PAI.
Gifts and Entertainment.
- ------------------------
No Covered Person should give or accept a substantial gift ($100 or more),
excessive entertainment or preferential treatment from any person or company
seeking favor or business with PAI. If you receive an unsolicited gift that has
a value in excess of $100, you must immediately report the gift to the
Compliance Officer, and then donate the gift to any charity of your choice.
IV. POLICIES ON TRANSACTIONS IN PUBLICLY-TRADED SECURITIES
The following policy applies to any account established, or transactions
contemplated, in which a Covered Person has discretionary authority, and which
is the benefit to you (the Covered Person), your spouse, any minor children, any
relative living with you, and any person to whom you contribute support.
This policy does not apply to:
. transactions effected in any account over which you have no direct or
indirect control;
. transactions in securities issued by the government of the United
States or federal agencies, bankers' acceptances, bank certificates of
deposit, commercial paper, variable contracts issued by insurance
companies and shares of unaffiliated, registered open-end investment
companies.
4
<PAGE>
Policy Requirements for Personal Securities Transactions.
- ---------------------------------------------------------
On implementation of this policy, you are required:
. to sign the certificate appearing on the final page stating that you
have read and understand this Code of Ethics, and agree to comply with
it. All Covered Persons will be required to sign this certificate as a
condition of employment.
. to direct account custodian to deliver to Compliance Officer copies of
all your brokerage account statements and confirmations.
. to have all securities trades approved in advance of trading by the
Compliance Officer. William L. Edwards will approve trades in the
Compliance Officer's absence.
Procedures for Personal Securities Transactions.
- ------------------------------------------------
Prior to trading you must seek trade approval with PAI's Compliance Officer. If
a requested trade is not on PAI's "restricted list" (current trading list) the
trade will generally be approved. After approval the Compliance Officer or you
(the Covered Person) will execute trades. In the event PAI is trading or plans
on trading in the security, approval will not be granted for three days after
----------
all client trading is complete. All requests, whether approved or denied, will
be maintained in your trading file.
All Covered Persons are also required:
. at the end of each quarter confirm all trading in your (the Covered
Persons) accounts. Compliance will inform you (the Covered Person) of
any discrepancies in record keeping and will resolve all differences.
Policy Regarding Front-Running and Scalping.
- --------------------------------------------
Any Covered Person, who acquires or has beneficial ownership in a security which
is being purchased or sold, or considered for purchase or sale, by PAI, and
benefits from a personal transaction in that security in such a way that it
could be construed as Front Running or Scalping or unethical in any way, whether
intentional or unintentional, shall necessarily and immediately break the
transaction at his or her own cost.
What is "Front Running"
- -----------------------
"Front Running" is generally defined as the practice of an investment adviser
effecting a securities trade for its own account or the account of an affiliate,
based on non-public information, in order to obtain a profit, prior to executing
the same transaction for a client.
What is "Scalping"
- ------------------
"Scalping" is generally defined as the practice of an investment adviser
purchasing shares of a security shortly before the advisory firm recommends the
security for investment or directs its client to invest in that security, and
then immediately sells those shares at a profit on the rise in market price
following the stock recommendation or client purchase.
5
<PAGE>
Under Front Running and Scalping, Securities regulators often take the position
that any transaction prior to a client transaction can be a breach of fiduciary
duty to the client if the adviser receives a better price.
PAI reserves the right to require you to reverse, cancel or freeze, at your own
expense, any transaction or position in a specific security if PAI believes such
transaction or position might violate this Code of Ethics or appear improper.
In the event that a profit was made on the transaction the proceeds will be
disgorged pro-rata among Palo Alto Investors' Clients.
V. RECORDS
The Compliance Officer shall preserve in an easily accessible place:
. this Code of Ethics and any Code of Ethics superseded by this Code of
Ethics during a Covered Persons employment;
. a record of any violation of this Code of Ethics and any action taken
thereon during a Covered Persons employment
The Compliance Officer shall notify all Covered Persons that they are required
to sign a certificate annually stating they have complied with this Code of
Ethics. The Compliance Officer shall be responsible for reviewing the reports
and reporting to PAI's President any violation or apparent violation of this
Code of Ethics. It is the Compliance Officer's responsible to maintain all
Covered Person's records and reports and to safeguard confidentiality.
VI. SIGNATURE
I certify that I have received and read a copy of the Code of Ethics of Palo
Alto Investors and agree to be bound by this Code. I further certify that no
breach of the Code has occurred or is occurring and understand that any such
breach of the Code is grounds for immediate dismissal, criminal penalties,
and/or substantial personal liabilities. I also certify that I meet and will
continue to meet all reporting requirements of this Code.
Signature: _______________________________ Date: ______________________
Name: _______________________________
6
<PAGE>
PALO ALTO INVESTORS
Employee/Affiliate Trade Ticket
COMPLIANCE APPROVAL and TRADE EXECUTION
Name: ______________________________________________________________________
Brokerage Account Title: ___________________________________________________
- --------------------------------------------------------------------------------
Buy Transaction Security Name/ Number Price Completed
Or Trade Date Ticker Symbol Of Shares Per Share Transaction
Sell Time & Date
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature:__________________________ Date:_____________
Approved By: _______________________ Date:_____________
PAI Compliance Officer
7
<PAGE>
PALO ALTO INVESTORS
Accounts with Brokerage Firms and Financial Institutions
Name:________________________________________________________
I hereby certify that the following is a complete list of all accounts with any
brokerage firm or other financial institution through which any securities
covered by this Code of Ethics may be purchased or sold in accordance with the
Code of Ethics of PAI.
I agree to instruct the Custodian to furnish PAI with copies of all
confirmations of trades and other activity in all accounts.
- --------------------------------------------------------------------------------
Broker Account Account Relationship
Name Number Name [if applicable]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature: ________________________________________ Date: ________________
8
<PAGE>
PALO ALTO INVESTORS
Quarterly Summary of Transactions
Name: _______________________________________________________________________
For the Quarter Ended: ______________________________________________________
- --------------------------------------------------------------------------------
[B]uy/ Transaction Security Description/ Price Executing Broker/
[S]ell Trade Date Ticker Symbol Per Share Dealer
- --------------------------------------------------------------------------------
SAMPLE FORM
- --------------------------------------------------------------------------------
SAMPLE FORM
- --------------------------------------------------------------------------------
SAMPLE FORM
- --------------------------------------------------------------------------------
SAMPLE FORM
- --------------------------------------------------------------------------------
_______ No transactions have been made during this period.
I have provided PAI with a copy of all confirmations and periodic account
statements for all the above transactions.
Signature: SAMPLE FORM Date: __________
-----------
9
<PAGE>
SAMCO FUNDS, INC. &
SEIX INVESTMENT ADVISORS, INC.
CODE OF ETHICS
(Rule 17j-l Policy)
Governing Purchase and Sale of Securities by Each
Officer, Director, and Employee
Effective March 9, 2000
-----------------------
I. Legal Requirement
Rule 17j-l under the Investment Company Act of 1940 ("Rule 17j-1") makes it
unlawful for any director, officer or employee of SAMCO Funds, Inc. ( the
"Fund") or of its investment adviser or principal underwriter (as well as other
persons), in connection with the purchase and sale by such person of a security
"held or to be acquired" by the Fund:
1. To employ any device, scheme or artifice to defraud the Fund;
2. To make to the Fund any untrue statement of a material fact or omit to
state to the Fund a material fact necessary in order to make the
statements made, in light of the circumstances under which they are
made, not misleading;
3. To engage in any act, practice, or course of business which operates or
would operate as a fraud or deceit upon the Fund; or
4. To engage in any manipulative practice with respect to the Fund.
A security is "held or to be acquired" if within the most recent 15 days it
(i) is or has been held by the Fund, or (ii) is being considered by the Fund or
Seix Investment Advisors Inc. (the "Adviser") for purchase by the Fund.
To assure compliance with these restrictions, the Fund and the Adviser
adopt and agree to be governed by the provisions contained in this Code of
Ethics, provided that the Adviser and each person affiliated with the Adviser,
-------------
as applicable, who would otherwise be subject to the provisions of this Code
will instead be governed by the provisions of the Code of Ethics of the Adviser
as long as such Code of Ethics and any changes thereto have been approved in
accordance with the requirements of Rule 17j-1, if applicable, provided further
----------------
that the Adviser shall provide to the Compliance Officer, in advance of each
- ----
meeting of the Board of Directors, information regarding any violations of the
Code of Ethics of the Adviser, as applicable, involving persons who would
otherwise be Access Persons hereunder whose violations were relevant to the
Fund.
<PAGE>
II. General Principles
The Fund shall be governed by the following principles and shall apply them
to their directors, officers, employees and "Access Persons," as applicable./1/
A. No Access Person shall engage in any act, practice or course of conduct
that would violate the provisions of Rule 17j-l set forth above.
B. The interests of the Fund and its shareholders are paramount and come
before the interests of any Access Person or employee.
C. Personal investing activities of all Access Persons and employees shall be
conducted in a manner that shall avoid actual or potential conflicts of
interest with the Fund and its shareholders.
D. Access Persons shall not use such positions, or any investment
opportunities presented by virtue of such positions, to the detriment of
the Fund and its shareholders.
III. Substantive Restrictions
A. The price paid or received by the Fund for any security should not be
affected by a buying or selling interest on the part of an Access Person,
or otherwise result in an inappropriate advantage to the Access Person. To
that end:
(a) no Access Person shall enter an order for the purchase or sale of a
security which the Fund is, or is considering, purchasing or selling
until the day after the Fund's transactions in that security have been
completed unless the Compliance Officer determines that it is clear
that, in view of the nature of the security and the market for such
security, the order of the Access Person will not affect the price
paid or received by the Fund, provided that the provisions of this
-------------
paragraph III.A shall not apply to any director of the Fund who is not
an "interested person" of the Fund (as defined in Section 2(a)(19) of
the Investment Company Act of 1940) except with respect to securities
transactions where such director knew or, in the ordinary course of
fulfilling his or her official duties as a director of the Fund,
should have known that such security was being purchased or sold by
the Fund or a purchase or sale of such security was being considered
by or with respect to the Fund; and
______________
/1/ An "Access Person" is (1) each director, or officer of the Fund, or the
Adviser; (2) any natural person in a control relationship (25% ownership)
to the Fund and the Adviser; (3) each of those employees of the Fund and
the Adviser who in connection with his or her regular duties obtains
information about the purchase or sale of a security by the Fund or whose
functions relate to the making of such recommendations, provided that,
-------------
each Access Person who is affiliated with the Adviser will be governed by
the provisions of the Code of Ethics of the Adviser and will not be
subject to the provisions of this Code.
2
<PAGE>
(b) a Portfolio Manager of the Fund may not buy or sell a security within
seven days before or after the Fund trades in the security./2/
B. No "Investment Person" may acquire any securities issued as part of an
initial public offering of the issuer./3/
C. Each Investment Person must seek prior approval from the Compliance Officer
for private placement transactions. Such approval shall take into account,
among other factors, whether the investment opportunity should be reserved
for the Fund and whether the opportunity is being offered to such person
because of his or her position with the Fund. Any such Investment Person
who has been authorized to acquire securities in a private placement must
disclose his or her interest if he or she is involved in the Fund's
consideration of an investment in such issuer. Any decision to acquire such
issuer's securities on behalf of the Fund shall be subject to review by
Investment Persons with no personal interest in the issuer.
D. An Investment Person may not profit from the purchase and sale or sale and
purchase of the same or equivalent securities within sixty calendar days.
Nothing in this restriction shall be deemed to prohibit avoidance of a net
loss from a purchase and sale or sale and purchase of the same or
equivalent securities within a period shorter than sixty calendar days.
E. An Investment Person must not accept gifts in excess of limits contained in
Conduct Rule 3060 of The National Association of Securities Dealers from
any entity doing business with or on behalf of the Fund or the Adviser.
F. An Investment Person shall not serve on the boards of directors of publicly
traded companies, or in any similar capacity, absent the prior approval of
such service by the Compliance Officer following the receipt of a written
request for such approval. In the event such a request is approved,
procedures shall be developed to avoid potential conflicts of interest.
G. Any profits derived from securities transactions in violation of paragraphs
A, B, C or D, above, shall be forfeited and paid to the Fund for the
benefit of its shareholders. Gifts accepted in violation of paragraph E
shall be forfeited, if practicable, and/or dealt with in any manner
determined appropriate and in the best interests of the Fund and its
shareholders.
H. The restrictions of this Section III shall not apply to the following
transactions unless the Compliance Officer determines that such
transactions violate the General Principles of this Code:
1. reinvestments of dividends pursuant to a plan;
____________________
/2/ "Portfolio Managers" include those employees of the Fund or the Adviser
authorized to make investment decisions on behalf of the Fund.
/3/ An "Investment Person" includes any Portfolio Manager or employee of the
Fund or the Adviser such as a securities analyst and trader, who advises
Portfolio Managers or executes their decisions.
3
<PAGE>
2. transactions in: short-term securities issued or guaranteed by an
agency or instrumentality of the U.S. Government; bankers'
acceptances; U.S. bank certificates of deposit; and commercial paper;
3. transactions in which direct or indirect beneficial ownership is not
acquired or disposed of;
4. transactions in accounts as to which an Access Person has no
investment control, subject, as applicable, to subparagraph IV.A 4;
5. transactions in accounts of an Access Person for which investment
discretion is not maintained by the Access Person but is granted to
any of the following that are unaffiliated with the Adviser or
Manager: a registered broker-dealer, registered investment adviser or
other investment manager acting in a similar fiduciary capacity,
provided the following conditions are satisfied:
-------
(a) The terms of the account agreement ("Agreement") must be in
writing and filed with the Compliance Officer prior to any
transactions;
(b) Any amendment to the Agreement must be filed with the Compliance
Officer prior to its effective date;
(c) The Agreement must require the account manager to comply with
the reporting provisions of paragraph 3 of Section IV.A;
(d) The exemptions provided by this Section shall not be available
for a transaction or class of transactions which is suggested or
directed by the Access Person or as to which the Access Person
acquires advance information; and
6. transactions in securities in connection with an employer sponsored or
other tax qualified plan, such as a 401(k) plan, an IRA, or ESOP, in
an amount not exceeding $1,000 in any calendar month.
7. transactions in shares issued by open-end investment companies.
IV. Procedures
A. To enable the Fund to determine with reasonable assurance whether the
provisions of Rule 17j-l (b) and this Code of Ethics are being observed by
its Access Persons:
1. Upon commencement of employment by the Fund or otherwise assuming the
status of "Access Person", each Access Person shall within ten days of
attaining such status disclose in writing, in a form acceptable to the
Compliance Officer, all
4
<PAGE>
direct or indirect "Beneficial Ownership" interests of such Access
Person in "Reportable Securities."/4/ Such form shall include, at a
minimum:
a. The title, number of shares and principal amount of each security
in which the Access Person had any direct or indirect Beneficial
Ownership when the person became an Access Person;
b. The name of any broker, dealer or bank with whom the Access
Person maintained an account in which any securities were held
for the direct or indirect benefit of the Access Person as of the
date the person became an Access Person; and
c. The date that the report was submitted by the Access Person.
2. Each Access Person shall obtain the prior approval of the Compliance
Officer of all personal securities transactions in Reportable
Securities.
3. Each Access Person shall notify the Compliance Officer of all
brokerage accounts in which he or she has any beneficial interest (a)
within ten days of receipt of this Code or (b) within ten days after
the later opening of any such account. With respect to any new account
established by the Access Person in which any securities are held for
the direct or indirect benefit of the Access Person, the following
information must be reported:
a. The name of the broker, dealer or bank with whom the Access
Person established the account;
b. The date that the account was established; and,
c. The date that the report is submitted by the Access Person.
______________
/4/ (a) "Beneficial Ownership" generally means having a direct or indirect
pecuniary interest in a security and is legally defined to be beneficial
ownership as used in Rule 16a-1(a)(2) under Section 16 of the Securities
Exchange Act of 1934. Beneficial ownership is presumed regarding securities
and accounts held in the name of a spouse or any other family member living
in the same household. Beneficial ownership also extends to transactions by
entities over which a person has ownership, voting or investment control,
including corporations (and similar entities), trusts and foundations.
(b) "Reportable Securities" include generally all securities, and financial
instruments related to securities, except: securities issued by, or that
are direct obligations of, the United States Government; bankers'
acceptances; bank certificates of deposit; commercial paper; and shares of
registered open-end investment companies.
5
<PAGE>
4. Each Access Person, with respect to each brokerage account in which
such Access Person has any beneficial interest shall arrange that the
broker shall mail directly to the Compliance Officer at the same time
they are mailed or furnished to such Access Person (a) duplicate
copies of brokers' advice covering each transaction in Reportable
Securities in such account, (b) copies of periodic statements with
respect to the account, and (c) copies of broker trade confirmations.
5. Annually, each Access Person must submit a report containing the
following information (which information must be current as of a date
no more than 30 days before the report is submitted):
a. The title, number of shares and principal amount of each security
in which the Access Person had any direct or indirect Beneficial
Ownership;
b. The name of any broker, dealer or bank with whom the Access
Person maintains an account in which any securities were held for
the direct or indirect benefit of the Access Person; and
c. The date that the report is submitted.
6. The provisions of this Section IV.A shall not apply to any director of
the Fund who is not an "interested person" of the Fund (as defined in
Section 2(a)(19) of the Investment Company Act of 1940) except with
respect to reporting of securities transactions where such director
knew or, in the ordinary course of fulfilling his or her official
duties as a director of the Fund, should have known that, during the
15-day period immediately preceding or after the date of a transaction
in a security by the director, such security was purchased or sold by
the Fund or a purchase or sale of such security was considered by the
Fund or the Adviser.
7. Notwithstanding the provisions of this Section IV.A. no Access Person
shall be required to make any report with respect to securities held
in any account over which such person does not have any direct or
indirect influence or control.
B. The Compliance Officer shall notify each Access Person that he or she is
subject to this reporting requirement, and shall deliver a copy of this
policy to each Access Person. The Compliance Officer shall annually obtain
written assurances from each Access Person that he or she is aware of his
or her obligations under this Code of Ethics and has complied with the Code
and with its reporting requirements.
C. The Compliance Officer shall cause a system of monitoring personal
investment activity by Access Persons to be designed that would identify
abusive or inappropriate trading patterns or other practices of Access
Persons. The Compliance Officer shall report on such system to the Board of
Directors of the Fund at the next Board meeting following its design and
thereafter in connection with the annual review of this Code referred to in
paragraph IV.G, below.
6
<PAGE>
D. The Compliance Officer shall report to the Board of Directors of the Fund
at each meeting regarding the following matters not previously reported:
1. Any information pursuant to Sections IV.A.4 and 6 with respect to each
reported transaction in a security which was held by or acquired by
the Fund within 15 days before or after the date of the reported
transaction or at a time when, to the knowledge of the individual
responsible for monitoring compliance with the Code of Ethics, the
Fund or the investment adviser was considering the purchase or sale of
such security, unless the transaction was a reinvestment of dividends
pursuant to a plan.
2. With respect to any transaction not required to be reported to the
Board of Directors by the operation of subparagraph (1) that he
believes nonetheless may evidence violation of this policy.
3. Apparent violations of the reporting requirement.
4. Other material violations of this Code of Ethics of which the
Compliance Officer has become aware since the previous report pursuant
to this Section IV.D.
5. Any violations of the Code of Ethics of the Adviser reported by the
Adviser in accordance with Section I hereof.
6. The results of monitoring of personal investment activities of Access
Persons in accordance with the procedures referred to in Section IV.C
hereof.
E. The Compliance Officer shall have discretion not to make a report to the
Board of Directors under paragraph IV.D if he or she finds that by reason
of the size of the transaction, the circumstances or otherwise, no fraud or
deceit or manipulative practice could reasonably be found to have been
practiced on the Fund in connection with its holding or acquisition of the
security or that no other material violation of this Code has occurred. A
written memorandum of any such finding shall be filed with reports made
pursuant to this Code.
F. The Board of Directors shall consider reports made to it hereunder and upon
discovering that a violation of this Code has occurred, the Board of
Directors may impose such sanctions, in addition to any forfeitures imposed
pursuant to Section III.G. hereof, as it deems appropriate, including,
among other things, a letter of sanction or suspension or termination of
the employment of the violator.
G. The Compliance Officer shall report to the Board of Directors on an annual
basis concerning existing personal investing procedures, violations during
the prior year, sanctions imposed and any recommended changes in existing
restrictions or procedures. The Compliance Officer shall also certify on an
annual basis that the Fund, the investment adviser, and the principal
underwriter, as applicable, has adopted procedures necessary to prevent
Access Persons from violating the Code.
H. The Board of Directors shall review the Code and its operation at least
once a year.
7
<PAGE>
I. This Code and any related procedures, a copy of each report by (or
duplicate brokers' advice for the account of) an Access Person, any written
report or memorandum hereunder by the Compliance Officer, and lists of all
persons required to make reports shall be preserved with the Fund's records
for the period required by Rule 17j-l.
8
<PAGE>
shapiro Capital Management Company Inc.
IV. Code of Ethics
A. Responsibility. It is the responsibility of all supervisory personnel to
ensure that the Company conducts its business with the highest level of
ethical standards and in keeping with its fiduciary duties to its clients.
B. Duty to Clients. The Company has a duty to exercise its authority and
responsibility for the benefit of its clients, to place the interests of
its clients first, and to refrain from having outside interests that
conflict with the interests of its clients. The Company must avoid any
circumstances that might adversely affect or appear to affect its duty of
complete loyalty to its clients.
C. Prohibited Acts.
1. Employing any device, scheme or artifice to defraud;
2. Making any untrue statement of a material fact;
3. Omitting to state a material fact necessary in order to make a statement,
in light of the circumstances under which it is made, not misleading;
4. Engaging in any fraudulent or deceitful act, practice or course of
business; or,
5. Engaging in any manipulative practices.
D. Conflicts of Interest. The Company has a duty to disclose potential and
actual conflicts of interest to their clients. All IARs and solicitors have
a duty to report potential and actual conflicts of interest to the Company.
Gifts (other than de minimis gifts) should not be accepted from persons or
entities doing business with the Company.
E. Use of Disclaimers. The Company shall not attempt to limit liability for
willful conduct or gross negligence through the use of disclaimers.
F. Suitability. The Company shall only recommend those investments that are
suitable for a client, based upon the client's particular situation and
circumstances.
<PAGE>
G. Duty to Supervise. Advisers Act Section 203(e)(5) The Company is
responsible for ensuring adequate supervision over the activities of all
persons who act on its behalf. Specific duties include, but are not limited
to:
1. Establishing procedures that could be reasonably expected to prevent and
detect violations of the law by its advisory personnel;
2. Analyzing its operations and creating a system of controls to ensure
compliance with applicable securities laws;
3. Ensuring that all advisory personnel fully understand the Company's
policies and procedures; and,
4. Establishing a review system designed to provide reasonable assurance that
the Company's policies and procedures are effective and are being followed.
<PAGE>
SUBJECT: P136 Code of Ethics
----------------------------------------------------------------------
DATE: 6/98 PAGE 1 OF 12
--------------------------------------------------- ------ ----
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
POLICY Smith Breeden Associates, Inc. serves as investment manager of
the Smith Breeden Group of Mutual Funds. To ensure compliance
with the requirements of Section 17(j) of the Investment Company
Act of 1940 and of Rule 17j-1 thereunder, and Rule 206 of the
Investment Advisers Act, the Company has adopted a Code of
Ethics.
-----------------------------------------------------------------
CONDITION OF Employees are required to read and agree to follow the
EMPLOYMENT provisions of the Code of Ethics as a condition of employment.
Employees are required to certify that they will abide by the
terms of the Code upon employment and annually thereafter.
-----------------------------------------------------------------
PROVISIONS OF A copy of the Code of Ethics is included in this manual.
THE CODE Additional copies can be obtained from the Company's Compliance
Officer.
<PAGE>
SUBJECT: P136 Code of Ethics
----------------------------------------------------------------------
DATE: 6/98 PAGE 2 OF 12
------------------------------------------------------ --- ----
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CODE OF ETHICS
SMITH BREEDEN ASSOCIATES, INC.
------------------------------
Adopted as of October 22, 1992
Revised as of October 10, 1996
Revised as of June 10, 1997
Revised as of June 9, 1998
In order to ensure that personnel of Smith Breeden Associates, Inc. (the
"Company") and the Smith Breeden Mutual Funds (the "Funds") comply with the
requirements of Section 17(j) of the Investment Company Act of 1940, as amended
(the "Act"), and of Rule 17j-1 thereunder, and, with respect to the Company, the
Investment Advisers Act of 1940 (the "Advisers Act"), the Company and the Funds
have adopted the Code of Ethics (the "Code") set forth below. As used in this
Code of Ethics, the term "Client" shall include the Funds as it applies to
personnel of the Funds, and shall include the Funds and other clients of Smith
Breeden Associates, Inc., as it applies to personnel of Smith Breeden
Associates.
I. Definitions
-----------
A. "Access person" means any employee, director, trustee, officer or
advisory person of the Company or the Funds; except that for purposes of
the reporting requirements of Section IV, it does not include Trustees
of the Funds who are not "interested persons" within the meaning of
Section 2 (a)(19) of the Act, unless such Trustee knew, or in the
ordinary course of fulfilling his official duties should have known,
that during the 15 day period immediately preceding or after the date of
the transaction in a security by Trustee, such security was being
considered for purchase or sale or was purchased or sold by a Fund.
(The "should have known" standard implies no duty of inquiry, does not
presume that there should have been any deduction or extrapolation from
discussions or memoranda dealing with tactics to be employed in meeting
a Fund's investment objectives, or that any knowledge is to be imputed
because of prior knowledge of a Fund's portfolio holdings, market
considerations or a Fund's investment policies, objectives, and
restrictions.)
<PAGE>
SUBJECT: P136 Code of Ethics
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DATE: 6/98 PAGE 3 OF 12
---------------------------------------------------- ------ ----
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- --------------------------------------------------------------------------------
B. "Advisory person" means (i) any employee of the Company or a Fund, or of
any company in a control relationship to the Company or a Fund, who, in
connection with his or her regular functions or duties, makes,
participates in, or obtains information regarding the purchase or sale
of a security by any Client, or whose functions relate to the making of
any recommendations with respect to such purchases or sales; and (ii)
any natural person in a control relationship to the Company or a Fund
who obtains information concerning information concerning
recommendations made to any Client with regard to the purchase or sale
of a security.
C. "Beneficial ownership" shall be interpreted in the same manner as it
would be in determining whether a person is subject to the provisions of
Section 16 of the Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder, except that the determination of
direct or indirect beneficial ownership shall apply to all securities
which an access person has or acquires.
D. "Control" shall have the same meaning as that set forth in Section
2(a)(9) of the Act. Section 2(a)(9) provides that "control" means the
power to exercise a controlling influence over the management or
policies of a company, unless such power is solely the result of an
official position with such company.
E. A security is "being considered for purchase or sale" when a
recommendation to purchase or sell a security has been made and
communicated or, with respect to the person making the recommendation,
when such person seriously considers making such a recommendation.
F. A security is "being purchased or sold" by a Client from the time when a
purchase or sale program has been communicated to the person who places
the buy and sell orders for such Client until the time when such program
has been fully completed or terminated.
G. "Security" shall have the meaning set forth in Section 2(a)(36) of the
Act, except that it shall not include securities issued by the
Government of the United States (including government money market
instruments of the type issued by agencies of the federal government or
guaranteed by the federal government or its agencies), bankers'
acceptances, bank certificates of deposit, commercial paper and shares
of registered open-end investment
<PAGE>
SUBJECT: P136 Code of Ethics
----------------------------------------------------------------------
DATE: 6/98 PAGE 4 OF 12
---------------------------------------------------- ----- ----
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
companies, or such other securities as may be excepted under the
provisions of Rule 17j-1 from time to time in effect.
H. "Security held or to be acquired" by a Client means any security which,
within the most recent fifteen days, (i) is or has been held by such
Client, or (ii) is being or has been considered by the Client or its
investment adviser for purchase by the Client.
II. Prohibited Purchases and Sales
------------------------------
A. No access person shall, in connection with the purchase or sale,
directly or indirectly, by such person of a security held or to be
acquired by any Client:
1. employ any device, scheme or artifice to defraud such Client;
2. make to such Client any untrue statement of a material fact or omit
to state to such Client a material fact necessary in order to make
the statements made, in light of the circumstances under which they
are made, not misleading;
3. engage in any act, practice or course of business which would
operate as a fraud or deceit upon such Client; or
4. engage in any manipulative practice with respect to such Client.
B. In this connection, subject to the exceptions stated in Section III of
this Code, it shall be impermissible for any access person to purchase
or sell, directly or indirectly, any security (or any option to purchase
or sell such security) in which he had, or by reason of such transaction
acquires, any direct or indirect beneficial ownership and which:
1. is being considered for purchase or sale by any Client; or
2. is being purchased or sold by any Client.
"Security held or to be acquired" by a Client means any security which,
within the most recent fifteen days, (i) is or has been held by such
Client, or (ii) is being or has been considered by the Client or its
investment adviser for purchase by the Client.
<PAGE>
SUBJECT: P136 Code of Ethics
----------------------------------------------------------------------
DATE: 6/98 PAGE 5 OF 12
---------------------------------------------------- ------ ----
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
C. Any purchase by an access person in an initial public offering must be
pre-approved by the Compliance Officer of the Company and the Funds (the
"Compliance Officer").
D. Any access person who questions whether a contemplated transaction is
prohibited by this Code should discuss the transaction with the
Compliance Officer prior to proceeding with the transaction.
III. Exempted Transactions
---------------------
The prohibitions of Section II of this Code shall not apply to the
following transactions by access persons:
A. Purchases or sales over which the access person has no direct or
indirect influence or control.
B. Purchases or sales of securities which are not eligible for purchase or
sale by any Client, as determined by reference to the Act and blue sky
laws and regulations thereunder, the investment objectives and policies
and investment restrictions of any Client, undertakings made to
regulatory authorities, and other policies adopted from time to time by
any Client, the Company, or the Funds as applicable.
C. Purchases or sales which are nonvolitional on the part of either the
access person or any Client, including purchases or sales upon exercise
of puts or calls written by the access person and sales from a margin
account pursuant to a bona fide margin call.
D. Purchases which are part of an automatic dividend reinvestment plan.
E. Purchases effected upon the exercise of rights issued by an issuer pro
---
rata to all holders of a class of its securities, to the extent such
----
rights were acquired from such issuer.
F. Specific transactions which appear to present no reasonable likelihood
of harm to any Client, which are otherwise in accordance with Rule 17j-1
and Section 206 of the Advisers Act, and which the Portfolio Management
Group ("PMG") of the Company and the Funds has authorized in advance.
<PAGE>
SUBJECT: P136 Code of Ethics
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DATE: 11/98 PAGE 6 OF 12
---------------------------------------------------- ------ ----
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G. Specific transactions which each of the Board of Directors of the
Company and Board of Trustees of the Funds (each, a "Board of
Directors"), after consideration of all the facts and circumstances,
determine do not involve any realistic possibility of violation of Rule
17j-1 under the Act or Section 206 of the Advisors Act.
Specifically, the Directors have determined that all transactions in
interest rate and stock index futures and options are exempted, provided
that the total amount of daily purchases and sales of contracts by any
one access person does not exceed in the aggregate the greater of (i) 1%
of the average contract trading volume of the relevant contract for the
previous five trading days or (ii) 1% of the number of such contracts
outstanding on the previous day. For purposes of these volume limits,
futures and options will be treated as separate contracts and each type
of future of option (e.g., June 1999 Eurodollar and December 1999
Eurodollar) will be treated as a separate contract. Purchases or sales
of a futures contract in connection with the pending expiration of a
current contract (the "rolling" of a contract to a future month
contract) will not count toward any volume limit.
Subject to the restrictions of Section II-A, the Directors have also
determined that all transactions in de minimus amounts (of 100 shares or
less) or transactions in shares of companies with market capitalization
in excess of $100 million which are traded on a national securities
exchange (including NASDAQ) are exempt. A trade in excess of 100 shares
of a small market capitalization company shall require approval from the
Compliance Officer if the company is included on a list maintained by
the Compliance Officer. The list will name all companies with less than
$100 million in capitalization in which a discretionary account
maintains a position, as well as any small market capitalization
companies which a portfolio manager has asked to be listed.
An employee must contact the Compliance Officer to ascertain whether the
small market capitalization company in which he or she wants to trade is
included on the list. If the small market capitalization company is
included on the list, the Compliance Officer will contact one of the
portfolio managers on each account which holds the stock, and/or the
portfolio manager who asked that the company be put on the list, to
obtain permission for the employee to trade in excess of 100 shares of
the company's stock. The Compliance Officer will notify the employee
when and if he or she may trade. The
<PAGE>
SUBJECT: P136 Code of Ethics
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DATE: 6/98 PAGE 7 OF 12
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- --------------------------------------------------------------------------------
employee's trade must be placed and executed by end of the business day
following the day of receipt of clearance from the Compliance Officer.
Purchases and sales not exempted as described above may be allowed
providing the following procedures are followed:
1. The access person wishing to trade ("the trader") must give written
notification of his or her proposed transaction to all members of
the PMG, who will determine whether the security proposed to be
traded is being considered for purchase or sale or being purchased
or sold by a client.
2. If, subsequent to giving written notification, the trader contacts
all members of the PMG and receives unanimous approval, the trade
may be executed the day notification is given.
3. If, in the instance where after giving written notification prior
to 5:00 p.m. EST to all members of the PMG, the trader does not
succeed in establishing contact with all members of the PMG, but
receives no negative responses by the opening of trading the
following day, the trade may be executed at that time.
4. A member of the PMG must refuse approval of a transaction if his or
her Client has an open order for the security proposed to be
traded, or that security is being considered for purchase or sale
by his or her Client.
5. Transactions by access persons must not be made through individual
brokers who also serve Clients.
IV. Reporting
---------
A. Every access person (except for non-employee Board members of the Company
and Funds) shall file with the Compliance Officer a report containing the
information described in Section IV-B of this Code with respect to
transactions in any security in which such access person has, or by reason
of such transaction acquires, any direct or indirect beneficial ownership
in the security (regardless of
<PAGE>
whether such transaction is listed in Section III); provided, however, that
such access person shall not be required to make a report with respect to
transactions
SUBJECT: P136 Code of Ethics
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DATE: 6/98 PAGE 8 OF 12
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
effected for any account over which such person does not have any direct
or indirect influence or control.
B. Every report shall be made not later than 48 hours after the transaction
to which the report relates was effected. The report should be made
using the Personal Trades form of the Company's electronic mail system
(or by other written means if unsuccessful) and should contain the
following information:
1. The date of the transaction and the title and number of shares or
the principal amount of each security involved;
2. The nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition), including information
sufficient to establish any exemption listed in Section III which
is relied upon;
3. The price at which the transaction was effected; and
4. The name of the broker, dealer or bank with or through whom the
transaction was effected.
C. The making of such report shall not be construed as an admission by the
person making such report that he has any direct or indirect beneficial
ownership in the security to which the report relates, and the existence
of any report shall not be construed as an admission that any event
reported on constitutes a violation of Section II hereof.
D. In addition to making the report described in Paragraph B of this
section, each access person should request that copies of his or her
monthly or quarterly brokerage account statements be sent to the
Compliance Officer.
E. An access person claiming an exemption under Section III-G must forward
copies of all trade notifications to the Compliance Officer.
The Compliance Officer shall file his or her personal reports listed in
sections A through E above with another Principal of the Company for
review.
<PAGE>
SUBJECT: P136 Code of Ethics
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DATE: 6/98 PAGE 9 OF 12
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- --------------------------------------------------------------------------------
V. Review and Enforcement
----------------------
A. Review
------
1. The Compliance Officer of the Company shall cause the reported
personal securities transactions to be compared with completed
portfolio transactions of the Clients to determine whether any
transactions (each a "Reviewable Transaction") listed in Section II
may have occurred.
2. If the Compliance Officer determines that a Reviewable Transaction
may have occurred, he shall then determine whether a violation of
this Code may have occurred, taking into account all the exemptions
provided under Section III. Before making any determination that a
violation has been committed by an individual, the Compliance
Officer shall give such person an opportunity to supply additional
information regarding the transaction in question.
3. The Principal who receives the reports of the Compliance Officer
shall conduct the same review as described in Items 1 and 2 above
with regard to the reports submitted by the Compliance Officer.
B. Enforcement
-----------
1. If the Compliance Officer (or the Principal who reviews the
Compliance Officer's trades) determines that a violation of this
Code may have occurred, he or she shall promptly report the
possible violation to the relevant Board of Directors, which, with
the exception of any person whose transaction is under
consideration, shall take such actions as they consider
appropriate, including imposition of any sanctions that they
consider appropriate.
<PAGE>
2. No person shall participate in a determination of whether he has
committed a violation of this Code or in the imposition of any
sanction against himself. If a securities transaction of the
Compliance Officer is under consideration, another Director or
officer of the Company or the Funds, as the case may be, shall act
in all respects in the manner prescribed herein for the Compliance
Officer.
SUBJECT: P136 Code of Ethics
--------------------------------------------------------------------
DATE: 6/98 PAGE 10 OF 12
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. Any person who is determined by the relevant Board of Directors to
have intentionally violated this Code will suffer immediate
termination of employment.
4. If the relevant Board of Directors determines that an access person
has inadvertently violated this Code, such Directors have the
discretion to issue a warning to the individual. In determining
whether a warning is appropriate, such Directors shall consider all
the facts and circumstances including, but not limited to, whether
the Client was harmed, whether the individual profited or had the
opportunity to profit, and the materiality of the transaction.
Compliance with Section III-G will be considered a safe harbor.
VI. Records
-------
A. The Company and the Funds shall maintain records in the manner and to
the extent set forth below. Such records shall be available for
appropriate examination by representatives of the Securities and
Exchange Commission.
1. A copy of this Code and any other Code of Ethics which is, or at
any time within the past five years has been, in effect shall be
preserved in an easily accessible place.
2. A record of any violation of this Code and of any action taken as a
result of such violation shall be preserved in an easily accessible
place for a period of not less than five years following the end of
the fiscal year in which the violation occurs.
<PAGE>
3. A copy of each report made pursuant to this Code by any access
person shall be preserved by the Company and the Funds for a period
of not less than five years from the end of the fiscal year in
which it is made, the first two years in an easily accessible
place.
4. A list of all persons who are, or within the past five years have
been, required to make reports pursuant to this Code shall be
maintained in an easily accessible place.
SUBJECT: P136 Code of Ethics
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DATE: 6/98 PAGE 11 OF 12
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B. Confidentiality
---------------
All reports of securities transactions and any other information filed
with the Company or the Funds pursuant to this Code shall be treated as
confidential, except as regards appropriate examinations by
representatives of the Securities and Exchange Commission.
VII. Amendment; Interpretation of Provisions
---------------------------------------
The Directors of the Funds or the Company may from time to time amend this
Code or adopt such interpretations of this Code, in each case as it
applies to the Funds or the Company, as they deem appropriate.
<PAGE>
SUBJECT: P136 Code of Ethics
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DATE: 6/98 PAGE 12 OF 12
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Employee Agreement
- ------------------
I understand and agree to abide by this Code of Ethics.
Signed:___________________________________________________________________
Typed or Printed Name:____________________________________________________
Date:_____________________________________________________________________
<PAGE>
Wellington Management Company, llp
Wellington Trust Company, na
Wellington Management International
Wellington International Management Company Pte Ltd.
Code of Ethics
- ----------------- ---------------------------------------------------------
Summary Wellington Management Company, llp and its affiliates
have a fiduciary duty to investment company and
investment counseling clients which requires each employee
to act solely for the benefit of clients. Also, each
employee has a duty to act in the best interest of the
firm. In addition to the various laws and regulations
covering the firm's activities, it is clearly in the
firm's best interest as a professional investment advisory
organization to avoid potential conflicts of interest or
even the appearance of such conflicts with respect to the
conduct of the firm's employees. Wellington Management's
personal trading and conduct must recognize that the
firm's clients always come first, that the firm must avoid
any actual or potential abuse of our positions of trust
and responsibility, and that the firm must never take
inappropriate advantage of its positions. While it is not
possible to anticipate all instances of potential
conflict, the standard is clear.
In light of the firm's professional and legal
responsibilities, we believe it is appropriate to restate
and periodically distribute the firm's Code of Ethics to
all employees. It is Wellington Management's aim to be as
flexible as possible in its internal procedures, while
simultaneously protecting the organization and its clients
from the damage that could arise from a situation
involving a real or apparent conflict of interest. While
it is not possible to specifically define and prescribe
rules regarding all possible cases in which conflicts
might arise, this Code of Ethics is designed to set forth
the policy regarding employee conduct in those situations
in which conflicts are most likely to develop. If an
employee has any doubt as to the propriety of any
activity, he or she should consult the President or
Regulatory Affairs Department.
The Code reflects the requirements of United States law,
Rule 17j-1 of the Investment Company Act of 1940, as
amended on October 29, 1999, as well as the
recommendations issued by an industry study group in 1994,
which were strongly supported by the SEC. The term
"Employee" includes all employees and Partners.
- ----------------- ---------------------------------------------------------
Policy on Personal Essentially, this policy requires that all personal
Securities securities transactions (including acquisitions or
Transactions dispositions other than through a purchase or sale)
by all Employees must be cleared prior to execution. The
only exceptions to this policy of prior clearance are
noted below.
- ----------------- ---------------------------------------------------------
Definition of The following transactions by Employees are considered
"Personal Securities "personal" under applicable SEC rules and therefore
Transactions" subject to this statement of policy:
1
Transactions for an Employee's own account, including
IRA's.
<PAGE>
Code of Ethics
Page 2
- ----------------- ---------------------------------------------------------
2
Transactions for an account in which an Employee has
indirect beneficial ownership, unless the Employee has no
direct or indirect influence or control over the account.
Accounts involving family (including husband, wife, minor
children or other dependent relatives), or accounts in
which an Employee has a beneficial interest (such as a
trust of which the Employee is an income or principal
beneficiary) are included within the meaning of "indirect
beneficial interest".
If an Employee has a substantial measure of influence or
control over an account, but neither the Employee nor the
Employee's family has any direct or indirect beneficial
interest (e.g., a trust for which the Employee is a
trustee but not a direct or indirect beneficiary), the
rules relating to personal securities transactions are not
considered to be directly applicable. Therefore, prior
clearance and subsequent reporting of such transactions
are not required. In all transactions involving such an
account an Employee should, however, conform to the spirit
of these rules and avoid any activity which might appear
to conflict with the investment company or counseling
clients or with respect to the Employee's position within
Wellington Management. In this regard, please note "Other
Conflicts of Interest", found later in this Code of
Ethics, which does apply to such situations.
- ----------------- ---------------------------------------------------------
Preclearance Except as specifically exempted in this section, all
Required ----------------------------------------------------
Employees must clear personal securities transactions
-----------------------------------------------------
prior to execution. This includes bonds, stocks
------------------
(including closed end funds), convertibles, preferreds,
options on securities, warrants, rights, etc. for domestic
and foreign securities, whether publicly traded or
privately placed. The only exceptions to this requirement
are automatic dividend reinvestment and stock purchase
plan acquisitions, broad-based stock index and U.S.
government securities futures and options on such futures,
transactions in open-end mutual funds, U.S. Government
securities, commercial paper, or non-volitional
transactions. Non-volitional transactions include gifts to
an Employee over which the Employee has no control of the
timing or transactions which result from corporate action
applicable to all similar security holders (such as
splits, tender offers, mergers, stock dividends, etc.).
Please note, however, that most of these transactions must
be reported even though they do not have to be precleared.
See the following section on reporting obligations.
Clearance for transactions must be obtained by contacting
the Director of Global Equity Trading or those personnel
designated by him for this purpose. Requests for clearance
and approval for transactions may be communicated orally
or via email. The Trading Department will maintain a log
of all requests for approval as coded confidential records
of the firm. Private placements (including both securities
and partnership interests) are subject to special
clearance by the Director of Regulatory Affairs, Director
of Enterprise
<PAGE>
Code of Ethics
Page 3
- ----------------- ---------------------------------------------------------
Risk Management or the General Counsel, and
the clearance will remain in effect for a reasonable
period thereafter, not to exceed 90 days.
Clearance for personal securities transactions for
publicly traded securities will be in effect for one
trading day only. This "one trading day" policy is
interpreted as follows:
. If clearance is granted at a time when the principal
market in which the security trades is open, clearance
is effective for the remainder of that trading day until
the opening of that market on the following day.
. If clearance is granted at a time when the principal
market in which the security trades is closed, clearance
is effective for the next trading day until the opening
of that market on the following day.
- ----------------- ---------------------------------------------------------
Filing of Reports Records of personal securities transactions by Employees
will be maintained. All Employees are subject to the
following reporting requirements:
1
Duplicate Brokerage All Employees must require their securities brokers to
Confirmations send duplicate confirmations of their securities
transactions to the Regulatory Affairs Department.
Brokerage firms are accustomed to providing this service.
Please contact Regulatory Affairs to obtain a form letter
to request this service. Each employee must return to the
Regulatory Affairs Department a completed form for each
brokerage account that is used for personal securities
transactions of the Employee. Employees should
not send the completed forms to their brokers
---
directly. The form must be completed and returned to the
Regulatory Affairs Department prior to any transactions
being placed with the broker. The Regulatory Affairs
Department will process the request in order to assure
delivery of the confirms directly to the Department and to
preserve the confidentiality of this information. When
possible, the transaction confirmation filing requirement
will be satisfied by electronic filings from securities
depositories.
2
Filing of Quarterly SEC rules require that a quarterly record of all personal
Report of all securities transactions submitted by each person subject
"Personal Securities to the Code's requirements and that this record be
Transactions" available for inspection. To comply with these rules,
every Employee must file a quarterly personal securities
transaction report within 10 calendar days after the end
of each calendar quarter. Reports are filed electronically
utilizing the firm's proprietary Personal Securities
Transaction Reporting System (PSTRS) accessible to all
Employees via the Wellington Management Intranet.
At the end of each calendar quarter, Employees will be
notified of the filing requirement. Employees are
responsible for submitting the quarterly report within the
deadline established in the notice.
<PAGE>
Code of Ethics
Page 4
- ----------------- ---------------------------------------------------------
Transactions during the quarter indicated on brokerage
confirmations or electronic filings are displayed on the
Employee's reporting screen and must be affirmed if they
are accurate. Holdings not acquired through a broker
submitting confirmations must be entered manually. All
Employees are required to submit a quarterly report, even
if there were no reportable transactions during the
quarter.
Employees must also provide information on any new
brokerage account established during the quarter including
the name of the broker, dealer or bank and the date the
account was established.
IMPORTANT NOTE: The quarterly report must include the
--------------
required information for all "personal securities
transactions" as defined above, except transactions in
open-end mutual funds, money market securities, U.S.
Government securities, and futures and options on futures
on U.S. government securities. Non-volitional transactions
and those resulting from corporate actions must also be
reported even though preclearance is not required and the
nature of the transaction must be clearly specified in the
report.
3
Certification of As part of the quarterly reporting process on PSTRS,
Compliance Employees are required to confirm their compliance
with the provisions of this Code of Ethics.
4
Filing of Personal Annually, all Employees must file a schedule indicating
Holding Report their personal securities holdings as of December 31 of
each year by the following January 30. SEC Rules require
that this report include the title, number of shares and
principal amount of each security held in an Employee's
personal account, and the name of any broker, dealer or
bank with whom the Employee maintains an account.
"Securities" for purposes of this report are those which
must
be reported as indicated in the prior paragraph. Newly
hired Employees are required to file a holding report
within ten (10) days of joining the firm. Employees may
indicate securities held in a brokerage account by
attaching an account statement, but are not required to do
so, since these statements contain additional information
not required by the holding report.
5
Review of Reports All reports filed in accordance with this section will be
maintained and kept confidential by the Regulatory Affairs
Department. Reports will be reviewed by the Director of
Regulatory Affairs or personnel designated by her for this
purpose.
- ----------------- ---------------------------------------------------------
Restrictions on While all personal securities transactions must be
"Personal Securities cleared prior to execution, the following guidelines
indicate which transactions will be prohibited,
discouraged,
<PAGE>
Code of Ethics
Page 5
- ----------------- ---------------------------------------------------------
Transactions" or subject to nearly automatic clearance. The clearance
of personal securities transactions may also depend upon
other circumstances, including the timing of the proposed
transaction relative to transactions by our investment
counseling or investment company clients; the nature of
the securities and the parties involved in the
transaction; and the percentage of securities involved in
the transaction relative to ownership by clients. The word
"clients" refers collectively to investment company
clients and counseling clients. Employees are expected to
be particularly sensitive to meeting the spirit as well as
the letter of these restrictions.
Please note that these restrictions apply in the case of
debt securities to the specific issue and in the case of
common stock, not only to the common stock, but to any
equity-related security of the same issuer including
preferred stock, options, warrants, and convertible bonds.
Also, a gift or transfer from you (an Employee) to a third
party shall be subject to these restrictions, unless the
donee or transferee represents that he or she has no
present intention of selling the donated security.
1
No Employee may engage in personal transactions involving
any securities which are:
. being bought or sold on behalf of clients until one
trading day after such buying or selling is completed
or canceled. In addition, no Portfolio Manager may
engage in a personal transaction involving any security
for 7 days prior to, and 7 days following, a
transaction in the same security for a client account
managed by that Portfolio Manager without a special
exemption. See "Exemptive Procedures" below. Portfolio
Managers include all designated portfolio managers and
others who have direct authority to make investment
decisions to buy or sell securities, such as investment
team members and analysts involved in Research Equity
portfolios. All Employees who are considered Portfolio
Managers will be so notified by the Regulatory Affairs
Department.
. the subject of a new or changed action recommendation
from a research analyst until 10 business days
following the issuance of such recommendation;
. the subject of a reiterated but unchanged
recommendation from a research analyst until 2 business
days following reissuance of the recommendation
. actively contemplated for transactions on behalf of
clients, even though no buy or sell orders have been
placed. This restriction applies from the moment that
an Employee has been informed in any fashion that any
Portfolio Manager intends to purchase or sell a
specific security. This is a particularly sensitive
area and one in which each Employee must exercise
caution to avoid actions which, to his or her
knowledge, are in conflict or in competition with the
interests of clients.
<PAGE>
Code of Ethics
Page 6
- ----------------- ---------------------------------------------------------
2
The Code of Ethics strongly discourages short term trading
by Employees. In addition, no Employee may take a "short
term trading" profit in a security, which means the sale
of a security at a gain (or closing of a short position at
a gain) within 60 days of its purchase, without a special
exemption. See "Exemptive Procedures". The 60 day
prohibition does not apply to transactions resulting in a
loss, nor to futures or options on futures on broad-based
securities indexes or U.S. government securities.
3
No Employee engaged in equity or bond trading may engage
in personal transactions involving any equity securities
of any company whose primary business is that of a
broker/dealer.
4
Subject to preclearance, Employees may engage in short
sales, options, and margin transactions, but such
transactions are strongly discouraged, particularly due to
the 60 day short term profit-taking prohibition. Any
Employee engaging in such transactions should also
recognize the danger of being "frozen" or subject to a
forced close out because of the general restrictions which
apply to personal transactions as noted above. In specific
case of hardship an exception may be granted by the
Director of Regulatory Affairs or her designee upon
approval of the Ethics Committee with respect to an
otherwise "frozen" transaction.
5
No Employee may engage in personal transactions involving
the purchase of any security on an initial public
offering. This restriction also includes new issues
resulting from spin-offs, municipal securities and thrift
conversions, although in limited cases the purchase of
such securities in an offering may be approved by
the Director of Regulatory Affairs or her designee upon
determining that approval would not violate any policy
reflected in this Code. This restriction does not apply to
open-end mutual funds, U. S. government issues or money
market investments.
6
Employees may not purchase securities in private
placements unless approval of the Director of Regulatory
Affairs, Director of Enterprise Risk Management or the
General Counsel has been obtained. This approval will be
based upon a determination that the investment opportunity
need not be reserved for clients, that the Employee is not
being offered the investment opportunity due to his or her
employment with Wellington Management and other relevant
factors on a case-by-case basis. If the Employee has
portfolio management or securities analysis
responsibilities and is granted approval to purchase a
private placement, he or she must disclose the privately
placed holding later if
<PAGE>
Code of Ethics
Page 7
- ----------------- ----------------------------------------------------------
asked to evaluate the issuer of the security. An
independent review of the Employee's analytical work or
decision to purchase the security for a client account
will then be performed by another investment professional
with no personal interest in the transaction.
Gifts and Other Employees should not seek, accept or offer any gifts or
Sensitive Payments favors of more than minimal value or any preferential
treatment in dealings with any client, broker/dealer,
portfolio company, financial institution or any other
organization with whom the firm transacts business.
Occasional participation in lunches, dinners, cocktail
parties, sporting activities or similar gatherings
conducted for business purposes are not prohibited.
However, for both the Employee's protection and that of
the firm it is extremely important that even the
appearance of a possible conflict of interest be avoided.
Extreme caution is to be exercised in any instance in
which business related travel and lodgings are paid for
other than by Wellington Management, and prior approval
must be obtained from the Regulatory Affairs Department.
Any question as to the propriety of such situations should
be discussed with the Regulatory Affairs Department and
any incident in which an Employee is encouraged to violate
these provisions should be reported immediately. An
explanation of all extraordinary travel, lodging and
related meals and entertainment is to be reported in a
brief memorandum to the Director of Regulatory Affairs.
Employees must not participate individually or on behalf
of the firm, a subsidiary, or any client, directly or
indirectly, in any of the following transactions:
1
Use of the firm's funds for political purposes.
2
Payment or receipt of bribes, kickbacks, or payment or
receipt of any other amount with an understanding that
part or all of such amount will be refunded or delivered
to a third party in violation of any law applicable to the
transaction.
3
Payments to government officials or employees (other than
disbursements in the ordinary course of business for such
legal purposes as payment of taxes).
4
<PAGE>
Code of Ethics
Page 8
- ----------------- ----------------------------------------------------------
Payment of compensation or fees in a manner the purpose of
which is to assist the recipient to evade taxes, federal
or state law, or other valid charges or restrictions
applicable to such payment.
5
Use of the funds or assets of the firm or any subsidiary
for any other unlawful or improper purpose.
- ----------------- ----------------------------------------------------------
Other Conflicts of Employees should also be aware that areas other than
Interest personal securities transactions or gifts and sensitive
payments may involve conflicts of interest. The following
should be regarded as examples of situations involving
real or potential conflicts rather than a complete list of
situations to avoid.
"Inside Information" Specific reference is made to the firm's policy on the
use of "inside information" which applies to personal
securities transactions as well as to client transactions.
Use of Information Information acquired in connection with employment by the
organization may not be used in any way which might be
contrary to or in competition with the interests of
clients. Employees are reminded that certain clients have
specifically required their relationship with us to be
treated confidentially.
Disclosure of Information regarding actual or contemplated investment
Information decisions, research priorities or client interests
should not be disclosed to persons outside our
organization and in no way can be used for personal gain.
Outside All outside relationships such as directorships or
Activities trusteeships of any kind or membership in
investment organizations (e.g., an investment club) must
be cleared by the Director of Regulatory Affairs prior to
the acceptance of such a position. As a general matter,
directorships in unaffiliated public companies or
companies which may reasonably be expected to become
public companies will not be authorized because of the
potential for conflicts which may impede our freedom to
act in the best interests of clients. Service with
charitable organizations generally will be authorized,
subject to considerations related to time required during
working hours and use of proprietary information.
Exemptive Procedure The Director of Regulatory Affairs, the Director of
Enterprise Risk Management, the General Counsel or the
Ethics Committee can grant exemptions from the personal
trading restrictions in this Code upon determining that the
transaction for which an exemption is requested would not
result in a conflict of interest or violate any other
policy embodied in this Code. Factors to be considered may
include: the size and holding period of the Employee's
position in the security, the market capitalization of the
issuer, the liquidity of
<PAGE>
Code of Ethics
Page 9
- ----------------- ----------------------------------------------------------
the security, the reason for the Employee's requested
transaction, the amount and timing of client trading in
the same or a related security, and other relevant
factors.
Any Employee wishing an exemption should submit a written
request to the Director of Regulatory Affairs setting
forth the pertinent facts and reasons why the employee
believes that the exemption should be granted. Employees
are cautioned that exemptions are intended to be
exceptions, and repetitive exemptive applications by an
Employee will not be well received.
Records of the approval of exemptions and the reasons for
granting exemptions will be maintained by the Regulatory
Affairs Department.
- ----------------- ----------------------------------------------------------
Compliance with Adherence to the Code of Ethics is considered a basic
The Code of Ethics condition of employment with our organization. The
Ethics Committee monitors compliance with the Code and
reviews violations of the Code to determine what action or
sanctions are appropriate.
Violations of the provisions regarding personal trading
will presumptively be subject to being reversed in the
case of a violative purchase, and to disgorgement of any
profit realized from the position (net of transaction
costs and capital gains taxes payable with respect to the
transaction) by payment of the profit to any client
disadvantaged by the transaction, or to a charitable
organization, as determined by the Ethics Committee,
unless the Employee establishes to the satisfaction of the
Ethics Committee that under the particular circumstances
disgorgement would be an unreasonable remedy for the
violation.
Violations of the Code of Ethics may also adversely affect
an Employee's career with Wellington Management with
respect to such matters as compensation and advancement.
Employees must recognize that a serious violation of the
Code of Ethics or related policies may result, at a
minimum, in immediate dismissal. Since many provisions of
the Code of Ethics also reflect provisions of the U.S.
securities laws, Employees should be aware that violations
could also lead to regulatory enforcement action resulting
in suspension or expulsion from the securities business,
fines and penalties, and imprisonment.
Again, Wellington Management would like to emphasize the
importance of obtaining prior clearance of all personal
securities transactions, avoiding prohibited transactions,
filing all required reports promptly and avoiding other
situations which might involve even an apparent conflict
of interest. Questions regarding interpretation of this
policy or questions related to specific situations should
be directed to the Regulatory Affairs Department or Ethics
Committee.
Revised: March 1, 2000
<PAGE>
THE WESTPORT FUNDS
WESTPORT ADVISERS, LLC
WESTPORT ASSET MANAGEMENT, INC.
Code of Ethics & Conduct
I. Introduction
This Code of Ethics and Conduct (the "Code") has been adopted by The
Westport Funds (the "Funds"), Westport Advisers, LLC ("WALLC") and Westport
Asset Management, Inc. ("WAMI") (collectively, "Westport"), in accordance with
the federal securities laws, including the Investment Company Act of 1940, as
amended, the Investment Advisers Act of 1940, as amended, and the Securities
Exchange Act of 1934, as amended (the "1934 Act"). The purpose of the Code is to
establish guidelines and procedures to identify and prevent persons who may have
knowledge of Westport's investments and investment intentions from breaching
their fiduciary duties and to deal with other situations that may pose a
conflict of interest or a potential conflict of interest.
Carefully read the guidelines and procedures of this Code. When you believe
that you sufficiently understand them, please sign, date, and return the Annual
Certificate of Compliance (attached as Appendix I) to the Compliance Director.
Please keep a copy of the Code for your reference.
Additionally, federal securities laws require money managers and others to
adopt policies and procedures to identify and prevent the misuse of material,
non-public information. Therefore, Westport has developed and adopted Policies
and Procedures Concerning the Misuse of Material Non-Public Information (the
"Insider Trading Policy") that applies to all employees, officers and trustees
(attached as Appendix VI). Read it carefully. When you believe that you
sufficiently understand its terms and conditions, please sign, date and return
the Insider Trading Policy Annual Certificate of Compliance (attached as
Appendix VII) to the Compliance Director.
II. Definitions
As used in the Code, the following terms have the following meanings:
Access Person: means any trustee, director, officer, member or employee of a
Westport entity. It would also generally include any entity or
natural person in a control relationship to any Westport
entity.
Advisory Client: means any person or entity to which WAMI or WALLC provides
investment advisory services. This term includes any
registered or unregistered investment company for which WAMI
or WALLC serves as an adviser or sub-adviser and any separate
account clients.
Beneficial
Ownership: generally means any interest in a Covered Security for which
an Access Person or any member of his or her immediate family
sharing the same
<PAGE>
household can directly or indirectly receive a monetary
("pecuniary") benefit. Please see Appendix II for a complete
definition.
Compliance
Director: means the person appointed by each Westport entity and
indicated in Appendix VIII, as updated from time to time. The
Compliance Director may delegate any or all of his or her
responsibilities under the Code, as specified in Appendix
VIII. In instances when the Code is applied to the Compliance
Director, any other principal of the appropriate Westport
entity may act as the Compliance Director.
Control: of the Funds, WALLC or WAMI means the power to exercise a
controlling influence over the management or policies of the
entity (unless such power is solely the result of an official
position with the entity). Any person who owns (directly or
through one or more controlled companies), more than 25% of
the voting securities of one of these entities shall be
presumed to control such entity.
Independent
Trustee: means any person who serves on the Board of Trustees of the
Funds who is not an "interested person" as that term is
defined in Section 2(a)(19) of the Investment Company Act of
1940, as amended. Independent Trustees are exempted from most
of the Code's provisions. See, for example, Article V,
Sections 2 and 3, and Article IX.
Covered Security: means any and every security as defined in Section 2(a)(36) of
the Investment Company Act of 1940, as amended, but does not
include the following, so that transactions in the following
are not covered by the Code:
. direct obligations of the Government of the United States;
. bankers' acceptances, bank certificates of deposit,
commercial paper and high quality short-term debt
instruments, including repurchase agreements; and
. shares issued by registered open-end investment companies
(mutual funds).
III. General Principles
This Code applies to all Access Persons. The Code acknowledges the general
principles that Access Persons:
. owe a fiduciary obligation to all Advisory Clients;
2
<PAGE>
. have the duty at all times to place the interests of all Advisory Clients
first and foremost;
. must conduct their Personal Securities Transactions in a manner that
avoids conflicts of interest or abuses of their position of trust and
responsibility; and
. should not take improper advantage of their positions in relation to
Advisory Clients.
No Access Person shall, directly or indirectly in connection with its
purchase or sale of a Security Held or to be Acquired by any Advisory Client:/1/
. employ any device, scheme or artifice to defraud any Advisory Client;
. make any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements made to the Advisory
Client, in light of the circumstances under which they are made, not
misleading;
. engage in any act, practice, or course of business that operates or would
operate as a fraud or deceit upon any Advisory Client; or
. engage in any manipulative practice with respect to any Advisory Client.
IV. Inside Information
No Access Person may use material, non-public information about a security
or issuer in breach of a duty of trust or confidence that is owed directly,
indirectly, or derivatively, to the issuer of that security, the shareholders of
that issuer, any Advisory Client, or to any other person who is the source of
the material non-public information. Any Access Person who believes he or she
is in possession of such information must contact the Compliance Director
immediately to discuss the information and the circumstances surrounding its
receipt. Please refer to the Insider Trading Policy attached as Appendix VI for
more information.
V. Prohibited Transactions
1. Same Day Trading
No Access Person may purchase or sell, directly or indirectly, any
Covered Security in which he or she has, or by reason of such transaction
acquires, any direct or indirect beneficial ownership if, to his or her
actual knowledge at the time of such purchase or sale, the same or an
equivalent
_________________
/1/ "Security Held or to be Acquired" by any Advisory Client means (1) any
Covered Security which, within the most recent 15 days, is or has been held
by an Advisory Client, or is being or has been considered by an Advisory
Client or Westport for purchase by an Advisory Client, and (2) any option
to purchase or sell, and any security convertible into or exchangeable for,
a Covered Security described in clause (1) above.
3
<PAGE>
Covered Security is (1) being considered for purchase or sale by an
Advisory Client that day; or (2) being purchased or sold by an Advisory
Client that day.
Notwithstanding the above, accounts in which an Access Person has a
beneficial ownership interest in a Covered Security solely by reason of an
indirect pecuniary interest described in Rule 16a-1(a)(2)(ii)(B) or (C)
under the 1934 Act may purchase or sell, directly or indirectly, any
Covered Security even if the same or an equivalent Covered Security is (1)
being considered for purchase or sale by an Advisory Client that day; or
(2) being purchased or sold by an Advisory Client that day provided that
such accounts receive the average price for all such purchases and sales
executed for such accounts and all Advisory Clients that day, with
transaction costs shared on a pro rata basis.
2. Transactions in Covered Securities
Unless prior written approval is obtained as described in Article VII,
no Access Person, other than Independent Trustees, may engage in a
transaction in any Covered Security.
3. Initial Public Offerings and Private Placements
Unless prior written approval is obtained as described in Article VII,
no Access Person, other than Independent Trustees, may engage in a
transaction in any security in an initial public offering or a private
placement.
An Access Person who has been approved to engage in a transaction in a
private placement must disclose that investment if he or she plays a part
in subsequent investment considerations concerning the issuer of such
security for an Advisory Client. In such circumstances, Westport's
decision to purchase or sell securities of the issuer shall be subject to
an independent review by an Access Person with no personal interest in the
issuer.
VI. Exemptions
The prohibitions of Article V of this Code shall not apply to:
. Purchases or sales effected in any account over which the Access Person
has no direct or indirect influence or control or in any account which is
managed on a discretionary basis by a person other than such Access
Person and with respect to which such Access Person does not in fact
influence or control such transactions;
. Purchases or sales of securities which are not eligible for purchase or
sale by any Advisory Client;
. Purchases or sales which are non-volitional on the part of either the
Access Person or any Advisory Client;
4
<PAGE>
. Purchases which are part of an automatic dividend reinvestment plan;
. Purchases effected upon the exercise of rights or options issued by an
issuer pro rata to all holders of a class of its securities, to the
extent such rights or options were acquired from such issuer, and sales
of such rights or options so acquired; and
. Any securities transaction, or series of related transactions, involving
500 shares or less in the aggregate, if the issuer has a market
capitalization (outstanding shares multiplied by the current price per
share) greater than $1.75 billion.
VII. Pre-Approval Procedures
1. Approval Requirements
An Access Person must obtain prior written approval from a principal
of Westport for all securities transactions otherwise prohibited by Article
V. Another principal of Westport must approve transactions made by a
principal of Westport.
2. Time of Approval
Pre-approval must be obtained prior to the proposed securities
transaction and is valid for only 12 hours after approval.
3. Form
Pre-approval must be obtained in writing by completing and signing a
Personal Trading Request and Authorization Form (including the details of
the proposed securities transaction) and submitting it to a principal of
Westport. Please use the form attached as Appendix III.
4. Filing
The Compliance Director will retain a copy of all completed Personal
Trading Request and Authorization Forms in the manner contemplated by
Article XII.
5. Factors Considered in Approval of Personal Securities Transactions
Generally, the factors described below will be considered by Westport
principals in determining whether or not to approve a proposed securities
transaction.
. whether the proposed purchase or sale is likely to have any economic
impact on any Advisory Client or on their ability to purchase or sell
securities of the same class or other securities of the same issuer;
. whether any Advisory Client has a pending "buy" or "sell" order in that
security or has completed a purchase or sale of that security that day;
5
<PAGE>
. whether the amount or nature of the securities transaction or person
making it is likely to affect the price of or market for the security;
. whether the security proposed to be purchased or sold is one that would
qualify for purchase or sale by any Advisory Client;
. whether the security is currently being considered for purchase or sale
by Westport that day;
. whether the securities transaction would create the appearance of
impropriety, whether or not an actual conflict exists; and
. whether the investment opportunity should be reserved for an Advisory
Client, and whether the opportunity is being offered to the Access Person
by virtue of his or her position.
However, if warranted by the nature of the transaction, and notwithstanding the
prohibition in Section V.1., the Compliance Director has the authority, only in
exceptional circumstances, to approve a securities transaction where the
security is currently being considered for purchase or sale by Westport that
day.
VIII. Reporting by Access Persons Other Than Independent Trustees of the
Funds/2/
1. Initial Holdings Report
Beginning on March 1, 2000, no later than 10 days after a person
becomes an Access Person (other than Independent Trustees of the Funds),
such person must file a report with the Compliance Director which contains
the following information:
. the title, number of shares and principal amount of each Covered Security
in which such person has any direct or indirect beneficial ownership;
. the name of the broker, dealer or bank with whom such person maintains an
account in which any securities are held for the direct or indirect
benefit of such person; and
. the date the report is submitted to the Compliance Director.
_________________________
/2/ Each Access Person required to make a report is responsible for taking the
initiative to file reports as required under the Code. Any effort by the
Compliance Director to facilitate the reporting process does not change or
alter that responsibility.
Any report required by Articles VIII and IX may contain a statement that
the report will not be construed as an admission that the person making the
report has any direct or indirect beneficial ownership in the Covered
Security to which the report relates.
6
<PAGE>
2. Quarterly Transaction Reports
Beginning with the calendar quarter ending March 31, 2000, no later
than 10 days after the end of a calendar quarter, every Access Person
(other than Independent Trustees of the Funds) must file a report with the
Compliance Director with respect to any transaction during the calendar
quarter in a Covered Security in which the Access Person had any direct or
indirect beneficial ownership (the "Quarterly Report"). The Quarterly
Report, which may be in the form of the cover page in Appendix IV and
attached account statements, must contain:
. the date of each transaction, the title, the interest rate and maturity
date (if applicable), the number of shares and the principal amount of
each Covered Security involved;
. the nature of the transaction (i.e., purchase or sale or other type of
acquisition or disposition);
. the price of the Covered Security at which the transaction was effected;
. the name of the broker, dealer or bank with or through which the
transaction was effected; and
. the date that the report is submitted to the Compliance Director.
With respect to any quarter in which an account was established by an
Access Person in which any securities were held for the direct or indirect
benefit of the Access Person, such Quarterly Report must also contain the
name of the broker, dealer or bank with whom the Access Person established
the account and the date the account was established.
3. Annual Holdings Reports
No later than January 30, 2001, and every January 30 thereafter, every
Access Person (other than Independent Trustees of the Funds) must file a
report with the Compliance Director which contains the following
information:
. the title, number of shares and principal amount of each Covered
Security in which such person has any direct or indirect beneficial
ownership as of December 31 of the prior calendar year;
. the name of the broker, dealer or bank with whom such person maintains
an account in which any securities are held for the direct or indirect
benefit of such person; and
. the date the report is submitted to the Compliance Director.
The report may be in the form of the cover page in Appendix V and attached
account statements.
7
<PAGE>
IX. Reporting by Independent Trustees of the Funds/3/
An Independent Trustee of the Funds must make a quarterly transaction
report containing the information required by Article VIII, Section 2, no later
than 10 days after the end of a calendar quarter with respect to transactions
occurring in such quarter in a Covered Security only if such trustee knew or, in
-------
the ordinary course of fulfilling his or her official duties as a trustee of the
Funds, should have known that during the 15-day period immediately before or
after such trustee's transaction in a Covered Security, the Funds purchased or
sold the Covered Security, or the Funds or their investment adviser considered
purchasing or selling the Covered Security..
X. Determination of Access Persons
Each current trustee, director, officer, member and employee of Westport
will be evaluated by the Compliance Director to determine whether he or she is
an Access Person before March 1, 2000. Those who are determined to be Access
Persons will be notified of their status as an Access Person and their
corresponding reporting obligations by March 1, 2000.
Each potential new trustee, director, officer, member or employee of
Westport will be evaluated to determine whether he or she is an Access Person
before he or she is offered a position and will be notified of his or her status
as an Access Person, if applicable, before taking his or her position.
XI. Review of Reports Required by this Code of Ethics
Each report required to be submitted under Articles VIII and IX of the Code
will be promptly reviewed by the Compliance Director when submitted.
Any violation or potential violation of the Code shall be brought to the
attention of the appropriate principal of the affected Westport entity within
five business days of its discovery. The Compliance Director will investigate
any such violation or potential violation and report to such principal with a
recommendation of appropriate action to be taken against any individual whom it
is determined has violated the Code, as is necessary to cure the violation and
prevent future violations.
The Compliance Director will keep a written record of all investigations in
connection with any Code violations including any action taken as a result of
the violation.
XII. Recordkeeping Requirements
The following records must be maintained at the principal place of business
of the appropriate Westport entity in the manner and to the extent set out
below. These records must be made available to the Securities and Exchange
Commission or any representative of the Commission at any time and from time to
time for reasonable periodic, special or other examination:
______________________
/3/ Ordinarily, reports would need to be filed only if an Independent Trustee
actually knows of a Fund transaction since, generally, Independent Trustees
--------
would not be expected to be in a position in which they "should have known"
of a Fund transaction.
8
<PAGE>
. A copy of the Code that is in effect, or at any time within the past
five years was in effect, must be maintained in an easily accessible
place;
. A record of any violation of the Code, and of any action taken as a
result of the violation, must be maintained in an easily accessible
place for at least five years after the end of the fiscal year in which
the violation occurs;
. A copy of each report required to be submitted by Access Persons under
Articles VIII and IX of the Code, including any information provided on
broker transaction confirmations and account statements, must be
maintained for at least five years after the end of the fiscal year in
which the report is made or the information is provided, the first two
years in an easily accessible place;
. A record of all Access Persons, currently or within the past five years,
who are or were required to make reports under the Code will be
established prior to March 1, 2000 and maintained in an easily
accessible place;
. A record of all persons, currently or within the past five years, who
are or were responsible for reviewing reports of Access Persons will be
established prior to March 1, 2000 and maintained in an easily
accessible place;
. A copy of each Personal Trading Request and Authorization Form submitted
to the Compliance Director (including a record of all approvals to
acquire securities in an initial public offering or private placement,
indicating the reasons therefor) must be maintained for at least five
years after the end of the fiscal year in which the form was submitted
or the approval is granted, whichever is later; and
. A copy of each report to the Board of Trustees of the Funds required to
be submitted pursuant to Article XIII of the Code must be maintained for
at least five years after the end of the fiscal year in which it is
made, the first two years in an easily accessible place.
. A record of all accounts, currently or within the past five years, in
which an Access Person has or had a beneficial ownership interest in a
Covered Security solely by reason of an indirect pecuniary interest
described in Rule 16a-1(a)(2)(ii)(B) or (C) under the 1934 Act must be
maintained in an easily accessible place.
XIII. Reports to the Board of Trustees of the Funds
No later than September 1, 2000 and no less frequently than annually
thereafter, the Compliance Director will prepare a written report to be
furnished to the Board of Trustees of the Funds that:
. Describes any issues arising under the Code since the last report to the
Board of Trustees of the Funds, including, but not limited to,
information about material violations of the Code and sanctions imposed
in response to the material violations; and
9
<PAGE>
. Certifies that each Westport entity has adopted the procedures in
Articles X through XII of the Code and this Article XIII, which Articles
are reasonably necessary to prevent Access Persons from violating the
Code.
No later than September 1, 2000 and no less frequently than annually
thereafter, the distributor of the Funds must prepare a written report to be
furnished to the Board of Trustees of the Funds that:
. Describes any issues arising under its code of ethics since the last
report to the Board of Trustees, including, but not limited to,
information about material violations of its code of ethics and
sanctions imposed in response to the material violations; and
. Certifies that it has adopted procedures reasonably necessary to prevent
Access Persons from violating its code of ethics.
XIV. Confidentiality of Adviser Transactions
Specific information relating to any Advisory Client's portfolio or
activities is strictly confidential and should not be discussed with anyone
outside Westport.
XV. Sanctions
A violation of this Code is subject to the imposition of such sanctions by
each Westport entity as may be deemed appropriate under the circumstances to
achieve the purposes of the Code. Sanctions for violations of the Code will be
determined by the Compliance Director, in consultation with the principals of
the appropriate Westport entity and outside counsel. Such sanctions may include
a written warning, suspension or termination of employment, a letter of censure
and/or disgorgement of any profit.
XVI. Amendments and Modifications
This Code may be amended or modified as deemed necessary by the officers of
the appropriate Westport entity. In the case of amendments or modifications by
the Funds or WALLC, the amendments and modifications must also by approved by
the trustees of the Funds within six months of any such amendment or
modification.
XVII. Annual Certification
All Access Persons must certify annually that they understand the Code,
have had an opportunity to ask questions about the Code, and will comply with
all applicable aspects of the Code by submitting an Annual Certificate of
Compliance (attached as Appendix I) to the Compliance Director no later than
December 31 of each year.
10
<PAGE>
APPENDIX I
THE WESTPORT FUNDS
WESTPORT ADVISERS, LLC
WESTPORT ASSET MANAGEMENT, INC.
Code of Ethics & Conduct
ANNUAL CERTIFICATE OF COMPLIANCE
_________________________
Name (please print)
This is to certify that the attached Code of Ethics and Conduct ("Code")
was distributed to me on ____________, 20___. I have read and understand the
Code. I certify that I have complied with the Code during the course of my
association with Westport, and that I will continue to do so in the future.
Moreover, I agree to promptly report to the Compliance Director any violation or
possible violation of the Code of which I become aware.
I understand that violation of the Code will be grounds for disciplinary
action or dismissal and may also be a violation of federal and/or state
securities laws.
_____________________________________
Signature
_____________________________________
Date
<PAGE>
APPENDIX II
The term "beneficial owner" shall mean any person who, directly or
indirectly, through any contract, arrangement, understanding, relationship or
otherwise, has or shares a direct or indirect pecuniary interest in securities,
subject to the following:
(1) The term "pecuniary interest" in any class of securities shall
mean the opportunity, directly or indirectly, to profit or share in any profit
derived from a transaction in the subject securities.
(2) The term "indirect pecuniary interest" in any class of securities
shall include, but not be limited to:
(A) Securities held by members of a person's immediate family sharing
the same household; provided, however that the presumption of such beneficial
ownership may be rebutted;
(B) A general partner's proportionate interest in the portfolio
securities held by a general or limited partnership. The general partner's
proportionate interest, as evidenced by the partnership agreement in effect at
the time of the transaction and the partnership's most recent financial
statements, shall be the greater of: (1) the general partner's share of the
partnership's profits, including profits attributed to any limited partnership
interests held by the general partner and any other interests in profits that
arise from the purchase and sale of the partnership's portfolio securities; or
(2) the general partner's share of the partnership capital account, including
the share attributable to any limited partnership interest held by the general
partner;
(C) A performance-related fee, other than an asset-based fee,
received by any broker, dealer, bank, insurance company, investment company,
investment adviser, investment manager, trustee or person or entity performing a
similar function; provided, however, that no pecuniary interest shall be present
where: (1) the performance-related fee, regardless of when payable, is
calculated based upon net capital gains and/or net capital appreciation
generated from the portfolio or from the fiduciary's overall performance over a
period of one year or more; and (2) securities of the issuer do not account for
more than 10 percent of the market value of the portfolio. A right to a
nonperformance-related fee alone shall not represent a pecuniary interest in the
securities;
(D) A person's right to dividends that is separated or separable from
the underlying securities. Otherwise, a right to dividends alone shall not
represent a pecuniary interest in the securities;
(E) A person's interest in securities held by a trust, as specified
in Rule 16a-8(b); and
(F) A person's right to acquire securities through the exercise or
conversion of any derivative security, whether or not presently exercisable.
<PAGE>
(3) A shareholder shall not be deemed to have a pecuniary interest in the
portfolio securities held by a corporation or similar entity in which the person
owns securities if the shareholder is not a controlling shareholder of the
entity and does not have or share investment control over the entity's
portfolio.
2
<PAGE>
THE WESTPORT FUNDS
WESTPORT ADVISERS, LLC
WESTPORT ASSET MANAGEMENT, INC.
APPENDIX III
Personal Trading Request and Authorization Form
Employee Name _______________________________
Person On Whose Behalf Trade is Being Done (if different) ____________________
Broker ___________________ Brokerage Account Number _________________
Covered Security ________________________________ Ticker Symbol ______
Company Name, Type of Covered Security
Number of Shares or Units ______ Price per Share or Unit _______
Approximate Total Price ________ Buy or Sell ________
I hereby certify that all of the following information is true and complete:
To the best of my knowledge, neither I nor anyone at Westport possess material,
non-public information about the issuer or the security.
To the best of my knowledge, the requested transaction is consistent with the
letter and spirit of the Code.
_______________________________________ ________________
Signature Date
When signed and dated by a principal of Westport, this authorization is approved
for this transaction only and is effective for 12 hours from the time written
below unless you are notified otherwise by the a principal of Westport. A record
of this transaction will be kept by the Compliance Director in confidential
files./1/
a.m.
_______________________________ _________________ __________ p.m.
Westport Principal Date Time
/1/ Compliance Director or Westport principal please note: If approval is
granted to acquire securities in an initial public offering or in a private
placement, indicate the reasons for such approval on the reverse side of
this form. This form must be maintained for at least five years after the
end of the fiscal year in which the form was submitted or the approval is
granted, whichever is later in accordance with Article XII of the Code.
<PAGE>
WESTPORT FUNDS
WESTPORT ADVISERS, LLC
WESTPORT ASSET MANAGEMENT, INC.
APPENDIX IV
Quarterly Securities Transactions Report
For the quarter ending _______________, _______
I hereby certify that the transactions on the attached pages are the only
transactions in Covered Securities entered into during the quarter ending on the
date written above in which I had any direct or indirect beneficial ownership.
Please check the applicable box below:
[_] During the quarter ending on the date written above, I have not
established any new account in which any securities were held during such
quarter for my direct or indirect benefit.
[_] During the quarter ending on the date written above, I have
established the following new accounts in which any securities were held during
such quarter for my direct or indirect benefit:
Name of Broker, Dealer, or Bank Date Established
--------------------------------------------------------------------------
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
Signature ____________________________________________
Name: ____________________________________________
Please Print
Date: ________
<PAGE>
THE WESTPORT FUNDS
WESTPORT ADVISERS, LLC
WESTPORT ASSET MANAGEMENT, INC.
APPENDIX V
Annual Holdings Report
For the calendar year ending December 31, _______
I hereby certify that the securities on the attached account statements are
the only Covered Securities in which I have a direct or indirect beneficial
ownership as of the date written above.
Listed below are the names of every broker, dealer and bank with whom I
maintain an account in which securities are held for my direct or indirect
benefit:
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
Signature ____________________________________________
Name: ____________________________________________
Please Print
Date: ____________________________________________
<PAGE>
APPENDIX VI
POLICIES AND PROCEDURES
CONCERNING THE MISUSE OF MATERIAL
NON-PUBLIC INFORMATION
(the "Insider Trading Policy")
Every trustee, director, officer, member or employee (each a "Covered
Person") of The Westport Funds, Westport Advisers, LLC and Westport Asset
Management, Inc. (collectively, "Westport") must read and retain a copy of these
Policies and Procedures Concerning the Misuse of Material Non-Public Information
(the "Insider Trading Policy"). Any questions regarding the Insider Trading
Policy described herein should be referred to Westport's Compliance Director.
SECTION I. POLICY STATEMENT ON INSIDER TRADING ("Policy Statement")
Westport's Policy Statement applies to every Covered Person and extends to
activities both within and outside the scope of their duties at Westport.
Westport forbids any Covered Person from engaging in any activities that would
be considered to be "insider trading."
The term "insider trading" is not defined in the federal securities laws,
but generally is understood to prohibit the following activities:
1. trading while in possession of material non-public information;
2. recommending the purchase or sale of securities while in possession of
material non-public information; or
3. communicating material non-public information to others (i.e.,
"tipping").
The elements of insider trading and the penalties for such unlawful conduct
are discussed below. If, after reviewing this Policy Statement, you have any
questions you should consult the Compliance Director.
A. Who is an Insider?
-----------------
The concept of "insider" is broad and it includes trustees, directors,
officers, partners, members, and employees of a company. In addition, a person
can become a "temporary insider" if that person is given material inside
information about a company or the market for the company's securities on the
reasonable expectation that the recipient would maintain the information in
confidence and would not trade on it.
B. What is Material Information?
----------------------------
Trading, tipping, or recommending securities transactions while in
possession of inside information is not an actionable activity unless the
information is "material." Generally, information is considered material if: (i)
there is a substantial likelihood that a reasonable investor would consider it
important in making his or her investment decisions or (ii) it would
significantly
<PAGE>
alter the total mix of information made available. A pragmatic test is whether
the information is reasonably certain to have a substantial effect on the price
of a company's securities. Information that should be considered material
includes, but is not limited to, the following: dividend changes, earnings
estimates, changes in previously released earnings estimates, a joint venture,
the borrowing of significant funds, a major labor dispute, merger or acquisition
proposals or agreements, major litigation, liquidation problems, and
extraordinary management developments. For information to be considered material
it need not be so important that it would have changed an investor's decision to
purchase or sell particular securities; rather it is enough that it is the type
of information on which reasonable investors rely in making purchase or sale
decisions. The materiality of information relating to the possible occurrence of
any future event may depend on the likelihood that the event will occur and its
significance if it did occur.
C. What is Non-Public Information?
------------------------------
All information is considered non-public until it has been effectively
communicated to the marketplace. One must be able to point to some fact to show
that the information is generally public. For example, information found in a
report filed with the Securities and Exchange Commission, or appearing in Dow
Jones, Reuters Economic Services, The Wall Street Journal or other publications
of general circulation would be considered public. Information in bulletins and
research reports disseminated by brokerage firms are also generally considered
to be public information.
D. Penalties for Insider Trading
-----------------------------
Penalties for trading on or communicating material non-public information
are severe, both for individuals involved in such unlawful conduct and their
employers. A person can be subject to some or all of the penalties below even if
he or she did not personally benefit from the violation. Penalties include:
1. civil injunctions;
2. criminal penalties for individuals of up to $1,000,000 and for "non-
natural persons" of up to $2.5 million dollars plus, for individuals, a
maximum jail term of ten years;
3. private rights of actions for disgorgement of profits;
4. civil penalties for the person who committed the violation of up to
three times the profit gained or loss avoided, whether or not the person
actually benefited;
5. civil penalties for the employer or other controlling person of up to
the greater of $1,000,000 per violation or three times the amount of the
profit gained or loss avoided as a result of each violation; and
6. a permanent bar, pursuant to the SEC's administrative jurisdiction, from
association with any broker, dealer, investment company, investment
adviser, or municipal securities dealer.
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In addition, any violation of this Policy Statement can be expected to
result in serious sanctions by Westport, including dismissal of the persons
involved.
SECTION II. PROCEDURES TO IMPLEMENT WESTPORT'S POLICY STATEMENT
The following procedures have been established to aid Westport's Employees
in avoiding insider trading, and to aid Westport in preventing, detecting and
imposing sanctions against insider trading. Every Covered Person must follow
these procedures or risk serious sanctions, as described above. If you have any
questions about these procedures you should consult the Compliance Director.
A. Identifying Insider Information
-------------------------------
Before trading for yourself or others, including for any client accounts
managed by Westport, in the securities of a company about which you may have
potential insider information, or revealing such information to others or making
a recommendation based on such information, you should ask yourself the
following questions:
1. Is the information material? Is this information that an investor would
consider important in making a investment decision? Is this information
that would substantially affect the market price of the securities if
generally disclosed?
2. Is the information non-public? To whom has this information been
provided? Has the information been effectively communicated to the
marketplace by being published in The Wall Street Journal or other
publications of general circulation, or has it otherwise been made
available to the public?
If, after consideration of the above, you believe that the information is
material and non-public, or if you have questions as to whether the information
may be material and non-public, you should take the following steps:
1. Report the matter immediately to the Compliance Director. In consulting
with the Compliance Director, you should disclose all information that
you believe may bear on the issue of whether the information you have is
material and non-public.
2. Refrain from purchasing or selling securities with respect to such
information on behalf of yourself or others, including for client
accounts managed by Westport.
3. Refrain from communicating the information inside or outside Westport,
other than to the Compliance Director.
After the Compliance Director has reviewed the issue, you will be
instructed to continue the prohibitions against trading, tipping, or
communication, or you will be allowed to trade and communicate the information.
In appropriate circumstances, the Compliance Director will consult with counsel
as to the appropriate course to follow.
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<PAGE>
B. Personal Securities Trading
---------------------------
All Covered Persons must adhere to Westport's Code of Ethics and Conduct
("Code") with respect to securities transactions effected for their own account
and accounts over which they have a direct or indirect beneficial interest.
Please refer to the Code as necessary.
C. Restricting Access to Material Non-Public Information
-----------------------------------------------------
Information in your possession that you identify, or which has been
identified to you as material and non-public, must not be communicated to
anyone, except as provided in paragraph II.A., above. In addition, you should
make certain that such information is secure. For example, files containing
material non-public information should be sealed and inaccessible and access to
computer files containing material non-public information should be restricted
by means of a password or other similar restriction.
D. Resolving Issues Concerning Insider Trading
-------------------------------------------
If, after consideration of the items set forth in paragraph II.A. above,
doubt remains as to whether information is material or non-public, or if there
is any unresolved question as to the applicability or interpretation of the
foregoing procedures, or as to the propriety of any action, please discuss such
matters with the Compliance Director before trading on or communicating the
information in question to anyone.
E. Supervisory Procedures
----------------------
Westport's Compliance Director is critical to the implementation and
maintenance of these Policy and Procedures against insider trading. The
supervisory procedures set forth below are designed to prevent insider trading.
1. Prevention of Insider Trading
-----------------------------
In addition to the prior written approval and monthly reporting procedures
specified in the Code concerning personal securities transactions, the following
measures have been implemented to prevent insider trading by Covered Persons:
a. Each Covered Person will be provided with a copy of the Insider
Trading Policy;
b. The Compliance Director will answer questions regarding the Insider
Trading Policy;
c. The Compliance Director will resolve issues of whether information
received by a Covered Person is material and non-public;
d. The Compliance Director will review on a regular basis, and update
as necessary, the Insider Trading Policy;
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<PAGE>
e. Whenever it has been determined that a Covered Person has material
non-public information, the Compliance Director will implement
measures to prevent dissemination of such information; and
f. Upon the request of any Covered Person, the Compliance Director
will promptly review and either approve or disapprove a request for
clearance to trade in the subject securities.
2. Special Reports to Management
-----------------------------
Promptly upon learning of a potential violation of the Insider Trading
Policy, the Compliance Director will prepare a confidential written report to
the management of the effected Westport entity providing full details and
recommendations for further action.
3. Annual Reports to Management
----------------------------
On an annual basis, the Compliance Director will prepare a written report
to the management of each Westport entity setting forth:
a. full details of any investigation, either internal or by a
regulatory agency, of any suspected insider trading and the results
of such investigation; and
b. an evaluation of the current Insider Trading Policy and any
recommendations for improvement.
In response to such reports, management of each Westport entity will
determine whether any changes to the Insider Trading Policy may be appropriate.
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<PAGE>
THE WESTPORT FUNDS
WESTPORT ADVISERS, LLC
WESTPORT ASSET MANAGEMENT, INC.
APPENDIX VII
POLICIES AND PROCEDURES
CONCERNING THE MISUSE OF MATERIAL
NON-PUBLIC INFORMATION
(the "Insider Trading Policy")
ANNUAL CERTIFICATE OF COMPLIANCE
_________________________
Name (please print)
This is to certify that the I have read and sufficiently understand the Insider
Trading Policy distributed to me on __________, 20___. I certify that I have
complied with the Insider Trading Policy during the course of my association
with Westport and that I will continue to do so in the future. Moreover, I agree
to promptly report to the Compliance Director any violation or possible
violation of the Insider Trading Policy of which I become aware.
I understand that violation of the Insider Trading Policy will be grounds for
disciplinary action or dismissal and may also be a violation of federal and/or
state securities laws.
_____________________________________
Signature
_____________________________________
Date
<PAGE>
APPENDIX VIII
COMPLIANCE DIRECTOR
As of _____________, 2000, each of the Funds, WALLC, and WAMI has designated the
following person as Westport's Compliance Director:
Ronald H. Oliver
The Compliance Director may delegate his or her functions as he or she sees fit.
The Compliance Director may consult with outside counsel as appropriate.
Securities transactions of the Compliance Director may be pre-approved pursuant
to the procedure in Article VII of the Code by any principal of the appropriate
Westport entity.
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in this Registration
Statement on Form N-1A of our report dated February 16, 2000, relating to the
financial statements and financial highlights which appears in the December 31,
1999 Annual Report to Shareholders of TIFF Multi-Asset Fund, TIFF International
Equity Fund, TIFF Emerging Markets Fund, TIFF U.S. Equity Fund, TIFF Bond Fund
and TIFF Short-Term Fund (constituting TIFF Investment Program, Inc.), which is
also incorporated by reference into the Registration Statement. We also consent
to the references to us under the headings "Independent Accountants" and
"Financial Highlights" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
New York, New York
April 26, 2000
