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THE VANTAGEPOINT FUNDS
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 2000
AS REVISED DECEMBER 27, 2000
The Vantagepoint Funds is a no-load, diversified open-end management
investment company. The Vantagepoint Funds operates as a "series" investment
company, offering nineteen distinct investment portfolios (the "Funds"), each
Fund having different investment objectives. This Statement of Additional
Information ("SAI") contains additional information about the Funds.
This SAI is not a prospectus. This SAI is incorporated by reference into, and
should be read in conjunction with, the Funds' current prospectus, dated May
1, 2000, as revised December 1, 2000. A copy of the prospectus may be obtained
by writing to the Funds or calling 1-800-669-7400.
The Funds' most recent financial statements for Funds that were in operation
during 1999 are included in the Audited Annual Report which is herein
incorporated by reference to this SAI. A copy of this Annual Report must
accompany this SAI.
TABLE OF CONTENTS
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PAGE
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Investment Objectives & Policies................................ 2
Management of The Vantagepoint Funds............................ 7
Control Persons and Principal Holders of Securities............. 8
Investment Advisory and Other Services.......................... 8
Portfolio Transactions of the Funds............................. 13
Capital Stock and Other Securities.............................. 13
Purchase, Redemption, and Pricing of Shares..................... 14
Taxation of the Fund............................................ 16
Calculation of Performance Data................................. 16
Legal Counsel, Independent Auditors, & Custodian................ 18
Financial Statements............................................ 18
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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 on July 28, 1998.
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, VIA selects the Master Portfolios in which each Index Fund invests.
With respect to the Model Portfolio Funds, VIA hires and manages subadvisers
who are responsible for the day-to-day management and security selections of
the underlying Funds. The Vantagepoint Funds are as follows:
Actively Managed Funds: Money Market Fund
U.S. Treasury Securities Fund
Income Preservation Fund
Asset Allocation Fund
Equity Income Fund
Growth & Income Fund
Growth Fund
International Fund
Aggressive Opportunities Fund
Index Funds: Core Bond Index Fund
500 Stock Index Fund
Broad Market Index Fund
Mid/Small Company Index Fund
Overseas Equity Index Fund
Model Portfolio Funds: Saving Oriented Fund
Conservative Growth Fund
Traditional Growth Fund
Long-Term Growth Fund
All-Equity Growth Fund
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.
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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
SAI 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.
The Model Portfolio Funds respective investment objectives and principal
investment strategies are described in the prospectus. The following
information supplements, and should be read in conjunction with, the
Prospectus. The Model Portfolio Funds pursue their objectives by investing all
of their assets in shares of other mutual funds. The Model Portfolio Funds
currently allocate their assets among the various portfolios offered by The
Vantagepoint Funds. Each current underlying fund's investment objective and
principal investment strategies are described in The Vantagepoint Funds'
current Prospectus. Currently, the Model Portfolios expect to be fully
invested in shares of underlying funds.
As explained in the prospectus, and in greater detail on page 6, each 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 SAI 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"), nor
are the Broad Market Index or Mid/Small Company Index Funds sponsored,
endorsed, sold, or promoted 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.
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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 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 ("S&P 500 Index") -- consists of 500
companies representing larger capitalization stocks traded in the U.S.
Standard & Poor's/BARRA Value Index -- a subset of the S & P 500 Index that
includes stocks with lower price-to-book ratios.
Wilshire 5000 Equity Index -- consists of common equity securities of
companies domiciled in the U.S. for which daily pricing is available; the
broadest measure of the U.S. equity market.
Wilshire 4500 Equity Index -- consists of all stocks in the Wilshire 5000
except for those included in the Standard & Poor's 500 Index; represents mid-
and small-capitalization companies.
Morgan Stanley Capital International EAFE Index ("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 - ("EAFE Free Index") A
subset of the EAFE Index, that excludes securities that are not available for
purchase by foreign investors.
Lehman Brothers Long-Term Treasury Bond Index -- consists of all Treasury
obligations with maturities of 10 years or greater.
Lehman Brothers Government/Credit 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.
ELIGIBLE INVESTMENTS
In addition to the securities and financial instruments described in the
prospectus, the Vantagepoint Funds (which includes the underlying Vantagepoint
Funds for the Model Portfolio 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.
Currently, the Model Portfolios expect to be fully invested in shares of
underlying funds.
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.
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.
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OTHER INVESTMENTS:
The Funds (which includes the underlying Vantagepoint Funds for the Model
Portfolio 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 and the Overseas Equity
Index Fund.
iv. Options. The Income Preservation Fund; bond and index options only.
The Income Preservation Fund may invest to a limited extent in high yield
securities and non-dollar denominated debt securities. The Fund's investments
in high yield securities expose it to a substantial degree of credit risk.
Prices of high yield securities will rise and fall primarily in response to
actual or perceived changes in the issuer's financial health, although changes
in market interest rates also will affect prices. High yield securities may
experience reduced liquidity and sudden and substantial decreases in price.
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 (which includes the
underlying Vantagepoint Funds for the Model Portfolio Funds) 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 net 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 SAI 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);
(7) Purchase or sell puts or calls, or combinations thereof except as provided
herein or in the prospectus;
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(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 SAI. 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 Income Preservation 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 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 (see page 6 for a description of the Master
Portfolio's policies).
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 Overseas Equity Index Fund's Master Portfolio is the
International Index Master Portfolio which seeks to match the total return
performance of an international portfolio of common stocks represented by the
EAFE Free 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 Overseas Equity
Index Fund invests exclusively in the International Index Master 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 Overseas Equity, 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.
FUNDAMENTAL OPERATING POLICIES OF THE MASTER PORTFOLIO
The Master Portfolio is subject to the following fundamental investment
limitations which cannot be changed without approval by the holders of a
majority (as defined in the 1940 Act) of the Master Portfolio's outstanding
voting securities. To obtain approval, a majority of the Master Portfolio's
outstanding voting securities means the vote of the lesser of: (1) 67% or more
of the voting securities present, if more than 50% of the outstanding voting
securities are present or represented, or (2) more than 50% of the outstanding
voting shares.
The Master Portfolio may not:
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1. invest more than 5% of its assets in the obligations of any single issuer,
except that up to 25% of the value of its total assets may be invested,
and securities issued or guaranteed by the U.S. government, or its
agencies or instrumentalities may be purchased, without regard to any such
limitation. This limitation does not apply to foreign currency
transactions including, without limitation, foreign currency contracts.
2. hold more than 10% of the outstanding voting securities of any single
issuer. This investment restriction applies only with respect to 75% of
its total assets.
3. invest in commodities, except that the Master Portfolio may purchase and
sell (i.e., write) options, forward contracts, futures contracts,
including those relating to indexes, and options on futures contracts or
indexes.
4. purchase, hold or deal in real estate, or oil, gas or other mineral leases
or exploration or development programs, but the Master Portfolio may
purchase and sell securities that are secured by real estate or issued by
companies that invest or deal in real estate.
5. borrow money, except to the extent permitted under the 1940 Act, provided
that the Master Portfolio may borrow up to 20% of the current value of its
net assets for temporary purposes only in order to meet redemptions, and
these borrowings may be secured by the pledge of up to 20% of the current
value of its net assets. For purposes of this investment restriction, the
Master Portfolio's entry into options, forward contracts, futures
contracts, including those relating to indexes, and options on futures
contracts or indexes shall not constitute borrowing to the extent certain
segregated accounts are established and maintained by the Master
Portfolio.
6. make loans to others, except through the purchase of debt obligations and
the entry into repurchase agreements. However, the Master Portfolio may
lend its portfolio securities in an amount not to exceed one-third of the
value of its total assets. Any loans of portfolio securities will be made
according to guidelines established by the SEC and the Master Portfolio's
Board of Trustees.
7. act as an underwriter of securities of other issuers, except to the extent
that the Master Portfolio may be deemed an underwriter under the
Securities Act of 1933, as amended, by virtue of disposing of portfolio
securities.
8. invest 25% or more of its total assets in the securities of issuers in any
particular industry or group of closely related industries except that, in
the case of the Master Portfolio, there shall be no limitation with
respect to investments in (i) obligations of the U.S. government, its
agencies or instrumentalities; or (ii) any industry in which the EAFE Free
Index becomes concentrated to the same degree during the same period, the
Master Portfolio will be concentrated as specified above only to the
extent the percentage of its assets invested in those categories of
investments is sufficiently large that 25% or more of its total assets
would be invested in a single industry.
9. issue any senior security (as such term is defined in Section 18(f) of the
1940 Act), except to the extent the activities permitted in the Master
Portfolio's fundamental policies (3) and (5) may be deemed to give rise to
a senior security.
10. purchase securities on margin, but the Master Portfolio may make margin
deposits in connection with transactions in options, forward contracts,
futures contracts, including those related to indexes, and options on
futures contracts or indexes.
Non-Fundamental Investment Restrictions. The Master Portfolio has adopted the
following investment restrictions as non-fundamental policies. These
restrictions may be changed without shareholder approval by vote of a majority
of the Trustees of MIP, at any time. The Master Portfolio is subject to the
following investment restrictions, all of which are non-fundamental policies.
(1) The Master Portfolio may invest in shares of other open-end management
investment companies, subject to the limitations of Section 12(d)(1) of the
1940 Act. Under the 1940 Act, the Master Portfolio's investment in such
securities currently is limited, subject to certain exceptions, to (i) 3% of
total voting stock of any one investment company, (ii) 5% of the Master
Portfolio's net assets with respect to any one investment company, and (iii)
10% of the Master Portfolio's net assets in the aggregate. Other investment
companies in which the Master Portfolio invests can be expected to charge fees
for operating expenses, such as investment advisory and administration fees,
that would be in addition to those charged by the Master Portfolio.
(2) The Master Portfolio may not invest more than 15% of its net assets in
illiquid securities. For this purpose, illiquid securities include, among
others, (a) securities that are illiquid by virtue of the absence of a readily
available market or legal or contractual restrictions on resale, (b) fixed
time deposits that are subject to withdrawal penalties and that have
maturities of more than seven days, and (c) repurchase agreements not
terminable within seven days.
(3) The Master Portfolio may lend securities from its portfolio to
brokers, dealers, and financial institutions, in amounts not to exceed (in the
aggregate) one-third of the Master Portfolio's total assets. Any such loans of
portfolio securities will be fully
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collateralized based on values that are marked to market daily. The Master
Portfolio will not enter into any portfolio security lending arrangement
having a duration of longer than one year.
NON-FUNDAMENTAL OPERATING POLICIES OF THE MASTER PORTFOLIO ("FUND")
The following are the Master Portfolio ("Fund") non-fundamental operating
policies which may be changed by the Fund's Board of Directors without
shareholder approval.
Unless indicated otherwise below, the Fund may not:
1. Sell securities short, unless the Fund owns or has the right to obtain
securities equivalent in kind and amount to the securities sold short, or
unless it covers such short sale as required by the current rules and
positions of the Securities and Exchange Commission ("SEC") or its staff,
and provided that transactions in options, futures contracts, options on
futures contracts, or other derivative instruments are not deemed to
constitute selling securities short.
2. Purchase securities on margin, except that the Fund may obtain such
short-term credits as are necessary for the clearance of transactions; and
provided that margin deposits in connection with futures contracts,
options on futures contracts, or other derivative instruments shall not
constitute purchasing securities on margin.
3. Invest in illiquid securities if, as a result of such investment, more
than 15% (10% with respect to a money fund) of its net assets would be
invested in illiquid securities, or such other amounts as may be permitted
under the 1940 Act.
4. Purchase securities of other investment companies except in compliance
with the 1940 Act and applicable state law.
5. Invest all of its assets in the securities of a single open-end investment
management company with substantially the same fundamental investment
objective, restrictions and policies as the Fund.
6. Engage in futures or options on futures transactions which are
impermissible pursuant to Rule 4.5 under the Commodity Exchange Act and,
in accordance with Rule 4.5, will use futures or options on futures
transactions solely for bona fide hedging transactions (within the meaning
of the Commodity Exchange Act), provided, however, that the Fund may, in
addition to bona fide hedging transactions, use futures and options on
futures transactions if the aggregate initial margin and premiums required
to establish such positions, less the amount by which any such options
positions are in the money (within the meaning of the Commodity Exchange
Act), do not exceed 5% of the Fund's net assets.
7. Borrow money except (1) from banks or (2) through reverse repurchase
agreements or mortgage dollar rolls, and will not purchase securities when
bank borrowings exceed 5% of its total assets.
8. Make any loans other than loans of portfolio securities, except through
(1) purchases of debt securities or other debt instruments, or (2)
engaging in repurchase agreements.
Non-Fundamental Policy No. 5 does not apply because the Fund seeks to achieve
its investment objective by investing substantially all of its assets in the
Master Portfolio of MIP.
Unless noted otherwise, if a percentage restriction is adhered to at the time
of investment, a later increase or decrease in percentage resulting from a
change in the Fund's assets (i.e. due to cash inflows or redemptions) or in
market value of the investment or the Fund's assets will not constitute a
violation of that restriction.
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 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
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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 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 SAI, 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
The principal shareholder in the Vantagepoint Funds is 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 owns a majority of
the outstanding shares of each Fund and is therefore considered a "control"
person for purposes of the Investment Company Act of 1940.
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.
VIA provides investment advisory services to each of the Vantagepoint Funds,
including the Model Portfolios 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 invest, and hires and manages subadvisers
who are responsible for the day-to-day management and security selections of
the underlying Funds of the Model Portfolio Funds. 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:
8
<PAGE> 9
<TABLE>
<CAPTION>
ADVISORY FEE
------------
<S> <C>
All Funds except
the Index Funds 0.10%
(including the Model
Portfolio Funds)
Index Funds 0.05%
</TABLE>
VIA received the following investment advisory fees for the fiscal period
ended December 31, 1999:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
Advisory Fees Paid
-------------------------------------------------------------------------
<S> <C>
-------------------------------------------------------------------------
Money Market* $ 49,099
-------------------------------------------------------------------------
U.S. Treasury Securities 62,708
-------------------------------------------------------------------------
Asset Allocation 816,758
-------------------------------------------------------------------------
Equity Income 410,089
-------------------------------------------------------------------------
Growth & Income 133,407
-------------------------------------------------------------------------
Growth 1,985,662
-------------------------------------------------------------------------
International 174,734
-------------------------------------------------------------------------
Aggressive Opportunities 301,479
-------------------------------------------------------------------------
Core Bond Index 107,980
-------------------------------------------------------------------------
500 Stock Index 72,566
-------------------------------------------------------------------------
Broad Market Index 221,418
-------------------------------------------------------------------------
Mid/Small Company Index 7,240
-------------------------------------------------------------------------
Overseas Equity Index 17,067
-------------------------------------------------------------------------
</TABLE>
* VIA waived $24,715 of its fees for the period.
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.
Income Preservation, All-Equity Growth, Long-Term Growth, Traditional Growth,
Conservative Growth and Savings Oriented Funds were not in existence as
registered Funds for the fiscal period ended December 31, 1999 and therefore
paid no investment advisory or administrative services fees for this period.
VIA or VTA receives asset-based compensation for these administrative services
on an annual basis as follows:
<TABLE>
<CAPTION>
FEE FOR FEE FOR
INVESTOR SERVICES FUND SERVICES
---------------------- ----------------
<S> <C> <C>
All Funds except
the Index Funds
(including
underlying Funds
of the Model
Portfolio Funds) 0.20% 0.15%
Index Funds
Class I 0.15% 0.15%
-------
Class II 0.05% 0.05%
--------
</TABLE>
VIA or VTA received the following fees for administrative services for the
fiscal period ended December 31, 1999:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
Amount Received
-----------------------------------------------------------------
<S> <C>
-----------------------------------------------------------------
Money Market $ 171,166
-----------------------------------------------------------------
U.S. Treasury Securities 218,386
-----------------------------------------------------------------
Asset Allocation 2,845,926
-----------------------------------------------------------------
Equity Income 1,428,709
-----------------------------------------------------------------
Growth & Income 465,427
-----------------------------------------------------------------
Growth 7,155,685
-----------------------------------------------------------------
International 613,774
-----------------------------------------------------------------
Aggressive Opportunities 1,051,232
-----------------------------------------------------------------
</TABLE>
9
<PAGE> 10
<TABLE>
<S> <C>
-----------------------------------------------------------------
Overseas Equity Index 90,539
-----------------------------------------------------------------
Mid/Small Company Index 35,744
-----------------------------------------------------------------
Broad Market Index 1,153,990
-----------------------------------------------------------------
500 Stock Index 316,074
-----------------------------------------------------------------
Core Bond Index 585,974
-----------------------------------------------------------------
</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 Board of Directors of the Fund has adopted Insider Trading Policies
pursuant to Rule 17j-1 under the Investment Company Act of 1940. This policy
applies to the personal investing activities of its access persons as defined
by Rule 17j-1. The policy is designed to prevent unlawful practices in
connection with the purchase and sale of securities by access persons. Under
the policy, access persons are permitted to engage in personal securities
transactions, but are required to report their personal securities
transactions for monitoring purposes. A copy of this policy is on file with
the Securities & Exchange Commission and is available to the public.
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 and the fees paid
for the fiscal period ended December 31, 1999 are set forth below. The Income
Preservation Fund was not in operation for the fiscal period ended December
31, 1999 and therefore paid no fees to subadviser during this period. The
All-Equity, Long-Term Growth, Traditional Growth, Conservative Growth and
Savings Oriented Funds do not have subadviser fees.
<TABLE>
<CAPTION>
AGGRESSIVE OPPORTUNITIES FUND
AMOUNT PAID FOR
ASSETS PERIOD ENDED
SUBADVISER MANAGED FEE DEC. 31, 1999
----------------------------------- ------------------------ ------- ----------------
<S> <C> <C> <C>
First Pacific Advisers, Inc. First $100 million 0.80% $639,257
Over $100 million 0.75%
MFS Institutional Advisors, Inc. Flat fee 0.75% $634,124
TCW Investment Management Company First $100 Million 0.73% $626,419
Next $100 Million 0.69%
Over $200 Million 0.67%
INTERNATIONAL FUND
Subadviser
----------
Capital Guardian Trust Company First $25 Million 0.75%* $254,792
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% $231,876
Over $100 million 0.40%
T.Rowe Price International, Inc. First $20 Million 0.75% $130,239
Next $30 Million 0.60%
Over $50 Million 0.50%
After $200 Million 0.50%*
*On all assets managed
by T. Rowe Price
International, Inc.
GROWTH FUND(+)
Subadviser
----------
TCW Investment Management Company First $25 million 0.70% --
Next $25 million 0.50%
Next $50 million 0.45%
Next $400 million 0.40%
</TABLE>
10
<PAGE> 11
<TABLE>
<S> <C> <C> <C>
Over $500 million 0.35%
Atlanta Capital Management First $100 million 0.45%
Next $200 million 0.35%
Next $200 million 0.30%
Over $500 million 0.25%
Tukman Capital Management, Inc. Flat fee 0.50% --
Barclays Global Fund Advisors First $1 billion 0.15% $24,810(++)
Over $1 billion 0.01%
Fidelity Management Trust Company First $25 million 0.80% $1,255,100
Over $25 million 0.60%
Brown Capital Management, Inc. First $50 million 0.45% --
Next $50 million 0.40%
Next $100 million 0.30%
Next $300 million 0.25%
Over $500 million 0.20%
(+) Cadence Capital Management, Neuberger & Berman LLC and Fidelity Management
Trust Company also served as subadvisors to the Growth Fund until September
30, 1999 and received $1,019,044, $290,681 and $471,539 in subadvisory fees,
respectively.* William Blair & Company, LLC served as subadvisor to the
Fund until May 8, 2000 and was paid a fee of $890,609 for the period
ended December 31, 1999.
(++) Reflects higher fee schedule in place prior to October 1, 2000.
</TABLE>
<TABLE>
<CAPTION>
GROWTH & INCOME FUND
AMOUNT PAID FOR
ASSETS PERIOD ENDED
SUBADVISER MANAGED FEE DEC. 31, 1999
--------------------------------------- ----------------- -------- -------------
<S> <C> <C> <C>
Capital Guardian Trust Company First $25 million 0.55%* $188,689
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% $213,438
Next $35 million 0.40%
Next $50 million 0.30%
Over $100 million 0.25%
Wellington Management Company, LLP First $50 million 0.40% N/A
Next $50 million 0.30%
Over $100 million 0.25%
EQUITY INCOME FUND(+)
Subadviser
----------
Southeastern Asset Management, Inc.(+) First $50 million 0.75%
Over $50 million 0.50%
Barrow, Hanley, Mewhinney
& Strauss, Inc. First $10 million 0.75% $84,858
Next $15 million 0.50%
Next $175 million 0.25%
Next $600 million 0.20%
Next $200 million 0.15%
Over $1 billion 0.13%
T. Rowe Price Associates, Inc. First $500 million 0.40% $119,840
Over $500 million 0.375%
(+) Crawford Investments and Newell Associates served as subadvisers to the
Equity Income Fund until July 28, 1999 and received $220,502 and $287,436
respectively in subadvisory fees. Wellington Management served as a
subadviser to the Fund until December 13, 2000 and received a fee
of $90,361 for the period ended December 31, 1999.
ASSET ALLOCATION FUND
Subadviser
----------
Avatar Investors Associates Corp. First $250 million 0.25% $831,145
Next $250 million 0.20%
Over $500 million 0.18%
Mellon Capital Management First $200 million 0.38% $978,777
Over $200 million 0.20%
</TABLE>
11
<PAGE> 12
<TABLE>
<S> <C> <C> <C>
Wilshire Asset Management First $100 million 0.04% $83,037
Next $400 million 0.02%
Over $500 million 0.01%
Payden & Rygel Investment Counsel First $200 million 0.10% $233,511
Next $100 million 0.09%
Over $300 million 0.08%
INCOME PRESERVATION FUND
Subadviser
----------
Wellington First $100 million 0.25%
Over $100 million 0.15%
Payden & Rygel First $200 million 0.10%
Next $100 million 0.09%
Over $300 million 0.08%
PIMCO Flat Fee 0.25%
U.S. TREASURY SECURITIES FUND
Subadviser
----------
Seix Investment Advisors, Inc. First $25 million 0.17% $75,600
Next $50 million 0.12%
Next $25 million 0.07%
MONEY MARKET FUND
AIM Advisors, Inc. 0.08% N/A - amount
deducted from the
daily dividend
factor
</TABLE>
<TABLE>
<CAPTION>
INDEX FUNDS (BARCLAYS)
ADVISORY AND
ADMINISTRATIVE
FEES
--------------
<S> <C> <C>
Broad Market Index Fund 0.08%** $357,301
500 Stock Index Fund 0.05% $ 71,073
Core Bond Index Fund 0.08% $172,231
Mid/Small Company Index 0.10% $ 14,403
Overseas Equity Index 0.25% $ 21,557
</TABLE>
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".
* Fidelity Management Trust Company remains as subadviser to the Growth Fund,
however, that portion of the Fidelity account that had been managed by Kennedy
P. Richardson has been terminated.
**Barclays is entitled to receive monthly fees at the annual rate of 0.01% of
the average daily net assets of the U.S. Equity 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.
12
<PAGE> 13
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 following amount represents the amount of these
transactions and commissions paid for the fiscal period ended December 31,
1999:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
Total Brokerage Commissions Directed Brokerage Commissions
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Aggressive Opportunities $ 385,476 $ 1,210
---------------------------------------------------------------------------------------------------------------------------
International 240,532 19,238
---------------------------------------------------------------------------------------------------------------------------
Growth 5,540,732 711,081
---------------------------------------------------------------------------------------------------------------------------
Growth & Income 179,678 42,743
---------------------------------------------------------------------------------------------------------------------------
Equity Income 1,093,636 369,904
---------------------------------------------------------------------------------------------------------------------------
Asset Allocation 104,539 --
---------------------------------------------------------------------------------------------------------------------------
Total $ 7,544,593 $ 1,144,176
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Income Preservation Fund was not in operation for the fiscal period ended
December 31, 1999 and therefore did not pay commissions for this period.
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 (with the exception of the Model Portfolio Funds -
which do not have sub-advisors)). 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.
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
13
<PAGE> 14
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' custodian 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 $30 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 $75 million with
an average participant balance of at least $35 thousand 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 $30 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.
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;
14
<PAGE> 15
* 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.
SPECIAL INFORMATION ABOUT IRA REDEMPTIONS
As described in the prospectus, a transaction fee of 2% may be applied to the
value of amounts withdrawn from the Income Preservation Fund by IRA investors,
but only during certain periods and under certain conditions (see "Fees and
Expenses of the Funds"). The transaction fee will not be applied to
"qualified" IRA withdrawals as described below.
Examples of "qualified" IRA withdrawals are:
* Distributions made on or after the date on which the IRA owner attains age
59 1/2
* Distributions made to a beneficiary or to the IRA owner's estate on or
after the IRA owner's death
* Distributions made as a result of an IRA owner becoming disabled
* Direct trustee to trustee transfers and conversions of traditional IRAs to
Roth IRAs where the IRA owner continues the investment of the transferred
amount in the Fund
It is important that a shareholder consult a tax advisor regarding the terms,
conditions and tax consequences of any IRA withdrawals.
MINIMUM INVESTMENT REQUIREMENTS
Shareholders will be informed of any increase in the minimum investment
requirements by a new prospectus or a prospectus supplement, in which the new
minimum is disclosed. Any request for a redemption (including pursuant to
check writing privileges) by an investor whose account balance is (a) below
the currently applicable minimum investment, or (b) would be below that
minimum as a result of the redemption, will be treated as a request by the
investor of a complete redemption of that account. In addition, the Trust may
redeem an account whose balance (due in whole or in part to redemptions since
the time of last purchase) has fallen below the minimum investment amount
applicable at the time of the shareholder's most recent purchase of Fund
shares (unless the shareholder brings his or her account value up to the
currently applicable minimum investment).
TAX CONSEQUENCES
Note that in the case of tax-qualified retirement plans, a redemption from
such a plan may have adverse tax consequences. A shareholder contemplating
such a redemption should consult his or her own tax advisor. Other
shareholders should consider the tax consequences of any redemption.
15
<PAGE> 16
SUSPENSION OF THE RIGHT OF REDEMPTION
The Funds may suspend the right of redemption or the date of payment: (i) for
any period during which the NYSE, the Federal Reserve Bank of New York, the
NASDAQ, the Chicago Mercantile Exchange ("CME"), the CBOT, or any other
exchange, as appropriate, is closed (other than customary weekend or holiday
closings), or trading on the NYSE, the NASDAQ, the CME, the CBOT, or any other
exchange, as appropriate, is restricted; (ii) for any period during which an
emergency exists so that sales of a Fund's investments or the determination of
its NAV is not reasonably practicable; or (iii) for such other periods as the
SEC may permit for the protection of a Fund's investors.
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.
CALCULATION OF PERFORMANCE DATA
For purposes of quoting and comparing the performance of a Fund (other than the
Money Market Fund and the Income Preservation Fund) to that of other mutual
funds and to other relevant market indexes in advertisements or in reports to
shareholders, performance for the Fund may be stated in terms of total return.
Under the rules of the Securities and Exchange Commission ("SEC Rules"), Funds
advertising performance must include total return quotes calculated according to
the following formula:
n
P(1+T) = ERV
Where: P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years (1, 5 or 10); and
ERV = ending redeemable value of a hypothetical
$1,000 payment, made at the beginning of
the 1, 5 or 10 year periods, at the end of
the 1, 5, or 10 year periods (or
fractional portion thereof).
Under the foregoing formula, the time periods used in advertising will be
based on rolling calendar quarters, updated to the last day of the most recent
quarter prior to submission of the advertising for publication, and will cover
1, 5, and 10 year periods or a shorter period dating from the effectiveness of
the Registration Statement of the Funds. In calculating the ending redeemable
value, all dividends and distributions by a Fund are assumed to have been
reinvested at net asset value as described in the Trust's Prospectus on the
reinvestment dates during the period. Total return, or 'T' in the formula
above, is computed by finding the average annual compounded rates of return
over the 1, 5, and 10 year periods (or fractional portion thereof) that would
equate the initial amount invested to the ending redeemable value.
The total returns for each Fund for the period from March 1, 1999 (for the Funds
that were in existence and registered at that time) through December 31, 1999
were:
<TABLE>
<S> <C>
-------------------------------------------------------
Aggressive Opportunities 63.39%
-------------------------------------------------------
International 42.62%
-------------------------------------------------------
Growth 40.03%
-------------------------------------------------------
Growth & Income 23.50%
-------------------------------------------------------
Equity Income -4.60%
-------------------------------------------------------
Asset Allocation 8.61%
-------------------------------------------------------
U.S. Treasury Securities -0.66%
-------------------------------------------------------
Money Market 4.00%
-------------------------------------------------------
Overseas Equity Index Class I 30.03%
-------------------------------------------------------
Mid/Small Company Index Class I 40.90%
-------------------------------------------------------
Broad Market Index Class I 24.07%
-------------------------------------------------------
500 Stock Index Class I 19.52%
-------------------------------------------------------
Core Bond Index Class I -1.05%
-------------------------------------------------------
</TABLE>
16
<PAGE> 17
The total returns Class II shares of the Index Funds for the period from April
5, 1999 to December 31, 1999 were:
<TABLE>
<S> <C>
-------------------------------------------------------
Overseas Equity Index Class II 24.59%
-------------------------------------------------------
Mid/Small Company Index Class II 35.64%
-------------------------------------------------------
Broad Market Index Class II 19.01%
-------------------------------------------------------
500 Stock Index Class II 14.44%
-------------------------------------------------------
Core Bond Index Class II -1.19%
-------------------------------------------------------
</TABLE>
The All Equity Growth, Long-Term Growth, Traditional Growth, Conservative
Growth and Savings Oriented Funds ere not in operation during 1999.
In addition to the total return quotations discussed above, a Fund also may
advertise its yield based on a thirty-day (or one month) period ended on the
date of the most recent balance sheet included in the Trust's Registration
Statement, computed by dividing the net investment income per share of the
Fund earned during the period by the maximum offering price per Fund share on
the last day of the period, according to the following formula:
YIELD = 2(a-b + 1) 6- 1
--------
cd
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 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.
Under this formula, interest earned on debt obligations for purposes of "a"
above, is calculated by (i) computing the yield to maturity of each obligation
held by the "a" Fund based on the market value of the obligation (including
actual accrued interest) at the close of business on the last day of each
month, or, with respect to obligations purchased during the month, the
purchase price (plus actual accrued interest), (ii) dividing that figure by
360 and multiplying the quotient by the market value of the obligation
(including actual accrued interest as referred to above) to determine the
interest income on the obligation that is in a Fund's portfolio (assuming a
month of thirty days), and (iii) computing the total of the interest earned on
all debt obligations and all dividends accrued on all equity securities during
the thirty-day or one month period. In computing dividends accrued, dividend
income is recognized by accruing 1/360 of the stated dividend rate of a
security each day that the security is in the Fund's portfolio. Undeclared
earned income, computed in accordance with generally accepted accounting
principles, may be subtracted from the maximum offering price calculation
required pursuant to "d" above.
The 30-day yield as of December 31, 1999 for the following Funds was
Core Bond Class I 6.77%
Core Bond Class II 6.98%
U.S. Treasury 5.99%
The Income Preservation Fund was not in operation during 1999.
The annualized current yield of the Money Market and Income Preservation Fund,
as may be quoted from time to time in advertisements and other communications to
shareholders and potential investors, is computed by determining, for a stated
seven-day period, the net change, exclusive of capital changes and including the
value of additional shares purchased with dividends and any dividends declared
therefrom (which reflect deductions of all expenses of the Money Market Fund
such as management fees), in the value of a hypothetical pre-existing account
having a balance of one share at the beginning of the period, and dividing the
difference by the value of the account at the beginning of the base period to
obtain the base period return, and then multiplying the base period return by
365 divided by 7.
The annualized effective yield of the Money Market and Income Preservation Fund,
as may be quoted from time to time in advertisements and other communications to
shareholders and potential investors, is computed by determining (for the same
stated seven-day period as the current yield) the net change, exclusive of
capital changes and including the value of additional shares purchased with
dividends and any dividends declared therefrom (which reflect deductions of all
expenses of the Money Market Fund such as management fees), in the value of a
hypothetical pre-existing account having a balance of one share at the beginning
of the period, and dividing the
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difference by the value of the account at the beginning of the base period to
obtain the base period return, and then compounding the base period return by
adding 1, raising the sum to a power equal to 365 divided by 7, and
subtracting 1 from the result.
The current and effective 7-day yield as of December 31, 1999 for the Money
Market Fund was 5.01% and 5.13%, respectively.
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.
FINANCIAL STATEMENTS
The Funds' financial statements for the fiscal year ended December 31,
1999 for the Funds that were in operation during 1999, including notes thereto
and the report of PricewaterhouseCoopers LLP are incorporated by reference
into this SAI. A copy of the Funds' Annual Report to Shareholders (the "Annual
Report") must accompany the delivery of this SAI.
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