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EXHIBIT (d)(3)
FORM OF
INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT made this __st day of _______________, 1999, by and between
Commonfund Institutional Funds, a Delaware business trust (the "Company"),
Commonfund Asset Management Company , a Delaware Corporation (the "Investment
Manager"), and Western Asset Management Company (the "Sub-Adviser").
WHEREAS, the Company is an open-end, management investment company
registered under the Investment Company Act of 1940, as amended, which may
consist of several series, each having its own investment policies; and
WHEREAS, one of those series is the Commonfund Short Duration Fund (the
"Fund"); and
WHEREAS, the Company has entered into an investment advisory agreement
with the Investment Manager pursuant to which the Investment Manager will act as
investment manager to the Fund; and
WHEREAS, the Investment Manager, acting with the approval of the
Company, wishes to retain the Sub-Adviser to render discretionary investment
advisory services with respect to that portion of the Fund that may be allocated
by the Investment Manager for management by the Sub-Adviser from time to time
(together with all income earned on those assets and all realized and unrealized
capital appreciation related to those assets (the "Managed Assets"), and the
Sub-Adviser is willing to render such services.
NOW, THEREFORE, in consideration of mutual covenants herein contained,
the parties hereto agree as follows:
1. DUTIES OF SUB-ADVISER. The Sub-Adviser shall manage the
investment and reinvestment of the Managed Assets and
determine in its discretion, the securities and other property
to be purchased or sold and the portion of the Managed Assets
to retain in cash. The Sub-Adviser shall review all proxy
solicitation materials and shall exercise any voting rights
associated with securities comprising the Managed Assets in
the best interests of the Fund and its shareholders. The
Sub-Adviser shall provide the Investment Manager and the
Company with records concerning the Sub-Adviser's activities
that the Company is required to maintain, and to render
regular reports to the Investment Manager and to the Company
concerning the Sub-Adviser's discharge of the foregoing
responsibilities.
The Sub-Adviser shall discharge the foregoing responsibilities
subject to the written instructions and directions of the
Company and its Board of Directors
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and their agents, including the officers of the Company and
the Investment Manager, and in compliance with (i) such
policies as the Company may from time to time establish and
communicate to the Sub-Adviser, (ii) the objectives, policies,
and limitations for the Short Duration Fund set forth in the
Prospectus and Statement of Additional Information as those
documents may from time to time be amended or supplemented and
delivered to the Sub-Adviser (the "Prospectus and Statement of
Additional Information"), (iii) the Declaration of Trust of
the Company, and (iv) applicable laws and regulations
including the Investment Company Act of 1940 (the "1940 Act")
and the Internal Revenue Code of 1986. If a conflict in
policies or guidelines referenced herein occurs, the
Prospectus and Statement of Additional Information shall
control.
The Sub-Adviser agrees to perform such duties at its own
expense 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 Sub-Adviser will not, however, pay for the cost of
securities, commodities, and other investments (including
brokerage commissions and other transaction charges, if any)
purchased or sold for the Fund nor will the Sub-Adviser bear
any expenses that would result in the Company's inability to
qualify as a regulated investment company under provisions of
the Internal Revenue Code.
2. DUTIES OF INVESTMENT MANAGER The Investment Manager shall
continue to have responsibility for all services to be
provided to the Fund pursuant to the Advisory Agreement
between it and the Company and shall oversee and review the
Sub-Adviser's performance under this Agreement.
The Investment Manager shall furnish to the Sub-Adviser
current and complete copies of the Declaration of Trust and
By-laws of the Company, and the current Prospectus and
Statement of Additional Information as those documents may be
amended from time to time.
3. CUSTODY, DELIVERY AND RECEIPT OF SECURITIES. The Company shall
designate one or more custodians to hold the Managed Assets.
The custodians, as so designated, will be responsible for the
custody, receipt and delivery of securities and other assets
of the Fund including the Managed Assets, and the Sub-Adviser
shall have no authority, responsibility or obligation with
respect to the custody, receipt or delivery of securities or
other assets of the Fund including the Managed Assets. In the
event that any cash or securities of the Fund are delivered to
the Sub-Adviser, it will promptly deliver the same over to the
custodian for the benefit of and in the name of the Fund.
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Unless otherwise required by local custom, all securities
transactions for the Managed Assets will be consummated by
payment to or delivery by the Fund of cash or securities due
to or from the Managed Assets.
Repurchase agreements including tri-party repurchase
agreements and other trading agreements may be entered into by
the Fund acting through designated officers or agents;
custodians under tri-party repurchase agreements will act as
sub-custodians of the Fund.
4. PORTFOLIO TRANSACTIONS.
(a) Selection of Brokers. The Sub-Adviser is authorized to
select the brokers or dealers that will execute the purchases
and sales of portfolio securities and other property for the
Fund in a manner that implements the policy with respect to
brokerage set forth in the Prospectus and Statement of
Additional Information for the Fund or as the Board of
Directors or the Investment Manager may direct from time to
time and in conformity with federal securities laws.
In executing Fund transactions and selecting brokers or
dealers, the Sub-Adviser will use its best efforts to seek on
behalf of the Fund the best overall terms available. In
assessing the best overall terms available for any
transaction, the Sub-Adviser shall consider all factors that
it deems relevant, including the breadth of the market in the
security, the price of the security, the financial condition
and execution capability of the broker or dealer, and the
reasonableness of the commission, if any, both for the
specific transaction and on a continuing basis. In evaluating
the best overall terms available, and in selecting the
broker-dealer to execute a particular transaction, the
Sub-Adviser may also consider the brokerage and research
services provided (as those terms are defined in Section 28(e)
of the Securities Exchange Act of 1934). Consistent with any
guidelines established by the Board of Directors and
communicated to the Sub-Adviser, the Sub-Adviser is authorized
to pay to a broker or dealer who provides such brokerage and
research services a commission for executing a portfolio
transaction for the Fund that is in excess of the amount of
commission another broker or dealer would have charged for
effecting that transaction if, but only if, the Sub-Adviser
determines in good faith that such commission was reasonable
in relation to the value of the brokerage and research
services provided by such broker or dealer viewed in terms of
that particular transaction or terms of the overall
responsibilities of the Sub-Adviser to the Fund. In addition,
the Sub-Adviser is authorized to allocate purchase and sale
orders for securities to brokers or dealers (including brokers
and dealers
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that are affiliated with the Investment Manager, Sub-Adviser
or the Company's principal underwriter) to take into account
the sale of shares of the Company if the Sub-Adviser believes
that the quality of the transaction and the commission are
comparable to what they would be with other qualified firms.
In no instance, however, will Fund assets be purchased from or
sold to the Investment Manager, Sub-Adviser, the Company's
principal underwriter, or any affiliated person of either the
Company, the Investment Manager or the principal underwriter,
acting as principal in the transaction, except to the extent
permitted by the Securities and Exchange Commission ("SEC")
and the 1940 Act.
b) Aggregating Orders. The Sub-Adviser may aggregate orders
for purchase or sale of Managed Assets with similar orders
being made concurrently for other accounts managed by
Sub-Adviser, if, in Sub-Adviser's reasonable judgment, such
aggregation shall result in an overall economic benefit to the
Fund, taking into consideration the transaction price,
brokerage commission and other expenses. The Fund acknowledges
that the determination of such economic benefit to the Fund by
Sub-Adviser may represent Sub-Adviser's evaluation that the
Fund is benefited by relatively better purchase or sales
prices, lower commission expenses and beneficial timing of
transactions or a combination of these and other factors. In
any single transaction in which purchases and or sales of
securities of any issuer for the account of the Fund are
aggregated with other accounts managed by Sub-Adviser, the
actual prices applicable to the transaction will be averaged
among the accounts for which the transaction is effected,
including the account of Fund.
5. COMPENSATION OF THE SUB-ADVISER. For the services to be
rendered by the Sub-Adviser under this Agreement, the
Investment Manager shall pay to the Sub-Adviser compensation
at the rate specified in Schedule 1 as it may be amended from
time to time. Such compensation shall be paid at the times and
on the terms set forth in Schedule 1. All rights of
compensation under this Agreement for services performed as of
the termination date shall survive the termination of this
Agreement. Except as may otherwise be prohibited by law or
regulation (including any then current SEC staff
interpretations), the Sub-Adviser may, in its discretion and
from time to time, waive a portion of its fee.
6. OTHER EXPENSES. The Company shall pay all expenses relating to
mailing prospectuses, statements of additional information,
proxy solicitation material and shareholder reports to
shareholders.
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7. REPORTS.
(i) The Company and the Sub-Adviser agree to furnish
to each other, current prospectuses, proxy
statements, reports to shareholders, certified copies
of financial statements, and such other information
with regard to their affairs as each may reasonably
request. The Investment Manager will furnish to the
Sub-Adviser advertising and sales literature or other
material prepared for distribution to Fund
shareholders or the public, which refer to the
Sub-Adviser or its clients in any way, prior to the
use thereof, and the Investment Manager shall not use
any such materials if the Sub-Adviser reasonably
objects in writing within ten (10) business days (or
such other time as may be mutually agreed) after
receipt thereof.
(ii) The Sub-Adviser shall provide to the Fund's
custodian, on each business day, information relating
to all transactions in the Managed Assets and shall
provide such information to the Investment Manager
upon request. The Sub-Adviser will make all
reasonable efforts to notify the Custodian of all
orders to brokers for the Managed Assets by 9:00 am
EST on the day following the trade date and will
affirm the trade to the Custodian before the close of
business one business day after the trade date (T +
1).
(iii) The Sub-Adviser will promptly communicate to
the Investment Manager and to the Company such
information relating to portfolio transactions as
they may reasonably request.
(iv) The Sub-Adviser shall promptly notify the
Company and the Investment Manager of any financial
condition likely to impair the ability of the
Sub-Adviser to fulfill its commitments under this
Agreement.
8. STATUS OF SUB-ADVISER. The Sub-Adviser is and will continue to
be registered as such under the federal Investment Advisers
Act of 1940. The services of the Sub-Adviser to the Company
for the Fund are not to be deemed exclusive, and the
Sub-Adviser shall be free to render similar services to others
so long as its services to the Fund are not impaired thereby.
The Sub-Adviser shall be deemed to be an independent
contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the
Company in any way or otherwise be deemed an agent of the
Company.
9. CERTAIN RECORDS. The Sub-Adviser shall maintain all books and
records with respect to transactions involving the Managed
Assets required by
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subparagraphs (b)(5), (6), (7), (9), (10) and (11) and
paragraph (f) of Rule 31a-1 under the 1940 Act. The
Sub-Adviser shall provide to the Investment Manager or the
Board of Directors such periodic and special reports, balance
sheets or financial information, and such other information
with regard to its affairs as the Investment Manager or the
Board of Directors may reasonably request.
The Sub-Adviser shall keep the books and records relating to
the Managed Assets required to be maintained by the
Sub-Adviser under this Agreement and shall timely furnish to
the Investment Manager all information relating to the
Sub-Adviser's services under this Agreement needed by the
Investment Manager to keep the other books and records of the
Company required by Rule 31a-1 under the 1940 Act. The
Sub-Adviser shall also furnish to the Investment Manager any
other information relating to the Managed Assets that is
required to be filed by the Investment Manager or the Company
with the SEC or sent to shareholders under the 1940 Act
(including the rules adopted thereunder) or any exemptive or
other relief that the Investment Manager or the Company
obtains from the SEC. The Sub-Adviser agrees that all records
that it maintains on behalf of the Company are property of the
Company and the Sub-Adviser will surrender promptly to the
Company any of such records upon the Company's request;
provided, however, that the Sub-Adviser may retain a copy of
such records. In addition, for the duration of this Agreement,
the Sub-Adviser shall preserve for the periods prescribed by
Rule 31a-2 under the 1940 Act any such records as are required
to be maintained by it pursuant to this Agreement, and shall
transfer said records to any successor sub-adviser upon the
termination of this Agreement (or, if there is no successor
sub-adviser, to the Investment Manager).
10. LIMITATION OF LIABILITY OF SUB-ADVISER. The duties of the
Sub-Adviser shall be confined to those expressly set forth
herein, and no implied duties are assumed by or may be
asserted against the Sub-Adviser hereunder. The Sub-Adviser
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 10, the
term "Sub-Adviser" shall include directors, officers,
employees and other corporate agents of the Sub-Adviser as
well as that entity itself).
11. PERMISSIBLE INTERESTS. Agents and shareholders of the Company
may be interested in the Sub-Adviser (or any successor
thereof) as directors, partners, officers, or shareholders, or
otherwise; directors, partners, officers, agents, and
shareholders of the Sub-Adviser are or may be interested in
the
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Company as shareholders or otherwise; and the Sub-Adviser (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
Sub-Adviser if approved by the Board of Directors of the
Company subject to the rules and regulations of the Securities
and Exchange Commission.
12. DURATION AND TERMINATION. This Agreement shall become
effective upon its approval by the Board of Directors of the
Company and by a vote of the majority of the outstanding
voting securities of the Fund; provided, however, that at any
time the Adviser shall have obtained exemptive relief from the
Securities and Exchange Commission permitting it to engage a
Sub-Adviser without first obtaining approval of the Agreement
from a majority of the outstanding voting securities of the
Fund(s) involved, the Agreement shall become effective upon
its approval by the Company's Board of Directors. This
Agreement 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 by the vote of a (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 the vote of a
majority of the outstanding voting securities of the Fund;
provided, however, that if the shareholders of the Fund fail
to approve the Agreement as provided herein, the Sub-Adviser
may continue 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 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 the Fund on not less than 30 days nor
more than 60 days written notice to the Sub-Adviser, by the
Investment Manager at any time without the payment of a
penalty upon 90 days written notice to the Sub-Adviser, or by
the Sub-Adviser at any time without the payment of any penalty
on 90 days written notice to the Investment Manager. This
Agreement will automatically and immediately terminate in the
event of its assignment or in the event of the termination of
the Investment Manager's advisory agreement with the Company.
Any termination of this Agreement in accordance with the terms
hereof will not affect the obligations or liabilities accrued
prior to termination. Any notice
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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 1940 Act and the rules and
regulations thereunder; subject to such exceptions as may be
granted by the SEC 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 outset, such notices shall be delivered to the following
addresses:
(i) if to the Company:
c/o Commonfund Asset Management Company
Attention: President
000 Xxxx Xxxx Xxxx
Xxxxxxxx, XX. 00000;
(ii) if to the Investment Manager: at the
foregoing address;
(iii) if to the Sub-Adviser:
Western Asset Management Company
Attention: Xxxxx Xxxxxx
000 Xxxx Xxxxxxxx Xxxxxxxxx, 0xx Xxxxx,
Xxxxxxxx, Xxxxxxxxxx 00000.
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. MISCELLANEOUS. This instrument constitutes the sole and only
agreement of the parties to it relating to its object; any
prior agreements, promises or representations not expressly
set forth in this Agreement are of no force and effect. No
waiver or modification of this Agreement shall be effective
unless reduced to writing and signed by the party to be
charged. No failure to exercise and no delay in exercising on
the part of any party hereto of any right, remedy, power or
privilege hereunder shall operate as a waiver thereof.
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Except as set forth in Section 12, this Agreement binds and
inures to the benefit of parties, their successors and
assigns. This Agreement may be executed in more than one
counterpart each of which shall be deemed an original and both
of which, taken together, shall be deemed to constitute one
and the same instrument. A copy of the Certificate of Trust of
the Company is on file with the Secretary of State of the
State of Delaware and notice is hereby given that the
obligations under this instrument are not binding on any of
the Directors, officers or shareholders of the Company. Where
the effect of a requirement of the 1940 Act reflected in any
provision of this Agreement is altered by rule, regulation or
order of the SEC, whether of special or general application,
such provision shall be deemed to incorporate the effect of
such rule, regulation or order.
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:
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Attest:
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COMMONFUND ASSET MANAGEMENT COMPANY
By:
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Attest:
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WESTERN ASSET MANAGEMENT COMPANY
By:
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Attest:
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SCHEDULE 1
TO THE
INVESTMENT SUB-ADVISORY AGREEMENT
DATED , 1999
AMONG
COMMONFUND INSTITUTIONAL FUNDS
COMMONFUND ASSET MANAGEMENT COMPANY
AND
WESTERN ASSET MANAGEMENT COMPANY
FEES
Daily Accrual
Fees shall be accrued each day by applying to the Net Asset Value of the
Managed Assets at the end of that day, the daily rate, using a 365 day year,
equivalent to the following:
Rate
Managed Assets($) (% Per Annum)
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Current Amount 0.055%
Quarterly Payment
Fees shall be paid within 30 days following the end of each calendar quarter.
COMMONFUND ASSET WESTERN ASSET MANAGEMENT
MANAGEMENT COMPANY COMPANY LLP
By: By:
-------------------------------- --------------------------------
Name: Name:
Title: Title:
Date of this Schedule 1:
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