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THE VANTAGEPOINT FUNDS
STATEMENT OF ADDITIONAL INFORMATION
MARCH 1, 1999
REVISED JULY 1, 1999
The Vantagepoint Funds is a no-load, diversified open-end management investment
company. The Vantagepoint Funds operates as a "series" investment company,
offering thirteen distinct investment portfolios (the "Funds"), each Fund having
different investment objectives. This Statement of Additional Information
contains additional information about the Funds.
This Statement of Additional Information is not a prospectus. This Statement of
Additional Information is incorporated by reference into, and should be read in
conjunction with, the Funds' current prospectus, also dated March 1, 1999. A
copy of the prospectus may be obtained by writing to the Funds or calling
1-800-669-7400.
TABLE OF CONTENTS
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PAGE
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Description of the Fund and Its Investments and Risks........... 1
Management of The Vantagepoint Funds............................ 5
Control Persons and Principal Holders of Securities............. 6
Investment Advisory and Other Services.......................... 6
Portfolio Transactions.......................................... 10
Capital Stock and Other Securities.............................. 11
Purchase, Redemption, and Pricing of Shares..................... 12
Taxation of the Fund............................................ 12
Calculation of Performance Data................................. 13
Legal Counsel, Independent Auditors, & Custodian................ 13
Financial Statements............................................ 14
</TABLE>
DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
GENERAL INFORMATION
The Vantagepoint Funds is a no-load, diversified open-end management investment
company organized as a Delaware business trust. The Vantagepoint Funds are
managed by Vantagepoint Investment Advisers, LLC ("VIA"), which in turn hires
and manages subadvisers who are responsible for the day-to-day management and
security selections for the Funds. VIA supervises and directs each Fund's
investments. With respect to the Index Funds (other than the Overseas Equity
Index Fund), VIA selects the Master Portfolios in which each Index Fund invests.
The Vantagepoint Funds are as follows:
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Actively-Managed Funds: Aggressive Opportunities Fund
International Fund
Growth Fund
Growth & Income Fund
Equity Income Fund
Asset Allocation Fund
U.S. Treasury Securities Fund
Money Market Fund
Index Funds: Overseas Equity Index Fund
Mid/Small Company Index Fund
Broad Market Index Fund
500 Stock Index Fund
Core Bond Index Fund
</TABLE>
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The following discussion of investment objectives and policies for the Funds
supplements the discussion of those objectives and policies that is set forth in
the prospectus.
INVESTMENT OBJECTIVES AND POLICIES
The policies and guidelines set forth below for each Fund have been adopted by
the Board of Directors of the Vantagepoint Funds to govern the management and
administration of each Fund by VIA. Those designated as fundamental in this
Statement of Additional Information and in the prospectus cannot be changed
without shareholder approval. Other policies and guidelines described below and
in the prospectus may be reviewed and revised at the discretion of the Board of
Directors. Each Fund's investment administration is under the supervision of
VIA, which is responsible for appointing and monitoring of subadvisers to handle
the day-to-day investment of assets assigned to them.
With the exception of the Money Market Fund the assets of each actively-managed
Fund are managed by one or more subadvisers. Subadvisers are retained to manage
a particular portion of each Fund under the terms of written investment advisory
contracts with VIA.
The Money Market Fund is invested in the Short Term Investments Co. Liquid
Assets Portfolio, a registered money market mutual fund. The mutual fund's
investment adviser is AIM Advisors. Inc.
As explained in the prospectus, and in greater detail on page 5, each Index Fund
(with the exception of the Overseas Equity Index Fund) is structured as a
"feeder" fund investing in a "Master Portfolio" which has substantially similar
investment objectives and strategies as the applicable Index Fund. The
investment adviser for each "Master Portfolio" in which the corresponding Index
Fund invests is Barclays Global Fund Advisors ("Barclays").
Each subadviser is selected for its individual investment management expertise
and each operates independently of the others. Each subadviser is either
registered with the Securities and Exchange Commission (SEC) under the
Investment Advisers Act of 1940 or is a Bank, Insurance Company or Trust Company
exempt as such from registration. Further information on each Fund's
subadviser(s) may be found in the prospectus and this Statement of Additional
Information in the description of each Fund and under the heading "Investment
Advisory and Other Services".
Each subadviser agrees to exercise complete management discretion over assets of
the Fund allocated to its account in a manner consistent with the Fund's
investment policies and guidelines and within such further investment
limitations and conditions as may be established by VIA.
A formal review and appraisal of each Fund's investment objectives and
performance will be conducted periodically by the Board of Directors, and any
material changes in the Fund's fundamental investment objectives will be put to
a vote of its shareholders. The Funds may engage in one or more securities
lending programs conducted by the Funds' custodian or other appropriate
entities.
The 500 Stock Index Fund is not sponsored, endorsed, sold or promoted by
Standard & Poor's a division of the McGraw-Hill Companies, Inc. ("S&P"), or by
Wilshire Associates Inc. ("Wilshire Associates"). Neither S&P nor Wilshire
Associates makes any representation or warranty, express or implied, to the
owners of the product or any member of the public regarding the advisability of
investing in securities generally or in the product particularly or the ability
of the S&P 500 Index, the Wilshire 4500 Index(R) or the Wilshire 5000 Index(R)
to track general stock market performance. S&P's and Wilshire Associates' only
relationship to the licensee is the licensing of certain trademarks and trade
names of S&P and of the S&P 500 Index and Wilshire Associates and the Wilshire
4500 Index and Wilshire 5000 Index, which are determined, composed and
calculated by S&P or Wilshire Associates without regard to the licensee or the
product. S&P and Wilshire Associates have no obligation to take the needs of the
licensee or the owners of the product into consideration in determining,
composing or calculating the S&P 500 Index, the Wilshire 4500 Index or the
Wilshire 5000 Index. S&P and Wilshire Associates are not responsible for and
have not participated in the determination of the prices and amount of the
product or the timing of the issuance or sale of the product or in the
determination or calculation of the equation by which the product is to be
converted into cash. S&P and Wilshire Associates have no obligation or liability
in connection with the administration, marketing or trading of the product.
Neither S&P nor Wilshire Associates guarantees the accuracy and/or the
completeness of the S&P 500 Index, the Wilshire 4500 Index, the Wilshire 5000
Index or any data included therein and neither S&P nor Wilshire Associates shall
have any liability for any
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errors, omissions, or interruptions therein. S&P and Wilshire Associates make no
warranty, express or implied, as to results to be obtained by licensees, owners
of the product, or any other person or entity from the use of the S&P 500 Index,
Wilshire 4500 Index, Wilshire 5000 Index or any data included therein. S&P and
Wilshire Associates make no express or implied warranties, and expressly
disclaim all warranties of merchantability or fitness for a particular purpose
or use with respect to the S&P 500 Index, Wilshire 4500 Index, Wilshire 5000
Index or any data included therein. Without limiting any of the foregoing, in no
event shall S&P or Wilshire Associates have any liability for any special,
punitive, indirect, or consequential damages (including lost profits), even if
notified of the possibility of such damages.
COMPARATIVE INDEXES
The Funds may, from time to time, use one or more of the unmanaged indexes
listed below for purposes of appraising fund performance. This list of indexes
is not intended to be all inclusive, and other indexes, benchmarks or peer
groups may be used, as deemed appropriate by the Board of Directors.
Standard & Poor's 500 Stock Index -- consists of 500 companies representing
larger capitalization stocks traded in the U.S.
Standard & Poor's MidCap 400 Index -- consists of 400 medium sized domestic
stocks traded in the U.S.
Standard & Poor's BARRA MidCap Growth Index -- consists of the stocks of the S&P
MidCap 400 Index having growth characteristics.
Wilshire 5000 Equity Index -- consists of all common equity securities domiciled
in the U.S. for which daily pricing is available.
Wilshire 4500 Equity Index -- consists of all stocks in the Wilshire 5000 except
for those included in the Standard & Poor's 500 Stock Index.
Morgan Stanley Capital International EAFE Index -- consists of approximately
1,100 securities listed on the stock exchanges of developed markets of countries
in Europe, Australia and the Far East.
Morgan Stanley Capital International EAFE Free Index -- consists of
approximately 1100 securities listed on the stock exchanges of developed markets
of countries in Europe, Australia and the Far East. The EAFE Free Index excludes
securities that are not available to U.S. investors.
Lehman Brothers Long-Term Treasury Bond Index -- consists of all Treasury
obligations with maturities of 10 years or greater.
Lehman Brothers Government/Corporate Bond Index -- consists of U.S. Treasury,
agency, and corporate securities rated BBB or better.
Merrill Lynch 5-7 Year Treasury Index -- consists of all Treasury obligations
with maturities between 5 and 7 years.
Russell 2000 Index -- consists of the smallest 2,000 of the 3000 largest U.S.
companies based on total market capitalization, representing approximately 7% of
the Russell 3000 Index's total market capitalization.
ELIGIBLE INVESTMENTS
In addition to the securities and financial instruments described in the
prospectus, the Vantagepoint Funds are authorized to invest in the types of
securities and financial instruments listed below. Not all Funds will invest in
all such securities and/or financial instruments as indicated below.
A. CASH/CASH EQUIVALENTS: Fixed income obligations with maturity less than one
year, including short term accounts managed by a custodian institution and
shares of money market mutual funds. All funds may also participate in
repurchase agreements and reverse repurchase agreements.
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B. FINANCIAL FUTURES: A futures contract is an agreement to buy or sell a
specific amount of a commodity or financial instrument at a particular price on
a stipulated future date. Futures are used to adjust investment exposure and may
involve a small investment of cash relative to the magnitude of the risk
assumed. Such instruments are considered as the same type of security in which a
Fund invests primarily for the purpose of any limitations set forth here or in
the prospectus.
OTHER INVESTMENTS:
The funds may invest in certain other instruments as follows:
i. Rights and Warrants. All funds except the Money Market Fund and the
U.S. Treasury Securities Fund.
ii. Convertible Securities. All funds except the Money Market Fund and
the U.S. Treasury Securities Fund.
iii. Forward contracts. The International Fund, the Overseas Equity Index
Fund and the Growth Fund.
ELIGIBLE PRACTICES: There are no restrictions on subadvisers as to the
following:
- - Fund turnover.
- - Realized gains and losses.
These guidelines are not fundamental policies and may be changed by the Funds'
Board of Directors without a vote of shareholders.
FUND POLICIES AND INVESTMENT LIMITATIONS
The following policies supplement the Funds' investment limitations set forth in
the prospectus. It is the policy of each Fund not to engage in any of the
activities or business practices set forth below. Unless it is noted that a
particular restriction is not fundamental, these restrictions may not be changed
with respect to a particular Fund without the approval of a dollar-weighted
majority of the outstanding shares (the term "majority" is used as defined in
the Investment Company Act of 1940) of that Fund. A Fund may not:
(1) Issue senior securities, (as defined in the Investment Company Act of 1940)
except as permitted by rule, regulation, or order of the S. E. C.;
(2) Engage in the business of underwriting securities issued by others, except
to the extent a Fund may technically be deemed to be an underwriter under the
Securities Act of 1933, as amended (this restriction is not fundamental);
(3) Purchase or otherwise acquire any security if, as a result, more than 15% of
its net assets would be invested in securities that are illiquid (this
restriction is not fundamental);
(4) Make loans, except (i) by purchasing bonds, debentures or similar
obligations (including repurchase agreements, subject to the limitation
described in (3) above) which are either publicly distributed or customarily
purchased by institutional investors, and (ii) by lending its securities to
banks, brokers, dealers and other financial institutions so long as such loans
are not inconsistent with the Investment Company Act of 1940 or the rules and
regulations or interpretations of the Securities and Exchange Commission (the
"Commission") thereunder and the aggregate value of all securities loaned does
not exceed 33 1/3% of the market value of a Fund's total assets;
(5) Pledge, mortgage, or hypothecate its assets, except to secure authorized
borrowings as provided in the prospectus (this restriction is not fundamental);
(6) Buy any securities or other property on margin (except as may be needed to
enter into futures and options transactions as described in the prospectus and
this Statement of Additional Information and for such short-term credits as are
necessary for the clearance of transactions), or engage in short sales (unless
by virtue of a Fund's ownership of other securities that it has a right to
obtain at no added cost and which are equivalent in kind and amount to the
securities sold), except as set forth in the prospectus (this restriction is not
fundamental);
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(7) Purchase or sell puts or calls, or combinations thereof except as provided
in the prospectus;
(8) Purchase or sell real estate or real estate limited partnerships (although a
Fund may purchase securities secured by real estate interests or interests
therein, or issued by companies or investment trusts which invest in real estate
or interests therein);
(9) Invest in the securities of other investment companies, except as may be
acquired as part of a merger, consolidation or acquisition of assets approved by
a Fund's shareholders or otherwise to the extent permitted by Section 12 of the
Investment Company Act of 1940 or by any rule, regulation, opinion or
interpretation of the Commission. Notwithstanding this restriction, the Index
Funds and the Money Market Fund may enter into arrangements as described in the
prospectus and in this Statement of Additional Information. A Fund will invest
only in investment companies which have investment objectives and investment
policies consistent with those of the Fund making such investment except that a
Fund may invest a portion of its assets in a money market fund for cash
management purposes (this restriction is not fundamental);
(10) Invest in companies for the purpose of exercising control or management;
and
(11) Invest more than 25% of its assets in any single industry, except for the
Money Market Fund and with respect to the Index Funds, to the extent that such
industry concentration is a component of a Fund's benchmark index.
The above-mentioned Fund policies and investment limitations are considered at
the time investment securities are purchased (with the exception of the
restriction on illiquid securities).
THE INDEX FUNDS
Each Index Fund is managed by Barclays using quantitative, structured and
passive management techniques. Each such Fund, except the Overseas Index Fund,
is structured as a "feeder" fund which invests in a Master Portfolio of the
Master Investment Portfolio. The "Master Portfolio" invests in securities in
accordance with investment objectives, policies, and limitations that are
substantially similar to those of the applicable Index Fund.
The Broad Market Index Fund's Master Portfolio invests substantially all of its
assets in two other Master Portfolios of Barclays. One of these Master
Portfolios, in turn, invests substantially all of its assets in a representative
sample of stocks comprising the Wilshire 4500 Index. The other Master Portfolio,
in turn, invests substantially all of its assets in stocks comprising the S&P
500 Index (together, the "Underlying Portfolios"). The Master Portfolio's assets
will be invested in the Underlying Portfolios in proportions adjusted
periodically to maintain the capitalization range of the Wilshire 5000 Index.
The assets of the Vantagepoint Index Funds are invested in these Master
Portfolios in proportions that are designed to meet their respective objectives.
The Vantagepoint 500 Stock Index Fund invests exclusively in the S&P 500 Index
Portfolio. The Vantagepoint Mid/Small Company Index Fund invests exclusively in
the Extended Index Portfolio. The Vantagepoint Broad Market Index Fund invests
the U.S. Equity Index Fund which, in turn, invests in both Underlying Portfolios
in proportions that are designed to approximate the performance of the Wilshire
5000 Index. Finally, the Vantagepoint Core Bond Index Fund invests in a separate
Master Portfolio that is designed to track its benchmark index.
The Index Funds employ "passive" management techniques, meaning that each Fund
tries to match, as closely as possible, the performance of its benchmark index.
Because it would be very expensive to buy and sell all of the stocks (or bonds,
as the case may be) in the target index, the Mid / Small Company, the Broad
Market, and the Core Bond Index Funds use a "sampling" technique. Using computer
programs, each of these Funds selects securities that will recreate its
benchmark index in terms of factors such as industry, size, and other
characteristics. Therefore, the performance of the Funds versus their respective
benchmarks can be expected to deviate more than that of funds investing in all
of the securities contained in a benchmark.
MANAGEMENT OF THE VANTAGEPOINT FUNDS
The Vantagepoint Funds is organized as a Delaware business trust and is governed
by a 7-member Board of Directors, one of whom is an "interested" director as
that term is defined in the Investment Company Act of 1940. The Directors stand
in the position of
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fiduciaries to the shareholders and, as such, they have a duty of due care and
loyalty, and are responsible for protecting the interests of shareholders. The
Directors are responsible for the overall supervision of the operations of the
Vantagepoint Funds and evaluation of the performance of its investment adviser.
Vantagepoint Investment Advisers, LLC ("VIA") serves as investment adviser to
the Funds and employs a supporting staff of management personnel needed to
provide the requisite services to the Funds and also furnishes the Funds with
necessary office space, furnishings, and equipment. Each Fund pays its share of
VIA's net expenses which are allocated among the Funds under procedures approved
by the Funds' Board of Directors. In addition, each Fund bears its own direct
expenses, such as legal, auditing and custodial fees.
The Officers of the Vantagepoint Funds are also officers of VIA. The Officers of
the Funds manage its day-to-day operations and are responsible to the Funds'
Board of Directors.
The Vantagepoint Funds and affiliates adhere to an Insider Trading Policy
established pursuant to Rule 17j-1 of the Investment Company Act of 1940. The
policy is designed to prevent unlawful practices in connection with the purchase
and sale of securities by persons associated with the Funds, including officers
and employees of VIA.
The names of the Directors and Officers of the Funds and their principal
occupations over the last 5 years may be found in the prospectus under the
heading "Management of the Vantagepoint Funds".
COMPENSATION
Directors and Officers of the Funds do not receive salaries, retirement
benefits, deferred compensation or any other form of compensation from the
Vantagepoint Funds. Directors are reimbursed for expenses incurred in the
exercise of their duties. As of the date of this Statement of Additional
Information, Directors and Officers of the Funds as a group beneficially owned
less than 1% of the outstanding shares of the Funds.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Initially, the principal shareholder in the Vantagepoint Funds will be the ICMA
Retirement Trust (the "RT"), a District of Columbia common law trust. The RT was
established for the purpose of holding and investing the assets of public sector
retirement and deferred compensation plans. The RT will own a majority of the
outstanding shares of the Funds upon registration.
In exercising its rights as a shareholder in the Funds, the RT will seek
instructions from its investors, the plan sponsors of the public sector
retirement plans invested in the RT (the "employers"), in advance of exercising
the RT's voting rights. The RT will vote its shares of the Fund in the same
proportion as the instructions that it receives from the employers.
INVESTMENT ADVISORY AND OTHER SERVICES
VIA is a wholly-owned subsidiary of, and is controlled by the ICMA Retirement
Corporation ("RC"), a retirement plan administrator and investment adviser whose
principal investment advisory client is the RT. RC was established as a
not-for-profit organization in 1972 to assist state and local governments and
their agencies and instrumentalities in the establishment and maintenance of
deferred compensation and qualified retirement plans for the employees of such
public sector entities. These plans are established and maintained in accordance
with Sections 457 and 401, respectively, of the Internal Revenue Code of 1986,
as amended. RC has been registered as an investment adviser with the U.S.
Securities and Exchange Commission since 1983.
RC is governed by a 10-member Board of Directors approved by the Executive
Committee of the International City/County Management Association, the
organization that founded RC. RC is a non-stock corporation.
VIA is a Delaware limited liability company, and is registered as an investment
adviser with the Securities and Exchange Commission.
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VIA provides investment advisory services to each of the Vantagepoint Funds
pursuant to a Master Advisory Agreement (the "Advisory Agreement"). The advisory
services include Fund design, establishment of Fund investment objectives and
strategies, selection and management of subadvisers, and performance monitoring.
VIA supervises and directs the Funds' investments. Additionally, VIA selects the
Master Portfolios in which the Index Funds (other than the Overseas Equity Index
Fund) invest. VIA furnishes periodic reports to the Funds' Board of Directors
regarding the investment strategy and performance of each Fund.
Pursuant to the Advisory Agreement, the Vantagepoint Funds compensate VIA for
these services by paying VIA an annual advisory fee assessed against daily
average net assets under management in each Fund as follows:
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ADVISORY FEE
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All Funds except the Index Funds 0.10%
Index Funds 0.05%
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VIA or its broker-dealer affiliate, ICMA-RC Services LLC, provides all
distribution and marketing services for the Funds. VIA or its transfer agent
affiliate, Vantagepoint Transfer Agents, LLC. ("VTA"), also provides certain
administrative shareholder support services for the Vantagepoint Funds related
to the retirement plans investing in the Funds. VIA or VTA, as the case may be,
also provides Fund administration services, such as preparation of shareholder
reports and proxies, shareholder recordkeeping and processing of orders.
VIA or VTA receives asset-based compensation for these administrative services
on an annual basis as follows:
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FEE FOR FEE FOR
INVESTOR SERVICES FUND SERVICES
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All Funds except
the Index Funds 0.20% 0.15%
Index Funds
Class I 0.15% 0.15%
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Class II 0.05% 0.05%
- --------
</TABLE>
The advisory fee, the fee for Investor services, and the fee for Fund services
are deducted from the applicable Fund's assets, and their effect is factored
into any quoted share price or investment return for that Fund.
The day-to-day management of each Fund rests with one or more subadvisers hired
by the Funds with the assistance of VIA. The responsibility for overseeing
subadvisers rests with VIA's Investment Division, headed by Senior Vice
President John Tobey, reporting directly to Girard Miller, CFA , President of
VIA. The following tables identify each subadviser and indicate the annual
subadvisory fee that is paid out of the assets of each Fund. The fee is assessed
against average daily net assets under management. The fee schedules that have
been negotiated with each subadvisers are set forth below.
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AGGRESSIVE OPPORTUNITIES FUND
ASSETS
SUBADVISER MANAGED FEE
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First Pacific Advisers First $100 million 0.80%
Over $100 million 0.75%
MFS Institutional Advisers, Inc. Flat fee 0.75%
TCW Funds Management, Inc. First $100 Million 0.73%
Next $100 Million 0.69%
Over $200 Million 0.67%
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INTERNATIONAL FUND
Subadviser
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Capital Guardian Trust Company First $25 Million 0.75%*
Next $25 Million 0.60%
Next $200 Million 0.43%
Next $250 Million 0.38%
*Minimum Fee of $337,500
Payable to Capital
Guardian
Lazard Asset Management First $100 million 0.50%
Over $100 million 0.40%
Rowe Price-Fleming, International, Inc. First $20 Million 0.75%
Next $30 Million 0.60%
Over $50 Million* 0.50%
*On all assets managed
by Rowe Price-Fleming
GROWTH FUND
Subadviser
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Cadence Capital Management First $100 million 0.45%
Next $400 million 0.20%
Over $500 million 0.15%
William Blair & Company, LLC First $150 million 0.50%
Next $150 million 0.45%
Over $300 million 0.40%
Neuberger Berman, LLC Flat fee 0.45%
Barclays Global Fund Advisors First $500 million 0.04%
Next $500 million 0.02%
Over $1 billion 0.01%
Fidelity Management Trust Company
(Small Company account) First $25 million 0.80%
Over $25 million 0.60%
(Aggressive Equity account) Flat fee** 0.38%
</TABLE>
** From 1/1/2000 to 12/31/2000 the annual fee will be .45 of 1%. Beginning on
1/1/2001 the annual fee will be .80 of 1% on the first $25 million and .60% of
1% on assets over $25 million.
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<TABLE>
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GROWTH & INCOME FUND
ASSETS
SUBADVISER MANAGED FEE
- ---------------------------------------------- ------------------------- -------
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Capital Guardian Trust Company First $25 million 0.55%*
Next $25 million 0.40%
Over $50 million 0.23%
* Minimum fee of
$167,500 payable to
Capital Guardian
Putnam Investments Management, Inc. First $15 million 0.55%
Next $35 million 0.40%
Next $50 million 0.30%
Over $100 million 0.25%
EQUITY INCOME FUND
Subadviser
- ----------
Crawford Investment Counsel, Inc. First $100 million 0.20%
Next $100 million 0.15%
Over $200 million 0.10%
Newell Associates First $250 million 0.20%
Next $500 million 0.15%
Next $250 million 0.10%
Over $1 billion 0.08%
ASSET ALLOCATION FUND
Subadviser
- ----------
AVATAR Investors Associates Corp. First $250 million 0.25%
Next $250 million 0.20%
Over $500 million 0.18%
Mellon Capital Management First $200 million 0.38%
Over $200 million 0.20%
Wilshire Asset Management First $100 million 0.04%
Next $400 million 0.02%
Over $500 million 0.01%
Payden & Rygel Investment Counsel First $200 million 0.10%
Next $100 million 0.09%
Over $300 million 0.08%
</TABLE>
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<TABLE>
<CAPTION>
U.S. TREASURY SECURITIES FUND
Subadviser
- ----------
<S> <C> <C>
Seix Investment Advisors, Inc. First $25 million 0.17%
Next $50 million 0.12%
Next $25 million 0.07%
Money Market Fund (A I M Advisors, Inc) 0.08%
OVERSEAS EQUITY INDEX FUND
Barclays Global Fund Advisors N. A.* First $25 million 0.20%
Over $25 million 0.15%
</TABLE>
* Minimum fee of $75,000 payable to Barclays
<TABLE>
<CAPTION>
INDEX FUNDS (BARCLAYS)
ADVISORY AND
ADMINISTRATIVE
FEES
-----------------
<S> <C>
Broad Market Index Fund** 0.08%
500 Stock Index Fund 0.05%
Core Bond Index Fund 0.08%
Mid/Small Company Index 0.10%
</TABLE>
**Barclays is entitled to receive monthly fees at the annual rate of 0.01% of
the average daily net assets of the Master Portfolio, 0.08% of the average daily
net assets of the Extended Index Portfolio and 0.05% of the average daily net
assets of the S&P 500 Index Portfolio as compensation for its advisory services.
The Master Portfolio bears its pro rata share of the advisory fees of the
Underlying Portfolios. Based on these fee levels and the expected allocation of
assets between the two Underlying Portfolios, the advisory fees payable to
Barclays by the Master Portfolio on a combined basis will be approximately 0.07%
of the average daily net assets of the Master Portfolio. From time to time,
Barclays may waive such fees in whole or in part. Any such waiver will reduce
the expenses of the Master Portfolio and, accordingly, have a favorable impact
on its performance.
Information on the advisory services provided by each subadviser and services
provided by Barclays for each Fund can be found in the prospectus, under the
heading "Investment Policies, Investment Objectives, Principal Investment
Strategies, and Related Risks".
PORTFOLIO TRANSACTIONS OF THE FUNDS
VIA maintains a commission recapture program with certain brokers for the
Aggressive Opportunities Fund, the International Fund, the Growth Fund, the
Growth and Income Fund, and the Equity Income Fund. Under that program, a
percentage of commissions generated by the portfolio transactions for those
Funds is rebated to the Funds by the brokers and used to reduce the operating
expenses of those Funds.
The advisory agreements with each subadviser authorize the subadviser to select
the brokers or dealers who will execute the purchases or sales of securities for
each Fund. The agreements direct the subadvisers to use best efforts to obtain
the best available price and most favorable execution with respect to all
transactions for the Funds.
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In placing Fund transactions, each subadviser will use its best judgment to
choose the broker most capable of providing the brokerage services necessary to
obtain most favorable execution.
In choosing brokers, the subadvisers may take into account, in addition to
commission cost and execution capabilities, the financial stability and
reputation of the brokers and the brokerage and research services (as those
terms are defined in Section 28(e) of the Securities Exchange Act of 1934)
provided by such brokers. The subadviser is authorized to pay brokers who
provide such brokerage or research services a commission for executing a
transaction which is in excess of the commission another broker would have
charged for that transaction if the subadviser determines that such commission
is reasonable in relation to the value of the brokerage and research services
provided to the subadviser by the broker.
With respect to the Index Funds, Barclays assumes general supervision over
placing orders on behalf of the Master Portfolio for the purchase or sale of
portfolio securities. Allocation of brokerage transactions, including their
frequency, is made in the best judgment of Barclays and in a manner deemed fair
and reasonable to interestholders. In executing portfolio transactions and
selecting brokers or dealers, Barclays seeks to obtain the best overall terms
available for the Master Portfolio. In assessing the best overall terms
available for any transaction, Barclays considers factors deemed 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. The primary consideration is prompt execution of
orders at the most favorable net price. Certain of the brokers or dealers with
whom the Master Portfolio may transact business offer commission rebates to the
Master Portfolio. Barclays considers such rebates in assessing the best overall
terms available for any transaction. The overall reasonableness of brokerage
commissions paid is evaluated by Barclays based upon its knowledge of available
information as to the general level of commissions paid by other institutional
investors for comparable services. Brokers also are selected because of their
ability to handle special executions such as are involved in large block trades
or broad distributions, provided the primary consideration is met. Portfolio
turnover may vary from year to year, as well as within a year. High turnover
rates over 100% are likely to result in comparatively greater brokerage
expenses.
One or more of the subadvisers may aggregate sale and purchase orders from the
Funds with similar orders made simultaneously for other clients of the
subadviser. The subadviser will do so when, in its judgment, such aggregation
will result in overall economic benefit to the Fund, taking into consideration
the advantageous selling or purchase price, brokerage commission, and other
expenses.
If an aggregate order is executed in parts at different prices, or two or more
separate orders for two or more of a subadviser's clients are entered at
approximately the same time on any day are executed at different prices, the
subadviser has discretion, subject to its fiduciary duty to all its clients, to
use an average price at which such securities were purchased or sold for each of
the clients for whom such orders were executed.
The Vantagepoint Funds participate in a securities lending program under which
the Funds' custodians is authorized to lend Fund securities to qualified
institutional investors under contracts calling for collateral in U.S.
Government securities or cash in excess of the market value of the securities
loaned. The Vantagepoint Funds receive dividends and interest on the loaned
securities. Lending fees received in the Vantagepoint Funds account are used to
reduce overall custodial expenses in the Funds from which the loaned securities
originated.
CAPITAL STOCK AND OTHER SECURITIES
The Vantagepoint Funds is an open-end diversified management investment company
organized as a Delaware business trust. As an open-end company, the Vantagepoint
Funds continually offers shares to the public. With the exception of the Index
Funds, each Fund offers a single class of shares.
The Index Funds offer two classes of shares, Class I and Class II. Class I
shares are open to IRA and other individual accounts and each public sector
employee benefit plan that invests indirectly in the Funds through the ICMA
Retirement Trust containing assets of less than $40 million. Class II shares are
open (i) to qualifying public sector employee benefit plans that invest directly
in the Funds and have qualifying assets in excess of $125 million and (ii)
public sector employee benefit plans that invest indirectly in the Funds through
the ICMA Retirement Trust and have qualifying assets in excess of $40 million so
invested. Other plans with average account balances or other features that are
expected to afford the Index Funds with certain economies of scale in servicing
employee benefit plan participant accounts, may also qualify for Class II
shares.
11
<PAGE> 12
PURCHASE, REDEMPTION AND PRICING OF SHARES
PURCHASES
Reference is made to the prospectus under the heading "Purchases, Exchanges and
Redemptions".
The Funds reserve the right in their sole discretion (i) to suspend the offering
of their shares or (ii) to reject purchase orders when in the judgment of
management such rejection is in the best interest of a particular Fund or Funds.
REDEMPTIONS
Reference is made to the prospectus under the heading "Purchases, Exchanges and
Redemptions". The Funds may suspend redemption privileges or postpone the date
of payment (i) during any period that the New York Stock Exchange is closed or
trading on the exchange is restricted as determined by the Securities and
Exchange Commission (the "Commission"), (ii) during any period when an emergency
exists as defined by the rules of the Commission as a result of which it is not
reasonably practicable for the Funds to dispose of securities owned by it, or
fairly to determine the value of its assets, and (iii) for such other periods as
the Commission may permit.
Certain redemption requests must include a signature guarantee
A signature guarantee is designed to protect you against fraud and may be
required by The Vantagepoint Funds at the discretion of its management. A
redemption request must be made in writing and must include a signature
guarantee if any of the following situations would apply:
* The account registration has changed within the past 30 days;
* The check is being mailed to an address other than the one listed on the
account (record address);
* The check is being made payable to someone other than the account owner;
* The redemption proceeds are being transferred to an account with a
different registration;
* Proceeds are to be wired to a bank account that was not pre-designated;
* Any other transaction reasonably determined by the Funds to require a
signature guarantee.
A signature guarantee may be obtained from a bank, broker, dealer, credit union
(if authorized under state law), securities exchange or association, clearing
agency or savings association. Please note: a notary public cannot provide a
signature guarantee, and a notarized redemption request is not sufficient.
The Funds have made an election with the Commission to pay in cash all
redemptions requested by any shareholder of record limited in an amount during
any 90-day period to the lesser of $250,000 or 1% of the net assets of the Fund
at the beginning of such period. Such commitment is irrevocable without the
prior approval of the Commission. Redemptions in excess of the above limits may
be paid, in whole or in part, in investment securities or in cash, as the
Directors may deem advisable; however, payment will be made wholly in cash
unless the Directors believe that economic or market conditions exist which
would make a practice detrimental to the best interests of the Fund. If
redemptions are paid in investment securities, such securities will be valued as
set forth in the Prospectus under "Pricing and Timing of Transactions" and a
redeeming shareholder would normally incur brokerage expenses if he or she
converted these securities to cash.
TAXATION OF THE FUND
The Vantagepoint Funds intends to qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code, which would cause the income
and capital gains of the Trust to "pass through" to the shareholders for federal
income and capital gains tax purposes. Failure to qualify for Subchapter M
status could result in federal income and capital gains taxes being assessed at
the Fund level, which would reduce Fund returns correspondingly.
12
<PAGE> 13
CALCULATION OF PERFORMANCE DATA
As newly registered funds, the Vantagepoint Funds have no performance history.
However, the Vantagepoint Funds are patterned on, have the same investment
objectives, and are operated in substantially the same fashion, as certain funds
that have been offered through the ICMA Retirement Trust, an unregistered
commingled fund which holds and invests the assets of public sector retirement
plans. The inception dates of these funds are noted below. Substantially all of
the portfolio securities of each Vantagepoint Fund were transferred from the
corresponding fund of the ICMA Retirement Trust. Barclays was not the adviser to
any of the Funds shown during these periods. The underlying portfolio of each
fund of the ICMA Retirement Trust currently consists solely of the shares of the
corresponding Vantagepoint Fund in which it invests.
The performance shown below is the performance an investor would have received
had the funds of the ICMA Retirement Trust charged the same asset-based fees and
expenses as the Vantagepoint Funds, as set forth in the prospectus.
The ICMA Retirement Trust's index funds offered a single class of shares. The
ICMA Retirement Trust did not offer a money market fund or a growth and income
fund or a core bond index fund, and performance is not shown for those
Vantagepoint Funds. Figures shown are updated to most recent quarter-end.
Please note that the performance depicted is hypothetical. Actual performance of
the Vantagepoint Funds may vary from that shown.
<TABLE>
<CAPTION>
ONE THREE FIVE TEN SINCE INCEPTION
FUND YEAR YEAR YEAR YEAR INCEPTION DATE
- ---------------------------------- ---- ---- ---- ---- --------- ----
<S> <C> <C> <C> <C> <C> <C>
Aggressive
Opportunities 12.2% 18.2% N/A N/A 23.1% 10/01/1994
International 5.0% 8.5% N/A N/A 7.6% 10/01/1994
Growth 19.8% 22.4% 19.3% 18.9% N/A
Equity Income 16.0% 22.5% N/A N/A 22.0% 04/01/1994
Asset Allocation 22.4% 21.1% 17.7% 15.0% N/A
U.S. Treasury Securities 9.7% 6.6% 6.3% N/A 7.2% 07/01/1994
Overseas Equity Index 19.8% N/A N/A N/A 8.8% 07/01/1994
Mid/Small Company 7.3% N/A N/A N/A 16.3% 07/01/1994
Broad Market Index 22.7% 24.7% 21.3% 17.1% N/A
500 Stock Index 28.1% N/A N/A N/A 28.1% 07/01/1994
</TABLE>
Communications which refer to the use of a Fund as a potential investment for
employee benefit plans or Individual Retirement Accounts may quote a total
return based upon compounding of dividends on which it is presumed no Federal
tax applies.
In assessing such comparison of yields, an investor should keep in mind that the
composition of the investments in the reported averages may not be identical to
the formula used by the Fund to calculate its yield. In addition, there can be
no assurance that any Fund will continue its performance as compared to such
other averages.
LEGAL COUNSEL INDEPENDENT AUDITORS & CUSTODIAN.
Morgan, Lewis & Bockius, Washington, D.C. serves as legal counsel to The
Vantagepoint Funds. PricewaterhouseCoopers, LLP, Baltimore, MD, serves as
independent auditors. Investors Bank & Trust, Boston, MA serves as custodian.
13
<PAGE> 14
VANTAGEPOINT FUNDS VANTAGEPOINT MONEY MARKET FUND
STATEMENT OF ASSET AND LIABILITIES
FEBRUARY 19, 1999
<TABLE>
<CAPTION>
<S> <C>
Cash $100,000
Total Assets $100,000
Total Liabilities -
Net Assets - Offering and redemption price of $1.00 $100,000
Per share with 100,000 shares outstanding
</TABLE>
NOTES TO FINANCIAL STATEMENTS
A. ORGANIZATION
The Vantagepoint Funds (Delaware Business Trust) was organized on July 28, 1999
and was established as a no load open-end diversified "series" investment
company offering thirteen distinct investment portfolios (the "Funds"). The five
Index Funds offer two classes of shares. The other Funds offer a single class of
shares. The Vantagepoint Funds has had no operations other than those matters
related to their organization and registration as an investment company under
the Investment Company Act of 1940. The Statement of Assets and Liabilities
presented is for the Vantagepoint Money Market Fund, one of the portfolios
comprising The Vantagepoint Funds. The ICMA Retirement Corporation (a registered
Investment Adviser) has provided the initial capital for the Fund by purchasing
100,000 shares of the Vantagepoint Money Market Fund at $1.00 per share. Such
shares were acquired for investment and can be disposed of only by redemption.
The Funds are patterned on, have the same investment objectives, and are
operated in substantially the same fashion as certain funds offered through the
ICMA Retirement Trust, an unregistered commingled fund which holds and invests
the assets of public sector retirement plans. Most of the portfolio securities
of the ICMA Retirement Trust will be transferred in-kind to the corresponding
fund of the Vantagepoint Funds upon the commencement of operations. The
underlying portfolio of each fund of the ICMA Retirement Trust will consist
solely of the shares of the corresponding Vantagepoint Fund in which it invests.
B. ORGANIZATION COSTS
The costs incurred in connection with the organization of the Funds has been
borne by ICMA Retirement Corporation. The Funds will not be required to
reimburse ICMA Retirement Corporation for these costs.
C. MANAGEMENT OF THE FUNDS
The Funds are managed by Vantagepoint Investment Advisers, LLC (VIA) a
wholly-owned subsidiary of ICMA Retirement Corporation. VIA employs a
"multi-management" strategy in which it evaluates, selects, and monitors one or
more subadvisers for each Fund. Compensation for the investment management of
the Funds paid to VIA and the subadvisers is asset based, i.e., it consists of
an annual percentage fee calculated based on average assets under management.
The aggregate annual advisory fees paid to VIA and to subadvisers ranges from
.10% to .86% of the average daily net assets of each Fund. VIA or its
broker-dealer affiliate, ICMA-RC Services, LLC, provides all distribution and
marketing services to the Funds. VIA or its transfer agent affiliate,
Vantagepoint Transfer Agents, LLC ("UTA") also provides certain administrative
shareholder support services for the Funds. VIA or VTA receives asset-based
compensation for these additional administrative services ranging from .10% to
.35% of the average daily net assets of the Funds.
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<PAGE> 15
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of
The Vantagepoint Funds:
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of the Vantagepoint
Money Market Fund, one portfolio comprising The Vantagepoint Funds (the "Fund")
at February 19, 1999 in conformity with generally accepted accounting
principles. This financial statement is the responsibility of the Fund's
management; our responsibility is to express an opinion on this financial
statement based upon our audit. We conducted our audit of this financial
statement in accordance with generally accepted auditing standards which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statement is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statement, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
February 22, 1999
15
