1
Exhibit (d)(1)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 12th day of October, 1999, by and between
Commonfund Institutional Funds, a Delaware business trust (the "Company"), and
Commonfund Asset Management Company (the "Investment Manager").
WHEREAS, the Company is an open-end, diversified management investment
company registered under the Investment Company Act of 1940, as amended, which
may consist of several series, each having its own investment objective and
policies (each, a "Fund"); and
WHEREAS, the Company desires to retain the Investment Manager to render
investment management services with respect to each Fund as the Company and the
Investment Manager may agree upon and as are set forth in the attached schedule,
and the Investment Manager is willing to render such services.
NOW, THEREFORE, in consideration of mutual covenants herein contained,
the parties hereto agree as follows:
1. DUTIES OF INVESTMENT MANAGER. The Company employs the Investment
Manager to manage the investment and reinvestment of the assets of each
Fund, and, to that end, to retain (subject to the approval of the
Company's Board of Trustees and, except as otherwise permitted under
rule or regulation or the terms of any exemptive relief obtained in the
future from the Securities and Exchange Commission, a majority of the
outstanding voting securities of the Fund) one or more sub-advisers for
each Fund, to supervise the investment activities of such sub-advisers,
to allocate assets among such sub-advisers, to monitor the performance
of such sub-advisers and of each Fund, to determine in its discretion,
when appropriate, securities to be purchased and sold for each Fund,
and to render regular reports to the Company's officers and Directors
concerning its discharge of the foregoing responsibilities.
The Investment Manager shall discharge the foregoing responsibilities
subject to the control of the Board of Directors of the Company and in
compliance with (i) such standing instructions and other policies as
the Directors may from time to time establish, (ii) the objectives,
policies, and limitations for each such Fund set forth in the
prospectus and statement of additional information pertaining to such
Fund as amended from time to time, and (iii) applicable laws and
regulations.
The Investment Manager accepts such employment and agrees, at its own
expense, to render the services and to provide the office space,
furnishings and equipment and the personnel required by it to perform
the services on the terms and for the compensation provided herein. The
Investment Manager will not, however, pay for the cost of securities,
commodities, and other investments (including brokerage
1
2
commissions and other transaction charges, if any) purchased or sold
for the Company.
2. FUND TRANSACTIONS. The Investment Manager, and each sub-adviser
retained by the Investment Manager, is authorized to select the brokers
or dealers that will execute the purchases and sales of portfolio
securities for each Fund and is directed to use its best efforts to
obtain the best net results as described from time to time in the
Company's Prospectuses and Statement of Additional Information. The
Investment Manager will promptly communicate, or cause sub-advisers
retained by it to promptly communicate, to the officers and the Board
of Directors of the Company such information relating to portfolio
transactions as they may reasonably request.
It is understood that neither the Investment Manager nor any
sub-adviser retained by the Investment Manager, will be deemed to have
acted unlawfully, or to have breached a fiduciary duty to the Company
or be in breach of any obligation owing to the Company under this
Agreement, or otherwise, by reason of its having directed a securities
transaction on behalf of the Company to a broker-dealer in compliance
with the provisions of Section 28(e) of the Securities Exchange Act of
1934 or as described from time to time by the Company's Prospectuses
and Statement of Additional Information.
3. COMPENSATION OF THE INVESTMENT MANAGER. For the services to be rendered
by the Investment Manager as provided in Sections 1 and 2 of this
Agreement, the Company shall pay to the Investment Manager compensation
at the rate specified in the Schedule A which is attached hereto and
made a part of this Agreement. Such compensation shall be paid to the
Investment Manager at the end of each month, and shall be accrued daily
(using a 365 day year) at the annual percentage rate as specified in
the attached Schedule A. The fee shall be based on the average daily
net assets (less any assets held in non-interest bearing special
deposits with a Federal Reserve Bank). The Investment Manager may, in
its discretion and from time to time, waive a portion of its fee.
All rights of compensation under this Agreement for services performed
as of the termination date shall survive the termination of this
Agreement.
4. OTHER EXPENSES. The Company shall pay all expenses relating to mailing
to existing shareholders prospectuses, statements of additional
information, proxy solicitation material and shareholder reports.
5. EXCESS EXPENSES.
(a) If the expenses for any Fund for any fiscal year
(including fees and other amounts payable to the
Investment Manager, but excluding interest,
2
3
taxes, brokerage costs, litigation, and other
extraordinary costs) as calculated every business day
would exceed the expense limitations imposed on
investment companies by any applicable statute or
regulatory authority of any jurisdiction in which
shares of a Fund are qualified for offer and sale,
the Investment Manager shall bear such excess cost.
However, the Investment Manager will not bear
expenses of any Fund if that would result in the
Fund's inability to qualify as a regulated investment
company under provisions of the Internal Revenue
Code.
(b) The Investment Manager agrees to waive its fees and
to reimburse expenses of the Fund as necessary to
prevent the total operating expenses of the Fund from
exceeding 0.25% of net assets per annum in the period
that ends on October 31, 2001.
6. REPORTS. The Company and the Investment Manager agree to furnish to
each other, to the extent such documents are otherwise prepared,
current prospectuses, proxy statements, reports to shareholders,
certified copies of their financial statements, and such other
information with regard to their affairs as each may reasonably
request.
7. STATUS OF INVESTMENT MANAGER. The services of the Investment Manager to
the Company are not to be deemed exclusive, and the Investment Manager
shall be free to render similar services to others so long as its
services to the Company are not impaired thereby. The Investment
Manager shall be deemed to be an independent contractor and, unless
otherwise expressly provided or authorized, shall have no authority to
act for or represent the Company in any way or otherwise be deemed an
agent of the Company.
8. CERTAIN RECORDS. Any records required to be maintained and preserved
pursuant to the provisions of Rule 31a-1 and Rule 31a-2 promulgated
under the Investment Company Act of 1940 which are prepared or
maintained by the Investment Manager on behalf of the Company are the
property of the Company and will be surrendered promptly to the Company
on request.
9. LIMITATION OF LIABILITY OF INVESTMENT MANAGER. The duties of the
Investment Manager shall be confined to those expressly set forth
herein, and no implied duties are assumed by or may be asserted against
the Investment Manager hereunder. The Investment Manager shall not be
liable for any error of judgment or mistake of law or for any loss
arising out of any investment or for any act or omission in carrying
out its duties hereunder, except a loss resulting from willful
misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of reckless disregard of its obligations and
duties hereunder, except as may otherwise be provided under provisions
of applicable state law or Federal securities law which cannot be
waived or modified hereby. (As used in this Paragraph 9, the term
3
4
"Investment Manager" shall include directors, officers, employees and
other corporate agents of the Investment Manager, including any
sub-adviser retained by the Investment Manager to provide services to
the Company and its directors, officers, employees and agents, as well
as that entity itself).
10. PERMISSIBLE INTERESTS. Directors, partners, officers, agents, and
shareholders of the Company are or may be interested in the Investment
Manager (or any successor thereof) as directors, partners, officers, or
shareholders, or otherwise; directors, partners, officers, agents, and
shareholders of the Investment Manager are or may be interested in the
Company as Directors, officers, shareholders or otherwise; and the
Investment Manager (or any successor) is or may be interested in the
Company as a shareholder or otherwise. In addition, brokerage
transactions for the Company may be effected through affiliates of the
Investment Manager if approved by the Board of Directors, subject to
the rules and regulations of the Securities and Exchange Commission.
11. LICENSE OF INVESTMENT MANAGER'S NAME AND GOODWILL. Commonfund has
granted to the Investment Manager a license to use the trade names
"Commonfund" and "Common Fund" (together, the "Trade Name") together
with the business reputation and goodwill associated with the Trade
Name for a period ending on August 1, 2009. The Investment Manager
hereby grants a license to the Company to use the Trade Name and the
name of the Investment Manager in the name of the Company, in the names
of the Funds, and in advertising and other promotional literature
relating to the Funds, for the term of this Agreement, as it may be
renewed, up to August 1, 2009. The Company acknowledges that, in the
absence of such license, it has no right to use or promote its products
using the Trade Name or the name of the Investment Manager. The license
granted herein may be revoked at any time and for any reason upon 90
days notice from the Investment Manager to the Company. In the event of
such revocation, the Company shall immediately cease using the Trade
Name and the name of the Investment Manager and the business reputation
and goodwill associated with the Trade Name in connection with the
business of the Company and acknowledges that failure to comply with
this requirement would be a breach of contract for which there is no
adequate remedy at law.
12. DURATION AND TERMINATION. This Agreement, unless sooner terminated as
provided herein, shall remain in effect until two years from date of
execution, and thereafter, for periods of one year so long as such
continuance thereafter is specifically approved at least annually (a)
by the vote of a majority of those Directors of the Company who are not
parties to this Agreement or interested persons of any such party, cast
in person at a meeting called for the purpose of voting on such
approval, and (b) by the Directors of the Company, or by vote of a
majority of the outstanding voting securities of each Fund; provided,
however, that if the shareholders of any Fund fail to approve
the Agreement as provided herein, the Investment Manager may
continue
4
5
to serve hereunder in the manner and to the extent permitted
by the Investment Company Act of 1940 and rules and
regulations thereunder. The foregoing requirement that
continuance of this Agreement be "specifically approved at
least annually" shall be construed in a manner consistent with
the Investment Company Act of 1940 and the rules and
regulations thereunder.
This Agreement may be terminated as to any Fund at any time,
without the payment of any penalty by vote of a majority of
the Directors of the Company or by vote of a majority of the
outstanding voting securities of such Fund on not less than 30
days nor more than 60 days written notice to the Investment
Manager, or by the Investment Manager at any time without the
payment of any penalty, on 90 days written notice to the
Company. This Agreement will automatically and immediately
terminate in the event of its assignment. Any notice under
this Agreement shall be given in writing, addressed and
delivered, or mailed postpaid, to the other party at any
office of such party.
As used in this Section 12, the terms "assignment",
"interested persons," and a "vote of a majority of the
outstanding voting securities" shall have the respective
meanings set forth in the Investment Company Act of 1940 and
the rules and regulations thereunder; subject to such
exemptions as may be granted by the Securities and Exchange
Commission under said Act.
13. NOTICE. Any notice required or permitted to be given by either
party to the other shall be deemed sufficient if sent by
registered or certified mail, postage prepaid, addressed by
the party giving notice to the other party at the last address
furnished by the other party to the party giving notice. At
the commencement of this Agreement, addresses for notice shall
be as follows: if to the Company, at Commonfund Institutional
Funds, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇, and if to the
Investment Manager at Commonfund Asset Management Company, ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
14. SEVERABILITY. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be
affected thereby.
15. GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of New York and the applicable
provisions of the 1940 Act. To the extent that the applicable
laws of the State of New York, or any of the provisions
herein, conflict with the applicable provisions of the 1940
Act, the latter shall control.
16. NO INDIVIDUAL LIABILITY. A copy of the Declaration of Trust of
the Company is on file with the Secretary of State of the
State of Delaware and notice is hereby given
5
6
that the obligations of this instrument are not binding on any
of the Directors, officers or shareholders of the Company or
any Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the day and year first written above.
COMMONFUND INSTITUTIONAL FUNDS
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------
Attest: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
-----------------------
COMMONFUND ASSET MANAGEMENT COMPANY
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
Attest: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
-----------------------
6
7
SCHEDULE A
TO THE
INVESTMENT ADVISORY AGREEMENT
DATED OCTOBER 12, ▇▇▇▇
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ INSTITUTIONAL FUNDS
AND
COMMONFUND ASSET MANAGEMENT COMPANY
Pursuant to Article 3, the Company shall pay the Investment Manager compensation
at an annual rate as follows commencing on the date as specified:
Fund Annual Fee Date
---- ---------- ----
Commonfund
Short Duration Fund 0.19% Commencement of
distribution of Fund
shares
7
8
COMMONFUND INSTITUTIONAL FUNDS
COMMONFUND SHORT DURATION FUND
STANDING INSTRUCTIONS FROM BOARD OF DIRECTORS
TO
COMMONFUND ASSET MANAGEMENT COMPANY
Commonfund Asset Management Company (the "Investment Manager"), acting
as Investment Manager under its agreement with Commonfund Institutional Funds
(the "Company") for management of the Commonfund Short Duration Fund (the
"Fund"), shall perform services under the agreement in accordance with the
following standing instructions:
The Investment Manager shall:
(a) Recommend criteria that the Company should adopt for
identification and selection of sub-advisers for the
Fund;
(b) Identify, screen and interview sub-advisers for the
Fund, analyze the capabilities of such sub-advisers,
and, subject to the final approval of the Board,
retain one or more sub-advisers to invest assets of
one or more Funds taking into consideration the
comparative capabilities of available advisers and
expectations as to the way in which the investment
programs and styles of each will contribute, in
tandem, to the overall performance of the Fund;
(c) On behalf of the Company, negotiate and, subject to
the final approval of the Board of Directors of the
Company, enter into discretionary investment
management agreements with sub-advisers on suitable
terms with particular attention to performance
benchmarks and fees (it being understood that the
agreements will vest with the sub-advisers, and not
with the Investment Manager, the discretion to select
particular investments within the investment program,
performance criteria, investment policies, and
restrictions set forth in such agreements), and
consult with the Company, which has final
responsibility for the investment and operating
policies reflected in such agreements, as to terms
thereof that involve questions of interpretation of
such investment and operating policies;
(d) Review fee and other terms of agreements with
sub-advisers as it may
8
9
from time to time consider appropriate and negotiate
and agree to adjustments in such fees and terms in
its discretion;
(e) Review periodically the performance of each
sub-adviser against the sub-adviser's performance
benchmark and the sub-adviser's overall contribution
to the Fund's performance, and make such
recommendations to the Company as the Investment
Manager deems appropriate with respect to the
continuation, modification, or termination of the
agreement with each sub-adviser;
(f) Consult with the Company on policies with respect to
allocation of assets among sub-advisers and, within
parameters established by the Company as a result of
such consultations, allocate and reallocate assets to
and among sub-advisers in light of changing market
conditions, sub-adviser performance, and other
factors that the Investment Manager deems relevant
with the objective of maximizing investment
performance of each fund;
(g) Review the investment objectives, policies and
restrictions applicable to each fund in light of the
Fund's performance and make such recommendations as
the Investment Manager deems appropriate with respect
to any changes in such objectives, policies and
restrictions.
(h) If requested by the Company, manage on a
discretionary basis assets allocated to it for that
purpose, and in such cases determine in its
discretion the securities to be purchased or sold,
(i) Provide the Company with records concerning the
Investment Manager's activities which the Company is
required to maintain, and to render regular reports
to the Company's officers and Trustees concerning the
Investment Manager's discharge of the foregoing
responsibilities
9