<PAGE> 1
As Filed with the Securities and Exchange Commission On April 28, 2000
File Nos. 333-60789 and 811-08941
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933(X)
Pre-Effective Amendment No.___( )
Post-Effective Amendment No. 4(X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940(X)
Amendment No. 8 (X)
THE VANTAGEPOINT FUNDS
(Exact Name of Registrant as Specified in Charter)
777 North Capitol Street, NE Ste 600, Washington, DC 20002-4240
(Address of Principal Executive Offices) (Zip Code)
(202) 962-4621
(Registrant's Telephone Number, Including Area Code)
Paul F. Gallagher, Secretary
777 North Capitol Street, NE, Ste. 600
Washington, DC 20002
(Name and Address of Agent for Service of Process)
Copies to:
It is proposed that this filing will become effective (check appropriate box):
X immediately upon filing pursuant to paragraph (b) of rule 485
- -----
on (date) pursuant to paragraph (b)(1)(v) of rule 485
- -----
60 days after filing pursuant to paragraph (a)(1) of rule 485
- -----
on (date) pursuant to paragraph (a)(1) of rule 485
- -----
75 days after filing pursuant to paragraph (a)(2) of rule 485
- -----
on (date) pursuant to paragraph (a)(2) of rule 485
- -----
If appropriate, check the following box:
This post-effective amendment designates a new effective date for a
- ----- previously-filed post-effective amendment.
<PAGE> 2
THE VANTAGEPOINT FUNDS
PROSPECTUS
MAY 1, 2000
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 prospectus gives you information about the Vantagepoint Funds that you
should know before investing. You should read this prospectus carefully and
retain it for future reference. It contains important information, including how
each Fund invests and the services available to shareholders.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
[VANTAGEPOINT FUNDS LOGO]
<PAGE> 3
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SUMMARY 1
The Funds 1
FEE TABLES 11
INVESTMENT OBJECTIVES AND POLICIES 14
RISKS OF INVESTING IN THE FUNDS 23
Investment Limitations 24
MANAGEMENT OF THE FUNDS 24
Directors and Officers 26
SHAREHOLDER INFORMATION 27
Share Accounting for All Funds 27
Valuation of Funds 27
Reinvestment of Earnings 27
Pricing and Timing of Transactions 27
Reporting to Investors 28
PURCHASES, EXCHANGES AND REDEMPTIONS 28
Purchases 28
Purchases by Employee Benefit Plans 28
Exchanges and Allocations Among
Funds 29
Exchanges by Telephone 29
VantageLine 29
VantageLink 30
Purchases by IRA Investors 30
DISTRIBUTION ARRANGEMENTS 30
TAXATION 31
YEAR 2000 ISSUES 31
FINANCIAL HIGHLIGHTS 32
</TABLE>
<PAGE> 4
SUMMARY -- INVESTMENTS, RISKS AND PERFORMANCE
- --------------------------------------------------------------------------------
A summary of the investment objectives, principal investment strategies
(including the types of securities held in each Fund) and principal risks of
investing in the Funds is set forth below.
COMMON RISKS--The first six Funds listed in the following section and the first
four Index Funds listed on pages and invest primarily in common
stocks, and are subject to all of the general market risks of investing in the
stock market. Stock markets tend to move in cycles with periods of rising prices
and periods of falling prices. General market risk is discussed in greater
detail on page . To the extent that a particular Fund is managed according to
a specific style, it is subject to the risk that other investment styles may
outperform its style. Each Index Fund is also subject to the risk that it will
deviate from the performance of its benchmark, which is known as tracking error.
To varying degrees, all of the Funds entail the risk that an investor may lose
money.
PERFORMANCE--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 (the "Trust"), an
unregistered commingled fund that holds and invests the assets of public sector
retirement plans. Substantially all of the portfolio securities of each
Vantagepoint Funds were transferred from the corresponding fund of the ICMA
Retirement Trust on March 1, 1999. Performance figures set forth in this
prospectus for any period prior to March 1, 1999 represent performance of the
trust funds.
THE FUNDS
- --------------------------------------------------------------------------------
AGGRESSIVE OPPORTUNITIES FUND
INVESTMENT OBJECTIVE--To offer high long-term capital growth.
PRINCIPAL INVESTMENT STRATEGY--To invest primarily in common stocks of small- to
medium-capitalization companies. Strategies pursued by the Fund's subadvisers
include:
- investing in emerging growth companies
- identifying companies expected to exhibit high earnings growth
- investing in stocks believed to be undervalued.
PRINCIPAL RISKS--The returns on stocks of small-to medium-capitalization
companies tend to be more volatile at times than the returns on stocks of
larger-capitalization companies because of factors such as less certain
prospects for the growth of smaller companies and a lower degree of liquidity in
the markets for such stocks.
PERFORMANCE INFORMATION--The bar chart and the performance tables below
illustrate the risks and volatility of an investment in the Fund. Of course, the
Fund's past performance does not necessarily indicate how the Fund will perform
in the future.
The periods prior to March 1, 1999, when the Fund began operating, represent the
performance of a commingled fund that had the same investment objective and
policies and was advised by an affiliate of the adviser. This past performance
has been adjusted to reflect current expenses of the Fund. The commingled fund
was not a registered mutual fund so it was not subject to the same investment
and tax restrictions as the Fund. If it had been, the commingled fund's
performance may have been lower.
1
<PAGE> 5
This bar chart shows changes in the performance of the Aggressive Opportunities
Fund's shares from year to year.
[BAR CHART]
<TABLE>
<CAPTION>
AGGRESSIVE OPPORTUNITIES FUND
-----------------------------
<S> <C>
1995 39.35%
1996 25.50%
1997 17.39%
1998 12.17%
1999 58.08%
</TABLE>
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
39.89% -20.20%
(4TH QTR 99) (3RD QTR 98)
</TABLE>
PERFORMANCE TABLE
<TABLE>
<CAPTION>
SINCE
SHARES* 1 YEAR 3 YEARS 5 YEARS INCEPTION*
------- ------ ------- ------- ----------
<S> <C> <C> <C> <C>
Aggressive
Opportunities Fund 58.08% 27.68% 29.49% 29.11%**
Wilshire 4500 Index 35.03% 22.62% 23.59% 21.76%
Lipper Capital
Appreciation Fund
Index 39.19% 26.06% 24.82% 23.17%
</TABLE>
* Since October 1, 1994
**Shares of the Fund were offered beginning March 1, 1999. The performance
information shown prior to that date represents performance of the Fund's
predecessor commingled fund which was offered beginning October 1, 1994. The
performance of the predecessor commingled fund has been adjusted for the
expenses applicable to the Fund's Class I Shares.
INTERNATIONAL FUND
INVESTMENT OBJECTIVE--To offer long-term capital growth and diversification by
country.
PRINCIPAL INVESTMENT STRATEGY--To invest primarily in the common stocks of
companies headquartered outside of the United States. The Fund will invest at
least 65% of its assets in foreign equity securities. The Fund may also invest a
portion of its assets (35% or less) in bonds and domestic stocks. Strategies
pursued by the Fund's subadvisers include:
- investing primarily in stock of companies headquartered in developed
countries
- investing in companies of all capitalization sizes
- investing in companies with above-average potential for growth
- investing in stocks believed to be undervalued.
PRINCIPAL RISKS--The Fund is subject to the special risks of international
investing. These include: accounting and financial reporting standards that may
differ from those used in the U.S.; less supervision of stock exchanges and
brokers; the risk of foreign currency values changing relative to the U.S.
dollar; and the risk that political events or financial problems will weaken a
particular country's economy. Additionally, the Fund may invest in
less-developed markets where these risks can be more substantial.
PERFORMANCE INFORMATION--The bar chart and the performance tables below
illustrate the risks and volatility of an investment in the Fund. Of course, the
Fund's past performance does not necessarily indicate how the Fund will perform
in the future.
The periods prior to March 1, 1999, when the Fund began operating, represent the
performance of a commingled fund that had the same investment objective and
policies and was advised by an affiliate of the adviser. This past performance
has been adjusted to reflect current expenses of the Fund. The commingled fund
was not a registered mutual fund so it was not subject to the same investment
and tax restrictions as the Fund. If it had been, the commingled fund's
performance may have been lower.
This bar chart shows changes in the performance of the International Fund's
shares from year to year.
[BAR CHART]
<TABLE>
<CAPTION>
INTERNATIONAL FUND
------------------
<S> <C>
1995 10.78%
1996 16.47%
1997 4.48%
1998 4.96%
1999 39.01%
</TABLE>
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
21.28% -15.50%
(4TH QTR 99) (3RD QTR 98)
</TABLE>
2
<PAGE> 6
PERFORMANCE TABLE
<TABLE>
<CAPTION>
SINCE
1 YEAR 3 YEARS 5 YEARS INCEPTION*
------ ------- ------- ----------
<S> <C> <C> <C> <C>
International Fund 39.01% 15.09% 14.48% 12.97%**
MSCI EAFE Index 27.30% 16.06% 13.15% 12.28%
Lipper International
Fund Index 37.83% 18.53% 15.96% 14.19%
</TABLE>
* Since October 1, 1994
**Shares of the Fund were offered beginning March 1, 1999. The performance
information shown prior to that date represents performance of the Fund's
predecessor commingled fund which was offered beginning October 1, 1994. The
performance of the predecessor commingled fund has been adjusted for the
expenses applicable to the Fund's Shares.
GROWTH FUND
INVESTMENT OBJECTIVE--To offer long-term capital growth.
PRINCIPAL STRATEGY--To invest primarily in common stocks that are considered to
have above-average potential for growth. Strategies pursued by the Fund's
subadvisers include:
- investing primarily in common stocks of medium- to large-capitalization
companies
- selecting stocks of companies with long-term growth characteristics
PRINCIPAL RISK--The Fund's growth investment strategy may expose it to a greater
degree of price and earnings volatility over shorter time periods than the stock
market as a whole.
PERFORMANCE INFORMATION--The bar chart and the performance tables below
illustrate the risks and volatility of an investment in the Fund. Of course, the
Fund's past performance does not necessarily indicate how the Fund will perform
in the future.
The periods prior to March 1, 1999, when the Fund began operating, represent the
performance of a commingled fund that had the same investment objective and
policies and was advised by an affiliate of the Adviser. This past performance
has been adjusted to reflect current expenses of the Fund. The commingled fund
was not a registered mutual fund so it was not subject to the same investment
and tax restrictions as the Fund. If it had been, the commingled fund's
performance may have been lower.
This bar chart shows changes in the performance of the Growth Fund's shares from
year to year.
[BAR CHART]
<TABLE>
<CAPTION>
GROWTH FUND
-----------
<S> <C>
1990 3.81%
1991 52.70%
1992 -2.49%
1993 11.62%
1994 -3.72%
1995 36.64%
1996 21.61%
1997 25.84%
1998 19.84%
1999 35.79%
</TABLE>
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
27.72% -15.83%
(4TH QTR 98) (3RD QTR 98)
</TABLE>
PERFORMANCE TABLE
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Growth Fund 35.79% 26.99% 27.75% 18.91%*
Wilshire 5000 Index 23.56% 26.04% 27.07% 17.59%
Lipper Growth Fund
Index 27.96% 27.23% 26.27% 17.25%
</TABLE>
*Shares of the Fund were offered beginning March 1, 1999. The performance
information shown prior to that date represents performance of the Fund's
predecessor commingled fund which was offered beginning April 1, 1983. The
performance of the predecessor commingled fund has been adjusted for the
expenses applicable to the Fund's Shares.
GROWTH & INCOME FUND
INVESTMENT OBJECTIVE--To offer long-term capital growth and current income.
PRINCIPAL INVESTMENT STRATEGY--To invest primarily in common stocks that offer
the potential for capital appreciation and secondarily current income.
Strategies pursued by the Fund's subadvisers include:
- focusing on large-capitalization companies whose stocks offer potential
for price appreciation because of undervaluation, earnings growth or both
- emphasizing stocks which may pay dividends.
PRINCIPAL RISKS--The Fund is subject to all of the general risks of investing in
the stock market,
3
<PAGE> 7
notably the risk of price and earnings volatility over the short-term.
PERFORMANCE INFORMATION--The bar chart and the performance tables below
illustrate the risks and volatility of an investment in the Fund. Of course, the
Fund's past performance does not necessarily indicate how the Fund will perform
in the future.
The periods prior to March 1, 1999, when the Fund began operating, represent the
performance of a commingled fund that had the same investment objective and
policies and was advised by an affiliate of the adviser. This past performance
has been adjusted to reflect current expenses of the Fund. The commingled fund
was not a registered mutual fund so it was not subject to the same investment
and tax restrictions as the Fund. If it had been, the commingled fund's
performance may have been lower.
This bar chart shows changes in the performance of the Growth & Income Fund's
shares from year to year.
[BAR CHART]
<TABLE>
<CAPTION>
GROWTH & INCOME FUND
--------------------
<S> <C>
1999 26.03%
</TABLE>
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
17.62% -6.00%
(4TH QTR 99) (3RD QTR 99)
</TABLE>
PERFORMANCE TABLE
<TABLE>
<CAPTION>
1 YEAR SINCE INCEPTION*
------ ----------------
<S> <C> <C>
Growth & Income Fund 26.03% 46.39%**
S&P 500 Index 21.03% 39.18%
Lipper Growth & Income
Fund Index 11.87% 27.07%
</TABLE>
* Since October 1, 1998
**Shares of the Fund were offered beginning March 1, 1999. The performance
information shown prior to that date represents performance of the Fund's
predecessor commingled fund which was offered beginning October 1, 1998. The
performance of the predecessor commingled fund has been adjusted for the
expenses applicable to the Fund's Shares.
EQUITY INCOME FUND
INVESTMENT OBJECTIVE--To offer long-term capital growth with consistency derived
from dividend yield.
PRINCIPAL INVESTMENT STRATEGY--To invest primarily in dividend-paying common
stocks of well-established companies. Strategies pursued by the Fund's
subadvisers include:
- investing in common stocks of companies that pay dividends at a
relatively high level.
- a general focus on large-capitalization companies.
- investing in companies whose stocks are considered "out of favor."
PRINCIPAL RISKS--While investment in the Fund involves risk, the Fund's emphasis
on income should result in less volatility than is associated with other types
of common stock funds over the long-term. As a result of the Fund's income
focus, certain sectors and/or specific industries may be emphasized. As such,
the Fund may exhibit greater sensitivity to certain economic factors (e.g.,
changing interest rates) than the general stock market.
PERFORMANCE INFORMATION--The bar chart and the performance tables below
illustrate the risks and volatility of an investment in the Fund. Of course, the
Fund's past performance does not necessarily indicate how the Fund will perform
in the future.
The periods prior to March 1, 1999, when the Fund began operating, represent the
performance of a commingled fund that had the same investment objective and
policies and was advised by an affiliate of the adviser. This past performance
has been adjusted to reflect current expenses of the Fund. The commingled fund
was not a registered mutual fund so it was not subject to the same investment
and tax restrictions as the Fund. If it had been, the commingled fund's
performance may have been lower.
4
<PAGE> 8
This bar chart shows changes in the performance of the Equity Income Fund's
shares from year to year.
[BAR CHART}
<TABLE>
<CAPTION>
EQUITY INCOME FUND
------------------
<S> <C>
1995 35.35%
1996 18.29%
1997 33.97%
1998 16.02%
1999 -8.46%
</TABLE>
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
12.86% -10.40%
(2ND QTR 97) (3RD QTR 99)
</TABLE>
PERFORMANCE TABLE
<TABLE>
<CAPTION>
SINCE
1 YEAR 3 YEARS 5 YEARS INCEPTION
------ ------- ------- ---------
<S> <C> <C> <C> <C>
Equity Income Fund -8.46% 12.48% 17.90% 16.09%**
S&P/BARRA Value Index 12.72% 18.88% 22.94% 20.23%**
Lipper Equity Income
Fund Index 4.19% 13.98% 17.80% 15.83%
</TABLE>
*Since April 1, 1994
**Shares of the Fund were offered beginning March 1, 1999. The performance
information shown prior to that date represents performance of the Fund's
predecessor commingled fund which was offered beginning April 1, 1994. The
performance of the predecessor commingled fund has been adjusted for the
expenses applicable to the Fund's Shares.
ASSET ALLOCATION FUND
INVESTMENT OBJECTIVE--The Fund's investment objective is to offer long-term
capital growth at a lower level of risk than an all equity portfolio.
PRINCIPAL INVESTMENT STRATEGY--To invest in a portfolio actively allocated among
common stocks, U.S. Treasury securities, and money market instruments. Under
normal circumstances the Fund has invested 45% to 85% of its assets in common
stocks, although the stock allocation can range from 0-100%. The remainder of
the Fund's assets will be invested in U.S. Treasury obligations and money market
instruments. Strategies pursued by the subadvisers focus on:
- allocating among stocks, bonds and cash
- approximating the general market return of each asset class
- allocating the stock portion of the Fund to a portfolio designed to
approximate the performance of the S&P 500 Index
PRINCIPAL RISKS--The Fund is subject to manager risk--the risk that the
allocation strategy of the subadvisers will fail to meet the Fund's objectives.
PERFORMANCE INFORMATION--The bar chart and the performance tables below
illustrate the risks and volatility of an investment in the Fund. Of course, the
Fund's past performance does not necessarily indicate how the Fund will perform
in the future.
The periods prior to March 1, 1999, when the Fund began operating, represent the
performance of a commingled fund that had the same investment objectives and
policies and was advised by an affiliate of the adviser. This past performance
has been adjusted to reflect current expenses of the Fund. The commingled fund
was not a registered mutual fund so it was not subject to the same investment
and tax restrictions as the Fund. If it had been, the commingled fund's
performance may have been lower.
This bar chart shows changes in the performance of the Asset Allocation Fund's
Shares from year to year.
[BAR CHART]
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND
---------------------
<S> <C>
1990 0.07%
1991 25.86%
1992 6.04%
1993 10.19%
1994 -1.71%
1995 29.24%
1996 15.74%
1997 25.32%
1998 22.42%
1999 8.22%
</TABLE>
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
12.61% -8.60%
(4TH QTR 98) (3RD QTR 90)
</TABLE>
5
<PAGE> 9
PERFORMANCE TABLE
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Asset Allocation Fund 8.22% 18.41% 19.95% 13.64%*
65/25/10 Index** 11.42% 19.93% 21.25% 14.58%
Lipper Flexible
Portfolio Fund Index 9.83% 14.81% 16.37% 12.24%
</TABLE>
*Shares of the Fund were offered beginning March 1, 1999. The performance
information shown prior to that date represents performance of the Fund's
predecessor commingled fund which was offered beginning December 1, 1974. The
performance of the predecessor commingled fund has been adjusted for the
expenses applicable to the Fund's Shares.
**65% S&P 500 Index/25% Lehman Brothers Long Treasury Index/10% 91-day T-bills.
U.S. TREASURY SECURITIES FUND
INVESTMENT OBJECTIVE--To offer current income.
PRINCIPAL INVESTMENT STRATEGY--Strategies pursued by the Fund's subadviser
include:
- investing at least 65% of the Fund's net assets in U.S. Treasury
Securities.
- investing up to 35% of the Fund's net assets in U.S. government agency
mortgage pass-through securities.
PRINCIPAL RISKS--As with any bond fund, the market prices of the securities held
in the portfolio fluctuate as interest rates change. Generally, the value of a
bond moves in a direction opposite to that of interest rates, and the greater
the maturity of the bond, the greater the resulting change in value. The U.S.
Treasury Securities Fund will experience the volatility of an intermediate-
term (3-7 years) bond fund. The portion of the Fund's assets invested in
mortgage pass-through securities may expose it to pre-payment risk, which is the
risk that, in an environment of falling interest rates, mortgages will be paid
off early. This requires the Fund to invest the proceeds of such repayments in
lower-yielding instruments.
PERFORMANCE INFORMATION--The bar chart and the performance tables below
illustrate the risks and volatility of an investment in the Fund. Of course, the
Fund's past performance does not necessarily indicate how the Fund will perform
in the future.
The periods prior to March 1, 1999, when the Fund began operating, represent the
performance of a commingled fund that had the same investment objective and
policies and was advised by an affiliate of the adviser. This past performance
has been adjusted to reflect current expenses of the Fund. The commingled fund
was not a registered mutual fund so it was not subject to the same investment
and tax restrictions as the Fund. If it had been, the commingled fund's
performance may have been lower.
This bar chart shows changes in the performance of the U.S. Treasury Securities
Fund's shares from year to year.
[BAR CHART]
<TABLE>
<CAPTION>
U.S. TREASURY SECURITIES FUND
-----------------------------
<S> <C>
1993 10.64%
1994 -5.38%
1995 18.06%
1996 1.69%
1997 8.70%
1998 9.70%
1999 -2.67%
</TABLE>
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
6.25% -3.46%
(3RD QTR 98) (1ST QTR 94)
</TABLE>
PERFORMANCE TABLE
<TABLE>
<CAPTION>
SINCE
SHARES 1 YEAR 3 YEARS 5 YEARS INCEPTION*
------ ------ ------- ------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury
Securities Fund -2.67% 5.09% 6.86% 5.80%**
Merrill Lynch 5-7
Year Treasury Index -2.35% 5.64% 7.57% 6.62%
</TABLE>
*Since July 1, 1992.
** Shares of the Fund were offered beginning March 1, 1999. The performance
information shown prior to that date represents performance of the Fund's
predecessor commingled fund which was offered beginning July 1, 1992. The
performance of the predecessor commingled fund has been adjusted for the
expenses applicable to the Fund's Shares.
MONEY MARKET FUND
INVESTMENT OBJECTIVE--To seek maximum current income, consistent with
maintaining liquidity and a stable share price of $1.00.
6
<PAGE> 10
PRINCIPAL INVESTMENT STRATEGY--To invest all of its assets in the Short-Term
Investments Co. Liquid Assets Portfolio, which invests in high-quality,
short-term money market instruments. The Portfolio's adviser is AIM Advisors,
Inc.
PRINCIPAL RISK--An investment in the Fund is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
the Fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Fund.
PERFORMANCE INFORMATION--Performance varies from year to year and past
performance is not necessarily an indication of future performance. The Money
Market Fund commenced operations on March 1, 1999.
OVERSEAS EQUITY INDEX FUND
INVESTMENT OBJECTIVE--To offer long-term capital growth and diversification by
approximating the performance of the Morgan Stanley Capital International
Europe, Australia, and Far East Free (EAFE Free) Index.
PRINCIPAL INVESTMENT STRATEGY--To invest in a sampling of securities that is
selected and weighted to result in investment characteristics comparable to
those of the Morgan Stanley Capital International Europe, Australia and Far East
Free (EAFE Free) Index and performance that will correlate with the performance
of the index.
PRINCIPAL RISKS--The Fund is subject to the risks of investing internationally,
as described for the International Fund.
PERFORMANCE INFORMATION--The bar chart and the performance tables below
illustrate the risks and volatility of an investment in the Fund. Of course, the
Fund's past performance does not necessarily indicate how the Fund will perform
in the future.
The periods prior to March 1, 1999, when the Fund began operating, represent the
performance of a commingled fund that had the same investment objective and
policies and was advised by an affiliate of the adviser. This past performance
has been adjusted to reflect current expenses of the Class I shares of the Fund.
The commingled fund was not a registered mutual fund so it was not subject to
the same investment and tax restrictions as the Fund. If it had been, the
commingled fund's performance may have been lower.
[BAR CHART]
This bar chart shows changes in the performance of the Overseas Equity Index
Fund's Class I shares from year to year.
<TABLE>
<CAPTION>
OVERSEAS EQUITY INDEX FUND
--------------------------
<S> <C>
1998 19.79%
1999 26.25%
</TABLE>
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
20.05% -14.12%
(4TH QTR 98) (3RD QTR 98)
</TABLE>
PERFORMANCE TABLE
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR SINCE INCEPTION*
-------------- ------ ----------------
<S> <C> <C>
Overseas Equity Index Fund 26.25% 15.25%**
Morgan Stanley EAFE Free
Index 27.05% 16.30%
</TABLE>
*Since June 2, 1997.
**Class I shares of the Fund were offered beginning March 1, 1999. The
performance information shown prior to that date represents performance of the
Fund's predecessor commingled fund which was offered beginning June 2, 1997.
The performance of the predecessor commingled fund has been adjusted for the
expenses applicable to the Fund's Class I shares.
MID/SMALL COMPANY INDEX FUND
INVESTMENT OBJECTIVE--To offer long-term capital growth by approximating the
performance of the Wilshire 4500 Index.
PRINCIPAL INVESTMENT STRATEGY--To invest in a sampling of securities that is
selected and weighted to result in investment characteristics comparable to
those of the Wilshire 5000 Index and performance that will correlate with the
performance of that index.
7
<PAGE> 11
PRINCIPAL RISKS--The returns on stocks of mid-to small-capitalization companies
tend to be more volatile than the returns on stocks of larger-capitalization
companies.
PERFORMANCE INFORMATION--The bar chart and the performance tables below
illustrate the risks and volatility of an investment in the Fund. Of course, the
Fund's past performance does not necessarily indicate how the Fund will perform
in the future.
The periods prior to March 1, 1999, when the Fund began operating, represent the
performance of a commingled fund that had the same investment objective and
policies and was advised by an affiliate of the adviser. This past performance
has been adjusted to reflect current expenses of the Class I shares of the Fund.
The commingled fund was not a registered mutual fund so it was not subject to
the same investment and tax restrictions as the Fund. If it had been, the
commingled fund's performance may have been lower.
This bar chart shows changes in the performance of the Mid/Small Company Index
Fund's Class I shares from year to year.
[BAR CHART]
<TABLE>
<CAPTION>
MID/SMALL COMPANY INDEX FUND
----------------------------
<S> <C>
1998 7.28%
1999 33.08%
</TABLE>
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
29.62% -17.78%
(4TH QTR 99) (3RD QTR 98)
</TABLE>
PERFORMANCE TABLE
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR SINCE INCEPTION*
-------------- ------ ----------------
<S> <C> <C>
Mid/Small Company Index
Fund 33.08% 22.52%**
Wilshire 4500 Index 35.03% 24.09%
</TABLE>
* Since June 2, 1997
**Class I shares of the Fund were offered beginning March 1, 1999. The
performance information shown prior to that date represents performance of the
Fund's predecessor commingled fund which was offered beginning June 2, 1997.
The performance of the predecessor commingled fund has been adjusted for the
expenses applicable to the Fund's Class I shares.
BROAD MARKET INDEX FUND
INVESTMENT OBJECTIVE--To offer long-term capital growth by approximating the
performance of the Wilshire 5000 Index.
PRINCIPAL INVESTMENT STRATEGY--To invest in a sampling of securities that are
selected and weighted to result in investment characteristics comparable to
those of the Wilshire 5000 Index and performance that will correlate with the
performance of that index.
PRINCIPAL RISKS--The Fund is expected to have the same volatility as the U.S.
stock market as a whole. Additionally, the Wilshire 5000 Index includes smaller
capitalization companies whose stocks tend to have more price volatility than
those of larger companies.
PERFORMANCE INFORMATION--The bar chart and the performance tables below
illustrate the risks and volatility of an investment in the Fund. Of course, the
Fund's past performance does not necessarily indicate how the Fund will perform
in the future.
The periods prior to March 1, 1999, when the Fund began operating, represent the
performance of a commingled fund that had the same investment objective and
policies and was advised by an affiliate of the adviser. This past performance
has been adjusted to reflect current expenses of the Class I shares of the Fund.
The commingled fund was not a registered mutual fund so it was not subject to
the same investment and tax restrictions as the Fund. If it had been, the
commingled fund's performance may have been lower.
8
<PAGE> 12
This bar chart shows changes in the performance of the Broad Market Index Fund's
Class I shares from year to year.
[BAR CHART]
<TABLE>
<CAPTION>
BROAD MARKET INDEX FUND
-----------------------
<S> <C>
1990 -4.71%
1991 30.15%
1992 7.58%
1993 8.49%
1994 0.47%
1995 35.09%
1996 20.75%
1997 30.82%
1998 22.65%
1999 23.43%
</TABLE>
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
21.42% -14.15%
(4TH QTR 98) (3RD QTR 90)
</TABLE>
PERFORMANCE TABLE
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Broad Market Index Fund 23.43% 25.58% 26.43% 16.73%*
Wilshire 5000 Index 23.56% 26.04% 27.07% 17.59%
</TABLE>
*Class I shares of the Fund were offered beginning March 1, 1999. The
performance information shown prior to that date represents performance of the
Fund's predecessor commingled fund which was offered beginning November 1,
1988. The performance of the predecessor commingled fund has been adjusted for
the expenses applicable to the Fund's Class I Shares.
500 STOCK INDEX FUND
INVESTMENT OBJECTIVE--To offer long-term capital growth by approximating the
performance of the Standard and Poor's (S&P) 500 Index.
PRINCIPAL INVESTMENT STRATEGY--To invest in all of the stocks in the S&P 500
Index, weighted to replicate, as closely as practical, investment
characteristics of the index.
PRINCIPAL RISKS--The Fund is expected to have the same volatility as the S&P 500
Index.
PERFORMANCE INFORMATION--The bar chart and the performance tables below
illustrate the risks and volatility of an investment in the Fund. Of course, the
Fund's past performance does not necessarily indicate how the Fund will perform
in the future.
The periods prior to March 1, 1999, when the Fund began operating, represent the
performance of a commingled fund that had the same investment objectives and
policies and was advised by an affiliate of the adviser. This past performance
has been adjusted to reflect current expenses of the Class I shares of the Fund.
The commingled fund was not a registered mutual fund so it was not subject to
the same investment and tax restrictions as the Fund. If it had been, the
commingled fund's performance may have been lower.
This bar chart shows changes in the performance of the 500 Stock Index Fund's
Class I shares from year to year.
[BAR CHART]
<TABLE>
<CAPTION>
500 STOCK INDEX FUND
--------------------
<S> <C>
1998 28.12%
1999 20.52%
</TABLE>
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
21.18% -9.95%
(4TH QTR 98) (3RD QTR 98)
</TABLE>
PERFORMANCE TABLE
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR SINCE INCEPTION*
-------------- ------ ----------------
<S> <C> <C>
500 Stock Index Fund 20.52% 25.13%**
S&P 500 Index 21.04% 25.51%
</TABLE>
*Since June 2, 1997
** Class I Shares of the Fund were offered beginning March 1, 1999. The
performance information shown prior to that date represents performance of the
Fund's predecessor commingled fund which was offered beginning June 2, 1997. The
performance of the predecessor common trust fund has been adjusted for the
expenses applicable to the Fund's Class I Shares.
CORE BOND INDEX FUND
INVESTMENT OBJECTIVE--To offer current income by approximating the performance
of the Lehman Brothers Government/Corporate Bond Index.
PRINCIPAL INVESTMENT STRATEGY--To invest in a sampling of bonds that is selected
and weighted to result in investment characteristics comparable to those of the
Lehman Brothers Government/Corporate and performance that will correlate with
the performance of that index.
9
<PAGE> 13
PRINCIPAL RISKS--As with any bond fund, the market prices of the securities held
in the portfolio will fluctuate as INTEREST RATES change. Generally, the value
of a bond moves in a direction opposite to that of interest rates, and the
greater the maturity of the bond, the greater the resulting change in value. The
Fund should experience the volatility characteristics of an
intermediate-maturity fixed income fund. The average maturity of bonds in the
index is expected to range from eight to twelve years and the average credit
quality is Aaa.
PERFORMANCE INFORMATION--The bar chart and the performance tables below
illustrate the risks and volatility of an investment in the Fund. Of course, the
Fund's past performance does not necessarily indicate how the Fund will perform
in the future.
The periods prior to March 1, 1999, when the Fund began operating, represent the
performance of a commingled fund that had the same investment objectives and
policies and was advised by an affiliate of the adviser. This past performance
has been adjusted to reflect current expenses of the Class I Shares of the Fund.
The commingled fund was not a registered mutual fund so it was not subject to
the same investment and tax restrictions as the Fund. If it had been, the
commingled fund's performance may have been lower.
This bar chart shows changes in the performance of the Core Bond Index Fund's
Class I Shares from year to year.
[BAR CHART]
<TABLE>
<CAPTION>
CORE BOND INDEX FUND
--------------------
<S> <C>
1998 8.43%
1999 -2.88%
</TABLE>
<TABLE>
<S> <C>
BEST QUARTER WORST QUARTER
4.42% -1.52%
(3RD QTR 98) (2ND QTR 99)
</TABLE>
PERFORMANCE TABLE
<TABLE>
<CAPTION>
CLASS I SHARES 1 YEAR SINCE INCEPTION*
-------------- ------ ----------------
<S> <C> <C>
Core Bond Index Fund -2.88% 4.88%**
Lehman Brothers
Government/Corporate
Bond Index -2.15% 5.84%
</TABLE>
*Since June 2, 1997
** Class I Shares of the Fund were offered beginning March 1, 1999. The
performance information shown prior to that date represents performance of the
Fund's predecessor commingled fund which was offered beginning June 2, 1997. The
performance of the predecessor commingled fund has been adjusted for the
expenses applicable to the Fund's Class I Shares.
10
<PAGE> 14
FEE TABLES
- --------------------------------------------------------------------------------
FEES AND EXPENSES OF THE FUNDS
The purpose of the following tables is to assist you in understanding the
various costs that you, as a shareholder, will bear directly or indirectly in
connection with an investment in one or more of the Vantagepoint Funds.
As you can see in the first table, you do not pay transaction fees of any kind
when you buy, sell, or exchange your shares.
SHAREHOLDER TRANSACTION EXPENSES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<S> <C>
MAXIMUM SALES CHARGE (LOAD) IMPOSED
ON PURCHASES NONE
MAXIMUM DEFERRED SALES CHARGE
(LOAD) NONE
MAXIMUM SALES CHARGE (LOAD) IMPOSED
ON REINVESTED DIVIDENDS (AND
OTHER DISTRIBUTIONS) NONE
REDEMPTION FEE NONE
EXCHANGE FEE NONE
MAXIMUM ACCOUNT FEE NONE
</TABLE>
The second table shows the annual operating expenses you may pay if you buy and
hold shares of a Fund. These expenses, calculated as a percentage of average net
assets, are deducted from Fund assets, and their effect is factored into any
quoted share price or investment return.
11
<PAGE> 15
ANNUAL FUND OPERATING EXPENSES
(DEDUCTED FROM FUND ASSETS)
<TABLE>
<CAPTION>
ADVISORY SUBADVISER OTHER TOTAL
FUNDS FEE EXPENSE EXPENSES EXPENSES
- ----- -------- ---------- -------- --------
<S> <C> <C> <C> <C>
Aggressive Opportunities 0.10% 0.72% 0.42% 1.24%
International 0.10% 0.51% 0.51% 1.12%
Growth 0.10% 0.38% 0.39% 0.87%
Growth & Income 0.10% 0.36% 0.43% 0.89%
Equity Income 0.10% 0.34% 0.41% 0.85%
Asset Allocation 0.10% 0.28% 0.41% 0.79%
U.S. Treasury Securities 0.10% 0.14% 0.43% 0.67%
Money Market 0.10% 0.09% 0.42% 0.61%
OVERSEAS EQUITY INDEX++
Class I 0.20% N/A 0.47% 0.67%
Class II ** 0.20% N/A 0.27% 0.47%
MID/SMALL CO. INDEX++
Class I 0.15% N/A 0.37% 0.52%
Class II ** 0.15% N/A 0.17% 0.32%
BROAD MARKET INDEX++
Class I 0.13% N/A 0.33% 0.46%
Class II ** 0.13% N/A 0.13% 0.26%
500 STOCK INDEX++
Class I 0.10% N/A 0.34% 0.44%
Class II ** 0.10% N/A 0.14% 0.24%
CORE BOND INDEX++
Class I 0.13% N/A 0.34% 0.47%
Class II ** 0.13% N/A 0.14% 0.27%
</TABLE>
++ Includes fees and other expenses incurred at the Master Portfolio level as a
result of the Index Funds being "feeder" funds investing in Master
Portfolios.
* For the Money Market Fund, management has agreed, for a period of two years
from the effective date of registration, to waive any fees that would result
in total Fund expenses in excess of an annual amount of 0.55%.
** Amounts shown are equivalent to the total expenses that will be paid by Class
II shareholders. Please see page for the eligibility criteria for Class II
shares.
12
<PAGE> 16
EXAMPLE
This example is intended to help you compare the cost of investing in the
Vantagepoint Funds with the cost of investing in other mutual funds.
This example assumes that you invest $10,000 in a Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
FUNDS 1 YR 3 YRS 5 YRS 10 YRS
----- ---- ----- ----- ------
<S> <C> <C> <C> <C>
Aggressive Opportunities $127 $396 $685 $1,507
International $115 $358 $620 $1,369
Growth $ 89 $279 $484 $1,076
Growth & Income $ 91 $285 $495 $1,100
Equity Income $ 87 $272 $473 $1,052
Asset Allocation $ 81 $253 $440 $ 981
U.S. Treasury Securities $ 69 $215 $374 $ 837
Money Market $ 63 $196 $341 $ 764
OVERSEAS EQUITY INDEX
Class I $ 69 $215 $374 $ 837
Class II ** $ 48 $151 $264 $ 593
MID/SMALL CO. INDEX
Class I $ 53 $167 $291 $ 654
Class II ** $ 33 $103 $180 $ 406
BROAD MARKET INDEX
Class I $ 47 $148 $258 $ 580
Class II ** $ 27 $ 84 $146 $ 331
500 STOCK INDEX
Class I $ 45 $142 $247 $ 555
Class II ** $ 25 $ 77 $135 $ 306
CORE BOND INDEX
Class I $ 48 $151 $264 $ 593
Class II ** $ 28 $ 87 $152 $ 344
</TABLE>
** Amounts shown are equivalent to the total expenses that will be paid by Class
II shareholders. Please see page 22 for the eligibility criteria for Class II
shares.
If you are investing through another financial institution or a retirement
account, you may be subject to additional fees or expenses, such as plan
administration fees. For more information, please refer to the program materials
of that financial institution or retirement account for any special provisions,
additional service features, or fees and expenses that may apply to your
investment in a Fund.
13
<PAGE> 17
INVESTMENT POLICIES,
INVESTMENT OBJECTIVES,
PRINCIPAL INVESTMENT STRATEGIES,
AND RELATED RISKS
- --------------------------------------------------------------------------------
The Funds are managed by their investment adviser, Vantagepoint Investment
Advisers, LLC ("VIA"). VIA employs a "multi-management" strategy in which it
evaluates, selects, and monitors one or more subadvisers for certain Funds. VIA
shall supervise and direct each Fund's investments. With respect to the Index
Funds, VIA selects the Master Portfolios in which each Index Fund invests.
A multi-management strategy seeks to improve consistency of return over time by
eliminating reliance on the results of a single subadviser. Therefore, where
advantageous, VIA allocates Fund assets among multiple subadvisers with distinct
and complementary investment strategies.
To construct a multi-managed Fund, VIA begins by identifying investment
strategies that are compatible with a Fund's objective. Next, VIA identifies
individual subadvisers who have demonstrated expertise in the consistent
execution of a specific investment strategy, and who complement the strategies
of other potential subadvisers. Selected subadvisers are then integrated within
a single Fund in weights that are expected to optimize return relative to risk.
Because each subadviser selects securities that reflect its specific investment
strategy, a multi-managed portfolio may be more diversified than any individual
subadviser's portfolio.
INVESTMENT OBJECTIVES AND POLICIES
- ----------------------------------------------------
The Funds have adopted certain investment policies and limitations. Those
designated as "fundamental" in this prospectus or in the Statement of Additional
Information cannot be changed without shareholder approval. Others may be
changed at the discretion of the Board of Directors.
The descriptions that follow are designed to help you choose the Funds that best
fit your investment objectives and tolerance for risk.
AGGRESSIVE OPPORTUNITIES FUND
GENERAL DESCRIPTION AND GOALS--The Aggressive Opportunities Fund seeks high
long-term growth of capital by investing primarily (at least 65%) in the common
stocks of small- to medium-capitalization U.S. and non-U.S. companies.
INVESTMENT STRATEGY--The Aggressive Opportunities Fund incorporates
complementary investment disciplines that provide exposure to a variety of
portfolio management approaches. Each subadviser employs a distinctive strategy
and focuses on securities reflecting that strategy.
The Fund invests in common stocks of companies with unique prospects for capital
appreciation. The Fund's investments may also include bonds. Instruments such as
futures contracts and options may be used occasionally for cash management
purposes, but will not be used for speculative purposes.
INVESTMENT RISKS--The Fund is subject to all of the general risks of investing
in the stock market. The Fund is also exposed to the added volatility of returns
for small- and medium-capitalization stocks as compared to the returns of
larger-capitalization stocks. The Fund can be expected to have significantly
greater volatility than the broad U.S. stock market (as measured by the S&P 500
Index) over any selected time period.
INVESTMENT SUBADVISERS--The Fund is managed by multiple subadvisers:
First Pacific Advisors, Inc. ("First Pacific Advisors"): (Los Angeles,
California) serves as a subadviser to the Fund. Robert Rodriguez serves
14
<PAGE> 18
as the Fund's portfolio manager. Mr. Rodriguez began his investment career in
1971, and joined First Pacific Advisors as a portfolio manager in 1983. First
Pacific Advisors invests its portion of the Fund's assets in small- to
medium-capitalization stocks and seeks stocks that are out-of-favor with the
market, often in undervalued industries. The number of holdings tends to be
concentrated.
MFS Institutional Advisors, Inc. ("MFS") (Boston, Massachusetts) serves as a
subadviser to the Fund. Brian Stack serves as the Fund's portfolio manager. Mr.
Stack began his investment career in 1983 and joined MFS as a portfolio manager
in 1993. MFS invests its portion of the Fund's assets in small-capitalization
stocks and seeks to invest in emerging growth companies that the subadviser
believes have potential to become major enterprises. These companies are often
in their early stages in their development.
TCW Funds Management Inc. ("TCW") (Los Angeles, California) serves as a
subadviser to the Fund. Douglas Foreman serves as the Fund's portfolio manager.
Mr. Foreman began his career as a portfolio manager in 1989 and assumed his
present position with TCW in 1994. TCW invests its portion of the Fund's assets
in small- to medium-capitalization stocks of companies expected to exhibit high
earnings growth, and employs techniques such as quantitative screening, research
evaluation, and direct company contact.
INTERNATIONAL FUND
GENERAL DESCRIPTION AND GOALS--The International Fund seeks long-term growth of
capital by investing primarily (at least 65%) in the common stocks of companies
headquartered outside of the United States. Dividend income is incidental to the
overall objective.
INVESTMENT STRATEGY--The International Fund incorporates complementary
investment disciplines that provide exposure to a variety of portfolio
management approaches. Each subadviser employs a distinctive strategy and
focuses on securities reflecting that strategy.
The Fund invests primarily in common stocks of companies headquartered in
developed countries, including those in Europe, Asia, and the Far East. The Fund
may also invest, to a lesser extent, in less developed markets in Asia, Europe,
Latin America, and Africa. In addition to common stocks, the Fund may invest in
other securities including stock index futures contracts, convertible
securities, currency futures, and investment grade bonds.
INVESTMENT RISKS--The Fund is subject to all of the general risks of investing
in the stock market. The Fund is also exposed to the additional risks of
investing in foreign securities. These risks include loss due to political,
legal, regulatory, and operational uncertainty, as well as currency conversion
factors. These risks can be greater in emerging markets.
INVESTMENT SUBADVISERS--The fund is managed by multiple subadvisers:
Capital Guardian Trust Company ("Capital Guardian"): (Los Angeles, California),
employs a multiple portfolio manager system in managing the portfolio. Capital
Guardian invests its portion of the Fund's assets in the stocks of companies of
any size that they believe have potential for growth that is not recognized by
the market.
Lazard Asset Management ("Lazard") (New York, New York), employs a team approach
to managing the portfolio. Lazard invests its portion of the Fund's assets
primarily in large-capitalization stocks and emphasizes a value approach that
seeks to identify certain characteristics of companies that it believes indicate
improving fundamentals.
Rowe Price-Fleming International, Inc.: ("Rowe Price-Fleming") (London, United
Kingdom/ Baltimore, Maryland), employs a team approach to managing the
portfolio. Rowe Price-Fleming invests its portion of the Fund's assets primarily
in medium-capitalization stocks and seeks companies with above-average earnings
growth potential at a reasonable price.
15
<PAGE> 19
GROWTH FUND
GENERAL DESCRIPTION AND GOALS--The Growth Fund seeks long-term growth of capital
by investing primarily (at least 65% of its assets) in common stocks with
above-average potential for growth in corporate earnings.
INVESTMENT STRATEGY--The Growth Fund is designed to incorporate complementary
investment disciplines that provide exposure to a wide variety of portfolio
management approaches. Each subadviser employs a distinctive growth strategy and
focuses on securities reflecting that strategy.
The Fund invests primarily in common stocks of companies with prospects for
above-average growth in earnings, with emphasis on stocks of seasoned,
medium-and larger-capitalization growth firms. The Fund also includes
smaller-capitalization stocks.
INVESTMENT RISKS--The Fund is subject to all of the general risks of investing
in the stock market. Additionally, the Fund's growth stock investment strategy
may expose it to a greater degree of price and earnings volatility over shorter
time periods than the stock market as a whole. There may be periods of time over
which other styles of investing outperform the growth style of the Fund.
INVESTMENT SUBADVISERS--The Fund is managed by multiple subadvisers:
Barclays Global Fund Advisors ("Barclays") (San Francisco, California) uses an
index approach to managing its portion of the Fund's assets. Barclays seeks to
replicate the performance and portfolio characteristics of the S&P 500 Index.
Fidelity Management Trust Company ("Fidelity") (Boston, Massachusetts) serves as
a subadviser to the Fund. Neal Miller, who began his investment career in 1983
and joined Fidelity as a portfolio manager in 1988, manages a portion of the
Fund that focuses on stocks of well-established, well-managed companies of all
sizes whose earnings benefit from emerging trends that are identified by
Fidelity.
TCW Funds Management, Inc. ("TCW"), (Los Angeles, California) serves as a
subadviser to the fund. Glen Bickerstaff serves as portfolio manager. Mr.
Bickerstaff has 19 years of experience as a portfolio manager and joined TCW in
1998. TCW follows a concentrated growth investment style which stresses the
stocks of larger companies that TCW believes have superior business models, and
are judged to be beneficiaries of secular market changes.
Tukman Capital Management, Inc. ("Tukman"), (Larkspur, California) serves as a
subadviser to the Fund. Melvin T. Tukman serves as portfolio manager. Mr. Tukman
has over 30 years of experience as a portfolio manager, and he founded the firm
in 1980. Tukman follows a contrarian investment style that focuses on stocks
that they believe exhibit strong fundamentals and are currently undervalued due
to investor neglect or anxiety.
Brown Capital Management, Inc. ("Brown"), (Baltimore, Maryland) serves as a
subadviser to the Fund. Eddie Brown, CFA serves as portfolio manager. Mr. Brown
has 28 years of experience as a portfolio manager and he founded the firm in
1983. Brown follows a growth-at-a-reasonable price investment style, that
selects stocks of mid- to large-sized companies that they believe have the
potential for earnings growth and are selling at a lower price relative to the
market.
William Blair & Company, L.L.C. ("William Blair") (Chicago, Illinois) serves as
a subadviser to the Fund. Robert Lanphier, IV serves as the Fund's portfolio
manager. Mr. Lanphier joined William Blair as a portfolio manager in 1987. Blair
invests its portion of the Fund's assets in medium to large capitalization
stocks and seeks to invest in durable companies exhibiting strong business
leadership, quality products and services, solid financial prospects, and strong
management.
GROWTH & INCOME FUND
GENERAL DESCRIPTION AND GOALS--The Growth & Income Fund seeks long-term capital
growth by investing primarily (at least 65 percent) in common stocks that offer
the potential for high total return
16
<PAGE> 20
through a combination of capital appreciation and current income.
INVESTMENT STRATEGY--The Growth & Income Fund is designed to incorporate
complementary investment disciplines that provide exposure to a variety of
portfolio management approaches. Each subadviser employs a distinctive strategy
and focuses on securities reflecting that strategy.
The Fund focuses on large-capitalization companies whose stocks offer good
potential for price appreciation because of undervaluation, earnings growth, or
both, with an emphasis on those which may provide current dividend income.
INVESTMENT RISKS--The Fund is subject to all the general risks of investing in
the stock market and is expected to exhibit the risk characteristics of a common
stock portfolio.
INVESTMENT SUBADVISERS--The Fund is managed by multiple subadvisers:
Capital Guardian Trust Company (Los Angeles, CA) serves as a subadviser to the
Fund and employs a multiple portfolio manager system in managing the portfolio.
This subadviser invests in are stocks of companies of any size that they believe
have potential for growth that is not recognized by the market.
Putnam Investment Management, Inc. ("Putnam") (Boston, MA) serves as a
subadviser to the Fund. Manuel Weiss Herrero serves as the Fund's portfolio
manager. Mr. Weiss Herrero began his investment career in 1987 when he joined
Putnam as a portfolio manager. This subadviser seeks the potential returns from
growth stocks but with reduced volatility through the use of risk control
techniques.
Wellington Management Company, LLP, ("Wellington") (Boston, Massachusetts)
serves as a subadviser to the Fund. John R. Ryan, CFA serves as portfolio
manager. Mr. Ryan began his investment career in 1969 and has been with
Wellington Management Company since 1981. Wellington Management Company seeks to
achieve the Fund's objective by investing in large capitalization companies,
which are selling at attractive prices relative to their upside potential.
EQUITY INCOME FUND
GENERAL DESCRIPTION AND GOALS--The Equity Income Fund seeks long-term, stable
growth of capital by investing primarily (at least 65 percent) in
dividend-paying, common stocks of well-established companies.
INVESTMENT STRATEGY--The Equity Income Fund incorporates complementary
investment disciplines that seek stocks that provide exposure to a variety of
portfolio management approaches. Each subadviser employs a distinctive strategy
and focuses on securities reflecting that strategy.
The Fund invests in the common stocks of companies that pay dividends at
relatively high levels. These yields may be indicative of attractive valuations
and investments that are undervalued relative to a stock's history and to the
overall U.S. stock market. The Fund may be diversified across all sizes of
companies but generally focuses on large-capitalization companies, which tend to
have the most stable long-term earnings and dividend-paying records.
INVESTMENT RISKS--While investment in the Fund involves risks, the Fund's
emphasis on income should result in less volatility than is associated with
other types of common stock funds over the long-term. As a result of the Fund's
income focus, certain sectors and/or industries may be emphasized. As such, the
Fund may exhibit greater sensitivity to certain economic factors (e.g., rising
interest rates) than the general stock market.
Due to the Fund's emphasis on large-capitalization, dividend-paying companies,
the Fund's volatility is expected to be equal to, or lower than that of the S&P
500 Index.
INVESTMENT SUBADVISERS--The Fund is managed by multiple subadvisers:
Barrow, Hanley, Mewhinney & Strauss, Inc. ("BHM&S"), (Dallas, Texas) serves as a
subadviser to the Fund. Richard A. Englander serves as portfolio manager. Mr.
Englander began his career as a portfolio manager in 1963 and joined BHM&S in
1985. BHM&S follows a value-oriented
17
<PAGE> 21
investment approach which stresses active management through a process of
individual stock selection on a bottom-up basis.
T. Rowe Price Associates, Inc., ("T. Rowe Price") (Baltimore, Maryland) serves
as a subadviser to the Fund. Brian C. Rogers, CFA, CIC serves as portfolio
manager. Mr. Rogers has over 20 years of experience as a portfolio manager and
has been with T. Rowe Price since 1981. T. Rowe Price seeks to achieve the
Fund's objective by investing in securities that display above-market yield and
below-market valuation.
Wellington Management Company, LLP, ("Wellington") (Boston, Massachusetts)
serves as a subadviser to the Fund. Stephen O'Brien, CFA serves as portfolio
manager. Mr. O'Brien began his investment career in 1969 and has been with
Wellington Management Company since 1982. Wellington Management Company seeks to
achieve the Fund's objective by investing in large capitalization companies,
that are selling at attractive prices relative to their earnings potential and
offer current income.
ASSET ALLOCATION FUND
GENERAL DESCRIPTION AND GOALS--The Asset Allocation Fund seeks long-term growth
of capital at a lower level of risk than a portfolio consisting entirely of
common stocks. The Fund pursues this objective by allocating assets among
stocks, U.S. Treasury securities, and money market instruments in proportions
determined by the subadvisers based on projected returns and risks for each
asset class.
INVESTMENT STRATEGY--The Asset Allocation Fund is designed to incorporate
complementary tactical asset allocation strategies, in which overall exposure to
stocks, U.S. Treasury securities, and cash is varied according to perceived
changes in relative value among asset classes. These strategies are based on
systematic assessments of quantifiable criteria such as long-term expected asset
class returns, valuation measures, economic and monetary indicators, and
financial market conditions.
The primary responsibility of the Fund's subadvisers is to allocate assets among
stocks, U.S. Treasury securities, and cash; the subadvisers do not select
individual common stocks. Allocation among asset classes may change dramatically
over time, although typically will occur incrementally. The stock allocation is
passively managed in a portfolio designed to approximate the performance of the
S&P 500 Index; the Treasury allocation is passively managed to approximate the
investment characteristics and performance of the Lehman Brothers Long Treasury
Index; and the money market allocation is actively managed. Stock and Treasury
exposure may be obtained or modified by using futures contracts.
INVESTMENT RISKS--The Fund is subject to the general risks associated with stock
market investing, as well as to interest rate risk.
INVESTMENT SUBADVISERS--The Fund is managed by multiple subadvisers:
AVATAR Investors Associates Corp. ("AVATAR") (New York, New York) serves as a
subadviser to the Fund. Edward S. Babbitt serves as the Fund's portfolio
manager. Mr. Babbitt entered the investment industry in 1970 and joined AVATAR
as a portfolio manager in 1980. AVATAR actively allocates assets between stocks
and money market instruments. At any given time, 100% of assets may be allocated
to stocks or to money market instruments, although shifts more typically occur
incrementally.
Mellon Capital Management Corp. ("Mellon") (San Francisco, California) serves as
a subadviser to the Fund. Thomas B. Hazuka serves as the Fund's portfolio
manager. Mr. Hazuka entered the investment industry in 1986 when he joined
Mellon as a portfolio manager. Mellon actively allocates assets among common
stocks, long-term U.S. Treasury obligations, and money market instruments. At
any given time, 100% of assets may be allocated to stocks, to Treasury
securities, or to money market instruments, although shifts more typically occur
incrementally.
Wilshire Asset Management ("Wilshire") (Santa Monica, California) serves as a
subadviser to the
18
<PAGE> 22
Fund. Thomas D. Stevens serves as the Fund's portfolio manager. Mr. Stevens
entered the investment industry in 1980, when he joined Wilshire as a portfolio
manager. Wilshire passively manages the stock allocations of AVATAR and Mellon
in a portfolio that fully replicates the S&P 500 Index, with small
period-to-period variances.
Payden & Rygel Investment Counsel ("Payden & Rygel") (Los Angeles, California)
serves as a subadviser to the Fund. Brian Matthews serves as the Fund's
portfolio manager. Mr. Matthews entered the investment industry in 1982 and
joined Payden & Rygel in 1985 as a portfolio manager. Payden & Rygel manages the
money market instrument allocations of AVATAR and Mellon, as well as cash
underlying futures positions.
Since AVATAR does not invest in bonds, the Fund's structure is biased to take
advantage of the long-term return potential of stocks. As a result, the Fund may
exhibit a level of price volatility and risk of loss more consistent with a
common stock portfolio than with a balanced portfolio, especially over the
shorter term.
U.S. TREASURY SECURITIES FUND
GENERAL DESCRIPTION AND GOALS--The U.S. Treasury Securities Fund seeks to offer
current income obtainable from active management of intermediate-term U.S.
Treasury securities and certain U.S. Government and Agency securities. Capital
growth is a secondary objective.
INVESTMENT STRATEGY--The Fund is designed to offer a rate of return equivalent
to intermediate-term U.S. Treasury securities, while minimizing the possibility
of default. Returns will reflect both interest income and market price changes
in the bonds held by the Fund.
The U.S. Treasury Securities Fund invests primarily in U.S. Treasury securities.
In addition, the subadviser is authorized to invest up to 35 percent of the net
assets of the Fund in U.S. Government Agency pass-through mortgage-backed
securities. The Fund may also invest in U.S. Treasury note and bond futures
contracts to adjust duration exposure in response to anticipated interest rate
movements. The combination of fixed-income securities and futures maintains
fixed-income exposure comparable to that of a fully invested intermediate term
portfolio.
INVESTMENT RISKS--The Fund should experience the volatility characteristics of
an intermediate-duration bond fund.
INVESTMENT SUBADVISER--The Fund's subadviser, Seix Investment Advisors, Inc.,
seeks to offer more return than is available in a passively managed
intermediate-term U.S. Treasury index by identifying undervalued U.S. Treasury
securities, and by allocating assets to, and selecting securities in, the
mortgage-backed sector. Christina Seix serves as the Fund's portfolio manager.
She founded the firm in 1991.
MONEY MARKET FUND
GENERAL DESCRIPTION AND GOALS--The Money Market Fund seeks to obtain the maximum
current income, consistent with preservation of capital and liquidity, that is
available through investments in specified money market instruments. The Fund
will meet the diversification and quality provisions of Rule 2a-7 under the
Investment Company Act of 1940.
INVESTMENT RISKS--The Fund seeks to maintain a constant net asset value per
share of $1.00. However there is no guarantee that it will be able to do so.
INVESTMENT STRATEGY--The Fund seeks to obtain its investment objective by
investing substantially all of its assets in a registered money market mutual
fund, the Short-Term Investment Co. Liquid Assets Portfolio, whose investment
adviser is AIM Advisers, Inc. The underlying portfolio of the AIM Liquid Assets
Fund consists of certificates of deposit of major U.S. banks, prime commercial
paper, high quality short-term corporate obligations, and short-term U.S.
government and agency securities. The Fund has an average maturity of less than
90 days.
19
<PAGE> 23
THE INDEX FUNDS
The five Index Funds described below follow an indexed or "passively managed"
approach to investing. This means that Barclays selects securities designed to
approximate the investment characteristics and performance of a specified
benchmark, such as the S&P 500 Index.(1)
Unlike an actively managed portfolio, an index fund does not rely on a portfolio
manager's ability to predict the performance of individual securities. An index
fund simply seeks to parallel the performance of its benchmark. Additionally,
index funds tend to have lower operating expenses than actively managed funds.
In order to take advantage of the economies of scale offered by a larger pool of
assets, each Index Fund is structured as a "feeder" fund. A "feeder" fund seeks
to achieve its investment objective by investing its assets in a "Master
Portfolio" managed by Barclays. Each Master Portfolio invests substantially all
of its assets in securities in accordance with investment objectives, policies,
and limitations that are substantially similar to those of the applicable Index
Fund. In other words, each Index Fund "feeds" shareholder investments into its
corresponding Master Portfolio.
The Broad Market Index Fund's Master Portfolio invests substantially all of its
assets in two other Master Portfolios managed by 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 approximate the weighted capitalization of the Wilshire 5000
Index.
Because it can be very expensive to buy and sell all of the securities in a
target benchmark, the Index Funds, with the exception of the 500 Stock Index
Fund, employ "sampling" techniques to approximate benchmark characteristics such
as capitalization and industry weight using fewer securities than contained in
the benchmark. Therefore, the performance of the Funds versus their respective
benchmarks may deviate more than that of Funds investing in all of the
securities contained in a benchmark.
Performance of the Index Funds will differ that of the underlying indexes for
several reasons. First, fees are netted against Fund performance, while the
indexes themselves bear no management fees, transaction costs, or other
expenses. Second, due to sampling techniques used by all the Index Funds except
the 500 Stock Index Fund, there will be tracking error, which may impact Fund
performance positively or negatively. Third, the timing of cash flows into and
out of the Funds will affect ability to precisely track the underlying indexes.
The Master Portfolios maintain equity exposure for cash balances by purchasing
appropriate futures contracts. Futures contracts are not used for leverage. The
Master Portfolios seek to remain fully invested at all times, without
significant cash balances.
Each Index Fund investing in a Master Portfolio reserves the right to change the
Master Portfolio in which it invests when the Board of Directors believes it is
in the best interests of the Fund's shareholders.
The Index Funds offer two classes of shares, Class I and Class II. Information
on your eligibility to invest in a particular class can be found under the
heading "Shareholder Information: Purchases."
- ---------------
(1)McGraw-Hill, Inc. ("McGraw-Hill") and Wilshire Associates, Inc. ("Wilshire
Associates") do not sponsor any portfolios of the Funds, nor are they affiliated
in any way with the Funds. "Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," and
"Standard & Poor's 500(R)" are trademarks of McGraw-Hill. "Wilshire 5000 Equity
Index(R)" and "Wilshire 4500 Equity Index(R)" and related marks are trademarks
of Wilshire Associates. None of the Funds are sponsored, endorsed, sold, or
promoted by these indices or their sponsors and neither the indices nor their
sponsors make any representation or warranty, express or implied, regarding the
advisability of investing in Funds.
20
<PAGE> 24
OVERSEAS EQUITY INDEX FUND
GENERAL DESCRIPTION AND GOALS--The Overseas Equity Index Fund seeks long-term
growth of capital by investing in common stocks of companies domiciled outside
the United States. The goal is to provide a portfolio that approximates the
investment characteristics and performance of the Morgan Stanley Capital
International Europe, Australia, and Far East Free (EAFE Free) Index.
INVESTMENT STRATEGY--The Overseas Equity Index Fund invests in a Master
Portfolio that invests in a sampling of securities contained in the EAFE Free
Index.
INVESTMENT RISKS--The Overseas Equity Index Fund is exposed to the risks of
investing in common stocks as well as the additional risks of investing in
foreign securities, which can be affected by currency, political, legal,
regulatory, and operational factors.
MID/SMALL COMPANY INDEX FUND
GENERAL DESCRIPTION AND GOALS--The Mid/ Small Company Index Fund seeks long-term
growth of capital by investing in common stocks of U.S. small- to
medium-capitalization companies. The goal is to provide a portfolio that
approximates the investment characteristics and performance of the Wilshire 4500
Index.
INVESTMENT STRATEGY--The Mid/Small Company Index Fund invests in a Master
Portfolio that invests in a sampling of securities contained in the Wilshire
4500 Index.
INVESTMENT RISKS--The Fund is exposed to the general risks of stock investing.
Additionally, the Wilshire 4500 Index includes smaller-capitalization companies
whose stocks tend to have more price volatility than those of larger companies.
BROAD MARKET INDEX FUND
GENERAL DESCRIPTION AND GOALS--The Broad Market Index Fund seeks long-term
growth of capital by investing in common stocks of U.S. companies across all
capitalization ranges. The goal is to provide a portfolio that approximates the
investment characteristics and performance of the Wilshire 5000 Index.
INVESTMENT STRATEGY--The Broad Market Index Fund invests in a Master Portfolio
that invests in two other Master Portfolios managed by Barclays that invest in a
sampling of securities contained in the Wilshire 4500 Index and the S&P 500
Index, respectively, in order to approximate the performance of the Wilshire
5000 Index.
INVESTMENT RISKS--The Broad Market Index Fund is exposed to the general risks of
stock investing. Additionally, the Wilshire 5000 Index includes
smaller-capitalization companies whose stocks tend to have more price volatility
than those of larger companies.
500 STOCK INDEX FUND
GENERAL DESCRIPTION AND GOALS--The 500 Stock Index Fund seeks long-term growth
of capital by investing in common stocks of larger-capitalization companies
traded on U.S. stock exchanges. The goal is to provide a portfolio that
approximates the investment characteristics and performance of the Standard &
Poor's 500 Index.
INVESTMENT STRATEGY--The 500 Stock Index Fund invests in a Master Portfolio that
seeks to replicate the holdings of the Standard & Poor's 500 Index.
INVESTMENT RISKS--The 500 Stock Index Fund is exposed to the general risks of
stock investing. The Fund is expected to have the same volatility as the U.S.
stock market, as measured by the S&P 500 Index.
CORE BOND INDEX FUND
GENERAL DESCRIPTION AND GOALS--The Core Bond Index Fund seeks current income and
growth of capital by investing in U.S. government and corporate investment-grade
obligations. The goal is to provide a portfolio that approximates the investment
characteristics and performance of the Lehman Brothers Government/Corporate Bond
Index.
21
<PAGE> 25
INVESTMENT STRATEGY--The Core Bond Index Fund invests in a Master Portfolio that
invests in a sampling of securities contained in the Lehman Brothers
Government/Corporate Bond Index.
INVESTMENT RISKS--The Core Bond Index Fund is exposed to the general risks of
investing in bonds. The Fund experiences volatility similar to that of an
intermediate-term bond fund. The average maturity of the Fund is expected to
range from eight years to twelve years. Market prices of the securities held in
the portfolio, including government securities, will fluctuate as interest rates
change. Interest rate changes also could affect the duration of bonds held in
the portfolio. The Fund is also exposed to credit risk, which is the risk that
the issuer of a corporate bond included in the index will default on its
obligations. However, the average credit quality of the index is Aaa, which
means that the level of such credit risk is very low. Please see p. for a
detailed discussion of credit risk.
22
<PAGE> 26
RISKS OF INVESTING IN THE FUNDS
- --------------------------------------------------------------------------------
The following is a description of one or more of the risks that you will face as
an investor in the Funds. It is important to keep in mind one of the main axioms
of investing: the higher the potential reward, the higher the risk of losing
money. The reverse is also generally true: the lower the potential reward, the
lower the risk.
I. STOCK MARKET RISK
Market risk is the possibility that stock prices overall will decline over short
or extended periods. Markets tend to move in cycles, with periods of rising
prices and periods of falling prices.
Although the U.S. stock market has risen substantially in recent years, this
trend is not indicative of the market's overall history.
To illustrate the volatility of the U.S. stock market, the following table shows
the best, worst and average total returns for the U.S. stock market over various
time periods as measured by the S&P 500 Index.
AVERAGE ANNUAL U.S. STOCK MARKET RETURNS
(1926-1999)
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS 20 YEARS
------ ------- -------- --------
<S> <C> <C> <C> <C>
Best 52.99% 28.55% 20.06% 17.87%
Worst -43.34% -12.47% -0.89% 3.11%
Average 13.28% 10.99% 11.13% 11.18%
</TABLE>
Keep in mind that the S&P 500 Index tracks mainly large-capitalization stocks.
Other groupings of stocks are likely to carry different degrees of volatility.
For example, small-capitalization stocks, as a group, have historically
exhibited greater short-term volatility than that of the S&P 500 Index. All of
the Funds except the Money Market Fund, the U.S. Treasury Securities Fund and
the Core Bond Index Fund are subject to some level of stock market risk.
Foreign securities are subject to the same market risks as U.S. securities, such
as general economic conditions and company and industry prospects. However,
foreign securities involve additional risk of loss due to political, economic,
legal, regulatory, operational and currency conversion and pricing factors
affecting investment in the securities of foreign businesses or governments.
These risk factors may be even more prevalent in emerging markets. Foreign
securities are also subject to the risks associated with the value of foreign
currencies. A decline in the value of foreign currency vs. the U.S. dollar
reduces the dollar value of securities denominated in that currency. The
International Fund and the Overseas Equity Index Fund are subject to these
risks. The Aggressive Growth, Growth, Growth & Income and Equity Income Funds
may invest a limited portion of their respective assets in foreign securities,
and would be subject to these risks to the extent of such investment.
II. BOND MARKET RISK
Bonds also experience market risk, which is primarily attributable to changes in
interest rates. The general rule is that if INTEREST RATES rise, bond prices
will fall. The reverse is also true: if interest rates fall, bond prices will
generally rise. These rules apply to government securities as well as to
corporate securities.
A bond with a longer MATURITY (or a bond fund with a longer average maturity)
will be more volatile than shorter term bonds. The U.S. Treasury Securities Fund
and the Core Bond Index Fund are both subject to this risk. Because of their
extreme short-term nature, money market instruments carry little market risk.
Bonds and bond funds are also exposed to CREDIT risk, which is the possibility
that the issuer of a bond will default on its obligation to pay interest and
principal. U.S. Treasury securities, which are backed by the full faith and
credit of the U.S. Government, have virtually no credit risk. Corporate bonds
rated Baa or above, such as some of the bonds held by the Core Bond Index Fund,
are generally considered to carry moderate credit
23
<PAGE> 27
risk. Corporate bonds rated lower than Ba are considered to have significant
credit risk.
Of course, bonds with lower credit ratings generally pay a higher level of
income to investors.
III. OBJECTIVE/STYLE RISK
All of the Funds are subject, in varying degrees, to objective risk, which is
the possibility that returns from a specific type of security in which a Fund
invests or the investment style of one or more of a Fund's subadvisers, or the
investment adviser to the Master Portfolios with respect to the Index Funds,
will trail the returns of the overall market.
In the past, different types of securities have experienced cycles of
outperformance and underperformance in comparison to the market in general.
Therefore, if you invest in a fund with a specific style you would be exposed to
this risk.
IV. MANAGER RISK
Manager risk is the risk that one of the Funds' subadvisers will do a poor job
of selecting securities and thus fail to meet the Fund's objectives. With
respect to the Index Funds, there is a risk that Fund performance will deviate
from that of the index. As with any mutual fund, there can be no guarantee that
a particular Fund will achieve its objective.
INVESTMENT LIMITATIONS
- ----------------------------------------------------
Each Fund has adopted certain limitations designed to reduce its exposure to
specific situations. Some of these limitations are that a Fund will not:
(a) with respect to 75% (100% for the Money Market Fund) of the value of its
total assets, purchase the securities of any issuer (except obligations of
the United States government and its instrumentalities and securities of
other investment companies) if as a result the Fund would hold more than 10%
of the outstanding voting securities of the issuer, or more than 5% of the
value of the Fund's total assets would be invested in the securities of such
issuer;
(b) invest more than 25% of its assets in any one industry (except for the Money
Market Fund or to the extent that the applicable benchmark for an Index Fund
does not meet this standard);
(c) borrow money except from banks for temporary or emergency purposes, and in
no event in excess of 15% of the market value of its total assets.
MANAGEMENT OF THE FUNDS
- --------------------------------------------------------------------------------
The investment adviser to the Vantagepoint Funds is VIA, whose offices are
located at 777 North Capitol Street NE, Suite 600, Washington, DC 20002-4240.
VIA provides its advisory services pursuant to an investment advisory agreement
with the Vantagepoint Funds. VIA is a wholly-owned subsidiary of the ICMA
Retirement Corporation (RC), which has been registered as an investment adviser
with the U.S. Securities and Exchange Commission since 1983. 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. RC's primary advisory client is the ICMA Retirement
Trust, which was formed to commingle and invest the assets of the retirement
plans administered by RC.
As investment adviser to the Funds, VIA continually monitors the performance of
the subadvisers. 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. The Funds have received an exemptive order from the SEC that
allows VIA to change subadvisers with the approval of the
24
<PAGE> 28
------------------
Fund's Board of Directors and upon notice to shareholders.
Compensation for the investment management of the Funds is asset based, i.e, it
consists of an annual percentage fee calculated based on average assets under
management. The fee is paid out of Fund assets. The aggregate annual fees paid
to VIA and the subadvisers for the fiscal year ended December 31, 1999 are as
follows:
<TABLE>
<CAPTION>
FUNDS ADVISORY FEE PAID*
----- ------------------
<S> <C>
Aggressive Opportunities 0.85%
International 0.63%
Growth 0.41%
Growth And Income 0.51%
Equity Income 0.35%
Asset Allocation 0.39%
U.S. Treasury Securities 0.22%
Money Market 0.18%
Overseas Equity Index 0.25%
Mid/Small Company Index 0.15%
Broad Market Index 0.13%
500 Stock Index 0.10%
Core Bond Index 0.13%
</TABLE>
*Consists of Advisory Fee plus the appropriate subadviser fee
The fees charged by each subadviser to the Funds and the investment adviser of
the Master Portfolios can be found in the Statement of Additional Information
under the heading "Investment Advisory and Other Services".
The subadvisers are retained on behalf of the Funds by VIA, and day-to-day
discretionary responsibility for security selection and portfolio management
rests with the subadvisers. 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. The responsibility for overseeing subadvisers rests with
VIA's Investment Division, whose division head, Senior Vice President John
Tobey, reports directly to Girard Miller, CFA, President of VIA.
Mr. Miller has over 16 years of experience in investment management, 6 years as
Chief Executive Officer and President of RC. He holds a Political Economy degree
from the University of Washington, a Masters in Economics from Wayne State
University in Detroit, Michigan, and a Masters of Public Administration from
Syracuse University, and is a Chartered Financial Analyst.
Mr. Tobey began his investment career in 1969. He assumed his current position
with RC in January of 1998. From 1995 to 1998 Mr. Tobey served as President and
Chief Executive Officer of Investment Directions, Inc., and from 1986 to 1994 he
served as President of the Liberty Asset Management Company. He holds a BS
degree in Finance from San Diego State University and an MBA degree from the
Stanford Graduate School of Business.
The investment program and its performance are subject to overall supervision
and periodic review by the Funds' Board of Directors.
The Directors and Officers of the Vantagepoint Funds, together with information
as to present positions and their principal business occupations during the last
five years, are shown below. Directors who are deemed to be "interested
persons", as defined in the Investment Company Act of 1940, are indicated by an
asterisk. The mailing address for the Directors and Officers of the Funds is 777
North Capitol St., NE, Ste. 600, Washington, D.C. 20002-4240.
25
<PAGE> 29
DIRECTORS AND OFFICERS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
NAME, ADDRESS POSITION DURING PAST 5 YEARS
------------- ---------- -----------------------------------------
<S> <C> <C>
George Bissell Director Chairman of Board
Boston, MA Keystone Group Funds
Donna Gilding Director Chief Investment Officer
New York, NY City of New York Pensions
Robert A. Bowman Director President, Chief Operating Officer and
Westport, CT Director (1995-1998)
Chief Financial Officer (1992-1995)
ITT Corporation
N. Anthony Calhoun Director Deputy Executive Director and
Chevy Chase, MD Chief Financial Officer
Pension Benefit Guaranty Assoc.
Arthur Lynch Director Director of Finance
Glendale, AZ City of Glendale, Arizona
Eddie Moore Director President, Virginia State University
Petersburg, VA Director -- Universal Corporation
Robin L. Wiessmann Director* Principal
Yardley, PA Artemis Capital Group, Inc.
Girard Miller President President and Chief Executive Officer
Washington, DC ICMA Retirement Corporation
Paul Breault Treasurer Chief Financial Officer (1998 to present)
Washington, DC ICMA Retirement Corporation
Formerly; Senior Vice President and
Retail Group Chief Financial Officer
Fidelity Investments
Paul Gallagher Secretary General Counsel (1998-present)
Washington, DC ICMA Retirement Corporation;
Formerly; Principal and Assistant General
Counsel,
The Vanguard Group
</TABLE>
* Ms. Wiessmann is considered an interested person because she is a member of
the Board of Directors of the ICMA Retirement Corporation. Officers of the
Funds are considered interested persons as defined in the Investment Company
Act of 1940.
26
<PAGE> 30
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
(For purposes of the following discussion, unless noted otherwise, "business
day" means the period(s) of time on any given day during which the New York
Stock Exchange is open for business. Unless noted otherwise, "close of business"
means 4:00 p.m. Eastern time on each business day or the final close of business
on any business day during which trading on the New York Stock Exchange is
suspended.)
SHARE ACCOUNTING FOR ALL FUNDS
- ----------------------------------------------------
The shares represent a dollar-weighted proportional ownership interest in each
of the Funds in which you are invested. The Funds do not issue share
certificates.
The price of a share is known as its net asset value ("NAV"). The daily NAV of a
share is determined at the close of each business day by adding the value of all
of a Fund's investments, plus cash and other assets, deducting liabilities, and
then dividing the result by the number of outstanding shares in the Fund as of
the end of the prior day and rounding the results to the nearest cent. The value
of your investment position equals the number of shares you own multiplied by
the current day's NAV.
Since share values (except for the Money Market Fund) and investment returns
will fluctuate, an exchange or redemption at any given time will normally result
in your receiving more or less than the original cost of your investment. Each
Fund's share value can be found daily in the mutual fund listing of most major
newspapers under the heading "Vantagepoint Funds".
VALUATION OF THE FUNDS
- ----------------------------------------------------
Investment securities held by the Funds are valued daily. Stocks are valued at
the price in effect at the close of business of the exchange on which they are
traded. Bonds are valued using pricing matrices obtained through Merrill Lynch
and other commercial pricing services.
Securities for which market quotations are not readily available are valued
according to methods established by the Board of Directors that are believed to
reflect fair value. If values of foreign securities have been materially
affected by events occurring after the close of a foreign market, foreign
securities may be valued by another method that the Board of Directors believes
reflects fair value.
The underlying Master Portfolio for each Index Fund is valued daily by the
Master Portfolio itself, and each Index Fund's investment in the underlying
Master Portfolio is part of the calculation of each Index Fund's NAV. Once the
market value of each Index Fund is determined, it is then divided by the number
of shares outstanding to arrive at that day's NAV for the Fund.
For the Money Market Fund, net asset value is calculated by valuing portfolio
securities by reference to the Fund's acquisition cost as adjusted for
amortization of premium or accretion of discount, rather than by reference to
their value based on current market factors. This valuation method generally
ignores fluctuations in the market price of the Fund's debt securities and
assumes a steady increase (decrease) in value until maturity.
REINVESTMENT OF EARNINGS
- ----------------------------------------------------
All earnings of the Funds (interest, dividend income, and capital gains) are
reinvested in the Funds and used to purchase additional shares.
PRICING AND TIMING OF TRANSACTIONS
- ----------------------------------------------------
Purchases, exchanges and redemptions are executed at the NAV next calculated
after the Fund or its transfer agent receives the transaction request. For
example, under normal circumstances, a transaction request received at 9:30 a.m.
on a business day is executed at the same price as that of a transaction request
received at 3:00 p.m. -- at that day's closing price. If the Funds receive a
transaction request in the morning, you do not insulate
27
<PAGE> 31
yourself from market gains or losses during the rest of the business day. A
transaction request received after the calculation of the NAV on one day will be
executed at the price in effect at the close of the next business day.
Transaction requests by facsimile must be received by 12 noon to receive that
day's NAV.
REPORTING TO INVESTORS
- ----------------------------------------------------
With respect to any investment transaction reports you may receive from
Vantagepoint Funds, review these reports carefully, and call the toll-free
customer service line at 1-800-669-7400 or contact the Funds on-line at
[email protected]. immediately if you see any discrepancies. In order
to correct a discrepancy, the Funds must be notified within 120 days of the
close of the calendar quarter in which the discrepancy occurs.
PURCHASES, EXCHANGES, AND REDEMPTIONS
- --------------------------------------------------------------------------------
PURCHASES
- ----------------------------------------------------
The Funds are open for investment exclusively by (i) the ICMA Retirement Trust;
(ii) the employee benefit plans of state and local governments and their
agencies and instrumentalities (including retirement and deferred compensation
plans established under Sections 401 and 457, respectively, of the Internal
Revenue Code of 1986, as amended); and (iii) Individual Retirement Accounts
("IRAs") of employees of state and local governments and the IRAs of other
persons having a familial or otherwise close relationship to those public sector
employees. The details of such eligibility criteria are set forth in the account
application.
Class I shares of the Index Funds 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 to (i) 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.
There are no minimum investment amounts, front-end sales charges, deferred sales
charges, back-end sales or redemption charges associated with investment in the
Vantagepoint Funds.
The Vantagepoint Funds reserve the right in their sole discretion to (i) 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 the Fund or
Funds.
PURCHASES BY EMPLOYEE
BENEFIT PLANS
- ----------------------------------------------------
Employee benefit plans must fill out a retirement plan account form that is to
be signed by the plan's trustee or other authorized official.
Investors may submit purchase orders to the Funds as often as daily. Payments
may be transmitted by check, wire, and Automated Clearing House, although it is
preferred that the Funds receive assets by wire. Investment detail must be
submitted on paper forms, diskette, magnetic tape, or electronically.
Purchase orders received in good order prior to next calculation of the NAV (or
12 noon with respect to fax instructions) are posted to investor accounts at the
closing NAV of that day, or if the
28
<PAGE> 32
day the contributions are received is not a business day, at the closing NAV of
the next business day. Purchase orders received in good order after close of
business are posted at the closing NAV of the next business day.
With respect to purchases made through the ICMA Retirement Trust, or by certain
employee benefit plans and other types of omnibus accounts, other arrangements
may be negotiated as to the timing and delivery of purchase instructions.
Posting of contributions to investor accounts is contingent upon submission of
purchase orders in good order to the Vantagepoint Funds. This means that the
requests must be accompanied by sufficient detail to enable the Vantagepoint
Funds to allocate assets properly. If a purchase request is not received in good
order, the deposit is held in a non-interest bearing account until all necessary
information is received. If the purchase request is still not in good order
after three business days, the assets are returned to the investor. Purchases
received for unidentified accounts for which no account form has been received
will be returned to the investor.
EXCHANGES AND ALLOCATIONS
AMONG FUNDS
- ----------------------------------------------------
Investors may submit exchange requests daily in writing or by telephone
exclusively through the VantageLine phone system at 1-800-669-7400. Remember
that an exchange is a two-part transaction-a redemption of shares in one Fund
and a purchase of shares in another Fund.
Exchange requests received in good order prior to close of business on the New
York Stock Exchange (normally 4:00 p.m. Eastern Time), or 12 noon for fax
instructions, on a business day are posted to investor accounts at that day's
closing NAV. Exchange requests received in good order after close of business
will be posted at the closing NAV of the next business day.
The allocation of new purchase amounts among the Funds may be changed by
investors without charge or limitation.
Written confirmations are normally sent to Investors on the business day
following the day the transaction occurs. Investors should verify the accuracy
of information in confirmations immediately upon receipt.
EXCHANGES BY TELEPHONE
- ----------------------------------------------------
Investors may make daily exchanges through VantageLine, the Funds' automated
service line by calling 1-800-669-7400. Instructions received through
VantageLine must be accompanied by a Personal Identification Number. In
addition, verbal instructions given to a telephone representative will be
accepted upon verification of your identity and will be tape recorded to permit
verification. Written confirmations are normally sent to investors on the
business day following the day the transactions occur. Investors should verify
the accuracy of information in confirmations immediately upon receipt. See
"VantageLine" below for more information.
VANTAGELINE
- ----------------------------------------------------
The Funds maintain VantageLine, an automated service line for the benefit of
Investors who have access to touch-tone telephones. You may use VantageLine to
make exchanges among Funds and change your investment allocation. The phone
number is 1-800-669-7400.
VantageLine is normally available 24 hours a day, seven days a week for your
convenience; however, service availability is not guaranteed. Neither the Funds,
the Funds' investment adviser nor the Funds' transfer agent will be responsible
for any loss (or foregone gain) you may experience as a result of the service
being unavailable or inoperative.
Should the VantageLine service or the "800" number become unavailable,
transactions may be made by VantageLink, as described below, or by express mail
at the shareholders' expense (see back cover for the Fund's address).
29
<PAGE> 33
VANTAGELINK
- ----------------------------------------------------
The Funds maintain VantageLink, a home page on the Internet. The address is
http://www.icmarc.org. Information available from the Internet includes account
balances (which requires a special password), investment allocations, and
investment performance. You may also execute transactions or make changes in
your investment allocation via VantageLink. The transfer agent for the Funds
will require that instructions received over the Internet be accompanied by a
Personal Identification Number. Written confirmations will normally be sent on
the business day after the transaction occurs. You should verify the accuracy of
information in confirmations immediately upon receipt.
VantageLink is normally available 24 hours a day, seven days a week. However,
service availability is not guaranteed. Like other Internet-based services,
VantageLink may be subject to external transmission problems that are beyond the
control of the Funds' management. Accordingly, neither the Funds, the Funds'
investment adviser, nor the Funds' transfer agent will be responsible for any
loss (or foregone gain) you may incur as a result of service being unavailable
or delayed.
PURCHASES BY IRA INVESTORS
- ----------------------------------------------------
PAYROLL DEDUCTION IRAS
Purchases made through payroll deduction of IRA contributions will be handled
the same as purchases made by employee benefit plans, but will require a
separate account form. Timing of investment, exchanges, and available services
will be the same as those for employee benefit plans. See "Purchases by Employee
Benefit Plans."
NON-PAYROLL DEDUCTION IRAS
First time IRA investors must fill out an IRA account application and mail it to
the Funds along with a check. Please call 1-800-669-7400 for assistance when you
are establishing a non-payroll deduction IRA account. Timing of investment,
exchanges, and available services will be the same as those for employee benefit
plans. See "Purchases by Employee Benefit Plans."
REDEMPTIONS
Shares may be redeemed at any time, subject to certain restrictions imposed by
the Internal Revenue Code on the timing of distributions under tax-favored
employee benefit plans and IRAs. If investment in the Funds has been made
through one or more of these plans, please call 1-800-669-7400 regarding these
restrictions. With the exception of redemptions that are made to effect
exchanges among the Vantagepoint Funds, redemption requests must be in writing.
REDEEMING SHARES IN WRITING
Write a letter of instruction with:
* Name of retirement plan, if applicable
* If a non-payroll IRA, your name and address
* The Fund's name
* Your Fund account number
* The dollar amount or number of shares to be redeemed
* How assets are to be distributed (by mail or by wire)
* If funds are to be distributed by wire, wire instructions.
A signature guarantee may be required, at the Funds' discretion, for certain
redemptions.
DISTRIBUTION ARRANGEMENTS
- ----------------------------------------------------
ICMA-RC Services, LLC (RC Services) serves as distributor to the Funds. RC
Services receives no compensation for its services as distributor.
30
<PAGE> 34
TAXATION
- --------------------------------------------------------------------------------
The Vantagepoint Funds intend to elect to be treated and to qualify each year as
a regulated investment company under Subchapter M of the Internal Revenue Code
of 1986, as amended. A regulated investment company generally is not subject to
federal income tax on income and gains distributed in a timely manner to its
shareholders. The Fund intends to distribute capital gains annually. The Money
Market, Core Bond Index and U.S. Treasury Funds will distribute dividends
monthly, and all of the remaining Funds will distribute dividends annually.
Normally, distributions to shareholders are taxable as income or capital gains
when such income and gains are distributed to them. However, shareholders who
invest in the Funds through section 401 plans, section 457 plans or IRAs, will
have earnings reinvested. If that is the case, the income is not taxable in the
year in which it is earned.
YEAR 2000 ISSUES
- --------------------------------------------------------------------------------
VIA and its affiliated entities have successfully completed a conversion to a
new core recordkeeping system that is Year 2000 compliant. A number of the other
systems employed by the Vantagepoint Funds have been developed within the past
few years and are also Year 2000 compliant. Because Year 2000 issues affect
virtually all organizations, the companies or entities in which the Funds invest
also could be adversely impacted by Year 2000 issues. The extent of such impact
cannot be predicted.
31
<PAGE> 35
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following financial highlights table is intended to help you understand a
Fund's performance for the period of the Fund's operation. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned (or lost) on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers LLP,
whose report along with the financial statements and related notes, appears in
the 1999 Annual Report which is available upon request.
FOR THE PERIOD FROM MARCH 1, 1999 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31,
1999.
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH & EQUITY ASSET U.S. TREASURY
OPPORTUNITIES INTERNATIONAL GROWTH INCOME INCOME ALLOCATION SECURITIES
------------- ------------- ---------- -------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................. $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss).................. (0.04) 0.08 0.00* 0.01 0.18 0.24 0.44
Net realized and
unrealized gain (loss)
on investments and
futures and foreign
currency transactions... 6.34 4.15 3.95 2.31 (0.68) 0.62 (0.50)
-------- -------- ---------- -------- -------- ---------- -------
TOTAL FROM INVESTMENT
OPERATIONS................ 6.30 4.23 3.95 2.32 (0.50) 0.86 (0.06)
-------- -------- ---------- -------- -------- ---------- -------
LESS DISTRIBUTIONS:
From net investment
income.................. (0.00) (0.15) (0.00)* (0.01) (0.18) (0.24) (0.44)
From net realized gains... (0.48) (0.32) (0.74) (0.46) (2.16) (0.13) (0.00)
-------- -------- ---------- -------- -------- ---------- -------
TOTAL DISTRIBUTIONS......... (0.48) (0.47) (0.74) (0.47) (2.34) (0.37) (0.44)
-------- -------- ---------- -------- -------- ---------- -------
NET ASSET VALUE, END OF
PERIOD.................... $ 15.82 $ 13.76 $ 13.21 $ 11.85 $ 7.16 $ 10.49 $ 9.50
======== ======== ========== ======== ======== ========== =======
Total return++.............. 63.39% 42.62% 40.03% 23.50% (4.60)% 8.61% (0.66)%
Ratios/Supplemental data:
Net assets, end of period
(000)................... $631,505 $316,937 $3,361,695 $235,062 $486,690 $1,100,101 $76,468
Number of shares
outstanding, end of
period (000)............ 39,924 23,039 254,497 19,833 67,988 104,874 8,052
Ratios to average net
assets:
Ratio of expenses to
average net assets+..... 1.28% 1.12% 0.80% 0.94% 0.75% 0.80% 0.66%
Ratio of net investment
income (loss) to average
net assets+............. (0.48)% 0.86% (0.01)% 0.17% 2.08% 2.68% 5.26%
Portfolio turnover++........ 50% 29% 129% 51% 77% 6% 176%
(1) Ratio of expenses to
average net assets prior
to expense reductions and
reimbursed expenses+...... 1.28% 1.14% 0.81% 0.96% 0.76% N/A N/A
(2) Ratio of net investment
income (loss) to average
net assets prior to
expense reductions and
reimbursed expenses+...... (0.48)% 0.84% (0.02)% 0.15% 2.07% N/A N/A
<CAPTION>
MONEY
MARKET
-------
<S> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................. $ 1.00
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss).................. 0.04
Net realized and
unrealized gain (loss)
on investments and
futures and foreign
currency transactions... 0.00
-------
TOTAL FROM INVESTMENT
OPERATIONS................ 0.04
-------
LESS DISTRIBUTIONS:
From net investment
income.................. (0.04)
From net realized gains... (0.00)
-------
TOTAL DISTRIBUTIONS......... (0.04)
-------
NET ASSET VALUE, END OF
PERIOD.................... $ 1.00
=======
Total return++.............. 4.00%
Ratios/Supplemental data:
Net assets, end of period
(000)................... $76,773
Number of shares
outstanding, end of
period (000)............ 76,773
Ratios to average net
assets:
Ratio of expenses to
average net assets+..... 0.55%
Ratio of net investment
income (loss) to average
net assets+............. 4.70%
Portfolio turnover++........ N/A
(1) Ratio of expenses to
average net assets prior
to expense reductions and
reimbursed expenses+...... 0.60%
(2) Ratio of net investment
income (loss) to average
net assets prior to
expense reductions and
reimbursed expenses+...... 4.65%
</TABLE>
- ------------------
* --Rounds to less than .01
+ --Annualized
++ --Not annualized
32
<PAGE> 36
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
OVERSEAS EQUITY INDEX MID/SMALL COMPANY INDEX
-------------------------------------- ---------------------------------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
FROM MARCH 1, FROM APRIL 5, FROM MARCH 1, FROM APRIL 5,
1999 (COM- 1999 (COM- 1999 (COM- 1999 (COM-
MENCEMENT OF MENCEMENT OF MENCEMENT OF MENCEMENT OF
OPERATIONS) TO OPERATIONS) TO OPERATIONS) TO OPERATIONS) TO
DECEMBER 31, 1999 DECEMBER 31, 1999 DECEMBER 31, 1999 DECEMBER 31, 1999
----------------- ------------------ ------------------ ------------------
CLASS I CLASS II CLASS I CLASS II
----------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD..................... $ 10.00 $10.00 $ 10.00 $10.00
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss)................... 0.11 0.15 0.06 0.07
Net realized and unrealized
gain (loss) on
investments and futures
and foreign currency
transactions............. 2.88 2.30 4.02 3.48
------- ------ ------- ------
TOTAL FROM INVESTMENT
OPERATIONS................. 2.99 2.45 4.08 3.55
------- ------ ------- ------
LESS DISTRIBUTIONS:
From net investment
income................... (0.17) (0.19) (0.06) (0.08)
From net realized gains.... (0.07) (0.07) (0.10) (0.10)
------- ------ ------- ------
TOTAL DISTRIBUTIONS.......... (0.24) (0.26) (0.16) (0.18)
------- ------ ------- ------
NET ASSET VALUE, END OF
PERIOD..................... $ 12.75 $12.19 $ 13.92 $13.37
======= ====== ======= ======
Total return++............... 30.03% 24.59% 40.90% 35.64%
Ratios/Supplemental data:
Net assets, end of period
(000).................... $48,416 $8,623 $21,548 $9,296
Number of shares
outstanding, end of
period (000)............. 3,798 708 1,548 695
Ratios to average net assets:
Ratio of expenses to
average net assets+...... 0.95% 0.75% 0.60% 0.40%
Ratio of net investment
income (loss) to average
net assets+.............. 1.17% 1.53% 0.75% 0.97%
Portfolio turnover++......... N/A N/A N/A N/A
(1) Ratio of expenses to
average net assets prior to
expense reductions and
reimbursed expenses+....... N/A N/A N/A N/A
(2) Ratio of net investment
income (loss) to average
net assets prior to expense
reductions and reimbursed
expenses+.................. N/A N/A N/A N/A
<CAPTION>
BROAD MARKET INDEX
-------------------------------------
FOR THE PERIOD FOR THE PERIOD
FROM MARCH 1, FROM APRIL 5,
1999 (COM- 1999 (COM-
MENCEMENT OF MENCEMENT OF
OPERATIONS) TO OPERATIONS) TO
DECEMBER 31, 1999 DECEMBER 31, 1999
----------------- -----------------
CLASS I CLASS II
----------------- -----------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD..................... $ 10.00 $ 10.00
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss)................... 0.10 0.09
Net realized and unrealized
gain (loss) on
investments and futures
and foreign currency
transactions............. 2.30 1.80
-------- --------
TOTAL FROM INVESTMENT
OPERATIONS................. 2.40 1.89
-------- --------
LESS DISTRIBUTIONS:
From net investment
income................... (0.09) (0.11)
From net realized gains.... (0.10) (0.10)
-------- --------
TOTAL DISTRIBUTIONS.......... (0.19) (0.21)
-------- --------
NET ASSET VALUE, END OF
PERIOD..................... $ 12.21 $ 11.68
======== ========
Total return++............... 24.07% 19.01%
Ratios/Supplemental data:
Net assets, end of period
(000).................... $519,581 $163,050
Number of shares
outstanding, end of
period (000)............. 42,539 13,963
Ratios to average net assets:
Ratio of expenses to
average net assets+...... 0.46% 0.26%
Ratio of net investment
income (loss) to average
net assets+.............. 0.99% 1.18%
Portfolio turnover++......... N/A N/A
(1) Ratio of expenses to
average net assets prior to
expense reductions and
reimbursed expenses+....... N/A N/A
(2) Ratio of net investment
income (loss) to average
net assets prior to expense
reductions and reimbursed
expenses+.................. N/A N/A
</TABLE>
- ------------------
+ --Annualized
++ --Not annualized
33
<PAGE> 37
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
500 STOCK INDEX CORE BOND INDEX
------------------------------------- -------------------------------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
FROM MARCH 1, FROM APRIL 5, FROM MARCH 1, FROM APRIL 5,
1999 (COM- 1999 (COM- 1999 (COM- 1999 (COM-
MENCEMENT OF MENCEMENT OF MENCEMENT OF MENCEMENT OF
OPERATIONS) TO OPERATIONS) TO OPERATIONS) TO OPERATIONS) TO
DECEMBER 31, 1999 DECEMBER 31, 1999 DECEMBER 31, 1999 DECEMBER 31, 1999
----------------- ----------------- ----------------- -----------------
CLASS I CLASS II CLASS I CLASS II
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.............. $ 10.00 $ 10.00 $ 10.00 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).................... 0.09 0.08 0.49 0.45
Net realized and unrealized gain (loss) on
investments and futures and foreign currency
transactions.................................. 1.86 1.36 (0.59) (0.57)
-------- -------- -------- -------
TOTAL FROM INVESTMENT OPERATIONS.................. 1.95 1.44 (0.10) (0.12)
-------- -------- -------- -------
LESS DISTRIBUTIONS:
From net investment income...................... (0.07) (0.09) (0.49) (0.45)
From net realized gains......................... (0.03) (0.03) (0.00) (0.00)
-------- -------- -------- -------
TOTAL DISTRIBUTIONS............................... (0.10) (0.12) (0.49) (0.45)
-------- -------- -------- -------
NET ASSET VALUE, END OF PERIOD.................... $ 11.85 $ 11.32 $ 9.41 $ 9.43
======== ======== ======== =======
Total return...................................... 19.52% 14.44% (1.05)% (1.19)%
Ratios/Supplemental data:
Net assets, end of period (000)................. $135,372 $119,236 $261,607 $48,288
Number of shares outstanding, end of period
(000)......................................... 11,428 10,532 27,796 5,118
Ratios to average net assets:
Ratio of expenses to average net assets+........ 0.44% 0.24% 0.47% 0.27%
Ratio of net investment income (loss) to average
net assets+................................... 1.04% 1.23% 5.99% 6.26%
Portfolio turnover++.............................. N/A N/A N/A N/A
(1) Ratio of expenses to average net assets prior
to expense reductions and reimbursed
expenses+....................................... N/A N/A N/A N/A
(2) Ratio of net investment income (loss) to
average net assets prior to expense reductions
and reimbursed expenses+........................ N/A N/A N/A N/A
</TABLE>
- ------------------
+ --Annualized
++ --Not annualized
34
<PAGE> 38
The Statement of Additional
Information ("SAI") includes
additional information about the
Vantagepoint Funds. The SAI has been
filed with the Securities and Exchange
Commission ("SEC") and is incorporated
by reference into this prospectus.
This means that the SAI, for legal
purposes, is part of this prospectus.
Additional information about the
Funds' investments is available in the
annual and semi-annual reports to
shareholders. In the Funds' annual
report, you will find a discussion of
the market conditions and investment
strategies that significantly affected
the Funds' performance during its last
year.
You can obtain a free copy of the SAI
and the most recent annual or
semi-annual report by calling
1-800-669-7400. You may also call
1-800-669-7400 to request other
information or to make shareholder
inquiries.
Information about the Fund (including
the SAI) can be reviewed and copied at
the Securities and Exchange
Commission's Public Reference Room in
Washington, D.C., or from the EDGAR
Database on the SEC's website
(http://www.sec.gov). Information on
the operation of the Public Reference
Room may be obtained by calling the
Commission at 1-202-942-8090. Copies
of this information may be obtained
upon payment of a duplicating fee, by
writing to: Securities and Exchange
Commission, Public Reference Section,
Washington, D.C. 20549-0102. You may
also obtain this information, upon
payment of a duplicating fee, by
e-mailing the SEC at the following
address: [email protected].
Reports and other information about
the Funds are also available on the
Commission's Internet site at
http://www.sec.gov.
Investment Company Act file numbers:
811-08941; 333-60789
[RECYCLE LOGO]
THIS PROSPECTUS IS PRINTED ENTIRELY ON
RECYCLED PAPER.
<PAGE> 39
THE VANTAGEPOINT FUNDS
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 2000
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 ("SAI") 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, dated May 1,
2000 respectively. 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 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
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Description of the Fund and Its Investments and Risks......................
Management of The Vantagepoint Funds.......................................
Control Persons and Principal Holders of Securities........................
Investment Advisory and Other Services.....................................
Portfolio Transactions.....................................................
Capital Stock and Other Securities.........................................
Purchase, Redemption, and Pricing of Shares................................
Taxation of the Fund.......................................................
Calculation of Performance Data............................................
Legal Counsel, Independent Auditors, & Custodian...........................
Financial Statements.......................................................
</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 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. The Vantagepoint Funds
are as follows:
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
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.
1
<PAGE> 40
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
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"), nor are
the Broad Market Index or Mid/Small Company Index Funds sponsored, endorsed,
sold, or promoted 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 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.
2
<PAGE> 41
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/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.
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.
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.
3
<PAGE> 42
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.
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 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 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);
(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
4
<PAGE> 43
(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 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:
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
5
<PAGE> 44
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 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
6
<PAGE> 45
("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 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".
7
<PAGE> 46
The Vantagepoint Funds have adopted an Insider Trading Policy that is designed
to comply with the requirements of Rule 17j-1 of the Investment Company Act of
1940. This policy permits fund personnel to engage in personal securities
transactions subject to certain conditions and limitations. Fund personnel who
have access to fund trading information as part of their jobs must obtain prior
approval from the Fund's Compliance Officer. The policy is on public file with
the Securities and Exchange Commission.
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
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
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. 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:
<TABLE>
<CAPTION>
ADVISORY FEE
------------
<S> <C>
All Funds except
the Index Funds 0.10%
Index Funds 0.05%
</TABLE>
8
<PAGE> 47
VIA received the following investment advisory fees for the fiscal period ended
December 31, 1999:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Advisory Fees Paid
- ------------------------------------------------------------------------------------------
<S> <C>
Aggressive Opportunities $ 301,479
- ------------------------------------------------------------------------------------------
International 174,734
- ------------------------------------------------------------------------------------------
Growth 1,985,662
- ------------------------------------------------------------------------------------------
Growth & Income 133,407
- ------------------------------------------------------------------------------------------
Equity Income 410,089
- ------------------------------------------------------------------------------------------
Asset Allocation 816,758
- ------------------------------------------------------------------------------------------
U.S. Treasury Securities 62,708
- ------------------------------------------------------------------------------------------
Money Market* 49,099
- ------------------------------------------------------------------------------------------
Overseas Equity Index 17,067
- ------------------------------------------------------------------------------------------
Mid/Small Company Index 7,240
- ------------------------------------------------------------------------------------------
Broad Market Index 221,418
- ------------------------------------------------------------------------------------------
500 Stock Index 72,566
- ------------------------------------------------------------------------------------------
Core Bond Index 107,980
- ------------------------------------------------------------------------------------------
</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.
VIA or VTA receives asset-based compensation for these administrative services
on an annual basis as follows:
FEE FOR FEE FOR
INVESTOR SERVICES FUND SERVICES
All Funds except ----------------- -------------
the Index Funds 0.20% 0.15%
Index Funds
Class I 0.15% 0.15%
-------
Class II 0.05% 0.05%
--------
VIA or VTA received the following fees for administrative services for the
fiscal period ended December 31, 1999:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Amount Received
- ------------------------------------------------------------------------------------------
<S> <C>
Aggressive Opportunities $ 1,051,232
- ------------------------------------------------------------------------------------------
International 613,774
- ------------------------------------------------------------------------------------------
Growth 7,155,685
- ------------------------------------------------------------------------------------------
Growth & Income 465,427
- ------------------------------------------------------------------------------------------
Equity Income 1,428,709
- ------------------------------------------------------------------------------------------
Asset Allocation 2,845,926
- ------------------------------------------------------------------------------------------
U.S. Treasury Securities 218,386
- ------------------------------------------------------------------------------------------
Money Market 171,166
- ------------------------------------------------------------------------------------------
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.
9
<PAGE> 48
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.
<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 Funds Management, Inc. 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%
Rowe Price-Fleming, 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 Rowe Price-Fleming
GROWTH FUND
Subadviser
----------
TCW Funds Management, Inc. First $25 million 0.70% --
Next $25 million 0.50%
Next $50 million 0.45%
Next $400 million 0.40%
Over $500 million 0.35%
William Blair & Company, LLC First $150 million 0.50% $890,609
Next $150 million 0.45%
Over $300 million 0.40%
Tukman Capital Management, Inc. Flat fee 0.50% --
Barclays Global Fund Advisors First $500 million 0.04% $24,810
Next $500 million 0.02%
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%
</TABLE>
10
<PAGE> 49
<TABLE>
<S> <C>
Next $300 million 0.25%
Over $500 million 0.20%
** 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.
</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
----------
Wellington Management Company, LLP First $50 million 0.40% $90,361
Next $100 million 0.30%
Over $200 million 0.25%
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%
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%
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%
</TABLE>
11
<PAGE> 50
<TABLE>
<S> <C> <C> <C>
Over $300 million 0.08%
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
N/A - amount
deducted from the
daily dividend
AIM Advisors, Inc. 0.08% 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 Investment advisory fees of $21,557
0.15% of the first $1 billion
of assets 0.10% of assets
in excess of $1 billion;
and administrative fees of
.10% on the first $1 billion
of assets and .07% on assets in
excess of $1 billion.
</TABLE>
**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.
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.*
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, respectively.
* 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.
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 following amount represents the amount of these
transactions and commissions paid for the fiscal period ended December 31, 1999:
12
<PAGE> 51
<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 --
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Securities -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Money Market N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Overseas Equity Index N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Mid/Small Company Index N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Broad Market Index N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
500 Stock Index N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Core Bond Index N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Total $7,544,593 $1,144,176
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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.
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' 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
13
<PAGE> 52
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.
14
<PAGE> 53
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.
15
<PAGE> 54
CALCULATION OF PERFORMANCE DATA
For purposes of quoting and comparing the performance of a Fund (other than the
Money Market 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
16
<PAGE> 55
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 through
December 31, 1999 were:
------------------------------------------------
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%
------------------------------------------------
The total returns for Class II shares of the Index Funds for the period from
April 5, 1999 to December 31, 1999 were:
------------------------------------------------
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%
------------------------------------------------
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:
6
YIELD = 2(a-b / cd + 1) - 1
<TABLE>
<S> <C> <C>
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.
</TABLE>
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%
17
<PAGE> 56
U.S. Treasury 5.99%
The Money Market Fund's annualized current yield, 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 Money Market Fund's annualized effective yield, 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 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.
PURCHASE AND REDEMPTION OF SHARES
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).
18
<PAGE> 57
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.
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.
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.
19
<PAGE> 58
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS
(b) Exhibits
(a) Agreement and Declaration of Trust of The Vantagepoint Funds (the
"Registrant" or the "Trust") incorporated herein by reference to
Exhibit (a) of Pre-Effective Amendment No. 1 to this Registration
Statement, filed on December 22, 1998.
(b) By-Laws of Registrant incorporated herein by reference to Exhibit
(b) of Pre-Effective Amendment No. 1 to this Registration Statement
filed, on December 22, 1998.
(c) Not applicable.
(d)(1) Master Investment Advisory Agreement between Registrant and
Vantagepoint Investment Advisors, LLC ("VIA") incorporated herein by
reference to Exhibit (d)(i) of Pre-Effective Amendment No. 3 to this
Registration Statement, filed on February 26, 1999.
(d)(2) Sub-Advisory Agreement by and between VIA and First Pacific
Advisors, Inc. re: the Aggressive Opportunities Fund is filed
herewith.
(d)(3) Sub-Advisory Agreement by and between VIA and MFS Institutional
Advisors, Inc. re: the Aggressive Opportunities Fund is filed
herewith.
(d)(4) Sub-Advisory Agreement by and between VIA and TCW Funds Management
re: the Aggressive Opportunities Fund is filed herewith.
(d)(5) Sub-Advisory agreement by and between VIA and Capital Guardian Trust
Company re: the International Fund is filed herewith.
(d)(6) Sub-Advisory Agreement by and between VIA and Lazard Asset
Management re: the International Fund is filed herewith.
(d)(7) Sub-Advisory Agreement by and between VIA and Rowe Price-Fleming
International, Inc. re: the International Fund is filed herewith.
(d)(8) Sub-Advisory Agreement by and between VIA and Barclays Global Fund
Advisors re: the Growth Fund to be filed by amendment.
(d)(9) Sub-Advisory Agreement by and between VIA and Fidelity Management
Trust Company re: the Growth Fund is filed herewith.
(d)(10) Sub-Advisory Agreement by and between VIA and TCW Funds Management,
Inc. re: the Growth Fund is filed herewith.
(d)(11) Sub-Advisory Agreement by and between VIA and Tukman Capital
Management, Inc. re: the Growth Fund to be filed by amendment.
(d)(12) Sub-Advisory Agreement by and between VIA and Brown Capital
Management, Inc. re: the Growth Fund to be filed by amendment.
(d)(13) Sub-Advisory Agreement by and between VIA and William Blair &
Company LLC re: the Growth Fund no longer applicable.
(d)(14) Sub-Advisory Agreement by and between VIA and Capital Guardian Trust
Company re: the Growth & Income Fund is filed herewith.
2
<PAGE> 59
(d)(15) Sub-Advisory Agreement by and between VIA and Putnam Investment
Management, Inc. re: the Growth & Income Fund is filed herewith.
(d)(16) Sub-Advisory Agreement by and between VIA and Wellington Management
Company LLP re: the Growth & Income Fund is filed herewith.
(d)(17) Sub-Advisory Agreement by and between VIA and Barrow, Hanley,
Mewhinney & Strauss, Inc. re: the Equity Income Fund is filed
herewith.
(d)(18) Sub-Advisory Agreement by and between VIA and T. Rowe Price
Associates re: the Equity Income Fund is filed herewith.
(d)(19) Sub-Advisory Agreement by and between VIA and Wellington Management
Company, LLP re: the Equity Income Fund is filed herewith.
(d)(20) Sub-Advisory Agreement by and between VIA and AVATAR Investors
Associates Corp. re: the Asset Allocation Fund is filed herewith.
(d)(21) Sub-Advisory Agreement by and between VIA and Mellon Capital
Management re: the Asset Allocation Fund is filed herewith.
(d)(22) Sub-Advisory Agreement by and between VIA and Wilshire Asset
Management re: the Asset Allocation Fund is filed herewith.
(d)(23) Sub-Advisory Agreement by and between VIA and Payden & Rygel
Investment Counsel re: the Asset Allocation Fund is filed herewith.
(d)(24) Sub-Advisory Agreement by and between VIA and SEIX Investment
Advisor, Inc. re: the U.S. Treasury Securities Fund is filed
herewith.
(e) Distribution Agreement between the Registrant and ICMA RC Services
LLC incorporated herein by reference to Exhibit (e) of Pre-Effective
Amendment No. 3 to this Registration Statement, filed on February
26, 1999.
(f) Not applicable.
(g) Custody Agreement between Registrant and Investors Bank & Trust to
be filed.
(h) Transfer Agency Agreement is filed herewith.
(i) Legal Opinion of Morgan, Lewis & Bockius LLP is filed herewith.
(j)(1) Consent of Independent Public Accountant PricewaterhouseCoopers, LLP
is filed herewith.
(j)(2) Consent of Independent Public Accountants to the Master Investment
Portfolios, KPMG LLP is filed herewith.
(k) Not applicable.
(l) Purchase Agreement incorporated herein by reference to Exhibit (l)
of Pre-Effective Amendment No. 3 to this Registration Statement
filed on February 26, 1999.
(n) Not applicable.
(o) Rule 18f-3 Plan is incorporated by reference to Exhibit (o) of
Pre-Effective Amendment No. 3 to this Registration Statement, filed
on February 26, 1999.
(p) Insider Trading Policy adopted pursuant to Rule 17j-1 is filed
herewith.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable.
ITEM 25. INDEMNIFICATION
3
<PAGE> 60
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to Directors, Officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than payment by the Registrant of expenses incurred or
paid by a Director, Officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
Director, Officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
VIA, the investment adviser for the Funds, is wholly owned by the ICMA
Retirement Corporation, which is itself a registered investment adviser. The
ICMA Retirement Corporation also provides plan administration services to public
sector Section 401 qualified retirement plans and public sector Section 457
deferred compensation plans. Girard Miller is President, Chief Executive Officer
and an ex-officio member of the Board of Directors of the ICMA Retirement
Corporation. Mr. Miller is president of the Fund's principal investment adviser,
VIA. Mr. Miller also serves as President of the ICMA Retirement Trust, a
principal shareholder in the Vantagepoint Funds. Mr. Miller serves as President,
Chief Executive Officer, and Supervisory Principal of ICMA-RC Services, LLC, a
wholly-owned broker-dealer subsidiary of the ICMA Retirement Corporation.
Robin L. Wiessman is a member of the Board of Directors of the ICMA Retirement
Corporation.
4
<PAGE> 61
ITEM 27. PRINCIPAL UNDERWRITER
ICMA-RC Services LLC ("RC Services") serves as distributor and principal
underwriter. RC Services does not serve as distributor to any other investment
company.
<TABLE>
<CAPTION>
Names and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Fund
- ---------------- ---------------- ---------
<S> <C> <C>
Girard Miller President President
Paul Breault Treasurer Treasurer
Paul Gallagher Secretary Secretary
</TABLE>
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
The books, accounts and other documentation required by Section 31(a) of the
Investment Company Act of 1940 and the Rules under that Section will be
maintained in the physical possession of Registrant, the Registrant's transfer
agent, VTA, which has a place of business at 777 North Capital Street, NE, Ste.
600, Washington, DC 20002, and the Registrant's custodian(s).
ITEM 29. MANAGEMENT SERVICES
Reference is made to the discussion in this Statement of Additional Information
regarding the ICMA Retirement Corporation, ICMA-RC Services, LLC, and
Vantagepoint Transfer Agents, LCC, under the heading "Investment Advisory and
Other Services."
ITEM 30. UNDERTAKINGS
None
5
<PAGE> 62
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this registration statement under Rule 485(b)
under the Securities Act and has duly caused this Post-Effective Amendment No. 4
to be signed on its behalf by the undersigned, thereunto duly authorized, in
Washington, the District of Columbia on the 28th day of April, 2000.
THE VANTAGEPOINT FUNDS
*
------------------------------------
Eddie Moore, Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been duly signed below by the following persons in the capacities
and on the date indicated.
<TABLE>
<CAPTION>
Signatures Title
---------- -----
<S> <C> <C>
* President April 28, 2000
- ------------------------------
Girard Miller
* Treasurer April 28, 2000
- ------------------------------
Paul Breault
* Trustee April 28, 2000
- ------------------------------
George Bissell
* Trustee April 28, 2000
- ------------------------------
Robert A. Bowman
* Trustee April 28, 2000
- ------------------------------
N. Anthony Calhoun
* Trustee April 28, 2000
- ------------------------------
Arthur Lynch
* Trustee April 28, 2000
- ------------------------------
Eddie Moore
</TABLE>
*By /s/ PAUL F. GALLAGHER
----------------------------
Paul F. Gallagher
Attorney-in-Fact
6
<PAGE> 63
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant, The Vantagepoint Funds certifies that it
meets all of the requirements for effectiveness of this registration statement
under Rule 485(b) under the Securities Act, and has duly caused this
Post-Effective Amendment No. 4 to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Little Rock, State of Arkansas on the
28th day of April, 2000.
MASTER INVESTMENT PORTFOLIO
BOND INDEX MASTER PORTFOLIO
EXTENDED INDEX MASTER PORTFOLIO
INTERNATIONAL INDEX MASTER PORTFOLIO
S&P 500 INDEX MASTER PORTFOLIO
U.S. EQUITY INDEX MASTER PORTFOLIO
By /s/ RICHARD H. BLANK, JR.
------------------------------
Richard H. Blank, Jr.
Secretary and Treasurer
(Principal Financial Officer)
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ RICHARD H. BLANK, JR.
- ----------------------------- Secretary and Treasurer April 28, 2000
Richard H. Blank, Jr. (Principal Financial Officer)
* Trustee April 28, 2000
- -----------------------------
Jack S. Euphrat*
* Chairman, President April 28, 2000
- ----------------------------- (Principal Executive Officer),
R. Greg Feltus* and Trustee
* Trustee April 28, 2000
- -----------------------------
W. Rodney Hughes*
* Trustee April 28, 2000
- -----------------------------
Lee Soong*
</TABLE>
* Richard H. Blank, Jr. signs this document pursuant to powers of attorney as
previously filed.
*By /s/ RICHARD H. BLANK, JR.
------------------------------------
Richard H. Blank, Jr.
Attorney-in-Fact
7
<PAGE> 64
EXHIBIT INDEX
(a) Agreement and Declaration of Trust of the Vantagepoint Funds (the
"Registrant" or the "Trust") incorporated herein by reference to
Exhibit (a) of Pre-Effective Amendment No. 1 to this Registration
Statement, filed on December 22, 1998.
(b) By-Laws of Registrant incorporated herein by reference to Exhibit
(b) of Pre-Effective Amendment No. 1 to this Registration Statement
filed, on December 22, 1998.
(c) Not applicable.
(d)(1) Master Investment Advisory Agreement between Registrant and
Vantagepoint Investment Advisors, LLC ("VIA") incorporated herein by
reference to Exhibit (d)(i) of Pre-Effective Amendment No. 3 to this
Registration Statement, filed on February 26, 1999.
(d)(2) Sub-Advisory Agreement by and between VIA and First Pacific
Advisors, Inc. re: the Aggressive Opportunities Fund is filed
herewith.
(d)(3) Sub-Advisory Agreement by and between VIA and Massachusetts
Financial Services re: the Aggressive Opportunities Fund is filed
herewith.
(d)(4) Sub-Advisory Agreement by and between VIA and TCW Fund Management
re: the Aggressive Opportunities Fund is filed herewith.
(d)(5) Sub-Advisory agreement by and between VIA and Capital Guardian Trust
Company re: the International Fund is filed herewith.
(d)(6) Sub-Advisory Agreement by and between VIA and Lazard Asset
Management re: the International Fund is filed herewith.
(d)(7) Sub-Advisory Agreement by and between VIA and Rowe Price-Fleming
International, Inc. re: the International Fund is filed herewith.
(d)(8) Sub-Advisory Agreement by and between VIA and Barclays Global Fund
Advisors re: the Growth Fund to be filed by amendment.
(d)(9) Sub-Advisory Agreement by and between VIA and Fidelity Management
Trust Company re: the Growth Fund is filed herewith.
(d)(10) Sub-Advisory Agreement by and between VIA and TCW Funds Management,
Inc. re: the Growth Fund is filed herewith.
(d)(11) Sub-Advisory Agreement by and between VIA and Tukman Capital
Management, Inc. re: the Growth Fund to be filed by amendment.
(d)(12) Sub-Advisory Agreement by and between VIA and Brown Capital
Management, Inc. re: the Growth Fund to be filed by amendment.
(d)(13) Sub-Advisory Agreement by and between VIA and William Blair &
Company LLC re: the Growth Fund is no longer applicable.
(d)(14) Sub-Advisory Agreement by and between VIA and Capital Guardian Trust
Company re: the Growth & Income Fund is filed herewith.
(d)(15) Sub-Advisory Agreement by and between VIA and Putnam Investment
Management, Inc. re: the Growth & Income Fund is filed herewith.
(d)(16) Sub-Advisory Agreement by and between VIA and Wellington Management
Company LLP re: the Growth & Income Fund is filed herewith.
(d)(17) Sub-Advisory Agreement by and between VIA and Barrow, Hanley,
Mewhinney L&Strauss, Inc. re: the Equity Income Fund is filed
herewith.
(d)(18) Sub-Advisory Agreement by and between VIA and T. Rowe Price
Associates re: the Equity Income Fund is filed herewith.
8
<PAGE> 65
(d)(19) Sub-Advisory Agreement by and between VIA and Wellington Management
Company, LLP re: the Equity Income Fund is filed herewith.
(d)(20) Sub-Advisory Agreement by and between VIA and AVATAR Investors
Associates Corp. re: the Asset Allocation Fund is filed herewith.
(d)(21) Sub-Advisory Agreement by and between VIA and Mellon Capital
Management re: the Asset Allocation Fund is filed herewith.
(d)(22) Sub-Advisory Agreement by and between VIA and Wilshire Asset
Management re: the Asset Allocation Fund is filed herewith.
(d)(23) Sub-Advisory Agreement by and between VIA and Payden & Rygel
Investment Counsel re: the Asset Allocation Fund is filed herewith.
(d)(24) Sub-Advisory Agreement by and between VIA and SEIX Invesstment
Advisor, Inc. re: the U.S. Treasury Securities Fund is filed
herewith.
(e) Distribution Agreement between the Registrant and ICMA RC Services
LLC incorporated herein by reference to Exhibit (e) of Pre-Effective
Amendment No. 3 to this Registration Statement, filed on February
26, 1999.
(f) Not applicable.
(g) Custody Agreement between Registrant and Investors Bank & Trust to
be filed.
(h) Transfer Agency Agreement is filed herewith.
(i) Legal Opinion of Morgan, Lewis & Bockius LLP is filed herewith.
(j)(1) Consent of Independent Public Accountant PriceWaterhouseCoopers, LLP
is filed herewith.
(j)(2) Consent of Independent Public Accountants to the Master Investment
Portfolios, KPMG LLP is filed herewith.
(k) Not applicable.
(l) Purchase Agreement incorporated herein by reference to Exhibit (l)
of Pre-Effective Amendment No. 3 to this Registration Statement
filed on February 26, 1999.
(n) Not applicable.
(o) Rule 18f-3 Plan is incorporated by reference to Exhibit (o) of
Pre-Effective Amendment No. 3 to this Registration Statement, filed
on February 26, 1999.
(p) Insider Trading Policy adopted pursuant to Rule 17j-1 is filed
herewith.
9
<PAGE> 1
Exhibit (d)(2)
INVESTMENT ADVISORY AGREEMENT
This Investment Advisory Agreement is made as of the
__________ day of _______________, 1999 by and between VANTAGEPOINT INVESTMENT
ADVISERS, LLC, a Delaware limited liability company (hereafter "Client"), and
FIRST PACIFIC ADVISORS CAPITAL at 11400 West Olympic Boulevard, Suite 1200, Los
Angeles, California 90064 (hereafter "Adviser") and is effective as of
March 1, 1999 (the "Effective Date").
WHEREAS, the Vantagepoint Funds (the "Funds") is a Delaware
Business Trust registered as an open-end management investment company under
the Investment Company Act of 1940;
WHEREAS, Client is party to an Investment Adviser Agreement
with the Funds for management of the investment operations of the Funds
including the establishment and operation of investment portfolios for the
Funds and the entering into of contracts with sub-advisers to assist in
managing the investment of the Funds property;
WHEREAS, Client and Adviser wish to enter into an agreement
pursuant to which Adviser will provide such assistance to Client.
AGREEMENTS:
In consideration of the performance by the Adviser as
Investment Adviser of certain assets held by the Funds, the Client has
authorized the Adviser to manage the securities and other assets as follows:
1. ACCOUNT
The account with respect to which the Adviser shall perform
its services shall consist of those assets of the Funds which the Client
determines to assign to an account with the Adviser, together with all income
earned by those assets and all realized and unrealized capital appreciation
related to those assets (hereafter "Account"). From time to time, the Client
may, upon notice to the Adviser, make additions to the Account and may, upon
notice to the Adviser, make withdrawals from the Account.
2. APPOINTMENT STATUS, POWERS OF ADVISER
(a) Purchase and Sale. Client hereby appoints Adviser to
manage the Account on the terms and conditions set forth in this Agreement.
Subject to the restrictions set forth in this Agreement, and acting always in
conformity with the Investment Policies provided in Paragraph 4, Adviser shall
supervise and direct investment of the Account. Client hereby grants the
Adviser complete, unlimited and unrestricted discretion and authority to select
portfolio securities with respect to the Account including the power to acquire
(by purchase, exchange, subscription or otherwise), to hold and dispose (by
sale, exchange or otherwise). The Adviser will consult with Client, upon the
request of the Client, concerning any transactions it makes with respect to the
investment of the Account.
(b) Limitation on Authority. Except as expressly authorized
herein or hereafter from time to time, Adviser shall for all purposes be deemed
an independent contractor and shall have no authority to act for or to
represent the Client or the Funds in any way or otherwise to be an agent of the
Client or the Funds.
(c) Voting. Unless otherwise instructed by Client, Adviser
shall have discretion to take any action or render any advice with respect to
the voting of shares or the execution of proxies solicited from time to time
by, or with respect to, the issuers of securities held in the Account. Adviser
will report annually to Client regarding such voting.
<PAGE> 2
(d) Key Personnel. Adviser agrees that the following key
personnel have primary responsibility with respect to the investment management
of the Account. If the(se) individual(s) is unable to devote sufficient time to
maintain primary responsibility of the Account, the Adviser must give Client
written advance notice, or prompt notice within three (3) business days, of the
name of the person designated by the Adviser to replace or supplement the
individual(s). In addition, the Adviser will give Client prompt written notice
of the replacement of any employee of the Adviser who has direct supervisory
responsibility for the key personnel or who has responsibility for setting
investment policy.
Key Personnel:
Robert Rodriguez
3. ACCEPTANCE OF APPOINTMENT
Adviser accepts the appointment as an investment adviser and
agrees to use its best efforts and professional judgment to make timely
investment transactions for the Client with respect to the investments of the
Account, and to provide the other services required of the Adviser under the
provisions of this Agreement.
4. INVESTMENT POLICIES
(a) Investment Objectives. The Adviser will adhere to the
investment objectives, guidelines, restrictions, and liquidity requirements of
the Funds as specified by the Client on SCHEDULE A hereto, and as restated or
modified from time to time by the Client in written notice to the Adviser.
(b) Funds' Agreement and Declaration of Trust. The Adviser
will adhere to all specific provisions established in the Funds' Agreement and
Declaration of Trust and Registration Statement as filed with the Securities
and Exchange Commission on Form N-1A ("Registration Statement), both of which
are hereby incorporated by reference and made a part of this Agreement. The
Client shall give written notice to the Adviser of any amendments to the
Agreement and Declaration of Trust or Registration Statement, which amendments,
upon their receipt by the Adviser, shall be binding on the Adviser.
(c) Investment Adviser Guidelines. The Adviser shall act in
accordance with the specific statement of Investment Adviser Guidelines,
SCHEDULE B, as restated or modified from time to time by the Client in written
notice to the Adviser. The Client retains the right, on written notice to the
Adviser, to modify any such objectives, guidelines, restrictions, and liquidity
requirements in any manner at any time.
(d) Conflict in Policies. If a conflict in policies or
guidelines referenced herein occurs, the Registration Statement shall govern
for purposes of this Agreement.
5. CUSTODY, DELIVERY, RECEIPT OF SECURITIES
(a) Custody Responsibilities. The Client shall designate one
or more custodians to hold the Account. The Custodian, as designated by the
Client will be responsible for the custody, receipt and delivery of securities
and other assets of the Funds (including the Account), and the Adviser shall
have no authority, responsibility or obligation with respect to the custody,
receipt or delivery of securities or other assets of the Funds (including the
Account). In the event that any cash or securities of the Funds are delivered
to the Adviser, it will promptly deliver the same over to the Custodian, in the
name of the Funds.
(b) Securities Transactions. All securities transactions for
the Account will be consummated by payment to or delivery by the Funds of cash
or securities due to or from the Account. The Adviser will notify the Custodian
of all orders to brokers for the Account by 9:00 am EST on the day following
the trade date and will affirm the trade within one (1) business day after the
trade date (T+1).
2
<PAGE> 3
(c) Tri-Party Agreement. The Adviser is authorized to enter
into Tri-Party Repurchase Agreements and sign the standard PSA tri-party
agreement (the "Tri-Party Agreement") on behalf of the Client and the
subcustodian thereunder is authorized to act as a subcustodian for the
Account's assets involved in any tri-party repurchase agreement pursuant to
such Tri-Party Agreement.
6. RECORD KEEPING AND REPORTING
(a) Records. Adviser will maintain proper and complete
records relating to the furnishing of services under this Agreement, including
records with respect to the acquisition, holding and disposition of securities
for Client. All records maintained pursuant to this Agreement shall be subject
to examination by Client and by persons authorized by it at all times upon
reasonable notice. Except as expressly authorized in this Agreement or as
required by applicable law, regulation or order of court or as directed by
other party in writing, Adviser and Client shall keep confidential the records
and other information obtained by reason of this Agreement (including, with
respect to Client, the investment information and transactions executed by
Adviser). Upon termination of this Agreement, Adviser shall promptly, upon
demand, return to Client all records Client reasonably believes are necessary
in order to discharge its responsibilities to the Funds. Adviser shall be
entitled to retain originals or copies of records pursuant to the requirements
of applicable laws or regulations.
(b) Quarterly Valuation Reports. Assuming appropriate
arrangements can be made with the Custodian, Adviser shall use best efforts to
provide to the Client within TEN (10) business days after the end of each
calendar quarter a statement of the fair market value of the Account as of the
close of such quarter together with an itemized list of the assets in the
Account.
(c) Valuation Methodology. For purposes of this Agreement,
fair market value shall mean, as of a particular date, the value of the Account
(determined in accordance with generally accepted accounting principles
consistently applied), plus income accrued thereon less the liabilities related
to the assets in the Account. Adviser shall reconcile security and cash
positions , and market values, and report discrepancies to the Client.
(d) Loss Reimbursement. Adviser shall reimburse the Account
for any loss caused by Adviser's actions that cause delay in the accurate daily
pricing of the Fund(s).
(e) Monthly Reports. Adviser shall provide the Client via
conference call a report as to the securities in the account, the fair market
value thereof and the accrued income thereon within FOUR (4) business days
after the end of each Calendar Month. Assuming appropriate arrangements can be
made with the Custodian, the Adviser shall also use best efforts to provide, in
writing, preliminary performance numbers and a brief explanation of these
results within FIVE (5) business days after the end of each Calendar Month. The
requested format will be as mutually agreed by Adviser and Client. For purposes
of this Agreement, fair market value shall mean, as of a particular date, the
value of the Account plus income accrued thereon less the liabilities related
to the assets in the Account.
(f) Reports on Request. Adviser shall provide to Client
promptly upon request any information available in the records maintained by
Adviser relating to the Account.
7. PURCHASE AND SALE OF SECURITIES
(a) Selection of Brokers. Except to the extent
otherwise instructed by Client, (it being understood that Client may, in its
absolute discretion, direct portfolio transactions for which Adviser is
responsible to any broker that Client may see fit), Adviser shall place all
orders for the purchase and sale of securities on behalf of the Client with
brokers or dealers selected by Adviser, but not with a person affiliated
3
<PAGE> 4
with Adviser, as the term "affiliated person" is defined in the Investment
Company Act of 1940 (hereafter an "Affiliate").
(b) Best Execution. In placing such orders, the Adviser will
give primary consideration to obtaining the most favorable price and efficient
execution. In evaluating the terms available for executing particular
transactions for Client and in selecting brokers and dealers to execute such
transactions, the Adviser may consider, in addition to commission cost and
execution capabilities, the financial stability and reputation of brokers and
dealers and the brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934, as amended) provided by
brokers and dealers. Adviser is authorized to pay a broker or dealer who
provides such brokerage and research services a commission for executing a
transaction which is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if Adviser determines
that such commission is reasonable in relation to the value of the brokerage
and research services provided by such broker or dealer in discharging
responsibilities with respect to the Account.
(c) Bunching Orders. Client agrees that Adviser may aggregate
sales and purchase orders of Account with similar orders being made
simultaneously for other accounts managed by Adviser. Adviser may allocate
trades as disclosed in Adviser's Form ADV.
8. INVESTMENT FEES
(a) Fee Schedule. The compensation of the Adviser for its
services under this Agreement shall be calculated and paid by the Client from
the assets of the Account in accordance with SCHEDULE C hereto. The Adviser
shall send a written invoice to the Client within 30 days of the quarter end
and shall be duly compensated from the assets of the Account.
(b) Fee Computation. The Adviser's fee shall be calculated
as provided in SCHEDULE C.
(c) Fee Amendment. Fee rates may be changed from time to time
by agreement between the Client and the Adviser; provided, however, that no
increase in such rates shall be made during the first calendar year of this
Agreement.
(d) Pro Rata Fee. If the Adviser should serve for less than
the whole of any calendar quarter, its compensation shall be determined as
provided above on the basis of the ending market value of the Account in the
month in which the termination occurs and shall be payable on a pro rata basis
for the period of the calendar quarter for which it has served as Adviser
hereunder.
9. BEST EFFORTS; NON-EXCLUSIVITY OF SERVICES
The Adviser shall devote its best efforts and such time as it
deems necessary to provide prompt and expert service to the Client. The
services of Adviser to be provided to Client hereunder are not to be deemed
exclusive and Adviser shall be free to provide similar services for its own
account and the accounts of other persons and to receive compensation for such
services. Client acknowledges that Adviser and its members, Affiliates and
employees, and Adviser's other clients may at any time, have, acquire,
increase, decrease, or dispose of positions in the same investments which are
at the same time being held, acquired for or disposed of under this Agreement
for the Client. Adviser shall have no obligation to acquire or dispose of a
position in any investment pursuant to this Agreement simply because Adviser,
its directors, members, Affiliates or employees invest in such a position for
its or their own accounts or for the account of another client.
4
<PAGE> 5
10. INSIDER TRADING POLICIES AND CODE OF ETHICS
Adviser hereby represents that it has adopted policies that
meet the requirements of Rule 17j-1 under the Investment Company Act of 1940.
Copies of such policies shall be delivered to the Client, and any violation of
such policies by personnel of the Adviser shall be reported to the Client.
11. INSURANCE
At all times during the term of this Agreement, Adviser shall
maintain, at its own cost and expense, professional liability insurance for
errors, omissions, and negligent acts, in an amount and with such terms as are
standard in the financial services industry for an investment adviser managing
the amount of aggregate assets managed by Adviser for Client and for the
Adviser's other clients.
12. LIABILITY
Adviser shall not be liable for any error of judgment or
mistake of law or for any loss arising out of any investment or for any act or
omission in the management of the account, except for willful misfeasance, bad
faith or negligence in the performance of its duties, or by reason of reckless
disregard of its obligations and duties hereunder. However, neither this
provision nor any other provision of this Agreement shall constitute a waiver
or limitation of any rights which Client may have under federal or state
securities laws.
13. TERM
This Agreement shall be in effect for an initial term of two
years beginning on the Effective Date. This Agreement may be renewed thereafter
for successive one-year periods if such renewal is approved annually by the
majority of those members of the Funds' Board of Directors who are not
"interested persons" as that term is defined in the Investment Company Act of
1940.
14. TERMINATION
This Agreement may be terminated by either party hereto,
without the payment of any penalty, immediately upon notice to the other in the
event of a breach of any provision thereof by the party so notified, or
otherwise by Adviser upon sixty (60) days' written notice to the Client or by
Client upon 30 days' written notice to Adviser, except that this Agreement
shall automatically terminate in the event of its assignment, as provided in
Paragraph 19, at the discretion of the Client in the event of Adviser's
ownership change as provided in Paragraph 19, or upon the termination of the
Funds. Any termination in accordance with the terms of this Agreement shall not
cause the payment of any penalty. Any such termination shall not affect the
status, obligations or liabilities of any party hereto to the other.
15. REPRESENTATIONS
(a) Adviser hereby confirms to Client that Adviser is
registered as an investment adviser under the Investment Advisers Act of 1940,
that it has full power and authority to enter into and perform fully the terms
of this Agreement and that the execution of this Agreement on behalf of Adviser
has been duly authorized and, upon execution and delivery, this Agreement will
be binding upon Adviser in accordance with its terms.
(b) Client hereby confirms to Adviser that it has full power
and authority to enter into this Agreement and that the execution of this
Agreement on behalf of Client has been fully authorized and, upon execution and
delivery, this Agreement will be binding upon Client in accordance with its
terms.
5
<PAGE> 6
16. NOTICES
Notices or other notifications given or sent under or
pursuant to this Agreement shall be in writing and be deemed to have been given
or sent if delivered to the party at its address listed below in person or by
telex or telecopy receipt of which is confirmed or by mail or by registered
mail, return receipt requested. The addresses of the parties are:
CLIENT:
Vantagepoint Investment Advisers, LLC
Attention: Legal Department
c/o ICMA Retirement Corporation
777 North Capitol Street, NE, Ste. 600
Washington, D.C. 20002-4240
ADVISER:
Andy Ward
First Pacific Advisors Capitol
11400 West Olympic Boulevard, Suite 1200
Los Angeles, California 90064
Each party may change its address by giving notice as herein
required.
17. SOLE INSTRUMENT
This instrument constitutes the sole and only agreement of
the parties to it relating to its object and correctly sets forth the rights,
duties, and obligations of each party to the other as of its date. Any prior
agreements, promises, negotiations or representations not expressly set forth
in this Agreement are of no force or effect.
18. WAIVER OR MODIFICATION
No waiver or modification of this Agreement shall be
effective unless reduced to a written document signed by the party to be
charged. No failure to exercise and no delay in exercising, on the part of any
party hereto, of any right, remedy, power or privilege hereunder, shall operate
as a waiver thereof. Only the Chief Executive Officer, has authority on behalf
of Client to modify or waive any of the provisions of the Agreement.
19. ASSIGNMENT AND OWNERSHIP CHANGE
This Agreement shall automatically terminate in the event of
its assignment. Adviser agrees to provide immediate written notice in the event
of an ownership change. Such an ownership change will entitle, but not require,
the Client to terminate the Agreement immediately or upon notice.
20. COUNTERPARTS
This Agreement may be executed in counterparts each of which
shall be deemed to be an original and all of which, taken together, shall be
deemed to constitute one and the same instrument.
6
<PAGE> 7
21. CHOICE OF LAW
This Agreement shall be governed by, and the rights of the
parties arising hereunder construed in accordance with, the laws of the State
of Delaware without reference to principles of conflict of laws.
22. YEAR 2000 TRANSITION
Adviser represents that the information systems used by it in
making investment decisions or otherwise fulfilling its obligations under this
Agreement will not be adversely affected by the Year 2000 transition.
IN WITNESS WHEREOF, THE PARTIES HERETO EXECUTE THIS AGREEMENT ON
, 199 and make it effective on the date set forth.
CLIENT ADVISER
Vantagepoint First Pacific Advisors Capital
Investment Advisers, LLC.
by: by:
- ------------------------ ------------------------
(signature) (signature)
- ------------------------ ------------------------
Girard Miller, President (name, title)
Date: Date:
7
<PAGE> 8
ADDENDUM DATED _______________ TO THE
INVESTMENT ADVISORY AGREEMENT DATED _____________
This addendum modifies and forms a part of the Investment Advisory Agreement
(the "Agreement") dated _______________ 1999, between Vantagepoint Investment
Advisers, LLC, a Delaware corporation ("Client"), and First Pacific Advisors
Capital ("Adviser"), relating to the Vantagepoint Funds ("VF").
All terms used in this Addendum have the same meaning given to them in the
Agreement unless specifically noted otherwise.
1. The assets of the Account to be managed by the Adviser under the Agreement
and this Addendum are assets of the Aggressive Opportunities Fund (the "Fund"),
a portfolio of VF. For purposes of Section 8 (Fees) and Schedule C, all payments
due to Adviser shall be solely made from the assets of the Fund.
2. All references in the Agreement and this Addendum to the Investment Policies
to be followed by Adviser in managing the assets of the Fund are hereby deemed
to include the Investment Policies set forth in the Agreement and any Schedules
to the Agreement, as well as the Fund's current prospectus and statement of
additional information as on file with the Securities and Exchange Commission.
3. The activities of the Client and the Adviser in managing the assets of the
Fund pursuant to the Agreement and this Addendum shall in all instances be
conducted subject to the supervision and direction of the Board of Directors of
VF.
4. For purposes of Sections 8 (Fees), 12 (Liability), 13 (Term), 14
(Termination), 15 (Representation), 16 (Notices), 18 (Waiver or Modification),
19 (Assignment and Ownership Change), and 22 (Year 2000 Transition) of the
Agreement, as well as for purposes of Schedule C of the Agreement, VF is hereby
made a party to the Agreement and shall be entitled to all notices, protections
and rights set forth in those Sections and in Schedule C to which Client is
entitled.
5. For purposes of the Agreement and this Addendum, Client and Adviser hereby
agree to maintain all books and records relating to VF that are required to be
maintained in accordance with good practice, applicable federal and state
securities laws, including the Investment Company Act of 1940 and or the
Investment Advisers Act of 1940, and such reasonable instructions as shall be
provided to Adviser by Client from time to time.
6. Adviser shall furnish Client and the Board of Directors of VF such periodic
and special reports and information as either of them may request, including
such information as shall be reasonably necessary to evaluate the terms of any
advisory agreement between Client and Adviser with respect to assets of VF.
7. For purposes of the Agreement and this Addendum, the value of the assets of
the Fund managed by Adviser shall be calculated in accordance with the
procedures for determining net asset value per share ("NAV") set forth in the
Fund's prospectus and statement of additional information.
8. Section 6 is hereby amended as follows:
a. 6(a) is amended beginning on line 8 and ending on line 9 by deleting
the parentheses and all language with in the parentheses;
b. 6(b) is deleted in its entirety;
c. 6(c) is redesignated 6(b) Reconciliations, the first sentence is
deleted;
8
<PAGE> 9
d. 6(d) is changed to 6(c); and
e. 6(e) is deleted and 6(f) is changed to 6(d).
9. Section 8, Investment Fees, is amended by deleting 8(b) and 8(c) in
their entirety and by redesignating 8(d) as 8(b).
10. Section 15, Representations, is amended by the insertion of 15(c)
below:
"(c) Adviser hereby acknowledges that VF is registered as an open end
investment company under the Investment Company Act of 1940 and is
subject to taxation as a regulated investment company under the
Internal Revenue Code; Adviser hereby represents that it is familiar
with the requirements of such laws and the rules and regulations
thereunder as they apply to VF and has systems and procedures in place
reasonably designed to permit Adviser, Client, and VF to comply with
such requirement."
IN WITNESS WHEREOF, THE PARTIES HERETO EXECUTE THIS ADDENDUM ON
February 25, 1999, and make it effective on the date set
forth.
VANTAGEPOINT INVESTMENT ADVISERS, LLC
By: Girard Miller
--------------------------------------
Title: President
--------------------------------------
FIRST PACIFIC ADVISORS CAPITAL
By: Julio J. de Puzo, Jr.
--------------------------------------
Title: Principal & CEO
--------------------------------------
VANTAGEPOINT FUNDS
(only with respect to Sections 8,
12, 13, 14, 15, 16, 18, 19, 22 and
Schedule C of the Agreement)
By: Girard Miller
-------------------------------------
Title: President
-------------------------------------
9
<PAGE> 10
SCHEDULE A
THE VANTAGEPOINT FUNDS
AGGRESSIVE OPPORTUNITIES FUND
STATEMENT OF INVESTMENT POLICIES
These Investment Policies and Guidelines have been adopted by the Vantagepoint
Funds (the "Funds") to govern the management and administration of the
Aggressive Opportunities Fund by Vantagepoint Investment Advisors, LLC ("VIA").
They may be reviewed and revised at the discretion of the Directors of the
Vantagepoint Funds (the "Directors"). VIA is responsible for the monitoring and
appointment of subadvisers to handle the day-to-day investment of assets
assigned to them.
I. GENERAL DESCRIPTION AND GOALS
The Aggressive Opportunities Fund seeks high, long-term capital
appreciation by investing in a variety of flexible investment
approaches and techniques. Investments may include U.S. and foreign
equity securities, options, financial derivatives, and short selling.
II. STRUCTURE
The assets of the Aggressive Opportunities Fund shall be managed by two
or more subadvisers. The subadvisers may be retained to manage separate
accounts under discretionary investment advisory contracts. Each
subadviser will be selected for its individual investment management
expertise and each will operate independently of the others. Each
subadviser must either be registered with the Securities and Exchange
Commission (SEC) under the Investment Advisers Act of 1940 or a Bank,
Insurance Company or Trust Company exempt as such from registration.
Each subadviser shall exercise complete management discretion over
assets of the Fund allocated to its account in a manner consistent with
these Investment Policies and Guidelines and with such further
investment limitations and conditions as may be recommended by VIA and
approved by the Directors. subadvisers will be obligated to manage Fund
assets as if they were subject to the fiduciary duty of care that
applies under the Employee Retirement Income Security Act of 1974
(ERISA) governing pension and profit sharing assets.
III. INVESTMENT STRATEGY
VIA shall select subadvisers that represent a variety of portfolio
management approaches and investment disciplines. These investment
approaches will be combined in a complementary manner to effectively
achieve the investment objective of the Fund. The Fund as a whole will
be more diversified than each individual subadviser's portfolio.
Investment strategies employed by the subadvisers included in the
Aggressive Opportunities Fund may include:
- equity securities of U.S. issuers including small and micro-
capitalization growth stocks,
- securities issued by companies that are "distressed" or
"out of favor",
- securities issued by foreign companies including companies
located in or doing business in emerging markets,
- commodities,
10
<PAGE> 11
- securities of companies that fluctuate with the value of
commodities such as precious metals,
- short selling,
- purchasing and writing options,
- futures contracts, and
- leverage.
Certain of the above strategies are not permitted or their use is
limited under the Investment Guidelines for the individual subadvisers.
IV. PERFORMANCE BENCHMARKS
Performance benchmarks will be established for the Fund. These
benchmarks will be recommended by VIA and adopted by the Directors and
will be reviewed and revised as appropriate from time to time. The
current performance benchmarks for the Fund are appended to this
document as Exhibit I.
V. DIRECTOR REVIEW
VIA will report periodically to the Directors on performance of the
Fund against benchmarks and on subadviser results and will evaluate for
the Directors the overall performance of the Fund relative to its
objectives. The Directors will consider such reports and other relevant
factors in appraising the investment objectives and performance of the
Fund.
INVESTMENT GUIDELINES
I. ELIGIBLE INVESTMENTS
A. EQUITY SECURITIES: U.S. and Non-U.S. common stock, preferred
stock, common stock equivalents (units of beneficial
interest), American Depository Receipts, convertible
preferred stocks, warrants, and other rights.
B. CASH/CASH EQUIVALENTS: Fixed income obligations with maturity
less than one year, or short-term accounts or securities
managed by a custodian institution.
C. FIXED INCOME: Fixed income and convertible fixed income
securities with maturities greater than one year.
D. FINANCIAL FUTURES: Equity index futures.
E ELIGIBLE PRACTICES: There are no restrictions on subadvisers
as to the following:
- Portfolio turnover.
- Realized gains and losses.
F. ELIGIBLE INVESTMENT LIMITS
<TABLE>
<CAPTION>
MINIMUM NORMAL RANGE MAXIMUM
------- ------------ -------
<S> <C> <C> <C>
U.S. equity securities 65% 80-100% 100%
Non-U.S. equity securities 0% 0-10% 20%
Cash and cash equivalents 0% 0-20% 35%
Fixed income securities 0% 0-5% 25%
</TABLE>
11
<PAGE> 12
<TABLE>
<S> <C> <C> <C>
except derivatives
Convertible securities 0% 5-15% 25%
</TABLE>
II. PROHIBITED PRACTICES AND SECURITIES
A. Securities for which there is no established trading market.
B. Securities issued by the subadvisers of the Fund or their
affiliates.
C. General partner interests.
D. Direct investments in oil, gas, or other mineral exploration or
development programs.
E. Direct investments in real estate or interests in real estate;
this does not preclude investment in purchases of securities
of real estate investment trusts and other companies holding
real estate or interests in real estate.
F. Commingled funds; this does not preclude investment in mutual funds
up to 10% of the Fund's market value at the time of purchase.
G. Acquisition of securities that would cause exposure to non-equity
holdings to exceed 35% of the Fund's market value at the time of
purchase.
H. Acquisition of securities that would cause exposure to a single
industry to exceed 25% of the Fund's market value at the time of
purchase.
I. In the absence of prior consent of VIA, acquisition of
securities of an issuer that would cause more than 5% of the Fund
to be invested in such securities.
J. In the absence of prior consent of VIA, acquisition of more than
5% of the outstanding shares of any class of equity securities.
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in Section I or Section II
of these Investment Guidelines may be acquired or employed, as the case
may be, but only if explicitly approved in advance by VIA.
IV. SECURITIES LENDING
Nothing herein shall prevent loans of securities in the Aggressive
Opportunities Fund pursuant to an established securities lending
program conducted by the Fund's custodian.
12
<PAGE> 13
EXHIBIT I
TO THE
STATEMENT OF INVESTMENT POLICIES AND GUIDELINES OF
THE AGGRESSIVE OPPORTUNITIES FUND
MARCH 1, 1999
The following standards will be used to measure the performance of the
Aggressive Opportunities Fund:
A. BENCHMARKS
1. The performance benchmark for the Fund is the RUSSELL 2000 INDEX.
This benchmark will be used to measure the Fund's performance net
of subadviser fees.
2. A peer group benchmark for the Fund will consist of mutual
funds with characteristics similar to the Fund. The peer group
will be used to measure the Fund's performance relative to
other funds with a similar investment approach. The peer group
benchmark will measure Fund performance net of all fees and
expenses except for the plan administration fee.
3. The Lipper Capital Appreciation Index, selected by Lipper
Analytical Services, will serve as the performance benchmark
for participant returns, net of all fees and expenses. In
assessing performance against this benchmark, it will be taken
into consideration that Lipper Analytical Services may change
the composition of the Index.
B. TIME HORIZON
The time horizon for performance measurement will be one, three, and
five years.
One Year:
Performance relative to any benchmark established for the Fund will
vary widely over one-year periods; such variance over short time
periods is expected and acceptable. However, if such variance is
determined to be caused by systemic issues, action may be appropriate.
Three and Five Years:
Performance of the Fund should track market and universe benchmarks
more closely as the evaluation period lengthens. The ideal performance
objective for the Aggressive Opportunities Fund is to exceed the
returns of all relevant benchmarks; however, shortfalls over various
time periods should be expected in some cases. Underperformance against
a single benchmark over an extended period may be acceptable,
particularly if other benchmarks have been exceeded.
C. INVESTMENT CHARACTERISTICS
The Fund may have investment characteristics which differ from the
general market, as measured by the Standard & Poor's 500 Index..
Because of the broad mandate given to the subadvisers in the Aggressive
Opportunities Fund, investment characteristics may be expected to vary
widely. For the total Fund, these would include, but are not limited
to:
13
<PAGE> 14
<TABLE>
<CAPTION>
CHARACTERISTIC RELATIVE TO S&P 500 INDEX
<S> <C>
Beta Higher
Capitalization Lower
Dividend Yield Lower
Hist. 5 year EPS Growth Higher
Price to Earnings Ratio Higher
Standard Deviation Higher
</TABLE>
14
<PAGE> 15
SCHEDULE B
VANTAGEPOINT INVESTMENT ADVISERS, LLC
AGGRESSIVE OPPORTUNITIES FUND
INVESTMENT GUIDELINES FOR
FIRST PACIFIC ADVISORS, INC.
MARCH 1, 1999
First Pacific Advisors, Inc. employs an absolute value approach to stock
selection primarily within the small to medium-sized company universe and in
industries out-of-favor in the current market. Investments tend to be
concentrated in a limited number of securities and are expected to be held for a
minimum of three to five years. Cash may accumulate in the portfolio if stock
prices become too high to meet the firm's value criteria.
I. ELIGIBLE INVESTMENTS
A. EQUITY SECURITIES: Common stock, preferred stock, common stock
equivalents (units of beneficial interest), American Depository
Receipts, convertible preferred stocks, warrants, and other
rights.
B. CASH/CASH EQUIVALENTS: Fixed income obligations with maturities
less than one year, or short term accounts or securities managed
by the custodian institution.
C. FIXED INCOME: Fixed income and convertible fixed income
securities with maturities greater than one year.
D. ELIGIBLE INVESTMENT LIMITS:
<TABLE>
<CAPTION>
MINIMUM NORMAL RANGE MAXIMUM
------- ------------ -------
<S> <C> <C> <C>
Equity securities 65% 85%-100% 100%
Fixed income, Cash
and cash equivalents 0% 0%-25% 35%
</TABLE>
II. PROHIBITED PRACTICES AND SECURITIES
A. Short sales unless against the box and not in excess of 25% of
total net assets.
B. Options unless the writing of covered calls.
C. Commodities (including financial futures).
D. Securities for which there is no established trading market.
E. Foreign securities in excess of 10% of total net assets unless
listed and traded in the U.S.
15
<PAGE> 16
F. Margin purchases and other forms of borrowing; granting of pledges
or other security interests in assets of the portfolio; use of
futures to obtain market leverage.
G. Securities offered by the Adviser or its affiliates.
H. General partner interests.
I. Direct investments in oil, gas, or other mineral exploration or
development programs.
J. Direct investments in real estate or interests in real estate;
this does not preclude investment in purchases of securities
of real estate investment trusts and other companies holding
real estate or interests in real estate.
K. In the absence of prior consent of VIA, acquisition of
securities of an issuer that would cause more than 5% of the
portfolio at the time of purchase to be invested in such
securities.
L. In the absence of prior consent of VIA, acquisition of more than
5% of the outstanding stock of an issuer.
M. In the absence of prior consent of VIA, acquisition of securities
that would cause exposure to a single industry to exceed 25% of
the portfolio at the time of purchase.
N. Commingled and registered mutual funds.
Exceptions to the above listed eligible investments and prohibited
securities or practices may be permitted with prior consent of VIA.
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in Section I or Section II
of these Investment Guidelines may be acquired or employed, as the case
may be, but only if explicitly approved in advance by VIA.
IV. PERFORMANCE BENCHMARK AND MONITORING CRITERIA
The standards outlined in this section are subject to review and
revision by VIA as and when appropriate.
A. PERFORMANCE BENCHMARKS
The market benchmark for measuring investment performance for
the Adviser is the RUSSELL 2000 INDEX. The Adviser is expected
to outperform the benchmark net of Adviser fees over rolling
three and five-year periods.
B. PEER GROUPS
VIA will develop an appropriate peer group against which to
compare investment performance. The peer group will consist of
other managers with a similar investment approach. The
managers within the peer group will be reviewed periodically
for consistency of style and may be changed as and when deemed
appropriate by VIA. Such changes will be communicated to the
Adviser.
16
<PAGE> 17
1. The peer group will consist primarily of mutual funds,
however separate account managers may be included.
2. VIA will track relative net-of-fee performance quarterly
and evaluate performance on a trailing one, three and
five-year basis.
3. VIA will compare the Adviser's net performance with the
one-year mean return of the peer group.
The current peer group consists of the following managers:
(under review)
17
<PAGE> 18
SCHEDULE C
VANTAGEPOINT INVESTMENT ADVISERS, LLC
FEE SCHEDULE
FOR
FIRST PACIFIC ADVISORS, INC.
The Adviser's quarterly fee shall be calculated based on the average daily
market value of the assets under management as provided by the Custodian, based
on the following annual rate:
$100 million 0.80 percent
Over $100 million 0.75 percent
EXAMPLE OF FEE CALCULATION (HYPOTHETICAL AMOUNTS)
<TABLE>
<S> <C> <C>
January 1, 1999 $190,000,000 End-of-Day Market Value
January 2, 1999 $190,678,462 End-of-Day Market Value
January 3, 1999 $190,796,123 End-of-Day Market Value
. . .
March 29, 1999 $194,512,214 End-of-Day Market Value
March 30, 1999 $194,720,978 End-of-Day Market Value
March 31, 1999 $194,901,556 End-of-Day Market Value
Quarterly Daily Average $192,601,555
$100 million 0.50 percent $500,000
Next $100 million 0.45 percent $416,707
Over $200 million 0.40 percent --------
Annual Fee $916,707
One-Fourth Annual Fee $229,177
</TABLE>
18
<PAGE> 1
(d)(3)
INVESTMENT ADVISORY AGREEMENT
This Investment Advisory Agreement is made as of the __________ day of
_______________, 1999, by and between VANTAGEPOINT INVESTMENT ADVISERS, LLC, a
Delaware limited liability company (hereafter "Client"), and MFS INSTITUTIONAL
ADVISORS, INC., at 500 Boylston Street, Boston, Massachusetts 02116 (hereafter
"Adviser") and is effective as of March 1, 1999 (the "Effective Date").
WHEREAS, the Vantagepoint Funds (the "Funds") is a Delaware Business Trust
registered as an open-end management investment company under the Investment
Company Act of 1940;
WHEREAS, Client is party to an Investment Adviser Agreement with the Funds for
management of the investment operations of the Funds including the establishment
and operation of investment portfolios for the Funds and the entering into of
contracts with sub-advisers to assist in managing the investment of the Funds
property;
WHEREAS, Client and Adviser wish to enter into an agreement pursuant to which
Adviser will provide such assistance to Client.
AGREEMENTS:
In consideration of the performance by the Adviser as Investment Adviser of
certain assets held by the Funds, the Client has authorized the Adviser to
manage the securities and other assets as follows:
1. ACCOUNT
The account with respect to which the Adviser shall perform its services shall
consist of those assets of the Funds which the Client determines to assign to
an account with the Adviser, together with all income earned by those assets
and all realized and unrealized capital appreciation related to those assets
(hereafter "Account"). From time to time, the Client may, upon notice to the
Adviser, make additions to the Account and may, upon notice to the Adviser,
make withdrawals from the Account.
2. APPOINTMENT STATUS, POWERS OF ADVISER
(a) Purchase and Sale. Client hereby appoints Adviser to manage the Account on
the terms and conditions set forth in this Agreement. Subject to the
restrictions set forth in this Agreement, and acting always in conformity with
the Investment Policies provided in Paragraph 4, Adviser shall supervise and
direct investment of the Account. Client hereby grants the Adviser complete,
unlimited and unrestricted discretion and authority to select portfolio
securities with respect to the Account including the power to acquire (by
<PAGE> 2
purchase, exchange, subscription or otherwise), to hold and dispose (by sale,
exchange or otherwise). The Adviser will consult with Client, upon the request
of the Client, concerning any transactions it makes with respect to the
investment of the Account.
(b) Limitation on Authority. Except as expressly authorized herein or hereafter
from time to time, Adviser shall for all purposes be deemed an independent
contractor and shall have no authority to act for or to represent the Client or
the Funds in any way or otherwise to be an agent of the Client or the Funds.
(c) Voting. Unless otherwise instructed by Client, Adviser
shall have discretion to take any action or render any advice with respect to
the voting of shares or the execution of proxies solicited from time to time by,
or with respect to, the issuers of securities held in the Account. Adviser will
report annually to Client regarding such voting.
(d) Key Personnel. Adviser agrees that the following key
personnel have primary responsibility with respect to the investment management
of the Account. If the(se) individual(s) is unable to devote sufficient time to
maintain primary responsibility of the Account, the Adviser must give Client
written advance notice, or prompt notice within three (3) business days, of the
name of the person designated by the Adviser to replace or supplement the
individual(s). In addition, the Adviser will give Client prompt written notice
of the replacement of any employee of the Adviser who has direct supervisory
responsibility for the key personnel or who has responsibility for setting
investment policy.
Key Personnel:
Joseph J. Trainor, President
Brian E. Stack, Portfolio Manager
3. ACCEPTANCE OF APPOINTMENT
Adviser accepts the appointment as an investment adviser and agrees to use its
best efforts and professional judgment to make timely investment transactions
for the Client with respect to the investments of the Account, and to provide
the other services required of the Adviser under the provisions of this
Agreement.
4. INVESTMENT POLICIES
(a) Investment Objectives. The Adviser will adhere to the
investment objectives, guidelines, restrictions, and liquidity requirements of
the Funds as specified by the Client on SCHEDULE A hereto, and as restated or
modified from time to time by the Client in written notice to the Adviser.
(b) Funds' Agreement and Declaration of Trust. The Adviser
will adhere to all specific provisions established in the Funds' Agreement and
Declaration of Trust and
2
<PAGE> 3
Registration Statement as filed with the Securities and Exchange Commission on
Form N-1A ("Registration Statement) which relate to the activities of the
Adviser as set forth in this Agreement. The Client shall give written notice to
the Adviser of any amendments to the Agreement and Declaration of Trust or
Registration Statement, which amendments, upon their receipt by the Adviser,
shall be binding on the Adviser.
(c) Investment Adviser Guidelines. The Adviser shall use act in accordance with
the specific statement of Investment Adviser Guidelines, SCHEDULE B, as
restated or modified from time to time by the Client in written notice to the
Adviser. The Client retains the right, on written notice to the Adviser, to
modify any such objectives, guidelines, restrictions, and liquidity
requirements in any manner at any time.
(d) Conflict in Policies. If a conflict in policies or guidelines referenced
herein occurs, the Registration Statement shall govern for purposes of this
Agreement.
5. CUSTODY, DELIVERY, RECEIPT OF SECURITIES
(a) Custody Responsibilities. The Client shall designate one or more custodians
to hold the Account. The Custodian, as designated by the Client will be
responsible for the custody, receipt and delivery of securities and other
assets of the Funds (including the Account), and the Adviser shall have no
authority, responsibility or obligation with respect to the custody, receipt or
delivery of securities or other assets of the Funds (including the Account). No
cash or securities of the Funds shall be accepted by the Adviser.
(b) Securities Transactions. All securities transactions for the Account will
be consummated by payment to or delivery by the Funds of cash or securities due
to or from the Account. The Adviser will use best efforts to notify the
Custodian of all orders to brokers for the Account by 9:00 am EST on the day
following the trade date and will make a best effort to affirm the trade within
one (1) business day after the trade date (T+1).
(c) Tri-Party Agreement. The Adviser is authorized to enter into Tri-Party
Repurchase Agreements and sign the standard PSA tri-party agreement (the
"Tri-Party Agreement") on behalf of the Client and the subcustodian thereunder
is authorized to act as a subcustodian for the Account's assets involved in any
tri-party repurchase agreement pursuant to such Tri-Party Agreement.
6. RECORD KEEPING AND REPORTING
(a) Records. Adviser will maintain proper and complete records relating to the
furnishing of services under this Agreement, including records with respect to
the acquisition, holding and disposition of securities for Client. All records
maintained
3
<PAGE> 4
pursuant to this Agreement shall be subject to examination by Client and by
persons authorized by it at all times upon reasonable notice. Except as
expressly authorized in this Agreement or as required by applicable law,
regulation or order of court or as directed by other party in writing, Adviser
and Client shall keep confidential the records and other information obtained
by reason of this Agreement (including, with respect to Client, the investment
information and transactions executed by Adviser). Upon termination of this
Agreement, Adviser shall promptly, upon demand, return to Client all records
pertaining to the Fund Client reasonably believes are necessary in order to
discharge its responsibilities to the Funds. Adviser shall be entitled to
retain originals or copies of records pursuant to the requirements of
applicable laws or regulations.
(b) Quarterly Valuation Reports. Adviser shall use best efforts to provide to
the Client within TEN (10) business days after the end of each calendar quarter
a statement of the fair market value of the Account as of the close of such
quarter together with an itemized list of the assets in the Account.
(c) Valuation Methodology. For purposes of this Agreement, fair market value
shall mean, as of a particular date, the value of the Account (determined in
accordance with generally accepted accounting principles consistently applied),
plus income accrued thereon less the liabilities related to the assets in the
Account. Adviser shall reconcile security and cash positions, and market
values, and report discrepancies to the Client.
(d) Loss Reimbursement. Adviser shall reimburse the Account for any loss
directly caused by Adviser's negligent actions that cause delay in the accurate
daily pricing of the Fund(s), with the understanding that Adviser will not be
responsible for the negligent actions of other service providers on the
Account, including broker-dealers, nor is Adviser responsible for the daily
pricing of the Fund(s).
(e) Monthly Reports. Adviser shall provide the Client an itemized report as to
the securities in the account, the fair market value thereof and the accrued
income thereon within FOUR (4) business days after the end of each Calendar
Month. The Adviser shall also use best efforts to provide, in writing,
preliminary performance numbers and a brief explanation of these results within
FIVE (5) business days after the end of each Calendar Month. The requested
format will be as mutually agreed by Adviser and Client. For purposes of this
Agreement, fair market value shall mean, as of a particular date, the value of
the Account plus income accrued thereon less the liabilities related to the
assets in the Account.
(f) Reports on Request. Adviser shall provide to Client promptly upon request
any information available in the records maintained by Adviser relating to the
Account.
7. PURCHASE AND SALE OF SECURITIES
4
<PAGE> 5
(a) Selection of Brokers. Except to the extent otherwise instructed by Client,
(it being understood that Client may, in its absolute discretion, direct
portfolio transactions for which Adviser is responsible to any broker that
Client may see fit), Adviser shall place all orders for the purchase and sale
of securities on behalf of the Client with brokers or dealers selected by
Adviser, but not with a person affiliated with Adviser, as the term "affiliated
person" is defined in the Investment Company Act of 1940 (hereafter an
"Affiliate"). Client agrees that if it instructs or directs the Adviser with
respect to the selection of brokers that the Adviser will not be responsible
for obtaining best execution as set forth in Section 7(b) of this Agreement.
(b) Best Execution. In placing such orders, the Adviser will give primary
consideration to obtaining the most favorable price and efficient execution. In
evaluating the terms available for executing particular transactions for Client
and in selecting brokers and dealers to execute such transactions, the Adviser
may consider, in addition to commission cost and execution capabilities, the
financial stability and reputation of brokers and dealers and the brokerage and
research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934, as amended) provided by brokers and dealers.
Adviser is authorized to pay a broker or dealer who provides such brokerage and
research services a commission for executing a transaction which is in excess
of the amount of commission another broker or dealer would have charged for
effecting that transaction if Adviser determines that such commission is
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer in discharging responsibilities with respect
to the Account and to Adviser's other clients.
(c) Bunching Orders. Client agrees that Adviser may aggregate sales and
purchase orders of Account with similar orders being made simultaneously for
other accounts managed by Adviser, if in Adviser's reasonable judgment such
aggregation shall result in an overall economic benefit to the Account taking
into consideration the advantageous selling or purchase price, brokerage
commission and other expenses. Client acknowledges that the determination of
such economic benefit to Client by Adviser represents Adviser's evaluation that
client is benefited by relatively better purchase or sales prices, lower
commission expenses and beneficial timing of transactions or a combination of
these and other factors.
8. INVESTMENT FEES
(a) Fee Schedule. The compensation of the Adviser for its services under this
Agreement shall be calculated and paid by the Client from the assets of the
Account in accordance with SCHEDULE C hereto. The Adviser shall send a written
invoice to the Client within 30 days of the quarter end and shall be duly
compensated from the assets of the Account.
5
<PAGE> 6
(b) Fee Computation. The Adviser's fee for each calendar quarter shall be
calculated as set forth in Schedule C.
(c) Fee Amendment. Fee rates may be changed from time to time by agreement
between the Client and the Adviser; provided, however, that no increase in such
rates shall be made during the first calendar year of this Agreement.
(d) Pro Rata Fee. If the Adviser should serve for less than the whole of any
calendar quarter, its compensation shall be determined as provided above on the
basis of the ending market value of the Account in the month in which the
termination occurs and shall be payable on a pro rata basis for the period of
the calendar quarter for which it has served as Adviser hereunder.
9. BEST EFFORTS; NON-EXCLUSIVITY OF SERVICES
The Adviser shall devote its best efforts and such time as it deems necessary
to provide prompt and expert service to the Client. The services of Adviser to
be provided to Client hereunder are not to be deemed exclusive and Adviser
shall be free to provide similar services for its own account and the accounts
of other persons and to receive compensation for such services. Client
acknowledges that Adviser and its members, Affiliates and employees, and
Adviser's other clients may at any time, have, acquire, increase, decrease, or
dispose of positions in the same investments which are at the same time being
held, acquired for or disposed of under this Agreement for the Client. Adviser
shall have no obligation to acquire or dispose of a position in any investment
pursuant to this Agreement simply because Adviser, its directors, members,
Affiliates or employees invest in such a position for its or their own accounts
or for the account of another client.
6
<PAGE> 7
10. INSIDER TRADING POLICIES AND CODE OF ETHICS
Adviser hereby represents that it has adopted policies that meet the
requirements of Rule 17j-1 under the Investment Company Act of 1940. Copies of
the Adviser's Code of Ethics shall be delivered to the Client, and any material
violation of such policies by personnel of the Adviser with respect to the Fund
shall be reported to the Client.
11. INSURANCE
At all times during the term of this Agreement, Adviser shall maintain, at its
own cost and expense, professional liability insurance for errors, omissions,
and negligent acts, in an amount and with such terms as are standard in the
financial services industry for an investment adviser managing the amount of
aggregate assets managed by Adviser for Client and for the Adviser's other
clients.
12. LIABILITY
Adviser shall not be liable to Client for honest mistakes of judgment or for
action or inaction taken in good faith for a purpose that the Adviser
reasonably believes to be in the best interests of the Client. Adviser shall be
liable to Client for any liability, damages or expenses of Client arising out
of the gross negligence, malfeasance or violation of applicable law by Adviser
or any of its officers, employees or Affiliates in providing management under
this Agreement. However, neither this provision nor any other provision of this
Agreement shall constitute a waiver or limitation of any rights which Client
may have under federal or state securities laws.
13. TERM
This Agreement shall be in effect for an initial term of two years beginning on
the Effective Date. This Agreement may be renewed thereafter for successive
one-year periods if such renewal is approved annually by the majority of those
members of the Funds' Board of Directors who are not "interested persons" as
that term is defined in the Investment Company Act of 1940.
14. TERMINATION
This Agreement may be terminated by either party hereto, without the payment of
any penalty, immediately upon notice to the other in the event of a breach of
any provision thereof by the party so notified, or otherwise by Adviser upon
sixty (60) days' written notice to the Client or by Client upon 30 days'
written notice to Adviser, except that this
7
<PAGE> 8
Agreement shall automatically terminate in the event of its assignment, as
provided in Paragraph 19, at the discretion of the Client in the event of
Adviser's ownership change as provided in Paragraph 19, or upon the termination
of the Funds. Any termination in accordance with the terms of this Agreement
shall not cause the payment of any penalty. Any such termination shall not
affect the status, obligations or liabilities of any party hereto to the other.
15. REPRESENTATIONS
(a) Adviser hereby confirms to Client that Adviser is registered as an
investment adviser under the Investment Advisers Act of 1940, that it has full
power and authority to enter into and perform fully the terms of this Agreement
and that the execution of this Agreement on behalf of Adviser has been duly
authorized and, upon execution and delivery, this Agreement will be binding
upon Adviser in accordance with its terms.
(b) Client hereby confirms to Adviser that it has full power and authority to
enter into this Agreement and that the execution of this Agreement on behalf of
Client has been fully authorized and, upon execution and delivery, this
Agreement will be binding upon Client in accordance with its terms.
16. NOTICES
Notices or other notifications given or sent under or pursuant to this
Agreement shall be in writing and be deemed to have been given or sent if
delivered to the party at its address listed below in person or by telex or
telecopy receipt of which is confirmed or by mail or by registered mail, return
receipt requested. The addresses of the parties are:
CLIENT:
Vantagepoint Investment Advisers, LLC
Attention: Legal Department
c/o ICMA Retirement Corporation
777 North Capitol Street, NE, Ste. 600
Washington, D.C. 20002-4240
ADVISER:
MFS Institutional Advisers, Inc.
500 Boylston Street
Boston, MA 02116
Attn: Paul G. Garbe
Each party may change its address by giving notice as herein required.
17. SOLE INSTRUMENT
8
<PAGE> 9
This instrument constitutes the sole and only agreement of the parties to it
relating to its object and correctly sets forth the rights, duties, and
obligations of each party to the other as of its date. Any prior agreements,
promises, negotiations or representations not expressly set forth in this
Agreement are of no force or effect.
18. WAIVER OR MODIFICATION
No waiver or modification of this Agreement shall be effective unless reduced
to a written document signed by the party to be charged. No failure to exercise
and no delay in exercising, on the part of any party hereto, of any right,
remedy, power or privilege hereunder, shall operate as a waiver thereof. Only
the Chief Executive Officer, has authority on behalf of Client to modify or
waive any of the provisions of the Agreement.
19. ASSIGNMENT AND OWNERSHIP CHANGE
This Agreement shall automatically terminate in the event of its assignment.
Adviser agrees to provide immediate written notice in the event of an ownership
change. Such an ownership change will entitle, but not require, the Client to
terminate the Agreement immediately or upon notice.
20. COUNTERPARTS
This Agreement may be executed in counterparts each of which shall be deemed to
be an original and all of which, taken together, shall be deemed to constitute
one and the same instrument.
21. CHOICE OF LAW
This Agreement shall be governed by, and the rights of the parties arising
hereunder construed in accordance with, the laws of the State of Delaware
without reference to principles of conflict of laws.
9
<PAGE> 10
22. YEAR 2000 WARRANTY
Adviser warrants that it has taken steps that it believes are reasonably
designed to address the problems related to the process and calculation of
date-related information and data from and after January 1, 2000 (commonly
known as the "Year 2000 Problem"). While the Adviser does not anticipate any
material disruption with respect to its information systems or those of its
vendors, there can be no assurance that these steps will be sufficient to avoid
any adverse impact.
IN WITNESSWHEREOF, THE PARTIES HERETO EXECUTE THIS AGREEMENT ON , 1999 and make
it effective on the date set forth.
CLIENT ADVISER
Vantagepoint MFS Institutional Advisors, Inc.
Investment Advisers, LLC
by: by:
(signature) (signature)
Girard Miller, President (name, title)
Date: Date:
10
<PAGE> 11
SCHEDULE A
THE VANTAGEPOINT FUNDS
AGGRESSIVE OPPORTUNITIES FUND
STATEMENT OF INVESTMENT POLICIES
These Investment Policies and Guidelines have been adopted by the Vantagepoint
Funds (the "Funds") to govern the management and administration of the
Aggressive Opportunities Fund by Vantagepoint Investment Advisors, LLC ("VIA").
They may be reviewed and revised at the discretion of the Directors of the
Vantagepoint Funds (the "Directors"). VIA is responsible for the monitoring and
appointment of subadvisers to handle the day-to-day investment of assets
assigned to them.
I. GENERAL DESCRIPTION AND GOALS
The Aggressive Opportunities Fund seeks high, long-term capital
appreciation by investing in a variety of flexible investment
approaches and techniques. Investments may include U.S. and foreign
equity securities, options, financial derivatives, and short selling.
II. STRUCTURE
The assets of the Aggressive Opportunities Fund shall be managed by two
or more subadvisers. The subadvisers may be retained to manage separate
accounts under discretionary investment advisory contracts. Each
subadviser will be selected for its individual investment management
expertise and each will operate independently of the others. Each
subadviser must either be registered with the Securities and Exchange
Commission (SEC) under the Investment Advisers Act of 1940 or a Bank,
Insurance Company or Trust Company exempt as such from registration.
Each subadviser shall exercise complete management discretion over
assets of the Fund allocated to its account in a manner consistent with
these Investment Policies and Guidelines and with such further
investment limitations and conditions as may be recommended by VIA and
approved by the Directors. subadvisers will be obligated to manage Fund
assets as if they were subject to the fiduciary duty of care that
applies under the Employee Retirement Income Security Act of 1974
(ERISA) governing pension and profit sharing assets.
11
<PAGE> 12
III. INVESTMENT STRATEGY
VIA shall select subadvisers that represent a variety of portfolio
management approaches and investment disciplines. These investment
approaches will be combined in a complementary manner to effectively
achieve the investment objective of the Fund. The Fund as a whole will
be more diversified than each individual subadviser's portfolio.
Investment strategies employed by the subadvisers included in the
Aggressive Opportunities Fund may include:
- equity securities of U.S. issuers including small and micro-
capitalization growth stocks,
- securities issued by companies that are "distressed" or "out of
favor",
- securities issued by foreign companies including companies
located in or doing business in emerging markets,
- commodities,
- securities of companies that fluctuate with the value of
commodities such as precious metals,
- short selling,
- purchasing and writing options,
- futures contracts, and
- leverage.
Certain of the above strategies are not permitted or their use is
limited under the Investment Guidelines for the individual subadvisers.
IV. PERFORMANCE BENCHMARKS
Performance benchmarks will be established for the Fund. These
benchmarks will be recommended by VIA and adopted by the Directors and
will be reviewed and revised as appropriate from time to time. The
current performance benchmarks for the Fund are appended to this
document as Exhibit I.
V. DIRECTOR REVIEW
VIA will report periodically to the Directors on performance of the
Fund against benchmarks and on subadviser results and will evaluate for
the Directors the overall performance of the Fund relative to its
objectives. The Directors will consider such reports and other relevant
factors in appraising the investment objectives and performance of the
Fund.
12
<PAGE> 13
INVESTMENT GUIDELINES
I. ELIGIBLE INVESTMENTS
A. EQUITY SECURITIES: U.S. and Non-U.S. common stock, preferred
stock, common stock equivalents (units of beneficial
interest), American Depository Receipts, convertible preferred
stocks, warrants, and other rights.
B. CASH/CASH EQUIVALENTS: Fixed income obligations with maturity
less than one year, or short-term accounts or securities
managed by a custodian institution.
C. FIXED INCOME: Fixed income and convertible fixed income
securities with maturities greater than one year.
D. FINANCIAL FUTURES: Equity index futures.
E ELIGIBLE PRACTICES: There are no restrictions on subadvisers
as to the following:
- Portfolio turnover.
- Realized gains and losses.
F. ELIGIBLE INVESTMENT LIMITS
<TABLE>
<CAPTION>
MINIMUM NORMAL MAXIMUM
------- RANGE -------
-----
<S> <C> <C> <C>
U.S. equity securities 65% 80-100% 100%
Non-U.S. equity securities 0% 0-10% 20%
Cash and cash equivalents 0% 0-20% 35%
Fixed income securities
except derivatives 0% 0-5% 25%
Convertible securities 0% 5-15% 25%
</TABLE>
13
<PAGE> 14
II. PROHIBITED PRACTICES AND SECURITIES
A. Securities for which there is no established trading market.
B. Securities issued by the subadvisers of the Fund or their affiliates.
C. General partner interests.
D. Direct investments in oil, gas, or other mineral exploration or
development programs.
E. Direct investments in real estate or interests in real estate; this does
not preclude investment in purchases of securities of real estate
investment trusts and other companies holding real estate or interests in
real estate.
F. Commingled funds; this does not preclude investment in mutual funds up to
10% of the Fund's market value at the time of purchase.
G. Acquisition of securities that would cause exposure to non-equity holdings
to exceed 35% of the Fund's market value at the time of purchase.
H. Acquisition of securities that would cause exposure to a single industry to
exceed 25% of the Fund's market value at the time of purchase.
I. In the absence of prior consent of VIA, acquisition of securities of an
issuer that would cause more than 5% of the Fund to be invested in such
securities.
J. In the absence of prior consent of VIA, acquisition of more than 5% of the
outstanding shares of any class of equity securities.
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in Section I or Section II
of these Investment Guidelines may be acquired or employed, as the case
may be, but only if explicitly approved in advance by VIA.
14
<PAGE> 15
IV. SECURITIES LENDING
Nothing herein shall prevent loans of securities in the Aggressive
Opportunities Fund pursuant to an established securities lending
program conducted by the Fund's custodian.
15
<PAGE> 16
EXHIBIT I
TO THE
STATEMENT OF INVESTMENT POLICIES AND GUIDELINES OF
THE AGGRESSIVE OPPORTUNITIES FUND
MARCH 1, 1999
The following standards will be used to measure the performance of the
Aggressive Opportunities Fund:
A. BENCHMARKS
1. The performance benchmark for the Fund is the RUSSELL 2000
INDEX. This benchmark will be used to measure the Fund's
performance net of subadviser fees.
2. A peer group benchmark for the Fund will consist of mutual
funds with characteristics similar to the Fund. The peer group
will be used to measure the Fund's performance relative to
other funds with a similar investment approach. The peer group
benchmark will measure Fund performance net of all fees and
expenses except for the plan administration fee.
3. The Lipper Capital Appreciation Index, selected by Lipper
Analytical Services, will serve as the performance benchmark
for participant returns, net of all fees and expenses. In
assessing performance against this benchmark, it will be taken
into consideration that Lipper Analytical Services may change
the composition of the Index.
B. TIME HORIZON
The time horizon for performance measurement will be one, three, and
five years.
One Year:
Performance relative to any benchmark established for the Fund will
vary widely over one-year periods; such variance over short time
periods is expected and acceptable. However, if such variance is
determined to be caused by systemic issues, action may be appropriate.
16
<PAGE> 17
Three and Five Years:
Performance of the Fund should track market and universe benchmarks
more closely as the evaluation period lengthens. The ideal performance
objective for the Aggressive Opportunities Fund is to exceed the
returns of all relevant benchmarks; however, shortfalls over various
time periods should be expected in some cases. Underperformance against
a single benchmark over an extended period may be acceptable,
particularly if other benchmarks have been exceeded.
C. INVESTMENT CHARACTERISTICS
The Fund may have investment characteristics which differ from the
general market, as measured by the Standard & Poor's 500 Index..
Because of the broad mandate given to the subadvisers in the Aggressive
Opportunities Fund, investment characteristics may be expected to vary
widely. For the total Fund, these would include, but are not limited
to:
<TABLE>
<CAPTION>
<S> <C>
CHARACTERISTIC RELATIVE TO S&P 500 INDEX
Beta Higher
Capitalization Lower
Dividend Yield Lower
Hist. 5 year EPS Growth Higher
Price to Earnings Ratio Higher
Standard Deviation Higher
</TABLE>
17
<PAGE> 18
SCHEDULE B
VANTAGEPOINT INVESTMENT ADVISERS, LLC
AGGRESSIVE OPPORTUNITIES FUND
INVESTMENT GUIDELINES
FOR
MFS INSTITUTIONAL ADVISORS, INC.
MARCH 1, 1999
MFS Institutional Advisors, Inc. invests primarily in securities of rapidly
growing companies that have the potential to become leaders in emerging
industries. Selected companies are expected to experience earnings growth over
time well in excess of the growth rate of the overall economy and the rate of
inflation. The portfolio tends to remain fully invested at all times.
I. ELIGIBLE INVESTMENTS
A. EQUITY SECURITIES: Common stock, preferred stock, common
stock equivalents (units of beneficial interest), American
Depository Receipts, convertible preferred stocks, warrants,
and other rights.
B. CASH/CASH EQUIVALENTS: Fixed income obligations with
maturities less than one year, or short term accounts or
securities managed by the custodian institution.
C. FIXED INCOME: Fixed income and convertible fixed income
securities with maturities greater than one year.
D. ELIGIBLE INVESTMENT LIMITS:
<TABLE>
<CAPTION>
MINIMUM NORMAL RANGE MAXIMUM
- ------- ------------- -------
<S> <C> <C> <C>
Equity securities 80% 90%-100% 100%
Cash and cash equivalents 0% 0%-10% 15%
Fixed income securities 0% 0%-5% 10%
</TABLE>
18
<PAGE> 19
II. PROHIBITED PRACTICES AND SECURITIES
A. Short sales.
B. Options.
C. Commodities (including financial futures).
D. Securities for which there is no established trading market.
E. Foreign securities unless listed and traded in the U.S.
F. Margin purchases and other forms of borrowing; granting of pledges
or other security interests in assets of the portfolio; use of
futures to obtain market leverage.
G. Securities offered by the Adviser or its affiliates.
H. General partner interests.
I. Direct investments in oil, gas, or other mineral exploration or
development programs.
J. Direct investments in real estate or interests in real estate;
this does not preclude investment in purchases of securities
of real estate investment trusts and other companies holding
real estate or interests in real estate.
K. In the absence of prior consent of VIA, acquisition of
securities of an issuer that would cause more than 5% of the
portfolio at the time of purchase to be invested in such
securities.
L. In the absence of prior consent of VIA, acquisition of more than
5% of the outstanding stock of an issuer.
M. In the absence of prior consent of VIA, acquisition of securities
that would cause exposure to a single industry to exceed 25% of
the portfolio at the time of purchase.
N. Commingled and registered mutual funds.
Exceptions to the above listed eligible investments and prohibited
securities or practices may be permitted with prior consent from VIA.
19
<PAGE> 20
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in Section I or Section II
of these Investment Guidelines may be acquired or employed, as the case
may be, but only if explicitly approved in advance by VIA.
IV. PERFORMANCE BENCHMARK AND MONITORING CRITERIA
The standards outlined in this section are subject to review and
revision by VIA as and when appropriate.
A. PERFORMANCE BENCHMARKS
The market benchmark for measuring investment performance for
the Adviser is the RUSSELL 2000 INDEX. The Adviser is expected
to outperform the benchmark net of Adviser fees over rolling
three and five-year periods.
B. PEER GROUPS
VIA will develop an appropriate peer group against which to
compare investment performance. The peer group will consist of
other managers with a similar investment approach. The
managers within the peer group will be reviewed periodically
for consistency of style and may be changed as and when deemed
appropriate by VIA. Such changes will be communicated to the
Adviser.
1. The peer group will consist primarily of mutual funds, however
separate account managers may be included.
2. VIA will track relative net-of-fee performance quarterly and
evaluate performance on a trailing one, three and five-year
basis.
3. VIA will compare the Adviser's net performance with the
one-year mean return of the peer group.
The current peer group consists of the following managers:
(under review)
20
<PAGE> 21
SCHEDULE C
VANTAGEPOINT INVESTMENT ADVISERS, LLC
FEE SCHEDULE
FOR
MFS INSTITUTIONAL ADVISORS, INC.
The Advisor's quarterly fee shall be calculated based on the average daily
market value of the assets under management as provided by the Custodian, based
on the following annual rate.
0.75 percent flat fee
EXAMPLE OF FEE CALCULATION (HYPOTHETICAL AMOUNTS)
<TABLE>
<S> <C> <C>
January 1, 1999 $190,000,000 End-of-Day Market Value
January 2, 1999 $190,678,462 End-of-Day Market Value
January 3, 1999 $190,796,123 End-of-Day Market Value
. . .
March 29, 1999 $194,512,214 End-of-Day Market Value
March 30, 1999 $194,720,978 End-of-Day Market Value
March 31, 1999 $194,901,556 End-of-Day Market Value
Quarterly Daily Average $192,601,555
$100 million 0.50 percent $500,000
Next $100 million 0.45 percent $416,707
Over $200 million 0.40 percent -------
Annual Fee $916,707
One-Fourth Annual Fee $229,177
</TABLE>
21
<PAGE> 1
(d)(4)
INVESTMENT ADVISORY AGREEMENT
This Investment Advisory Agreement is made as of the __________ day of
_______________, 1999, by and between VANTAGEPOINT INVESTMENT ADVISERS, LLC, a
Delaware limited liability company (hereafter "Client"), and TCW FUNDS
MANAGEMENT, INC., at 865 S. Figueroa Street, Los Angeles, California
90017(hereafter "Adviser") and is effective as of March 1, 1999 (the
"Effective Date").
WHEREAS, the Vantagepoint Funds (the "Funds") is a Delaware Business
Trust registered as an open-end management investment company under the
Investment Company Act of 1940, as amended (the "Investment Company Act");
WHEREAS, Client is party to an Investment Adviser Agreement with the
Funds for management of the investment operations of the Funds including the
establishment and operation of investment portfolios for the Funds and the
entering into of contracts with sub-advisers to assist in managing the
investment of the Funds property;
WHEREAS, Client and Adviser wish to enter into an agreement pursuant
to which Adviser will provide such assistance to Client.
AGREEMENTS:
In consideration of the performance by the Adviser as investment
adviser of certain assets held by the Funds, the Client has authorized the
Adviser to manage the securities and other assets as follows:
1. ACCOUNT
The account with respect to which the Adviser shall perform its
services shall consist of those assets of the Funds which the Client determines
to assign to an account with the Adviser, together with all income earned by
those assets and all realized and unrealized capital appreciation related to
those assets (hereafter "Account"). From time to time, the Client may, upon
notice to the Adviser, make additions to the Account and may, upon notice to the
Adviser, make withdrawals from the Account.
2. APPOINTMENT STATUS, POWERS OF ADVISER
(a) Purchase and Sale. Client hereby appoints Adviser to manage the
Account on the terms and conditions set forth in this Agreement. Subject to the
restrictions set forth in this Agreement, and acting always in conformity with
the Investment Policies provided in Paragraph 4, Adviser shall supervise and
direct investment of the Account. Client hereby grants the Adviser complete,
unlimited and unrestricted discretion and authority to select portfolio
securities with respect to the
<PAGE> 2
Account including the power to acquire (by purchase, exchange, subscription or
otherwise), to hold and dispose (by sale, exchange or otherwise). The Adviser
will consult with Client, upon the request of the Client, concerning any
transactions it makes with respect to the investment of the Account.
(b) Limitation on Authority. Except as expressly authorized herein or
hereafter from time to time, Adviser shall for all purposes be deemed an
independent contractor and shall have no authority to act for or to represent
the Client or the Funds in any way or otherwise to be an agent of the Client or
the Funds.
(c) Voting. Unless otherwise instructed by Client, Adviser shall have
discretion to take any action or render any advice with respect to the voting of
shares or the execution of proxies solicited from time to time by, or with
respect to, the issuers of securities held in the Account. Adviser will report
annually to Client regarding such voting.
(d) Key Personnel. Adviser agrees that the following key personnel
have primary responsibility with respect to the investment management of the
Account. If the(se) individual(s) is unable to devote sufficient time to
maintain primary responsibility of the Account, the Adviser must give Client
written advance notice, or prompt notice within three (3) business days, of the
name of the person designated by the Adviser to replace or supplement the
individual(s). In addition, the Adviser will give Client prompt written notice
of the replacement of any employee of the Adviser who has direct supervisory
responsibility for the key personnel or who has responsibility for setting
investment policy.
Key Personnel:
Chris Ainley
Douglas Foreman
Charles Larsen
3. ACCEPTANCE OF APPOINTMENT
Adviser accepts the appointment as an investment adviser and agrees to
use its best efforts and professional judgment to make timely investment
transactions for the Client with respect to the investments of the Account, and
to provide the other services required of the Adviser under the provisions of
this Agreement.
4. INVESTMENT POLICIES
(a) Investment Objectives. The Adviser will adhere to the investment
objectives, guidelines, restrictions, and liquidity requirements of the Funds as
specified by the Client on SCHEDULE A hereto, and as restated or modified from
time to time by the Client in written notice to the Adviser.
2
<PAGE> 3
(b) Agreement. The Adviser will adhere to all specific provisions
established in the Agreement and in the Registration Statement as filed with the
Securities and Exchange Commission on Form N-1A ("Registration Statement), which
is hereby incorporated by reference and made a part of this Agreement. The
Client shall give written notice to the Adviser of any amendments to the
Registration Statement, which amendments, upon their receipt by the Adviser,
shall be binding on the Adviser.
(c) Investment Adviser Guidelines. The Adviser shall act in accordance
with the specific statement of Investment Adviser Guidelines, SCHEDULE B, as
restated or modified from time to time by the Client in written notice to the
Adviser. The Client retains the right, on written notice to the Adviser, to
modify any such objectives, guidelines, restrictions, and liquidity requirements
in any manner at any time.
(d) Conflict in Policies. If a conflict in policies or guidelines
referenced herein occurs, the Registration Statement shall govern for purposes
of this Agreement.
5. CUSTODY, DELIVERY, RECEIPT OF SECURITIES
(a) Custody Responsibilities. The Client shall designate one or more
custodians to hold the Account. The Custodian, as designated by the Client will
be responsible for the custody, receipt and delivery of securities and other
assets of the Funds (including the Account), and the Adviser shall have no
authority, responsibility or obligation with respect to the custody, receipt or
delivery of securities or other assets of the Funds (including the Account). In
the event that any cash or securities of the Funds are delivered to the Adviser,
it will promptly deliver the same over to the Custodian, in the name of the
Funds.
(b) Securities Transactions. All securities transactions for the
Account will be consummated by payment to or delivery by the Funds of cash or
securities due to or from the Account. The Adviser will notify the Custodian of
all orders to brokers for the Account by 11:00 am EST on the day following the
trade date and will affirm the trade or fax trade authorization within one (1)
business day after the trade date (T+1).
(c) Tri-Party Agreement. The Adviser is authorized to enter into
Tri-Party Repurchase Agreements and sign the standard PSA tri-party agreement
(the "Tri-Party Agreement") on behalf of the Client and the subcustodian
thereunder is authorized to act as a subcustodian for the Account's assets
involved in any tri-party repurchase agreement pursuant to such Tri-Party
Agreement.
6. RECORD KEEPING AND REPORTING
(a) Records. Adviser will maintain proper and complete records
relating to the furnishing of services under this Agreement, including records
with respect to the
3
<PAGE> 4
acquisition, holding and disposition of securities for Client. All records
maintained pursuant to this Agreement shall be subject to examination by Client
and by persons authorized by it at all times upon reasonable notice. Except as
expressly authorized in this Agreement or as required by applicable law,
regulation or order of court or as directed by other party in writing, Adviser
and Client shall keep confidential the records and other information obtained by
reason of this Agreement (including, with respect to Client, the investment
information and transactions executed by Adviser). Upon termination of this
Agreement, Adviser shall promptly, upon demand, return to Client all records
Client reasonably believes are necessary in order to discharge its
responsibilities to the Funds. Adviser shall be entitled to retain originals or
copies of records pursuant to the requirements of applicable laws or
regulations.
(b) Quarterly Valuation Reports. Adviser shall use best efforts to
provide to the Client within TEN (10) business days after the end of each
calendar quarter a statement of the fair market value of the Account as of the
close of such quarter together with an itemized list of the assets in the
Account, as that information is reported on Adviser's recordkeeping system.
(c) Valuation Methodology. For purposes of this Agreement, fair market
value shall mean, as of a particular date, the value of the Account (determined
in accordance with generally accepted accounting principles consistently
applied), plus income accrued thereon less the liabilities related to the assets
in the Account. Adviser shall reconcile security and cash positions , and market
values, and report discrepancies to the Client.
(d) Loss Reimbursement. Adviser shall reimburse the Account for any
material loss directly caused by Adviser's breach of the standard of care set
forth in Section 12 that causes a material delay in the accurate daily pricing
of the Fund, providing such material loss was not the result of action or
inaction of other service providers to the Client or the Fund in failing to
observe the instructions of the Adviser. It is expressly understood that Adviser
has no responsibility for performing the daily pricing of the Fund(s).
(e) Monthly Reports. Adviser shall provide the Client an itemized
report as to the securities in the account, the fair market value thereof and
the accrued income thereon, as that information is reported on Adviser's
recordkeeping system, within FOUR (4) business days after the end of each
Calendar Month. The Adviser shall also use best efforts to provide, in writing,
preliminary performance numbers and a brief explanation of these results within
FIVE (5) business days after the end of each Calendar Month. The requested
format will be as mutually agreed by Adviser and Client. For purposes of this
Agreement, fair market value shall mean, as of a particular date, the value of
the Account plus income accrued thereon less the liabilities related to the
assets in the Account.
4
<PAGE> 5
(f) Reports on Request. Adviser shall provide to Client promptly upon
request any information available in the records maintained by Adviser relating
to the Account.
7. PURCHASE AND SALE OF SECURITIES
(a) Selection of Brokers. Except to the extent otherwise instructed by
Client, (it being understood that Client may, in its absolute discretion, direct
portfolio transactions for which Adviser is responsible to any broker that
Client may see fit), Adviser shall place all orders for the purchase and sale of
securities on behalf of the Client with brokers or dealers selected by Adviser,
but not with a person affiliated with Adviser, as the term "affiliated person"
is defined in the Investment Company Act of 1940 (hereafter an "Affiliate").
(b) Best Execution. In placing such orders, the Adviser will give
primary consideration to obtaining the most favorable price and efficient
execution. In evaluating the terms available for executing particular
transactions for Client and in selecting brokers and dealers to execute such
transactions, the Adviser may consider, in addition to commission cost and
execution capabilities, the financial stability and reputation of brokers and
dealers and the brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934, as amended) provided by
brokers and dealers. Adviser is authorized to pay a broker or dealer who
provides such brokerage and research services a commission for executing a
transaction which is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if Adviser determines
that such commission is reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer in discharging
responsibilities with respect to the Account.
(c) Bunching Orders. Client agrees that Adviser may aggregate sales
and purchase orders of Account with similar orders being made simultaneously for
other accounts managed by Adviser, if in Adviser's reasonable judgment such
aggregation shall result in an overall economic benefit to the Account taking
into consideration the advantageous selling or purchase price, brokerage
commission and other expenses. Client acknowledges that the determination of
such economic benefit to Client by Adviser represents Adviser's evaluation that
client is benefited by relatively better purchase or sales prices, lower
commission expenses and beneficial timing of transactions or a combination of
these and other factors.
8. INVESTMENT FEES
(a) Fee Schedule. The compensation of the Adviser for its services
under this Agreement shall be calculated and paid by the Client from the assets
of the Account in accordance with SCHEDULE C hereto. The Adviser shall send a
written invoice
5
<PAGE> 6
to the Client within 30 days of the quarter end and shall be duly compensated
from the assets of the Account.
(b) Fee Computation. The Adviser's fee for each calendar quarter shall
be calculated as set forth in Schedule C.
(c) Fee Amendment. Fee rates may be changed from time to time by
agreement between the Client and the Adviser; provided, however, that no
increase in such rates shall be made during the first calendar year of this
Agreement.
(d) Pro Rata Fee. If the Adviser should serve for less than the whole
of any calendar quarter, its compensation shall be determined as provided above
on the basis of the ending market value of the Account in the month in which the
termination occurs and shall be payable on a pro rata basis for the period of
the calendar quarter for which it has served as Adviser hereunder.
9. BEST EFFORTS; NON-EXCLUSIVITY OF SERVICES
The Adviser shall devote its best efforts and such time as it deems
necessary to provide prompt and expert service to the Client. The services of
Adviser to be provided to Client hereunder are not to be deemed exclusive and
Adviser shall be free to provide similar services for its own account and the
accounts of other persons and to receive compensation for such services. Client
acknowledges that Adviser and its members, Affiliates and employees, and
Adviser's other clients may at any time, have, acquire, increase, decrease, or
dispose of positions in the same investments which are at the same time being
held, acquired for or disposed of under this Agreement for the Client. Adviser
shall have no obligation to acquire or dispose of a position in any investment
pursuant to this Agreement simply because Adviser, its directors, members,
Affiliates or employees invest in such a position for its or their own accounts
or for the account of another client.
10. INSIDER TRADING POLICIES AND CODE OF ETHICS
Adviser hereby represents that it has adopted policies that meet the
requirements of Rule 17j-1 under the Investment Company Act. Copies of such
policies shall be delivered to the Client, and any violation of such policies by
personnel of the Adviser shall be reported to the Client.
11. INSURANCE
At all times during the term of this Agreement, Adviser shall
maintain, at its own cost and expense, professional liability insurance for
errors, omissions, and negligent acts, in an amount and with such terms as are
standard in the financial services industry
6
<PAGE> 7
for an investment adviser managing the amount of aggregate assets managed by
Adviser for Client and for the Adviser's other clients.
12. LIABILITY
Adviser shall not be liable to Client for honest mistakes of judgment
or for action or inaction taken in good faith for a purpose that the Adviser
reasonably believes to be in the best interests of the Client. Adviser shall be
liable to Client for any liability, damages or expenses of Client arising out of
the negligence, malfeasance or violation of applicable law by Adviser or any of
its officers, employees or Affiliates in providing management under this
Agreement. However, neither this provision nor any other provision of this
Agreement shall constitute a waiver or limitation of any rights which Client may
have under federal or state securities laws.
13. TERM
This Agreement shall be in effect for an initial term of two years
beginning on the Effective Date. This Agreement may be renewed thereafter for
successive one-year periods if such renewal is approved annually by the majority
of those members of the Funds' Board of Directors who are not "interested
persons" as that term is defined in the Investment Company Act.
14. TERMINATION
This Agreement may be terminated by either party hereto, without the
payment of any penalty, immediately upon notice to the other in the event of a
breach of any provision thereof by the party so notified, or otherwise by
Adviser upon sixty (60) days' written notice to the Client or by Client upon 30
days' written notice to Adviser, except that this Agreement shall automatically
terminate in the event of its assignment, as provided in Paragraph 19, at the
discretion of the Client in the event of Adviser's ownership change as provided
in Paragraph 19, or upon the termination of the Funds. Any termination in
accordance with the terms of this Agreement shall not cause the payment of any
penalty. Any such termination shall not affect the status, obligations or
liabilities of any party hereto to the other. In the event of termination for a
breach of this Agreement, any trades executed but not yet settled at the time of
notice of termination shall be settled.
15. REPRESENTATIONS
(a) Adviser hereby confirms to Client that Adviser is registered as an
investment adviser under the Investment Advisers Act of 1940, as amended, that
it has full power and authority to enter into and perform fully the terms of
this Agreement and that the execution of this Agreement on behalf of Adviser has
been duly authorized and,
7
<PAGE> 8
upon execution and delivery, this Agreement will be binding upon Adviser in
accordance with its terms.
(b) Client hereby confirms to Adviser that it has full power and
authority to enter into this Agreement and that the execution of this Agreement
on behalf of Client has been fully authorized and, upon execution and delivery,
this Agreement will be binding upon Client in accordance with its terms.
16. NOTICES
Notices or other notifications given or sent under or pursuant to this
Agreement shall be in writing and be deemed to have been given or sent if
delivered to the party at its address listed below in person or by telex or
telecopy receipt of which is confirmed or by mail or by registered mail, return
receipt requested. The addresses of the parties are:
CLIENT:
Vantagepoint Investment Advisers, LLC
Attention: Legal Department
c/o ICMA Retirement Corporation
777 North Capitol Street, NE, Ste. 600
Washington, D.C. 20002-4240
ADVISER:
TCW Funds Management, Inc.
865 S. Figueroa Street
Los Angeles, CA 90017
Attn: Mr. Don Benson (with a copy to General Counsel)
Each party may change its address by giving notice as herein required.
17. SOLE INSTRUMENT
This instrument constitutes the sole and only agreement of the parties
to it relating to its object and correctly sets forth the rights, duties, and
obligations of each party to the other as of its date. Any prior agreements,
promises, negotiations or representations not expressly set forth in this
Agreement are of no force or effect.
18. WAIVER OR MODIFICATION
No waiver or modification of this Agreement shall be effective unless
reduced to a written document signed by the party to be charged. No failure to
exercise and no delay in exercising, on the part of any party hereto, of any
right, remedy, power or privilege hereunder, shall operate as a waiver thereof.
Only the Chief Executive Officer,
8
<PAGE> 9
has authority on behalf of Client to modify or waive any of the provisions of
the Agreement.
19. ASSIGNMENT AND OWNERSHIP CHANGE
This Agreement shall automatically terminate in the event of its
assignment. Adviser agrees to provide immediate written notice in the event of
an ownership change. Such an ownership change will entitle, but not require, the
Client to terminate the Agreement immediately or upon notice.
20. COUNTERPARTS
This Agreement may be executed in counterparts each of which shall be
deemed to be an original and all of which, taken together, shall be deemed to
constitute one and the same instrument.
21. CHOICE OF LAW
This Agreement shall be governed by, and the rights of the parties
arising hereunder construed in accordance with, the laws of the State of
Delaware without reference to principles of conflict of laws.
22. YEAR 2000 WARRANTY
Adviser will use commercially reasonable efforts to prevent any
material problems from and after January 1, 2000 relating to the date function
or functions impacted by the date in its computer systems, auto-dialer system or
other date processing or information management systems used by it with respect
to the Client and the Account.
9
<PAGE> 10
IN WITNESS WHEREOF, THE PARTIES HERETO EXECUTE THIS AGREEMENT ON February 25,
1999 and make it effective on the date set forth.
CLIENT ADVISER
Vantagepoint TCW Funds Management, Inc.
Investment Advisers, LLC
by: by:
/s/ GIRARD MILLER /s/ MICHAEL CAHILL
- --------------------- ---------------------
(signature) (signature)
President Managing Director
- --------------------- ---------------------
(name, title) (name, title)
/s/ PATRICIA NAVIS
---------------------
(signature)
Vice President
---------------------
(name, title)
Date: Date:
10
<PAGE> 11
ADDENDUM DATED March 1, 1999 TO THE
INVESTMENT ADVISORY AGREEMENT DATED February 25, 1999
This addendum modifies and forms a part of the Investment Advisory Agreement
(the "Agreement") dated March 1 1999, between Vantagepoint Investment
Advisers, LLC, a Delaware corporation ("Client"), and TCW Funds Management, Inc.
("Adviser"), relating to the Vantagepoint Funds ("VF").
All terms used in this Addendum have the same meaning given to them in the
Agreement unless specifically noted otherwise.
1. The assets of the Account to be managed by the Adviser under the Agreement
and this Addendum are assets of the Aggressive Opportunities Fund (the "Fund"),
a portfolio of VF. For purposes of Section 8 (Fees) and Schedule C, all payments
due to Adviser shall be solely made from the assets of the Fund.
2. All references in the Agreement and this Addendum to the Investment Policies
to be followed by Adviser in managing the assets of the Fund are hereby deemed
to include the Investment Policies set forth in the Agreement and any Schedules
to the Agreement, as well as the Fund's current prospectus and statement of
additional information as on file with the Securities and Exchange Commission.
3. The activities of the Client and the Adviser in managing the assets of the
Fund pursuant to the Agreement and this Addendum shall in all instances be
conducted subject to the supervision and direction of the Board of Directors of
VF.
4. For purposes of Sections 8 (Fees), 12 (Liability), 13 (Term), 14
(Termination), 15 (Representation), 16 (Notices), 18 (Waiver or Modification),
19 (Assignment and Ownership Change), and 22 (Year 2000 Warranty) of the
Agreement, as well as for purposes of Schedule C of the Agreement, VF is hereby
made a party to the Agreement and shall be entitled to all notices, protections
and rights set forth in those Sections and in Schedule C to which Client is
entitled.
5. For purposes of the Agreement and this Addendum, Client and Adviser hereby
agree to maintain all books and records relating to VF that are required to be
maintained in accordance with good practice, applicable federal and state
securities laws, including the Investment Company Act of 1940 and or the
Investment Advisers Act of 1940, and such reasonable instructions as shall be
provided to Adviser by Client from time to time.
6. Adviser shall furnish Client and the Board of Directors of VF such periodic
and special reports and information as either of them may request, including
such
11
<PAGE> 12
information as shall be reasonably necessary to evaluate the terms of any
advisory agreement between Client and Adviser with respect to assets of VF.
7. For purposes of the Agreement and this Addendum, the value of the assets of
the Fund managed by Adviser shall be calculated in accordance with the
procedures for determining net asset value per share ("NAV") set forth in the
Fund's prospectus and statement of additional information.
8. Section 6 is hereby amended as follows:
a. 6(a) is amended beginning on line 8 and ending on line 9 by
deleting the parentheses and all language with in the
parentheses;
b. 6(b) is deleted in its entirety;
c. 6(c) is redesignated 6(b) Reconciliations, the first sentence is
deleted;
d. 6(d) is changed to 6(c); and
e. 6(e) is deleted and 6(f) is changed to 6(d).
9. Section 8, Investment Fees, is amended by deleting 8(b) and 8(c) in their
entirety and by redesignating 8(d) as 8(b).
10. Section 15, Representations, is amended by the insertion of 15(c) below:
"(c) Adviser hereby acknowledges that VF is registered as an open end
investment company under the Investment Company Act of 1940 and is
subject to taxation as a regulated investment company under the
Internal Revenue Code; Adviser hereby represents that it is familiar
with the requirements of such laws and the rules and regulations
thereunder as they apply to VF and has systems and procedures in place
reasonably designed to permit Adviser, Client, and VF to comply with
such requirement."
12
<PAGE> 13
SCHEDULE A
THE VANTAGEPOINT FUNDS
AGGRESSIVE OPPORTUNITIES FUND
STATEMENT OF INVESTMENT POLICIES
These Investment Policies and Guidelines have been adopted by the Vantagepoint
Funds (the "Funds") to govern the management and administration of the
Aggressive Opportunities Fund by Vantagepoint Investment Advisors, LLC ("VIA").
They may be reviewed and revised at the discretion of the Directors of the
Vantagepoint Funds (the "Directors"). VIA is responsible for the monitoring and
appointment of subadvisers to handle the day-to-day investment of assets
assigned to them.
I. GENERAL DESCRIPTION AND GOALS
The Aggressive Opportunities Fund seeks high, long-term capital
appreciation by investing in a variety of flexible investment
approaches and techniques. Investments may include U.S. and foreign
equity securities, options, financial derivatives, and short
selling.
II. STRUCTURE
The assets of the Aggressive Opportunities Fund shall be managed by
two or more subadvisers. The subadvisers may be retained to manage
separate accounts under discretionary investment advisory contracts.
Each subadviser will be selected for its individual investment
management expertise and each will operate independently of the
others. Each subadviser must either be registered with the
Securities and Exchange Commission (SEC) under the Investment
Advisers Act of 1940 or a Bank, Insurance Company or Trust Company
exempt as such from registration.
Each subadviser shall exercise complete management discretion over
assets of the Fund allocated to its account in a manner consistent
with these Investment Policies and Guidelines and with such further
investment limitations and conditions as may be recommended by VIA
and approved by the Directors. subadvisers will be obligated to
manage Fund assets as if they were subject to the fiduciary duty of
care that applies under the Employee Retirement Income Security Act
of 1974 (ERISA) governing pension and profit sharing assets.
III. INVESTMENT STRATEGY
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<PAGE> 14
VIA shall select subadvisers that represent a variety of portfolio
management approaches and investment disciplines. These investment
approaches will be combined in a complementary manner to effectively
achieve the investment objective of the Fund. The Fund as a whole
will be more diversified than each individual subadviser's
portfolio.
Investment strategies employed by the subadvisers included in the
Aggressive Opportunities Fund may include:
- equity securities of U.S. issuers including small and
micro-capitalization growth stocks,
- securities issued by companies that are "distressed" or "out
of favor",
- securities issued by foreign companies including companies
located in or doing business in emerging markets,
- commodities,
- securities of companies that fluctuate with the value of
commodities
- such as precious metals,
- short selling,
- purchasing and writing options,
- futures contracts, and
- leverage.
Certain of the above strategies are not permitted or their use is limited
under the Investment Guidelines for the individual subadvisers.
IV. PERFORMANCE BENCHMARKS
Performance benchmarks will be established for the Fund. These benchmarks
will be recommended by VIA and adopted by the Directors and will be
reviewed and revised as appropriate from time to time. The current
performance benchmarks for the Fund are appended to this document as
Exhibit I.
V. DIRECTOR REVIEW
VIA will report periodically to the Directors on performance of the Fund
against benchmarks and on subadviser results and will evaluate for the
Directors the overall performance of the Fund relative to its objectives.
The Directors will consider such reports and other relevant factors in
appraising the investment objectives and performance of the Fund.
15
<PAGE> 15
INVESTMENT GUIDELINES
I. ELIGIBLE INVESTMENTS
A. EQUITY SECURITIES: U.S. and Non-U.S. common stock, preferred
stock, common stock equivalents (units of beneficial interest),
American Depository Receipts, convertible preferred stocks,
warrants, and other rights.
B. CASH/CASH EQUIVALENTS: Fixed income obligations with maturity less
than one year, or short-term accounts or securities managed by a
custodian institution.
C. FIXED INCOME: Fixed income and convertible fixed income securities
with maturities greater than one year.
D. FINANCIAL FUTURES: Equity index futures.
E ELIGIBLE PRACTICES: There are no restrictions on subadvisers as to
the following:
- Portfolio turnover.
- Realized gains and losses.
F. ELIGIBLE INVESTMENT LIMITS
<TABLE>
<CAPTION>
MINIMUM NORMAL MAXIMUM
------- ------ -------
RANGE
-----
<S> <C> <C> <C>
U.S. equity securities 65% 80-100% 100%
Non-U.S. equity securities 0% 0-10% 20%
Cash and cash equivalents 0% 0-20% 35%
Fixed income securities
except derivatives 0% 0-5% 25%
Convertible securities 0% 5-15% 25%
</TABLE>
II. PROHIBITED PRACTICES AND SECURITIES
A. Securities for which there is no established trading market.
B. Securities issued by the subadvisers of the Fund or their
affiliates.
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<PAGE> 16
C. General partner interests.
D. Direct investments in oil, gas, or other mineral exploration or
development programs.
E. Direct investments in real estate or interests in real estate;
this does not preclude investment in purchases of securities of
real estate investment trusts and other companies holding real
estate or interests in real estate.
F. Commingled funds; this does not preclude investment in mutual
funds up to 10% of the Fund's market value at the time of
purchase.
G. Acquisition of securities that would cause exposure to non-equity
holdings to exceed 35% of the Fund's market value at the time of
purchase.
H. Acquisition of securities that would cause exposure to a single
industry to exceed 25% of the Fund's market value at the time of
purchase.
I. In the absence of prior consent of VIA, acquisition of securities
of an issuer that would cause more than 5% of the Fund to be
invested in such securities.
J. In the absence of prior consent of VIA, acquisition of more than
5% of the outstanding shares of any class of equity securities.
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in Section I or Section II of
these Investment Guidelines may be acquired or employed, as the case may
be, but only if explicitly approved in advance by VIA.
IV. SECURITIES LENDING
Nothing herein shall prevent loans of securities in the Aggressive
Opportunities Fund pursuant to an established securities lending program
conducted by the Fund's custodian.
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<PAGE> 17
EXHIBIT I
TO THE
STATEMENT OF INVESTMENT POLICIES AND GUIDELINES OF
THE AGGRESSIVE OPPORTUNITIES FUND
MARCH 1, 1999
The following standards will be used to measure the performance of the
Aggressive Opportunities Fund:
A. BENCHMARKS
1. The performance benchmark for the Fund is the RUSSELL 2000 INDEX.
This benchmark will be used to measure the Fund's performance net
of subadviser fees.
2. A peer group benchmark for the Fund will consist of mutual funds
with characteristics similar to the Fund. The peer group will be
used to measure the Fund's performance relative to other funds
with a similar investment approach. The peer group benchmark will
measure Fund performance net of all fees and expenses except for
the plan administration fee.
3. The Lipper Capital Appreciation Index, selected by Lipper
Analytical Services, will serve as the performance benchmark for
participant returns, net of all fees and expenses. In assessing
performance against this benchmark, it will be taken into
consideration that Lipper Analytical Services may change the
composition of the Index.
B. TIME HORIZON
The time horizon for performance measurement will be one, three, and five
years.
One Year:
Performance relative to any benchmark established for the Fund will vary
widely over one-year periods; such variance over short time periods is
expected and acceptable. However, if such variance is determined to be
caused by systemic issues, action may be appropriate.
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<PAGE> 18
Three and Five Years:
Performance of the Fund should track market and universe benchmarks more
closely as the evaluation period lengthens. The ideal performance
objective for the Aggressive Opportunities Fund is to exceed the returns
of all relevant benchmarks; however, shortfalls over various time periods
should be expected in some cases. Underperformance against a single
benchmark over an extended period may be acceptable, particularly if
other benchmarks have been exceeded.
C. INVESTMENT CHARACTERISTICS
The Fund may have investment characteristics which differ from the
general market, as measured by the Standard & Poor's 500 Index. Because
of the broad mandate given to the subadvisers in the Aggressive
Opportunities Fund, investment characteristics may be expected to vary
widely. For the total Fund, these would include, but are not limited to:
<TABLE>
<CAPTION>
CHARACTERISTIC RELATIVE TO S&P 500 INDEX
<S> <C>
Beta Higher
Capitalization Lower
Dividend Yield Lower
Hist. 5 year EPS Growth Higher
Price to Earnings Ratio Higher
Standard Deviation Higher
</TABLE>
19
<PAGE> 19
SCHEDULE B
VANTAGEPOINT INVESTMENT ADVISERS, LLC
AGGRESSIVE OPPORTUNITIES FUND
INVESTMENT GUIDELINES
FOR
TCW FUNDS MANAGEMENT, INC.
MARCH 1, 1999
TCW Fund Management, Inc. seeks to achieve superior returns through capital
appreciation from small- and mid-sized companies that exhibit rapid growth. The
portfolio is managed using a team approach. In addition to traditional
quantitative screens, fundamental research, and direct company visits, the team
identifies key non-earnings indicators referred to as "outcome drivers" to
select growth companies. These outcome drivers enable the team to evaluate
company performance without relying solely on earnings that may not always
presage future success for small rapidly growing companies. The portfolio tends
to remain fully invested at all times.
I. ELIGIBLE INVESTMENTS
A. EQUITY SECURITIES: Common stock, preferred stock, common stock
equivalents (units of beneficial interest), American Depository
Receipts, convertible preferred stocks, warrants, and other
rights.
B. CASH/CASH EQUIVALENTS: Fixed income obligations with maturities
less than one year, or short term accounts or securities managed
by the custodian institution.
C. FIXED INCOME: Fixed income and convertible fixed income securities
with maturities greater than one year.
D. ELIGIBLE INVESTMENT LIMITS:
<TABLE>
<CAPTION>
MINIMUM NORMAL RANGE MAXIMUM
------- ------------ -------
<S> <C> <C> <C>
Equity securities 80% 90%-100% 100%
Cash and cash equivalents 0% 0%-10% 15%
Fixed income securities 0% 0%-5% 10%
</TABLE>
20
<PAGE> 20
II. PROHIBITED PRACTICES AND SECURITIES
A. Short sales.
B. Options.
C. Commodities (including financial futures).
D. Securities for which there is no established trading market.
E. Foreign securities unless listed and traded in the U.S.
F. Margin purchases and other forms of borrowing; granting of pledges
or other security interests in assets of the portfolio; use of
futures to obtain market leverage.
G. Securities offered by the Adviser or its affiliates.
H. General partner interests.
I. Direct investments in oil, gas, or other mineral exploration or
development programs.
J. Direct investments in real estate or interests in real estate;
this does not preclude investment in purchases of securities of
real estate investment trusts and other companies holding real
estate or interests in real estate.
K. Acquisition of securities of an issuer that would cause more than
5% of the portfolio at the time of purchase to be invested in such
securities.
L. Acquisition of more than 5% of the outstanding stock of any issuer
at the time of purchase.
M. Acquisition of securities that would cause exposure to a single
industry to exceed 25% of the portfolio at the time of purchase.
N. Commingled and registered mutual funds.
Exceptions to the above listed eligible investments and prohibited
securities or practices may be permitted with prior consent from VIA.
21
<PAGE> 21
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in Section I or Section II of
these Investment Guidelines may be acquired or employed, as the case may
be, but only if explicitly approved in advance by VIA.
IV. PERFORMANCE BENCHMARK AND MONITORING CRITERIA
The standards outlined in this section are subject to review by VIA as
and when appropriate.
A. PERFORMANCE BENCHMARKS
The market benchmark for measuring investment performance for the
Adviser is the RUSSELL 2000 INDEX. The Adviser is expected to
outperform the benchmark net of Adviser fees over rolling three
and five-year periods.
B. PEER GROUPS
VIA will develop an appropriate peer group against which to
compare investment performance. The peer group will consist of
other managers with a similar investment approach. The managers
within the peer group will be reviewed periodically for
consistency of style and may be changed as and when deemed
appropriate by VIA. Such changes will be communicated to the
Adviser.
1. The peer group will consist primarily of mutual funds,
however separate account managers may be included.
2. VIA will track relative net-of-fee performance quarterly
and evaluate performance on a trailing one, three and
five-year basis.
3. VIA will compare the Adviser's net performance with the
one-year mean return of the peer group.
The current peer group consists of the following four managers:
Alger MidCap Growth (AMCGX)
Nicholas-Applegate Growth Equity A (NAPGX)
Putnam Vista A (PVISX)
T. Rowe Price New American Growth (PRWAX)
22
<PAGE> 22
SCHEDULE B-I
VANTAGEPOINT INVESTMENT ADVISERS, LLC
GROWTH FUND
INVESTMENT GUIDELINES
FOR
TCW FUNDS MANAGEMENT, INC.
OCTOBER 1, 1999
TCW Funds Management, Inc. selects stocks of high quality companies with
long-term growth characteristics selling at attractive valuations in relation to
the fundamental prospects of the underlying companies. Companies chosen are
believed to have strong and enduring business strategies and inherent advantages
over their competitors. The manager also considers a company's prospects for
capitalizing on broad investment and economic trends, based on a top-down
appraisal of the US economy. The portfolio is moderately concentrated in
generally 20 to 40 holdings and is normally fully invested in equities at all
times.
I. ELIGIBLE INVESTMENTS
A. EQUITY SECURITIES: Common stock, preferred stock, common stock
equivalents (units of beneficial interest), American Depository
Receipts, convertible preferred stocks, warrants, and other
rights.
B. CASH/CASH EQUIVALENTS: Fixed income obligations with maturities
less than one year, or short term accounts or securities managed
by the custodian institution.
C. FIXED INCOME: Fixed income and convertible fixed income securities
with maturities greater than one year.
D. ELIGIBLE INVESTMENT LIMITS:
<TABLE>
<CAPTION>
MINIMUM NORMAL RANGE MAXIMUM
------- ------------ -------
<S> <C> <C> <C>
U.S. Equity securities 80% 90%-100% 100%
Non-U.S. Equity securities 0% 0%-5% 10%
Cash and cash equivalents 0% 0%-10% 15%
Fixed income securities 0% 0%-5% 10%
</TABLE>
23
<PAGE> 23
II. PROHIBITED PRACTICES AND SECURITIES
O. Short sales.
P. Options.
Q. Commodities (including financial futures).
R. Securities for which there is no established trading market.
S. Foreign securities unless listed and traded in the U.S.
T. Margin purchases and other forms of borrowing; granting of pledges
or other security interests in assets of the portfolio; use of
futures to obtain market leverage.
U. Securities offered by the Adviser or its affiliates.
V. General partner interests.
W. Direct investments in oil, gas, or other mineral exploration or
development programs.
X. Direct investments in real estate or interests in real estate;
this does not preclude investment in purchases of securities of
real estate investment trusts and other companies holding real
estate or interests in real estate.
Y. Acquisition of securities of an issuer that would cause more than
7.5% of the portfolio at the time of purchase to be invested in
such securities.
Z. Acquisition of more than 5% of the outstanding stock of any
issuer.
AA. Acquisition of securities that would cause exposure to a single
industry to exceed 25% of the portfolio at the time of purchase.
BB. Commingled and registered mutual funds.
Exceptions to the above listed eligible investments and prohibited
securities or practices may be permitted with prior consent from VIA.
24
<PAGE> 24
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in Section I or Section II of
these Investment Guidelines may be acquired or employed, as the case may
be, but only if explicitly approved in advance by VIA.
IV. PERFORMANCE BENCHMARK AND MONITORING CRITERIA
The standards outlined in this section are subject to review by VIA as
and when appropriate.
A. PERFORMANCE BENCHMARKS
The market benchmark for measuring investment performance for the
Adviser is the STANDARD & POOR'S 500 INDEX. The Adviser is
expected to outperform the benchmark net of Adviser fees over
rolling three and five-year periods.
B. PEER GROUPS
VIA will develop an appropriate peer group against which to
compare investment performance. The peer group will consist of
other managers with a similar investment approach. The managers
within the peer group will be reviewed periodically for
consistency of style and may be changed as and when deemed
appropriate by VIA. Such changes will be communicated to the
Adviser.
4. The peer group will consist primarily of mutual funds, however
separate account managers may be included.
5. VIA will track relative net-of-fee performance quarterly and
evaluate performance on a trailing one, three and five-year basis.
6. VIA will compare the Adviser's net performance with the one-year
mean return of the peer group.
25
<PAGE> 25
SCHEDULE C
VANTAGEPOINT INVESTMENT ADVISERS, LLC
FEE SCHEDULE
FOR
TCW FUNDS MANAGEMENT INC.
The Adviser's quarterly fee shall be calculated based on the average daily
market value of the assets under management as provided by the Custodian, based
on the following annual rate.
First $25 million 0.70 percent
Next $25 million 0.50 percent
Next $50 million 0.45 percent
Next $400 million 0.40 percent
Over $500 million 0.35 percent
EXAMPLE OF QUARTERLY FEE CALCULATION (HYPOTHETICAL AMOUNTS)
<TABLE>
<S> <C> <C> <C>
January 1, 1999 $675,000,000 End-of-Day Market Value
January 2, 1999 $675,678,462 End-of-Day Market Value
January 3, 1999 $675,796,123 End-of-Day Market Value
. . .
March 29, 1999 $681,512,214 End-of-Day Market Value
March 30, 1999 $681,720,978 End-of-Day Market Value
March 31, 1999 $681,901,556 End-of-Day Market Value
Quarterly Daily Average $680,601,555
First $25 million 0.70 percent $175,000
Next $25 million 0.50 percent $125,000
Next $50 million 0.45 percent $225,000
Next $400 million 0.40 percent $1,600,000
Over $500 million 0.35 percent $632,105
- - - - - -
Annual Fee $2,757,105
One-Fourth Annual Fee $689,276
</TABLE>
26
<PAGE> 1
(d)(5)
INVESTMENT ADVISORY AGREEMENT
This Investment Advisory Agreement is made as of the
__________ day of _______________, 1999, by and between VANTAGEPOINT INVESTMENT
ADVISERS, LLC, a Delaware limited liability company (hereafter "Client"), and
CAPITAL GUARDIAN TRUST COMPANY, a California corporation, with offices at 333
South Hope Street, Los Angeles, California 90071 (hereafter "Sub-Adviser") and
is effective as of March 1,1999 (the "Effective Date").
WHEREAS, the Vantagepoint Funds (the "Funds") is a Delaware
Business Trust registered as an open-end management investment company under the
Investment Company Act of 1940;
WHEREAS, Client is party to an Investment Adviser Agreement
with the Funds for management of the investment operations of the Funds
including the establishment and operation of investment portfolios for the Funds
and the entering into of contracts with sub-advisers to assist in managing the
investment of the Funds property;
WHEREAS, Client and Sub-Adviser wish to enter into an
agreement pursuant to which Sub-Adviser will provide such assistance to Client.
AGREEMENTS:
In consideration of the performance by the Sub-Adviser as
Investment Sub-Adviser of certain assets of the Vantagepoint International
portfolio of the Funds, the Client has authorized the Sub-Adviser to manage the
securities and other assets as follows:
1. ACCOUNT
The account with respect to which the Sub-Adviser shall
perform its services shall consist of those assets of the Funds which the Client
determines to assign to an account with the Sub-Adviser, together with all
income earned by those assets and all realized and unrealized capital
appreciation related to those assets (hereafter "Account"). From time to time,
the Client may, upon notice to the Sub-Adviser, make additions to the Account
and may, upon reasonable advance notice to the Sub-Adviser, make withdrawals
from the Account.
2. APPOINTMENT STATUS, POWERS OF SUB-ADVISER
(a) Purchase and Sale. Client hereby appoints Sub-Adviser to
manage the Account on the terms and conditions set forth in this Agreement.
Subject to the restrictions set forth in this Agreement, and acting always in
conformity with the Investment Policies provided in Paragraph 4, Sub-Adviser
shall supervise and direct investment of the Account. Client hereby grants the
Sub-Adviser complete, unlimited and unrestricted discretion and authority to
select portfolio securities with respect to the Account including the power to
acquire (by purchase, exchange, subscription or otherwise), to hold and dispose
(by sale, exchange or otherwise). The Sub-Adviser will consult with Client, upon
the request of the Client, concerning any transactions it makes with respect to
the investment of the Account.
(b) Limitation on Authority. Except as expressly authorized
herein or hereafter from time to time, Sub-Adviser shall for all purposes be
deemed an independent contractor and shall have no authority to act for or to
represent the Client or the Funds in any way or otherwise to be an agent of the
Client or the Funds.
(c) Voting. Unless otherwise instructed by Client, Sub-Adviser
shall have discretion to take any action or render any advice with respect to
the voting of shares or the execution of proxies solicited from time to time by,
or with respect to, the issuers of securities held in the Account. Sub-Adviser
will report
<PAGE> 2
annually to Client regarding such voting, provided, however, Client may
terminate Sub-Adviser's discretion as above by providing written notice to
Sub-Adviser.
(d) Key Personnel. Sub-Adviser agrees that the following key
personnel have primary responsibility with respect to the investment management
of the Account. If the(se) individual(s) is unable to devote sufficient time to
maintain primary responsibility of the Account, the Sub-Adviser must give Client
written advance notice if practicable, or prompt notice within three (3)
business days, of the name of the person designated by the Sub-Adviser to
replace or supplement the individual(s). In addition, the Sub-Adviser will give
Client prompt written notice of the replacement of any employee of the
Sub-Adviser who has direct supervisory responsibility for the key personnel or
who has responsibility for setting investment policy.
Key Personnel:
Donnalisa Barnum
Ted Samuels
Gene Stein
Bryan Jacobowski
Michael Ericksen
David Fisher
3. ACCEPTANCE OF APPOINTMENT
Sub-Adviser accepts the appointment as an investment
Sub-Adviser and agrees to use its best efforts and professional judgment to make
timely investment transactions for the Client with respect to the investments of
the Account, and to provide the other services required of the Sub-Adviser under
the provisions of this Agreement.
4. INVESTMENT POLICIES
Investment Objectives. The Sub-Adviser will adhere to the investment objectives,
guidelines, restrictions, and liquidity requirements of the Funds as specified
by the Client on SCHEDULE A hereto, and as restated or modified from time to
time by the Client in advance written notice to the Sub-Adviser of at least ten
(10) business days, subject to the Sub-Adviser's review.
(b) Funds' Agreement and Declaration of Trust. The Sub-Adviser
will adhere to all applicable provisions established in the Funds' Agreement and
Declaration of Trust and Registration Statement as filed with the Securities and
Exchange Commission on Form N-1A ("Registration Statement) as are identified to
be the Sub-Adviser's specific duties under the Fund Compliance Manual (if any)
or as mutually agreed upon between Client and Sub-Adviser, all of which are
hereby incorporated by reference and made a part of this Agreement. The Client
shall give written notice to the Sub-Adviser of any amendments to the Agreement
and Declaration of Trust or Registration Statement, which amendments, upon their
receipt and acknowledgement by the Sub-Adviser, shall be binding on the
Sub-Adviser.
(c) Investment Sub-Adviser Guidelines. The Sub-Adviser shall
act in accordance with the specific statement of Investment Sub-Adviser
Guidelines, SCHEDULE B, as restated or modified from time to time by the Client
in written notice to the Sub-Adviser. The Client retains the right, on advance
written notice to the Sub-Adviser, to modify any such objectives, guidelines,
restrictions, and liquidity requirements in any manner at any time.
(d) Conflict in Policies. If a conflict in policies or
guidelines referenced herein occurs, the Registration Statement shall govern for
purposes of this Agreement.
VIA Fund Guidelines - March 1, 1999
<PAGE> 3
5. CUSTODY, DELIVERY, RECEIPT OF SECURITIES
(a) Custody Responsibilities. The Client shall designate one
or more custodians to hold the Account. The Custodian, as designated by the
Client will be responsible for the custody, receipt and delivery of securities
and other assets of the Funds (including the Account), and the Sub-Adviser shall
have no authority, responsibility or obligation with respect to the custody,
receipt or delivery of securities or other assets of the Funds (including the
Account). In the event that any cash or securities of the Funds are delivered to
the Sub-Adviser, it will promptly deliver the same over to the Custodian, in the
name of the Funds.
(b) Securities Transactions. All securities transactions for
the Account will be consummated by payment to or delivery by the Funds of cash
or securities due to or from the Account or in accordance with local market
practices. The Sub-Adviser will notify the Custodian of all orders to brokers
for the Account by 9:00 am EST on the day following the trade date and will
affirm the trade within one (1) business day after the trade date (T+1).
6. RECORD KEEPING AND REPORTING
(a) Records. Sub-Adviser will maintain proper and complete
records relating to the furnishing of services under this Agreement, including
records with respect to the acquisition, holding and disposition of securities
for Client. All records maintained pursuant to this Agreement shall be subject
to examination by Client and by persons authorized by it at all times upon
reasonable notice. Except as expressly authorized in this Agreement or as
required by applicable law, regulation or order of court or as directed by other
party in writing, Sub-Adviser and Client shall keep confidential the records and
other information obtained by reason of this Agreement (including, with respect
to Client, the investment information and transactions executed by Sub-Adviser).
Upon termination of this Agreement, Sub-Adviser shall promptly, upon demand,
return to Client all records Client reasonably believes are necessary in order
to discharge its responsibilities to the Funds. Sub-Adviser shall be entitled to
retain originals or copies of records pursuant to the requirements of applicable
laws or regulations.
(b) Quarterly Valuation Reports. Sub-Adviser shall use best
efforts to provide to the Client within TEN (10) business days after the end of
each calendar quarter a statement of the fair market value of the Account as of
the close of such quarter together with an itemized list of the assets in the
Account.
(c) Valuation Methodology. For purposes of this Agreement,
fair market value shall be determined as per the provisions of Schedule C.
(d) Loss Reimbursement. Sub-Adviser shall reimburse the
Account for any material loss caused by Sub-Adviser's breach of the standard of
care set forth in Section 12 that directly and proximately causes delay in the
accurate daily pricing of the Fund(s), providing such material loss was not the
result of action or inaction of other service providers to the Client or the
Fund in failing to observe the instructions of the Sub-Adviser. It is expressly
understood that Sub-Adviser has no responsibility with respect to the daily
pricing of the Fund(s).
(e) Monthly Reports. Sub-Adviser shall provide the Client an
itemized report as to the securities in the account, the fair market value
thereof and the accrued income thereon within TEN (10) business days after the
end of each Calendar Month. The Sub-Adviser shall also use best efforts to
provide, in writing, preliminary performance numbers within FIVE (5) business
days after the end of each Calendar Month. A brief explanation of such results
will be provided quarterly. The requested format will be as mutually agreed by
Sub-Adviser and Client.
VIA Fund Guidelines - March 1, 1999
<PAGE> 4
(f) Reports on Request. Sub-Adviser shall provide to Client
promptly upon request any information available in the records maintained by
Sub-Adviser relating to the Account.
7. PURCHASE AND SALE OF SECURITIES
(a) Selection of Brokers. Except to the extent otherwise
instructed by Client, (it being understood that Client may direct portfolio
transactions for which Sub-Adviser is responsible to any broker that Client may
see fit, subject to best execution), Sub-Adviser shall place all orders for the
purchase and sale of securities on behalf of the Client with brokers or dealers
selected by Sub-Adviser, but not with a person affiliated with Sub-Adviser, as
the term "affiliated person" is defined in the Investment Company Act of 1940
(hereafter an "Affiliate"). Client shall provide a list of "Affiliated Persons"
of Client which Sub-Adviser may rely upon.
(b) Best Execution. In placing such orders, the Sub-Adviser
will give primary consideration to obtaining the most favorable price and
efficient execution. In evaluating the terms available for executing particular
transactions for Client and in selecting brokers and dealers to execute such
transactions, the Sub-Adviser may consider, in addition to commission cost and
execution capabilities, the financial stability and reputation of brokers and
dealers and the brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934, as amended) provided by
brokers and dealers. Sub-Adviser is authorized to pay a broker or dealer who
provides such brokerage and research services a commission for executing a
transaction which is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if Sub-Adviser
determines that such commission is reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer in discharging
responsibilities with respect to the Account.
(c) Bunching Orders. Client agrees that Sub-Adviser may
aggregate sales and purchase orders of Account with similar orders being made
simultaneously for other accounts managed by Sub-Adviser, if in Sub-Adviser's
reasonable judgment such aggregation shall result in an overall economic benefit
to the Account over a reasonable period of time, taking into consideration the
advantageous selling or purchase price, brokerage commission and other expenses.
Client acknowledges that the determination of such economic benefit to Client by
Sub-Adviser represents Sub-Adviser's evaluation that client is benefited by
relatively better purchase or sales prices, lower commission expenses and
beneficial timing of transactions or a combination of these and other factors
over a reasonable period of time.
8. INVESTMENT FEES
(a) Fee Schedule. The compensation of the Sub-Adviser for its
services under this Agreement shall be calculated and paid by the Client from
the assets of the Account in accordance with SCHEDULE C hereto. The Sub-Adviser
shall send a written invoice to the Client within 30 days of the quarter end and
shall be duly compensated from the assets of the Account.
(a) Fee Computation. The Sub-Adviser's fee for each calendar
quarter shall be calculated as provided in SCHEDULE C.
(c) Fee Amendment. Fee rates may be changed from time to time by agreement
between the Client and the Sub-Adviser; provided, however, that no increase in
such rates shall be made during the first calendar year of this Agreement.
(d) Pro Rata Fee. If the Sub-Adviser should serve for less
than the whole of any calendar quarter, its compensation shall be determined as
provided above on the basis of the ending market value of the Account in the
month in which the termination occurs and shall be payable on a pro rata basis
for the period of the calendar quarter for which it has served as Sub-Adviser
hereunder.
VIA Fund Guidelines - March 1, 1999
<PAGE> 5
9. BEST EFFORTS; NON-EXCLUSIVITY OF SERVICES
The Sub-Adviser shall devote its best efforts and such time as
it deems necessary to provide prompt and expert service to the Client. The
services of Sub-Adviser to be provided to Client hereunder are not to be deemed
exclusive and Sub-Adviser shall be free to provide similar services for its own
account and the accounts of other persons and to receive compensation for such
services. Client acknowledges that Sub-Adviser and its members, Affiliates and
employees, and Sub-Adviser's other clients may at any time, have, acquire,
increase, decrease, or dispose of positions in the same investments which are at
the same time being held, acquired for or disposed of under this Agreement for
the Client. Sub-Adviser shall have no obligation to acquire or dispose of a
position in any investment pursuant to this Agreement simply because
Sub-Adviser, its directors, members, Affiliates or employees invest in such a
position for its or their own accounts or for the account of another client.
10. INSIDER TRADING POLICIES AND CODE OF ETHICS
Sub-Adviser hereby represents that it has adopted policies
that meet the requirements of Rule 17j-1 under the Investment Company Act of
1940. Copies of such policies shall be delivered to the Client upon request, and
any violation of such policies by personnel of the Sub-Adviser shall be reported
to the Client.
11. INSURANCE
At all times during the term of this Agreement, Sub-Adviser
shall maintain, at its own cost and expense, professional liability insurance
for errors, omissions, and negligent acts, in an amount and with such terms as
are reasonable within the financial services industry for an investment adviser
managing the amount of aggregate assets managed by Sub-Adviser for Client and
for the Sub-Adviser's other clients.
12. LIMITATION ON LIABILITY AND INDEMNIFICATION
Notwithstanding anything to the contrary herein, in the
absence of willful misconduct, bad faith, or gross negligence in the performance
of its obligations and duties under this Agreement, the Sub-Adviser shall not be
subject to liability to Client or any shareholders of Client or any other person
for any act or omission in the course of rendering services under this Agreement
or for losses sustained in connection with the matters to which this Agreement
relates. However, neither this provision nor any other provision of this
Agreement shall constitute a waiver or limitation of any rights which Client may
have under federal or state securities laws.
Sub-Adviser agrees to indemnify and hold harmless Client, any
affiliated person within the meaning of Section 2(a)(3) of the Investment
Company Act of 1940 ("affiliated person" and the "1940 Act", respectively) of
Client (other than the Sub-Adviser) and each person, if any, who, within the
meaning of Section 15 of the Securities Act of 1933 (the "1933 Act"), controls
the Client ("controlling person") against any an all losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses) to
which the Client, or such affiliated person or controlling person may become
subject under the 1933 Act, the 1940 Act, the Investment Advisers Act of 1940
(the "Advisers Act"), or under any other statute, at common law or otherwise,
which may be based upon the willful misconduct, bad faith or gross negligence by
the Sub-Adviser, provided, however, that no indemnity by the Sub-Adviser is
required for any matter which requires the Client to provide an indemnity under
the paragraph directly below.
VIA Fund Guidelines - March 1, 1999
<PAGE> 6
Client agrees to indemnify and hold harmless Sub-Adviser, its
affiliates and their respective directors, officers, employees and affiliated
persons and controlling persons (collectively, the "Indemnified Sub-Adviser
Parties") against any and all losses, claims, damages, liabilities or litigation
(including reasonable legal and other expenses) to which any of the Indemnified
Sub-Adviser Parties may become subject under the 1933 Act, the 1940 Act, the
Advisers Act, or under any other statute, at common law or otherwise, which does
not require the Sub-Adviser to provide an indemnity under the paragraph directly
preceding this one, provided that none of the Indemnified Sub-Adviser Parties
has acted in a manner that involves willful misconduct, bad faith or negligence
in the performance of its duties and obligations under this Agreement or under
any law applicable to Sub-Adviser.
13. TERM
This Agreement shall be in effect for an initial term of two
years beginning on the Effective Date. This Agreement may be renewed thereafter
for successive one-year periods if such renewal is approved annually by the
majority of those members of the Funds' Board of Directors who are not
"interested persons" as that term is defined in the Investment Company Act of
1940.
14. TERMINATION
This Agreement may be terminated by either party hereto,
without the payment of any penalty, immediately upon notice to the other in the
event of a breach of any provision thereof by the party so notified, or
otherwise by Sub-Adviser upon sixty (60) days' written notice to the Client or
by Client upon 30 days' written notice to Sub-Adviser, except that this
Agreement shall automatically terminate in the event of its assignment, as
provided in Paragraph 19, at the discretion of the Client in the event of
Sub-Adviser's ownership change as provided in Paragraph 19, or upon the
termination of the Funds. Any termination in accordance with the terms of this
Agreement shall not cause the payment of any penalty. Any such termination shall
not affect the status, obligations or liabilities of any party hereto to the
other.
15. REPRESENTATIONS
(a) Sub-Adviser hereby confirms to Client that Sub-Adviser is
a "bank" under Section (202)(a)(2) of the Investment Advisers Act of 1940, and
is therefore exempt under that Act from the registration and annual Form ADV
filing requirements for investment advisers, that it has full power and
authority to enter into and perform fully the terms of this Agreement, and that
the execution of this Agreement on behalf of Sub-Adviser has been duly
authorized and, upon execution and delivery, this Agreement will be binding upon
Sub-Adviser in accordance with its terms.
(b) Client hereby warrants and represents to Sub-Adviser that
(a) it has obtained all applicable licenses, permits, registrations and
approvals that may be required in order to serve in its designated capacities
with respect to the Funds, and shall continue to keep current such licenses,
permit, registrations and approvals for so long as this Agreement is in effect;
(b) it is not prohibited by the 1940 Act or other applicable laws and
regulations from performing the services contemplated by this Agreement; (c) it
will immediately notify that Sub-Adviser of the occurrence of any event that
would disqualify it from serving in its designated capacities with respect to
the Funds; and (d) this Agreement has been duly and validly authorized, executed
and delivered on behalf of Client and is a valid and binding agreement of the
Client enforceable in accordance with its terms .
VIA Fund Guidelines - March 1, 1999
<PAGE> 7
16. NOTICES
Notices or other notifications given or sent under or pursuant
to this Agreement shall be in writing and be deemed to have been given or sent
if delivered to the party at its address listed below in person or by telex or
telecopy receipt of which is confirmed or by mail or by registered mail, return
receipt requested. The addresses of the parties are:
CLIENT:
Vantagepoint Investment Advisers, LLC
Attention: Legal Department
c/o ICMA Retirement Corporation
777 North Capitol Street, NE, Ste. 600
Washington, D.C. 20002-4240
SUB-ADVISER:
Capital Guardian Trust Company
333 South Hope Street
Los Angeles, California 90071
Attention: Treasurer
Each party may change its address by giving notice as herein
required.
17. SOLE INSTRUMENT
This instrument constitutes the sole and only agreement of the
parties to it relating to its object and correctly sets forth the rights,
duties, and obligations of each party to the other as of its date. Any prior
agreements, promises, negotiations or representations not expressly set forth in
this Agreement are of no force or effect.
18. WAIVER OR MODIFICATION
No waiver or modification of this Agreement shall be effective
unless reduced to a written document signed by the party to be charged. No
failure to exercise and no delay in exercising, on the part of any party hereto,
of any right, remedy, power or privilege hereunder, shall operate as a waiver
thereof.
19. ASSIGNMENT AND OWNERSHIP CHANGE
This Agreement shall automatically terminate in the event of
its assignment. Sub-Adviser agrees to provide immediate written notice in the
event of an ownership change. Such an ownership change will entitle, but not
require, the Client to terminate the Agreement immediately or upon notice.
20. USE OF NAME
The parties agree that the name "Capital Guardian Trust
Company", the names of the Sub-Adviser's affiliates within the Capital Group
Companies, Inc., and any derivative or logo or trade or service mark, are
valuable property of the Sub-Adviser and its affiliates are the valuable
property of the Sub-Adviser and its affiliates. Except as may otherwise be
required by applicable law or regulation, the Funds and the Client shall have
the right to use such name(s), derivatives, logos, trade or service marks only
with the prior written approval of the Sub-Adviser, which approval shall not be
unreasonably withheld so long as this Agreement is in effect. Upon termination
of this Agreement, the Funds and the Client shall forthwith cease to use such
name(s), derivatives, logos, trade or service marks. The Funds and the Client
agree that they will review with the Sub-Adviser any advertisement, sales
literature, or notice prior to its use that makes reference to the Sub -Adviser
so that the Sub-Adviser may review the context in which it is referred to, it
being agreed that he Sub-Adviser shall have no responsibility to ensure the
adequacy of
VIA Fund Guidelines - March 1, 1999
<PAGE> 8
the form or content of such materials for purposes of the 1940 Act or other
applicable laws and regulations. If the Funds or the Client makes any
unauthorized use of the Sub-Adviser's name(s), derivatives, logos, trade or
service marks, the parties acknowledge that the Sub-Adviser shall suffer
irreparable harm for which monetary damages are inadequate, and thus the
Sub-Adviser shall be entitled to injunctive relief.
21. COUNTERPARTS
This Agreement may be executed in counterparts each of which
shall be deemed to be an original and all of which, taken together, shall be
deemed to constitute one and the same instrument.
22. CHOICE OF LAW
This Agreement shall be governed by, and the rights of the
parties arising hereunder construed in accordance with, the laws of the State of
Delaware without reference to principles of conflict of laws.
23. YEAR 2000 READINESS
Adviser represents that it has taken, and during the term of
this Agreement will continue to take, commercially reasonable steps designed to
ensure that all mission-critical software or other information technology used
by Adviser in the performance of Adviser's obligations under this Agreement will
be Year 2000 compliant in all material respects prior to the end of 1999.
Adviser represents that it has taken or is taking steps to obtain assurances
from its major service providers that similar efforts were or are being made by
those service providers. Adviser further represents that it will continue
periodically to update Client, upon request, on its Year 2000 readiness efforts.
IN WITNESS WHEREOF, THE PARTIES HERETO EXECUTE THIS AGREEMENT ON March 1, 1999,
and make it effective on the date set forth.
CLIENT SUB-ADVISER
Vantagepoint Capital Guardian Trust Company
Investment Advisers, LLC
by: by:
/s/ GIRARD MILLER /s/ MICHAEL BURIK
- ----------------------------- -------------------------------
(signature) (signature)
President Vice President
- ----------------------------- -------------------------------
(name, title) (name, title)
Date: Date:
VIA Fund Guidelines - March 1, 1999
<PAGE> 9
ADDENDUM DATED March 1, 1999 TO THE
INVESTMENT ADVISORY AGREEMENT DATED March 1, 1999
This addendum modifies and forms a part of the Investment Advisory Agreement
(the "Agreement") dated March 1 1999, between Vantagepoint Investment
Advisers, LLC, a Delaware corporation ("Client"), and Capital Guardian Trust
Company ("Adviser"), relating to the Vantagepoint Funds ("VF").
All terms used in this Addendum have the same meaning given to them in the
Agreement unless specifically noted otherwise.
1. The assets of the Account to be managed by the Adviser under the Agreement
and this Addendum are assets of the International Fund (the "Fund"), a portfolio
of VF. For purposes of Section 8 (Fees) and Schedule C, all payments due to
Adviser shall be solely made from the assets of the Fund.
2. All references in the Agreement and this Addendum to the Investment Policies
to be followed by Adviser in managing the assets of the Fund are hereby deemed
to include the Investment Policies set forth in the Agreement and any Schedules
to the Agreement, as well as the Fund's current prospectus and statement of
additional information as on file with the Securities and Exchange Commission.
This paragraph is not intended to supersede Section 4 of the Agreement.
3. The activities of the Client and the Adviser in managing the assets of the
Fund pursuant to the Agreement and this Addendum shall in all instances be
conducted subject to the supervision and direction of the Board of Directors of
VF.
4. For purposes of Sections 8 (Fees), 12 (Limitation on Liability and
Indemnification), 13 (Term), 14 (Termination), 15 (Representation), 16
(Notices), 18 (Waiver or Modification), 19 (Assignment and Ownership Change),
and 23 (Year 2000 Readiness) of the Agreement, as well as for purposes of
Schedule C of the Agreement, VF is hereby made a party to the Agreement and
shall be entitled to all notices, protections and rights set forth in those
Sections and in Schedule C to which Client is entitled.
5. For purposes of the Agreement and this Addendum, Client and Adviser hereby
agree to maintain all books and records relating to VF that are required to be
maintained in accordance with good practice, applicable federal and state
securities laws, including the Investment Company Act of 1940 and or the
Investment Advisers Act of 1940, and such reasonable instructions as shall be
provided to Adviser by Client from time to time.
6. Adviser shall furnish Client and the Board of Directors of VF such periodic
and special reports and information as either of them may reasonably request,
including such information as shall be reasonably necessary to evaluate the
terms of any advisory agreement between Client and Adviser with respect to
assets of VF.
7. For purposes of the Agreement and this Addendum, the value of the assets of
the Fund managed by Adviser shall be calculated in accordance with the
procedures for determining net asset value per share ("NAV") set forth in the
Fund's prospectus and statement of additional information.
8. Section 6 is hereby amended as follows:
a. 6(a) is amended beginning on line 8 and ending on line 9 by
deleting the parentheses and all language with in the parentheses;
b. 6(b) is deleted in its entirety;
VIA Fund Guidelines - March 1, 1999
<PAGE> 10
c. 6(c) is deleted;
d. 6(d) is changed to 6(b); and
e. 6(e) is deleted and 6(f) is changed to 6(c).
9. Section 8, Investment Fees, is amended by deleting 8(b) and 8(c) in their
entirety and by redesignating 8(d) as 8(b).
10. Section 15, Representations, is amended by the insertion of 15(c) below:
"(c) Adviser hereby acknowledges that VF is registered as an open end
investment company under the Investment Company Act of 1940 and is
subject to taxation as a regulated investment company under the Internal
Revenue Code; Adviser hereby represents that it is familiar with the
requirements of such laws and the rules and regulations thereunder.
<PAGE> 11
SCHEDULE A
THE VANTAGEPOINT FUNDS
INTERNATIONAL FUND
STATEMENT OF INVESTMENT POLICIES
These Investment Policies and Guidelines have been adopted by the Vantagepoint
Funds (the "Funds") to govern the management and administration of the
International Fund by Vantagepoint Investment Advisers, LLC ("VIA"). They may be
reviewed and revised at the discretion of the Directors of the Vantagepoint
Funds (the "Directors"). VIA is responsible for the monitoring and appointment
of subadvisers to handle the day-to-day investment of assets assigned to them.
I. GENERAL DESCRIPTION AND GOALS
The International Fund seeks long-term growth of capital by investing
at least 65% of its total assets in securities of companies whose
principal place of business is located in countries other than in the
United States. The Fund will invest primarily in equity securities,
however, debt securities of foreign governments and private issuers are
permitted. The Fund may invest in securities payable in any currency
and may hold foreign currency.
II. STRUCTURE
The assets of the International Fund shall be managed by two or more
subadvisers. The subadvisers may be retained to manage separate
accounts under discretionary investment advisory contracts. Each
subadviser will be selected for its individual investment management
expertise and each will operate independently of the others. Each
subadviser must either be registered with the Securities and Exchange
Commission (SEC) under the Investment Advisers Act of 1940 or a Bank,
Insurance Company or Trust Company exempt as such from registration.
Each subadviser shall exercise complete management discretion over
assets of the Fund allocated to its account in a manner consistent with
these Investment Policies and Guidelines and with such further
investment limitations and conditions as may be recommended by VIA and
approved by the Directors. Subadvisers will be obligated to manage Fund
assets as if they were subject to the fiduciary duty of care that
applies under the Employee Retirement Income Security Act of 1974
(ERISA) governing pension and profit sharing assets.
VIA Fund Guidelines - March 1, 1999
<PAGE> 12
III. INVESTMENT Strategy
VIA shall select subadvisers that represent a variety of portfolio
management approaches and investment disciplines. These investment
approaches will be combined in a complementary manner to effectively
achieve the investment objective of the Fund. The Fund as a whole will
be more diversified than each individual subadviser's portfolio.
Investment philosophies incorporated in the International Fund may
include "top-down" approaches which focus on macro-economic and
political events. Judgment, quantitative models and purchasing power
parity models are among the factors used to identify currencies and
markets that are overvalued or undervalued relative to the U.S. dollar.
The Fund subadvisers may also use "bottom-up" strategies which
emphasize company and industry dynamics. The future prospects of growth
in earnings per share, security valuation and dividend considerations
of companies will be among the investment criteria of those
subadvisers. Investments may include:
- non-U.S. and U.S. equity securities of large-, mid- and
small-cap companies,
- equity securities in emerging markets,
- securities issued by companies that are "distressed" or
"out of favor",
- futures contracts.
The Fund's performance may be significantly affected by changes in
foreign currency exchange rates.
Certain of the above strategies are not permitted or their use is
limited under the Investment Guidelines for the individual subadvisers.
IV. PERFORMANCE BENCHMARKS
Performance benchmarks will be established for the Fund. These
benchmarks will be recommended by VIA and adopted by the Directors and
will be reviewed and revised as appropriate from time to time. The
current performance benchmarks for the Fund are appended to this
document as Exhibit I.
V. DIRECTOR REVIEW
VIA will report periodically to the Directors on performance of the
Fund against benchmarks and on subadviser results and will evaluate for
the Directors the overall performance of the Fund relative to its
objectives. The Directors will consider such reports and other relevant
factors in appraising the investment objectives and performance of the
Fund.
<PAGE> 13
INVESTMENT GUIDELINES
I. ELIGIBLE INVESTMENTS
A. Equity Securities: Foreign and domestic common stock
(including shares of closed-end funds) or ordinary shares,
preferred stock, common stock equivalents (units of beneficial
interest), American Depository Receipts, convertible preferred
stocks, warrants, and other rights.
B. CASH/CASH EQUIVALENTS: Foreign and domestic fixed income
obligations with maturity less than one year, or short term
accounts managed by a custodian institution.
C. FIXED INCOME: Foreign and domestic fixed income and
convertible fixed income securities with maturities greater
than one year.
D. FINANCIAL FUTURES: Equity index and currency futures.
E. ELIGIBLE PRACTICES: There are no restrictions on subadvisers
as to the following:
- Portfolio turnover.
- Realized gains and losses.
F. Eligible investment limits
<TABLE>
<CAPTION>
MINIMUM NORMAL RANGE MAXIMUM
------- ------------ -------
<S> <C> <C> <C>
Non-U.S. equity securities 65% 85-100% 100%
U.S. equity securities 0% 0-15% 35%
Cash and cash equivalents 0% 0-15% 35%
Fixed income securities 0% 0-10% 25%
Convertible securities 0% 0-15% 25%
</TABLE>
II. PROHIBITED PRACTICES AND SECURITIES
A. Short sales
B. Options
C. Commodities (excluding financial and currency futures)
D. Securities for which there is no established trading market.
E. Securities issued by the subadviser of the Fund or its
affiliates.
F. General partner interests.
G. Direct investments in oil, gas, or other mineral exploration
or development programs.
H. Direct investments in real estate or interests in real estate;
this does not preclude investment in purchases of securities
of real estate investment trusts and other companies holding
real estate or interests in real estate.
13
<PAGE> 14
I. Commingled funds; this does not preclude investment in mutual
funds up to 10% of the Fund's market value at the time of
purchase.
J. Acquisition of securities that would cause exposure to a
single industry to exceed 25% of the Fund's market value at
the time of purchase.
K. In the absence of prior consent of VIA, acquisition securities
of an issuer that would cause more than 5% of the Fund to be
invested in such securities.
L. In the absence of prior consent of VIA, acquisition of more
than 5% of the outstanding shares of any class of equity
securities.
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in Section I or Section II
of these Investment Guidelines may be acquired or employed, as the case
may be, but only if explicitly approved in advance by VIA.
IV. SECURITIES LENDING
Nothing herein shall prevent loans of securities in the International
Fund pursuant to an established securities lending program conducted by
the Fund's custodian.
14
<PAGE> 15
EXHIBIT I
TO THE
STATEMENT OF INVESTMENT POLICIES AND GUIDELINES OF
THE INTERNATIONAL FUND
MARCH 1, 1999
The following standards will be used to measure the performance of the
International Fund:
A. BENCHMARKS
1. The performance benchmark for the Fund is the MSCI EUROPE,
AUSTRALIA, AND FAR EAST (EAFE) INDEX. This benchmark will be
used to measure the Fund's performance net of subadviser fees.
2. A peer group benchmark for the Fund will consist of mutual
funds with characteristics similar to the Fund. The peer group
will be used to measure the Fund's performance relative to
other funds with a similar investment approach. The peer group
benchmark will measure Fund performance net of all fees and
expenses except for plan administration fee.
3. The Lipper International Index, selected by Lipper Analytical
Services, will serve as the performance benchmark for
participant returns, net of all fees and expenses. In
assessing performance against this benchmark, it will be taken
into consideration that Lipper Analytical Services may change
the composition of the Index.
B. TIME HORIZON
The time horizon for performance measurement will be one, three, and
five years.
One Year:
Performance relative to any benchmark established for the International
Fund will vary widely over one-year periods; such variance over short
time periods is expected and acceptable. However, if such variance is
determined to be caused by systemic issues, action may be appropriate.
Three and Five Years:
Performance of the International Fund should track market and universe
benchmarks more closely as the evaluation period lengthens. The ideal
performance objective for the International Fund is to exceed the
returns of all relevant benchmarks; however, shortfalls over various
time periods should be expected in some cases. Underperformance against
a single benchmark over an extended period may be acceptable,
particularly if other benchmarks have been exceeded.
C. INVESTMENT CHARACTERISTICS
The Fund may have investment characteristics which differ from the
general international equity market as measured by the MSCI EAFE index.
Because of the broad mandate given subadvisers in the International
Fund, investment characteristics may be expected to vary widely.
However, the beta of the Fund may be higher than the MSCI EAFE Index.
15
<PAGE> 16
SCHEDULE B
VANTAGEPOINT INVESTMENT ADVISERS, LLC
GROWTH & INCOME FUND
INVESTMENT GUIDELINES
FOR
CAPITAL GUARDIAN TRUST COMPANY
MARCH 1, 1999
Capital Guardian Trust Company seeks to achieve long-term growth of capital and
income. Capital Guardian's investment approach is a blend of value and growth,
offering the opportunity for superior returns primarily through stock selection,
including special situations.
A team methodology is used to manage the portfolio, which allows the portfolio
managers to run concentrated portfolios. Since the managers and research
analysts have different areas of expertise, the overall portfolio is well
diversified.
The firm uses only its own, independent research. The managers focus on a
long-term outlook (four to five years) that allows them to take advantage of
short-term price moves.
I. ELIGIBLE INVESTMENTS
A. EQUITY SECURITIES: Common stock, preferred stock, common stock
equivalents (units of beneficial interest), American
Depository Receipts, convertible preferred stocks, warrants,
and other rights.
B. CASH/CASH EQUIVALENTS: Fixed income obligations with
maturities less than one year, or short term accounts or
securities managed by the custodian institution.
C. FIXED INCOME: Fixed income and convertible fixed income
securities with maturities greater than one year.
D. ELIGIBLE INVESTMENT LIMITS:
<TABLE>
<CAPTION>
MINIMUM NORMAL RANGE MAXIMUM
------- ------------ -------
<S> <C> <C> <C>
Equity securities 65% 80%-100% 100%
Cash and cash equivalents 0% 0%-10% 15%
Fixed income securities 0% 0%-10% 15%
</TABLE>
II. PROHIBITED PRACTICES AND SECURITIES
A. Short sales.
B. Options.
16
<PAGE> 17
C. Commodities (including financial futures).
D. Securities for which there is no established trading market.
E. Foreign securities unless listed and traded in the U.S.
F. Margin purchases and other forms of borrowing; granting of
pledges or other security interests in assets of the
portfolio; use of futures to obtain market leverage.
G. Securities offered by the Adviser or its affiliates.
H. General partner interests.
I. Direct investments in oil, gas, or other mineral exploration
or development programs.
J. Direct investments in real estate or interests in real estate;
this does not preclude investment in purchases of securities
of real estate investment trusts and other companies holding
real estate or interests in real estate.
K. Acquisition of securities of an issuer that would cause more
than 5% of the portfolio at the time of purchase to be
invested in such securities.
L. Acquisition of more than 5% of the outstanding stock of any
issuer.
M. Acquisition of securities that would cause exposure to a
single industry to exceed 25% of the portfolio at the time of
purchase.
N. Commingled and registered mutual funds.
Exceptions to the above listed eligible investments and prohibited
securities or practices may be permitted with prior consent from VIA.
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in Section I or Section II
of these Investment Guidelines may be acquired or employed, as the case
may be, but only if explicitly approved in advance by VIA.
IV. PERFORMANCE BENCHMARK AND MONITORING CRITERIA
The standards outlined in this section are subject to review by VIA as
and when appropriate.
A. PERFORMANCE BENCHMARKS
The market benchmark for measuring investment performance for
the Adviser is the STANDARD & POOR'S 500 INDEX. The Adviser is
expected to outperform the benchmark net of Adviser fees over
rolling three and five-year periods.
B. PEER GROUPS
VIA will develop an appropriate peer group against which to
compare investment performance. The peer group will consist of
other managers with a similar investment
17
<PAGE> 18
approach. The managers within the peer group will be reviewed
periodically for consistency of style and may be changed as
and when deemed appropriate by VIA. Such changes will be
communicated to the Adviser.
1. The peer group will consist primarily of mutual
funds, however separate account managers may be
included.
2. VIA will track relative net-of-fee performance
quarterly and evaluate performance on a trailing one,
three and five-year basis.
3. VIA will compare the Adviser's net performance with
the one-year mean return of the peer group.
The current peer group consists of the following managers:
(under review)
18
<PAGE> 19
FEE SCHEDULE
FOR
CAPITAL GUARDIAN TRUST COMPANY
The Advisor's quarterly fee shall be calculated based on the average daily
market value of the assets under management as provided by the Custodian, based
on the following annual rate.
Growth & Income*
$25 million 0.55 percent
Next $25 million 0.40 percent
Over $50 million 0.23 percent
International*
$25 million 0.75 percent
Next $25 million 0.60 percent
Next $200 million 0.43 percent
Over $250 million 0.38 percent
* For purposes of calculating the fee, all accounts under management will be
aggregated and a fee discount shall be applied.
EXAMPLE OF FEE CALCULATION (HYPOTHETICAL AMOUNTS)
January 1, 1999 $190,000,000 End-of-Day Market Value
January 2, 1999 $190,678,462 End-of-Day Market Value
January 3, 1999 $190,796,123 End-of-Day Market Value
. . .
March 29, 1999 $194,512,214 End-of-Day Market Value
March 30, 1999 $194,720,978 End-of-Day Market Value
March 31, 1999 $194,901,556 End-of-Day Market Value
Quarterly Daily Average $192,601,555
$100 million 0.50 percent $500,000
Next $100 million 0.45 percent $416,707
Over $200 million 0.40 percent -------
Annual Fee $916,707
One-Fourth Annual Fee $229,177
19
<PAGE> 1
EXHIBIT (d)(6)
INVESTMENT ADVISORY AGREEMENT
This Investment Advisory Agreement is made as of the
__________ day of _______________, 1999, by and between VANTAGEPOINT INVESTMENT
ADVISERS, LLC, a Delaware limited liability company (hereafter "Client"), and
LAZARD ASSET MANAGEMENT, a division of Lazard Freres & Co., a New York limited
liability company, at 30 Rockefeller Plaza, New York, NY 10112-6300 (hereafter
"Adviser") and is effective as of March 1,1999 (the "Effective Date").
WHEREAS, the Vantagepoint Funds (the "Funds") is a Delaware
Business Trust registered as an open-end management investment company under the
Investment Company Act of 1940;
WHEREAS, Client is party to an Investment Adviser Agreement
with the Funds for management of the investment operations of the Funds
including the establishment and operation of investment portfolios for the Funds
and the entering into of contracts with sub-advisers to assist in managing the
investment of the Funds' property;
WHEREAS, Client and Adviser wish to enter into an agreement
pursuant to which Adviser will provide such assistance to Client.
AGREEMENTS:
In consideration of the performance by the Adviser as
Investment Adviser of certain assets held by the Funds, the Client has
authorized the Adviser to manage the securities and other assets as follows:
1. ACCOUNT
The account with respect to which the Adviser shall perform
its services shall consist of those assets of the Funds which the Client
determines to assign to an account with the Adviser, together with all income
earned by those assets and all realized and unrealized capital appreciation
related to those assets (hereafter "Account"). From time to time, the Client
may, upon notice to the Adviser, make additions to the Account and may, upon
notice to the Adviser, make withdrawals from the Account.
2. APPOINTMENT STATUS, POWERS OF ADVISER
(a) Purchase and Sale. Client hereby appoints Adviser to
manage the Account on the terms and conditions set forth in this Agreement.
Subject to the restrictions set forth in this Agreement, and acting always in
conformity with the Investment Policies provided in Paragraph 4, Adviser shall
supervise and direct investment of the Account. Client hereby grants the Adviser
complete, unlimited and unrestricted discretion and authority to select
portfolio securities with respect to the Account including the power to acquire
(by purchase, exchange, subscription or otherwise), to hold and dispose (by
sale, exchange or otherwise). The Adviser will consult with Client, upon the
request of the Client, concerning any transactions it makes with respect to the
investment of the Account.
(b) Limitation on Authority. Except as expressly authorized
herein or hereafter from time to time, Adviser shall for all purposes be deemed
an independent contractor and shall have no authority to act for or to represent
the Client or the Funds in any way or otherwise to be an agent of the Client or
the Funds.
(c) Voting. Unless otherwise instructed by Client, Adviser
shall have discretion to take any action or render any advice with respect to
the voting of shares or the execution of proxies solicited from time to time by,
or with respect to, the issuers of securities held in the Account. Adviser will
report annually to Client regarding such voting.
<PAGE> 2
(d) Key Personnel. Adviser agrees that the following key
personnel have primary responsibility with respect to the investment management
of the Account. If the(se) individual(s) is unable to devote sufficient time to
maintain primary responsibility of the Account, the Adviser must give Client
written advance notice, or prompt notice within three (3) business days, of the
name of the person designated by the Adviser to replace or supplement the
individual(s). In addition, the Adviser will give Client prompt written notice
of the replacement of any employee of the Adviser who has direct supervisory
responsibility for the key personnel or who has responsibility for setting
investment policy.
Key Personnel:
Herbert W. Gullquist
John R. Reinsberg
3. ACCEPTANCE OF APPOINTMENT
Adviser accepts the appointment as an investment adviser and
agrees to use its best efforts and professional judgment to make timely
investment transactions for the Client with respect to the investments of the
Account, and to provide the other services required of the Adviser under the
provisions of this Agreement.
4. INVESTMENT POLICIES
(a) Investment Objectives. The Adviser will adhere to the
investment objectives, guidelines, restrictions, and liquidity requirements of
the Funds as specified by the Client on SCHEDULE A hereto, and as restated or
modified from time to time by the Client in written notice to the Adviser.
(b) Funds' Agreement and Declaration of Trust. The Adviser
will adhere to all specific provisions established in the Funds' Agreement and
Declaration of Trust and Registration Statement as filed with the Securities and
Exchange Commission on Form N-1A ("Registration Statement), both of which are
hereby incorporated by reference and made a part of this Agreement. The Client
shall give written notice to the Adviser of any amendments to the Agreement and
Declaration of Trust or Registration Statement, which amendments, upon their
receipt by the Adviser, shall be binding on the Adviser.
(c) Investment Adviser Guidelines. The Adviser shall use act
in accordance with the specific statement of Investment Adviser Guidelines,
SCHEDULE B, as restated or modified from time to time by the Client in written
notice to the Adviser. The Client retains the right, on written notice to the
Adviser, to modify any such objectives, guidelines, restrictions, and liquidity
requirements in any manner at any time.
(d) Conflict in Policies. If a conflict in policies or
guidelines referenced herein occurs, the Registration Statement shall govern for
purposes of this Agreement.
5. CUSTODY, DELIVERY, RECEIPT OF SECURITIES
(a) Custody Responsibilities. The Client shall designate one
or more custodians to hold the Account. The Custodian, as designated by the
Client will be responsible for the custody, receipt and delivery of securities
and other assets of the Funds (including the Account), and the Adviser shall
have no authority, responsibility or obligation with respect to the custody,
receipt or delivery of securities or other assets of the Funds (including the
Account). In the event that any cash or securities of the Funds are delivered to
the Adviser, it will promptly deliver the same over to the Custodian, in the
name of the Funds.
VIA Fund Guidelines - March 1, 1999
<PAGE> 3
(b) Securities Transactions. All securities transactions for
the Account will be consummated by payment to or delivery by the Funds of cash
or securities due to or from the Account. The Adviser will notify the Custodian
of all orders to brokers for the Account by 11:00 am EST on the day following
the trade date and will affirm the trade within one (1) business day after the
trade date (T+1).
(c) Tri-Party Agreement. The Adviser is authorized to enter
into Tri-Party Repurchase Agreements and sign the standard PSA tri-party
agreement (the "Tri-Party Agreement") on behalf of the Client and the
subcustodian thereunder is authorized to act as a subcustodian for the Account's
assets involved in any tri-party repurchase agreement pursuant to such Tri-Party
Agreement.
6. RECORD KEEPING AND REPORTING
(a) Records. Adviser will maintain proper and complete records
relating to the furnishing of services under this Agreement, including records
with respect to the acquisition, holding and disposition of securities for
Client. All records maintained pursuant to this Agreement shall be subject to
examination by Client and by persons authorized by it at all times upon
reasonable notice. Except as expressly authorized in this Agreement or as
required by applicable law, regulation or order of court or as directed by other
party in writing, Adviser and Client shall keep confidential the records and
other information obtained by reason of this Agreement (including, with respect
to Client, the investment information and transactions executed by Adviser).
Upon termination of this Agreement, Adviser shall promptly, upon demand, return
to Client all records Client reasonably believes are necessary in order to
discharge its responsibilities to the Funds. Adviser shall be entitled to retain
originals or copies of records pursuant to the requirements of applicable laws
or regulations.
(b) Quarterly Valuation Reports. Adviser shall use reasonable
best efforts to provide to the Client within ten (10) business days after the
end of each calendar quarter a statement of the fair market value of the Account
as of the close of such quarter together with an itemized list of the assets in
the Account.
(c) Valuation Methodology. For purposes of this Agreement,
fair market value shall mean, as of a particular date, the value of the Account
(determined in accordance with generally accepted accounting principles
consistently applied), plus income accrued thereon less the liabilities related
to the assets in the Account. Adviser shall reconcile security and cash
positions, and market values, and report discrepancies to the Client.
(d) Loss Reimbursement. Adviser shall reimburse the Account
for any loss caused by Adviser's negligent actions that cause delay in the
accurate daily pricing of the Fund(s).
(e) Monthly Reports. Adviser shall provide the Client an
itemized report as to the securities in the account, the fair market value
thereof and the accrued income thereon within TEN (10) business days after the
end of each Calendar Month. The Adviser shall also use reasonable best efforts
to provide, in writing, preliminary performance numbers and a brief explanation
of these results within FIVE (5) business days after the end of each Calendar
Month. The requested format will be as mutually agreed by Adviser and Client.
For purposes of this Agreement, fair market value shall mean, as of a particular
date, the value of the Account plus income accrued thereon less the liabilities
related to the assets in the Account.
(f) Reports on Request. Adviser shall provide to Client
promptly upon request any information available in the records maintained by
Adviser relating to the Account.
VIA Fund Guidelines - March 1, 1999
<PAGE> 4
7. PURCHASE AND SALE OF SECURITIES
(a) Selection of Brokers. Except to the extent otherwise
instructed by Client, (it being understood that Client may, in its absolute
discretion, direct portfolio transactions for which Adviser is responsible to
any broker that Client may see fit), Adviser shall place all orders for the
purchase and sale of securities on behalf of the Client with brokers or dealers
selected by Adviser, but not with a person affiliated with Adviser, as the term
"affiliated person" is defined in the Investment Company Act of 1940 (hereafter
an "Affiliate").
(b) Best Execution. In placing such orders, the Adviser will
give primary consideration to obtaining the most favorable price and efficient
execution. In evaluating the terms available for executing particular
transactions for Client and in selecting brokers and dealers to execute such
transactions, the Adviser may consider, in addition to commission cost and
execution capabilities, the financial stability and reputation of brokers and
dealers and the brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934, as amended) provided by
brokers and dealers. Adviser is authorized to pay a broker or dealer who
provides such brokerage and research services a commission for executing a
transaction which is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if Adviser determines
that such commission is reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer in discharging
responsibilities with respect to the Account.
(c) Bunching Orders. Client agrees that Adviser may aggregate
sales and purchase orders of Account with similar orders being made
simultaneously for other accounts managed by Adviser, if in Adviser's reasonable
judgment such aggregation shall result in an overall economic benefit to the
Account taking into consideration the advantageous selling or purchase price,
brokerage commission and other expenses. Client acknowledges that the
determination of such economic benefit to Client by Adviser represents Adviser's
evaluation that client is benefited by relatively better purchase or sales
prices, lower commission expenses and beneficial timing of transactions or a
combination of these and other factors.
8. INVESTMENT FEES
(a) Fee Schedule. The compensation of the Adviser for its
services under this Agreement shall be calculated and paid by the Client from
the assets of the Account in accordance with SCHEDULE C hereto. The Adviser
shall send a written invoice to the Client within 30 days of the quarter end and
shall be duly compensated from the assets of the Account.
(b) Fee Computation. The Adviser's fee for each calendar
quarter shall be calculated as set forth in Schedule C.
(c) Fee Amendment. Fee rates may be changed from time to time
by agreement between the Client and the Adviser; provided, however, that no
increase in such rates shall be made during the first calendar year of this
Agreement.
(d) Pro Rata Fee. If the Adviser should serve for less than
the whole of any calendar quarter, its compensation shall be determined as
provided above on the basis of the ending market value of the Account in the
month in which the termination occurs and shall be payable on a pro rata basis
for the period of the calendar quarter for which it has served as Adviser
hereunder.
VIA Fund Guidelines - March 1, 1999
<PAGE> 5
9. BEST EFFORTS; NON-EXCLUSIVITY OF SERVICES
The Adviser shall devote its reasonable best efforts and such
time as it deems necessary to provide prompt and expert service to the Client.
The services of Adviser to be provided to Client hereunder are not to be deemed
exclusive and Adviser shall be free to provide similar services for its own
account and the accounts of other persons and to receive compensation for such
services. Client acknowledges that Adviser and its members, Affiliates and
employees, and Adviser's other clients may at any time, have, acquire, increase,
decrease, or dispose of positions in the same investments which are at the same
time being held, acquired for or disposed of under this Agreement for the
Client. Adviser shall have no obligation to acquire or dispose of a position in
any investment pursuant to this Agreement simply because Adviser, its directors,
members, Affiliates or employees invest in such a position for its or their own
accounts or for the account of another client.
10. INSIDER TRADING POLICIES AND CODE OF ETHICS
Adviser hereby represents that it has adopted policies that
meet the requirements of Rule 17j-1 under the Investment Company Act of 1940.
Copies of such policies shall be delivered to the Client, and any violation of
such policies by personnel of the Adviser shall be reported to the Client.
11. INSURANCE
At all times during the term of this Agreement, Adviser shall
maintain, at its own cost and expense, professional liability insurance for
errors, omissions, and negligent acts, in an amount and with such terms as are
standard in the financial services industry for an investment adviser managing
the amount of aggregate assets managed by Adviser for Client and for the
Adviser's other clients.
12. LIABILITY
Adviser shall not be liable to Client for honest mistakes of
judgment or for action or inaction taken in good faith for a purpose that the
Adviser reasonably believes to be in the best interests of the Client. Adviser
shall be liable to Client for any liability, damages or expenses of Client
arising out of the negligence, malfeasance or violation of applicable law by
Adviser or any of its officers, employees or Affiliates in providing management
under this Agreement. However, neither this provision nor any other provision of
this Agreement shall constitute a waiver or limitation of any rights which
Client may have under federal or state securities laws.
13. TERM
This Agreement shall be in effect for an initial term of two
years beginning on the Effective Date. This Agreement may be renewed thereafter
for successive one-year periods if such renewal is approved annually by the
majority of those members of the Funds' Board of Directors who are not
"interested persons" as that term is defined in the Investment Company Act of
1940.
14. TERMINATION
This Agreement may be terminated by either party hereto,
without the payment of any penalty, immediately upon notice to the other in the
event of a breach of any provision thereof by the party so notified, or
otherwise by Adviser upon sixty (60) days' written notice to the Client or by
Client upon 30 days' written notice to Adviser, except that this Agreement shall
automatically terminate in the event of its
VIA Fund Guidelines - March 1, 1999
<PAGE> 6
assignment, as provided in Paragraph 19, at the discretion of the Client in the
event of Adviser's ownership change as provided in Paragraph 19, or upon the
termination of the Funds. Any termination in accordance with the terms of this
Agreement shall not cause the payment of any penalty. Any such termination shall
not affect the status, obligations or liabilities of any party hereto to the
other.
15. REPRESENTATIONS
(a) Adviser hereby confirms to Client that Adviser is
registered as an investment adviser under the Investment Advisers Act of 1940,
that it has full power and authority to enter into and perform fully the terms
of this Agreement and that the execution of this Agreement on behalf of Adviser
has been duly authorized and, upon execution and delivery, this Agreement will
be binding upon Adviser in accordance with its terms.
(b) Client hereby confirms to Adviser that it has full power
and authority to enter into this Agreement and that the execution of this
Agreement on behalf of Client has been fully authorized and, upon execution and
delivery, this Agreement will be binding upon Client in accordance with its
terms. Client will inform Adviser of all entities considered affiliated persons
of the Fund and will notify Adviser of any changes to such list of affiliates.
16. NOTICES
Notices or other notifications given or sent under or pursuant
to this Agreement shall be in writing and be deemed to have been given or sent
if delivered to the party at its address listed below in person or by telex or
telecopy receipt of which is confirmed or by mail or by registered mail, return
receipt requested. The addresses of the parties are:
CLIENT:
Vantagepoint Investment Advisers, LLC
Attention: Legal Department
c/o ICMA Retirement Corporation
777 North Capitol Street, NE, Ste. 600
Washington, D.C. 20002-4240
ADVISER:
Lazard Asset Management
30 Rockefeller Plaza
New York, NY 10012-6300
Attn: Jim Giallonza, Mutual Fund Services Group
Each party may change its address by giving notice as herein required.
17. SOLE INSTRUMENT
This instrument constitutes the sole and only agreement of the
parties to it relating to its object and correctly sets forth the rights,
duties, and obligations of each party to the other as of its date. Any prior
agreements, promises, negotiations or representations not expressly set forth in
this Agreement are of no force or effect.
VIA Fund Guidelines - March 1, 1999
<PAGE> 7
18. WAIVER OR MODIFICATION
No waiver or modification of this Agreement shall be effective
unless reduced to a written document signed by the party to be charged. No
failure to exercise and no delay in exercising, on the part of any party hereto,
of any right, remedy, power or privilege hereunder, shall operate as a waiver
thereof. Only the Chief Executive Officer, has authority on behalf of Client to
modify or waive any of the provisions of the Agreement.
19. ASSIGNMENT AND OWNERSHIP CHANGE
This Agreement shall automatically terminate in the event of
its assignment. Adviser agrees to provide immediate written notice in the event
of an ownership change. Such an ownership change will entitle, but not require,
the Client to terminate the Agreement immediately or upon notice.
20. COUNTERPARTS
This Agreement may be executed in counterparts each of which
shall be deemed to be an original and all of which, taken together, shall be
deemed to constitute one and the same instrument.
21. CHOICE OF LAW
This Agreement shall be governed by, and the rights of the
parties arising hereunder construed in accordance with, the laws of the State of
Delaware without reference to principles of conflict of laws.
22. YEAR 2000 WARRANTY
Adviser certifies that it has taken, or will take, the steps
set forth in Adviser's SEC Form ADV - Y2K with respect to the Year 2000 Problem.
The Adviser will provide Client with a copy of Adviser's Form ADV - Y2K, and
will provide periodic updates on the Y2K issue upon request.
IN WITNESS WHEREOF, THE PARTIES HERETO EXECUTE THIS AGREEMENT ON February 25,
1999 and make it effective on the date set forth.
CLIENT ADVISER
Vantagepoint Lazard Asset Management
Investment Advisers, LLC.
by: by:
/s/ GIRARD MILLER /s/ EILEEN ALEXANDERSON
- ------------------------------ ---------------------------
(signature) (signature)
President Managing Director
- ------------------------------ ---------------------------
(name, title) (name, title)
Date: Date:
VIA Fund Guidelines - March 1, 1999
<PAGE> 8
ADDENDUM DATED March 1 TO THE
INVESTMENT ADVISORY AGREEMENT DATED March 1
This addendum modifies and forms a part of the Investment Advisory Agreement
(the "Agreement") dated March 1 1999, between Vantagepoint Investment
Advisers, LLC, a Delaware corporation ("Client"), and Lazard Asset Management
("Adviser"), relating to the Vantagepoint Funds ("VF").
All terms used in this Addendum have the same meaning given to them in the
Agreement unless specifically noted otherwise.
1. The assets of the Account to be managed by the Adviser under the Agreement
and this Addendum are assets of the International Fund (the "Fund"), a portfolio
of VF. For purposes of Section 8 (Fees) and Schedule C, all payments due to
Adviser shall be solely made from the assets of the Fund.
2. All references in the Agreement and this Addendum to the Investment Policies
to be followed by Adviser in managing the assets of the Fund are hereby deemed
to include the Investment Policies set forth in the Agreement and any Schedules
to the Agreement, as well as the Fund's current prospectus and statement of
additional information as on file with the Securities and Exchange Commission.
3. The activities of the Client and the Adviser in managing the assets of the
Fund pursuant to the Agreement and this Addendum shall in all instances be
conducted subject to the supervision and direction of the Board of Directors of
VF.
4. For purposes of Sections 8 (Fees), 12 (Liability), 13 (Term), 14
(Termination), 15 (Representation), 16 (Notices), 18 (Waiver or Modification),
19 (Assignment and Ownership Change), and 22 (Year 2000 Warranty) of the
Agreement, as well as for purposes of Schedule C of the Agreement, VF is hereby
made a party to the Agreement and shall be entitled to all notices, protections
and rights set forth in those Sections and in Schedule C to which Client is
entitled.
5. For purposes of the Agreement and this Addendum, Client and Adviser hereby
agree to maintain all books and records relating to VF that are required to be
maintained in accordance with good practice, applicable federal and state
securities laws, including the Investment Company Act of 1940 and or the
Investment Advisers Act of 1940, and such reasonable instructions as shall be
provided to Adviser by Client from time to time.
6. Adviser shall furnish Client and the Board of Directors of VF such periodic
and special reports and information as either of them may request, including
such information as shall be reasonably necessary to evaluate the terms of any
advisory agreement between Client and Adviser with respect to assets of VF.
7. For purposes of the Agreement and this Addendum, the value of the assets of
the Fund managed by Adviser shall be calculated in accordance with the
procedures for determining net asset value per share ("NAV") set forth in the
Fund's prospectus and statement of additional information.
8. Section 6 is hereby amended as follows:
a. 6(a) is amended beginning on line 8 and ending on line 9 by
deleting the parentheses and all language with in the
parentheses;
b. 6(b) is deleted in its entirety;
c. 6(c) is redesignated 6(b) Reconciliations, the first sentence
is deleted;
d. 6(d) is changed to 6(c); and
e. 6(e) is deleted and 6(f) is changed to 6(d).
VIA Fund Guidelines - March 1, 1999
<PAGE> 9
9. Section 8, Investment Fees, is amended by deleting 8(b) and 8(c) in their
entirety and by redesignating 8(d) as 8(b).
10. Section 15, Representations, is amended by the insertion of 15(c) below:
"(c) Adviser hereby acknowledges that VF is registered as an open end
investment company under the Investment Company Act of 1940 and is
subject to taxation as a regulated investment company under the
Internal Revenue Code; Adviser hereby represents that it is familiar
with the requirements of such laws and the rules and regulations
thereunder as they apply to VF and has systems and procedures in place
reasonably designed to permit Adviser, Client, and VF to comply with
such requirement."
<PAGE> 10
Schedule A
THE VANTAGEPOINT FUNDS
INTERNATIONAL FUND
STATEMENT OF INVESTMENT POLICIES
These Investment Policies and Guidelines have been adopted by the Vantagepoint
Funds (the "Funds") to govern the management and administration of the
International Fund by Vantagepoint Investment Advisers, LLC ("VIA"). They may be
reviewed and revised at the discretion of the Directors of the Vantagepoint
Funds (the "Directors"). VIA is responsible for the monitoring and appointment
of subadvisers to handle the day-to-day investment of assets assigned to them.
I. GENERAL DESCRIPTION AND GOALS
The International Fund seeks long-term growth of capital by investing
at least 65% of its total assets in securities of companies whose
principal place of business is located in countries other than in the
United States. The Fund will invest primarily in equity securities,
however, debt securities of foreign governments and private issuers are
permitted. The Fund may invest in securities payable in any currency
and may hold foreign currency.
II. STRUCTURE
The assets of the International Fund shall be managed by two or more
subadvisers. The subadvisers may be retained to manage separate
accounts under discretionary investment advisory contracts. Each
subadviser will be selected for its individual investment management
expertise and each will operate independently of the others. Each
subadviser must either be registered with the Securities and Exchange
Commission (SEC) under the Investment Advisers Act of 1940 or a Bank,
Insurance Company or Trust Company exempt as such from registration.
Each subadviser shall exercise complete management discretion over
assets of the Fund allocated to its account in a manner consistent with
these Investment Policies and Guidelines and with such further
investment limitations and conditions as may be recommended by VIA and
approved by the Directors. Subadvisers will be obligated to manage Fund
assets as if they were subject to the fiduciary duty of care that
applies under the Employee Retirement Income Security Act of 1974
(ERISA) governing pension and profit sharing assets.
VIA Fund Guidelines - March 1, 1999
<PAGE> 11
III. INVESTMENT Strategy
VIA shall select subadvisers that represent a variety of portfolio
management approaches and investment disciplines. These investment
approaches will be combined in a complementary manner to effectively
achieve the investment objective of the Fund. The Fund as a whole will
be more diversified than each individual subadviser's portfolio.
Investment philosophies incorporated in the International Fund may
include "top-down" approaches which focus on macro-economic and
political events. Judgment, quantitative models and purchasing power
parity models are among the factors used to identify currencies and
markets that are overvalued or undervalued relative to the U.S. dollar.
The Fund subadvisers may also use "bottom-up" strategies which
emphasize company and industry dynamics. The future prospects of growth
in earnings per share, security valuation and dividend considerations
of companies will be among the investment criteria of those
subadvisers. Investments may include:
- non-U.S. and U.S. equity securities of large-, mid-
and small-cap companies,
- equity securities in emerging markets,
- securities issued by companies that are "distressed"
or "out of favor",
- futures contracts.
The Fund's performance may be significantly affected by changes in
foreign currency exchange rates.
Certain of the above strategies are not permitted or their use is
limited under the Investment Guidelines for the individual subadvisers.
IV. PERFORMANCE BENCHMARKS
Performance benchmarks will be established for the Fund. These
benchmarks will be recommended by VIA and adopted by the Directors and
will be reviewed and revised as appropriate from time to time. The
current performance benchmarks for the Fund are appended to this
document as Exhibit I.
V. DIRECTOR REVIEW
VIA will report periodically to the Directors on performance of the
Fund against benchmarks and on subadviser results and will evaluate for
the Directors the overall performance of the Fund relative to its
objectives. The Directors will consider such reports and other relevant
factors in appraising the investment objectives and performance of the
Fund.
<PAGE> 12
INVESTMENT GUIDELINES
I. ELIGIBLE INVESTMENTS
A. EQUITY SECURITIES: Foreign and domestic common stock
(including shares of closed-end funds) or ordinary shares,
preferred stock, common stock equivalents (units of beneficial
interest), American Depository Receipts, convertible preferred
stocks, warrants, and other rights.
B. CASH/CASH EQUIVALENTS: Foreign and domestic fixed income
obligations with maturity less than one year, or short term
accounts managed by a custodian institution.
C. FIXED INCOME: Foreign and domestic fixed income and
convertible fixed income securities with maturities greater
than one year.
D. FINANCIAL FUTURES: Equity index and currency futures.
E. ELIGIBLE PRACTICES: There are no restrictions on subadvisers
as to the following:
- Portfolio turnover.
- Realized gains and losses.
F. ELIGIBLE INVESTMENT LIMITS
<TABLE>
<CAPTION>
MINIMUM NORMAL RANGE MAXIMUM
------- ------------ -------
<S> <C> <C> <C>
Non-U.S. equity securities 65% 85-100% 100%
U.S. equity securities 0% 0-15% 35%
Cash and cash equivalents 0% 0-15% 35%
Fixed income securities 0% 0-10% 25%
Convertible securities 0% 0-15% 25%
</TABLE>
II. PROHIBITED PRACTICES AND SECURITIES
A. Short sales
B. Options
C. Commodities (excluding financial and currency futures)
D. Securities for which there is no established trading market.
E. Securities issued by the subadviser of the Fund or its affiliates.
F. General partner interests.
G. Direct investments in oil, gas, or other mineral exploration or
development programs.
H. Direct investments in real estate or interests in real estate; this
does not preclude investment in purchases of securities of real estate
investment trusts and other companies holding real estate or interests
in real estate.
12
<PAGE> 13
I. Commingled funds; this does not preclude investment in mutual funds up
to 10% of the Fund's market value at the time of purchase.
J. Acquisition of securities that would cause exposure to a single
industry to exceed 25% of the Fund's market value at the time of
purchase.
K. In the absence of prior consent of VIA, acquisition securities of an
issuer that would cause more than 5% of the Fund to be invested in such
securities.
L. In the absence of prior consent of VIA, acquisition of more than 5% of
the outstanding shares of any class of equity securities.
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in Section I or Section II
of these Investment Guidelines may be acquired or employed, as the case
may be, but only if explicitly approved in advance by VIA.
IV. SECURITIES LENDING
Nothing herein shall prevent loans of securities in the International
Fund pursuant to an established securities lending program conducted by
the Fund's custodian.
13
<PAGE> 14
EXHIBIT I
TO THE
STATEMENT OF INVESTMENT POLICIES AND GUIDELINES OF
THE INTERNATIONAL FUND
March 1, 1999
The following standards will be used to measure the performance of the
International Fund:
A. BENCHMARKS
1. The performance benchmark for the Fund is the MSCI EUROPE,
AUSTRALIA, AND FAR EAST (EAFE) INDEX. This benchmark will be
used to measure the Fund's performance net of subadviser fees.
2. A peer group benchmark for the Fund will consist of mutual
funds with characteristics similar to the Fund. The peer group
will be used to measure the Fund's performance relative to
other funds with a similar investment approach. The peer group
benchmark will measure Fund performance net of all fees and
expenses except for plan administration fee.
3. The Lipper International Index, selected by Lipper Analytical
Services, will serve as the performance benchmark for
participant returns, net of all fees and expenses. In
assessing performance against this benchmark, it will be taken
into consideration that Lipper Analytical Services may change
the composition of the Index.
B. TIME HORIZON
The time horizon for performance measurement will be one, three, and
five years.
One Year:
Performance relative to any benchmark established for the International
Fund will vary widely over one-year periods; such variance over short
time periods is expected and acceptable. However, if such variance is
determined to be caused by systemic issues, action may be appropriate.
14
<PAGE> 15
Three and Five Years:
Performance of the International Fund should track market and universe
benchmarks more closely as the evaluation period lengthens. The ideal
performance objective for the International Fund is to exceed the
returns of all relevant benchmarks; however, shortfalls over various
time periods should be expected in some cases. Underperformance against
a single benchmark over an extended period may be acceptable,
particularly if other benchmarks have been exceeded.
C. INVESTMENT CHARACTERISTICS
The Fund may have investment characteristics which differ from the
general international equity market as measured by the MSCI EAFE index.
Because of the broad mandate given subadvisers in the International
Fund, investment characteristics may be expected to vary widely.
However, the beta of the Fund may be higher than the MSCI EAFE Index.
15
<PAGE> 16
SCHEDULE B
VANTAGEPOINT INVESTMENT ADVISERS, LLC
INTERNATIONAL FUND
INVESTMENT GUIDELINES
FOR
LAZARD ASSET MANAGEMENT
MARCH 1, 1999
Lazard Asset Management identifies financially productive companies that are
inexpensively priced with an emphasis on undervalued markets around the world.
Quantitative screens are combined with fundamental analysis to identify
companies that meet Lazard's criteria for value, have demonstrated sustainable
earnings, and have potential for future success. The management team then uses a
risk-controlled process to construct a portfolio of 60 to 80 stocks that they
believe represent the best potential for price appreciation. The portfolio tends
to remain fully invested.
I. ELIGIBLE INVESTMENTS
A. EQUITY SECURITIES: U.S. and non-U.S. common stock, preferred
stock, common stock equivalents (units of beneficial
interest), American Depository Receipts, convertible preferred
stocks, warrants, and other rights.
B. CASH/CASH EQUIVALENTS: U.S. and non-U.S. fixed income
obligations with maturities less than one year, or short term
accounts or securities managed by the custodian institution.
C. FIXED INCOME: U.S. and non-U.S. fixed income and convertible
fixed income securities with maturities greater than one year.
D. OTHER INVESTMENTS: Options - Forward contracts and futures
contracts for currency management.
E. ELIGIBLE INVESTMENT LIMITS:
<TABLE>
<CAPTION>
MINIMUM NORMAL RANGE MAXIMUM
------- ------------ -------
<S> <C> <C> <C>
Equity securities 80% 90%-100% 100%
Cash and cash equivalents 0% 0%-10% 15%
Fixed income securities 0% 0%-10% 15%
</TABLE>
II. PROHIBITED PRACTICES AND SECURITIES
A. Short sales.
B. Options unless used for currency management.
C. Commodities (including financial futures).
D. Securities for which there is no established trading market.
16
<PAGE> 17
E. Securities in non-EAFE Index countries with the exception of
Canada.
F. Margin purchases and other forms of borrowing; granting of
pledges or other security interests in assets of the
portfolio; use of futures to obtain market leverage.
G. Securities offered by the Adviser or its affiliates.
H. General partner interests.
I. Direct investments in oil, gas, or other mineral exploration
or development programs.
J. Direct investments in real estate or interests in real estate;
this does not preclude investment in purchases of securities
of real estate investment trusts and other companies holding
real estate or interests in real estate.
K. In the absence of prior consent of VIA, acquisition of
securities of an issuer that would cause more than 5% of the
portfolio at the time of purchase to be invested in such
securities.
L. In the absence of prior consent of VIA, acquisition of more
than 5% of the outstanding stock of an issuer.
M. In the absence of prior consent of VIA, acquisition of
securities that would cause exposure to a single industry to
exceed 25% of the portfolio at the time of purchase.
N. In the absence of prior consent of VIA, acquisition of
securities that would cause exposure to a single country to
exceed 40% of the portfolio at the time of purchase.
O. Commingled and registered funds.
Exceptions to the above listed eligible investments and prohibited
securities or practices may be permitted with prior consent of the
Retirement Corporation.
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in Section I or Section II
of these Investment Guidelines may be acquired or employed, as the case
may be, but only if explicitly approved in advance by VIA.
IV. PERFORMANCE BENCHMARK AND MONITORING CRITERIA
The standards outlined in this section are subject to review and
revision by VIA as and when appropriate.
A. PERFORMANCE BENCHMARKS
The market benchmark for measuring investment performance for
the Adviser is the MSCI EAFE Index. The Adviser is expected to
outperform the benchmark net of Adviser fees over rolling
three and five-year periods.
B. PEER GROUPS
17
<PAGE> 18
VIA will develop an appropriate peer group against which to
compare investment performance. The peer group will consist of
other managers with a similar investment approach. The
managers within the peer group will be reviewed periodically
for consistency of style and may be changed as and when deemed
appropriate by VIA. Such changes will be communicated to the
Adviser.
1. The peer group will consist primarily of mutual
funds, however separate account managers may be
included.
2. VIA will track relative net-of-fee performance
quarterly and evaluate performance on a trailing one,
three, and five-year basis.
3. VIA will compare the Adviser's net performance with
the one-year mean return of the peer group.
The current peer group consists of the following managers:
(under review)
18
<PAGE> 19
FEE SCHEDULE
FOR
LAZARD ASSET MANAGEMENT
The Advisor's quarterly fee shall be calculated based on the average daily
market value of the assets under management as provided by the Custodian, based
on the following annual rate.
$100 million 0.50 percent
Over $100 million 0.40 percent
EXAMPLE OF FEE CALCULATION (HYPOTHETICAL AMOUNTS)
January 1, 1999 $190,000,000 End-of-Day Market Value
January 2, 1999 $190,678,462 End-of-Day Market Value
January 3, 1999 $190,796,123 End-of-Day Market Value
. . .
March 29, 1999 $194,512,214 End-of-Day Market Value
March 30, 1999 $194,720,978 End-of-Day Market Value
March 31, 1999 $194,901,556 End-of-Day Market Value
Quarterly Daily Average $192,601,555
$100 million 0.50 percent $500,000
Next $100 million 0.45 percent $416,707
Over $200 million 0.40 percent --------
Annual Fee $916,707
One-Fourth Annual Fee $229,177
19
<PAGE> 1
(d)(7)
INVESTMENT ADVISORY AGREEMENT
This Investment Advisory Agreement is made as of the
__________ day of _______________, 1999, by and between VANTAGEPOINT INVESTMENT
ADVISERS, LLC, a Delaware limited liability company (hereafter "Client"), and
ROWE-PRICE FLEMING INTERNATIONAL, INC., at 100 East Pratt Street, Baltimore,
Maryland 21202 (hereafter "Adviser") and is effective as of March 1, 1999
,1999, (the "Effective Date").
WHEREAS, the Vantagepoint Funds (the "Funds") is a Delaware
Business Trust registered as an open-end management investment company under the
Investment Company Act of 1940 (the "1940 Act");
WHEREAS, Client is party to an Investment Adviser Agreement
with the Funds for management of the investment operations of the Funds
including the establishment and operation of investment portfolios for the Funds
and the entering into of contracts with sub-advisers to assist in managing the
investment of the Funds property;
WHEREAS, Client and Adviser wish to enter into a sub-advisory
agreement pursuant to which Adviser will provide such assistance to Client.
AGREEMENTS:
In consideration of the performance by the Adviser as
Investment Adviser of certain assets held by the Funds, the Client has
authorized the Adviser to manage the securities and other assets as follows:
1. ACCOUNT
The account with respect to which the Adviser shall perform
its services shall consist of those assets of the Funds which the Client
determines to assign to an account with the Adviser, together with all income
earned by those assets and all realized and unrealized capital appreciation
related to those assets (hereafter "Account"). From time to time, the Client
may, upon notice to the Adviser, make additions to the Account and may, upon
notice to the Adviser, make withdrawals from the Account.
2. APPOINTMENT STATUS, POWERS OF ADVISER
(a) Purchase and Sale. Client hereby appoints Adviser to
manage the Account on the terms and conditions set forth in this Agreement.
Subject to the restrictions set forth in this Agreement, and acting always in
conformity with the Investment Policies provided in Paragraph 4, Adviser shall
supervise and direct investment of the Account. Client hereby grants the Adviser
complete, unlimited and unrestricted discretion and authority to select
portfolio securities with respect to the Account including the power to acquire
(by purchase, exchange, subscription or otherwise), to hold and dispose (by
sale, exchange or otherwise). The Adviser will consult with Client, upon the
request of the Client, concerning any transactions it makes with respect to the
investment of the Account.
(b) Limitation on Authority. Except as expressly authorized
herein or hereafter from time to time, Adviser shall for all purposes be deemed
an independent contractor and shall have no authority to act for or to represent
the Client or the Funds in any way or otherwise to be an agent of the Client or
the Funds.
(c) Voting. Unless otherwise instructed by Client, Adviser
shall have discretion to take any action or render any advice with respect to
the voting of shares or the execution of proxies solicited from time
<PAGE> 2
to time by, or with respect to, the issuers of securities held in the Account.
Adviser will report annually to Client regarding such voting.
(d) Key Personnel. Adviser agrees that the following key
personnel have primary responsibility with respect to the investment management
of the Account. If the(se) individual(s) is unable to devote sufficient time to
maintain primary responsibility of the Account, the Adviser must give Client
written advance notice, or prompt notice within three (3) business days, of the
name of the person designated by the Adviser to replace or supplement the
individual(s). In addition, the Adviser will give Client written notice of the
replacement of any employee of the Adviser who has direct supervisory
responsibility for the key personnel or who has responsibility for setting
investment policy as soon as reasonably practicable.
Key Personnel:
The Investment Advisory Group
3. ACCEPTANCE OF APPOINTMENT
Adviser accepts the appointment as an investment adviser and
agrees to use its best efforts and professional judgment to make timely
investment transactions for the Client with respect to the investments of the
Account, and to provide the other services required of the Adviser under the
provisions of this Agreement.
4. INVESTMENT POLICIES
(a) Investment Objectives. Subject to the supervision of the
Fund's Board of Directors and the Client, the Adviser shall direct the
investments of the Account in accordance with the Fund's investment objectives,
policies, and restrictions as provided in the Fund's Prospectus and Statement of
Additional Information as filed with the Securities and Exchange Commission on
Form N-1A ("Registration Statement"), as currently in effect and as amended or
supplemented from time to time, and such other limitations as the Fund or Client
may reasonably impose by written notice to the Adviser or as set forth in
SCHEDULE A. Client shall give Adviser copies of the Fund's Prospectus and
Statement of Additional Information, and any amendments or supplements thereto,
as soon a practicable after such documents become available.
(b) Funds' Agreement and Declaration of Trust. The Adviser
will adhere to all specific provisions relating to the investment of the Account
established in the Funds' Agreement and Declaration of Trust and Registration
Statement, both of which are hereby incorporated by reference and made a part of
this Agreement. The Client shall give written notice to the Adviser of any
amendments to the Agreement and Declaration of Trust or Registration Statement,
which amendments, upon their receipt by the Adviser, shall be binding on the
Adviser.
(c) Investment Adviser Guidelines. The Adviser shall act in
accordance with the Fund's Prospectus and Statement or Additional Information,
and in accordance with the limitations set forth in the specific statement of
Investment Adviser Guidelines, SCHEDULE B, as restated or modified from time to
time by the Client in written notice to the Adviser. The Client retains the
right, on written notice to the Adviser, to modify any such objectives,
guidelines, restrictions, and liquidity requirements in any manner at any time
as may be allowed pursuant to the 1940 Act.
(d) Conflict in Policies. If a conflict in policies or
guidelines referenced herein occurs, the Registration Statement shall govern for
purposes of this Agreement.
5. CUSTODY, DELIVERY, RECEIPT OF SECURITIES
VIA Fund Guidelines - March 1, 1999
<PAGE> 3
(a) Custody Responsibilities. The Client shall designate one
or more custodians to hold the Account. The Custodian, as designated by the
Client will be responsible for the custody, receipt and delivery of securities
and other assets of the Funds (including the Account), and the Adviser shall
have no authority, responsibility or obligation with respect to the custody,
receipt or delivery of securities or other assets of the Funds (including the
Account). In the event that any cash or securities of the Funds are delivered to
the Adviser, it will promptly deliver the same over to the Custodian, in the
name of the Funds.
(b) Securities Transactions. Unless otherwise required by
local custom, all securities transactions for the Account will be consummated by
payment to or delivery by the Funds of cash or securities due to or from the
Account. The Adviser will make all reasonable efforts to notify the Custodian of
all orders to brokers for the Account by 9:00 am EST on the day following the
trade date and will affirm the trade within the close of business one (1)
business day after the trade date (T+1).
(c) Tri-Party Agreement. The Adviser is authorized to enter
into Tri-Party Repurchase Agreements and sign the standard PSA tri-party
agreement (the "Tri-Party Agreement") on behalf of the Client and the
subcustodian thereunder is authorized to act as a subcustodian for the Account's
assets involved in any tri-party repurchase agreement pursuant to such Tri-Party
Agreement.
6. RECORD KEEPING AND REPORTING
(a) Records. Adviser will maintain proper and complete records
relating to the furnishing of services under this Agreement, including records
with respect to the acquisition, holding and disposition of securities for
Client that are required of an investment adviser to a registered investment
company pursuant to the 1940 Act and the Investment Advisers Act of 1940, and
the rules thereunder. All records maintained pursuant to this Agreement shall be
subject to examination by Client and by persons authorized by it during normal
business hours upon reasonable notice. Except as expressly authorized in this
Agreement or as required by applicable law, regulation or order of court or as
directed by other party in writing, Adviser and Client shall keep confidential
the records and other information obtained by reason of this Agreement
(including, with respect to Client, the investment information and transactions
executed by Adviser). Upon termination of this Agreement, Adviser shall
promptly, upon demand, return to Client all records Client reasonably believes
are necessary in order to discharge its responsibilities to the Funds. Adviser
shall be entitled to retain originals or copies of records pursuant to the
requirements of applicable laws or regulations.
(b) Quarterly Valuation Reports. Adviser shall use all
reasonable efforts to provide to the Client within TEN (10) business days after
the end of each calendar quarter a statement of the fair market value of the
Account as of the close of such quarter together with an itemized list of the
assets in the Account.
(c) Valuation Methodology. For purposes of this Agreement,
fair market value shall mean, as of a particular date, the value of the Account
(determined in accordance with generally accepted accounting principles
consistently applied), plus income accrued thereon less the liabilities related
to the assets in the Account as reported on Adviser's recordkeeping systems.
Adviser shall reconcile security and cash positions , and market values on a
monthly basis to the Custodian's records and report discrepancies to the Client
by ten (10) business days after the end of the month.
(d) Loss Reimbursement. Adviser shall reimburse the Account
for any material error to the Fund's net asset value caused by Adviser's breach
of its standard of care set forth in Section 12 that is a direct cause of a
delay in the accurate daily pricing of the Fund(s), provided such loss was not
the result of action or inaction of other service providers to the Client or the
Fund in failing to observe the instructions of the Adviser.
VIA Fund Guidelines - March 1, 1999
<PAGE> 4
(e) Monthly Reports. Adviser shall use reasonable efforts to provide
the Client an itemized report as to the securities in the account, the fair
market value thereof and the accrued income thereon within FOUR (4) business
days after the end of each Calendar Month. The Adviser shall also use all
reasonable efforts to provide, in writing, preliminary performance numbers and a
brief explanation of these results within FIVE (5) business days after the end
of each Calendar Month. The requested format will be as mutually agreed by
Adviser and Client. For purposes of this Agreement, fair market value shall
mean, as of a particular date, the value of the Account plus income accrued
thereon less the liabilities related to the assets in the Account.
(f) Reports on Request. Adviser shall provide to Client
promptly upon request any information available in the records maintained by
Adviser relating to the Account.
(g) Review of Materials. During the term of this Agreement,
the Client shall furnish to the Adviser at its principal office all
prospectuses, statements of additional information, proxy statements, reports to
shareholders, advertising and sales literature or other material prepared for
distribution to Fund shareholders or the public, which refer to the Adviser or
its clients in any way, prior to the use thereof, and the Client shall not use
any such materials if the Adviser reasonably objects in writing within ten (10)
business days (or such other time as may be mutually agreed) after receipt
thereof. The Client shall ensure that materials prepared by employees or agents
of the Client or its affiliates that refer to the Adviser or its clients in any
way are consistent with those materials previously approved by the Adviser as
referenced in the preceding sentence.
7. PURCHASE AND SALE OF SECURITIES
(a) Selection of Brokers. Except to the extent otherwise
instructed in writing by Client in acting on behalf of the Fund, (it being
understood that Client, acting on behalf of the Fund, may, in its absolute
discretion and consistent with the requirements of the 1940 Act and applicable
federal securities laws, direct portfolio transactions for which Adviser is
responsible to any broker that Client may see fit), Adviser shall place all
orders for the purchase and sale of securities on behalf of the Client with
brokers or dealers selected by Adviser, but not with a person affiliated with
Adviser, as the term "affiliated person" is defined in the Investment Company
Act of 1940 (hereafter an "Affiliate"), unless the transaction is in compliance
with Rules 17e-1 or 10f-3 under the 1940 Act, as applicable, and the Fund's
policies and procedures thereunder, copies of which shall be provided to
Adviser.
(b) Best Execution. In placing such orders, the Adviser will
give primary consideration to obtaining the most favorable price and efficient
execution reasonably available under the circumstances. In evaluating the terms
available for executing particular transactions for Client and in selecting
brokers and dealers to execute such transactions, the Adviser may consider, in
addition to commission cost and execution capabilities, the financial stability
and reputation of brokers and dealers and the brokerage and research services
(as those terms are defined in Section 28(e) of the Securities Exchange Act of
1934, as amended) provided by brokers and dealers. Adviser is authorized to pay
a broker or dealer who provides such brokerage and research services a
commission for executing a transaction which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if Adviser determines in good faith that such commission is
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer in discharging responsibilities with respect
to the Account or to other client accounts as to which it exercises investment
discretion.
(c) Bunching Orders. Client agrees that Adviser may aggregate
sales and purchase orders of Account with similar orders being made
simultaneously for other accounts managed by Adviser, if in Adviser's reasonable
judgment such aggregation shall result in an overall economic benefit or more
efficient execution to the Account taking into consideration the advantageous
selling or purchase price, brokerage commission and other expenses. Client
acknowledges that the determination of such economic benefit to the Fund by
Adviser represents Adviser's evaluation that the Account is benefited by
relatively
VIA Fund Guidelines - March 1, 1999
<PAGE> 5
better purchase or sales prices, lower commission expenses and beneficial timing
of transactions or a combination of these and other factors. In such event,
allocation of the securities so purchased or sold, as well as expenses incurred
in the transaction, will be made by the Adviser in a manner the Adviser
considers to be most equitable and consistent with its fiduciary obligations to
the Fund and to its other clients.
8. INVESTMENT FEES
(a) Fee Schedule. The compensation of the Adviser for its
services under this Agreement shall be calculated and paid by the Client from
the assets of the Account in accordance with SCHEDULE C hereto.
(b) Fee Computation. The Adviser's fee for each calendar
quarter shall be calculated as set forth in SCHEDULE C.
(c) Fee Amendment. Fee rates may be changed from time to time
by agreement between the Client and the Adviser consistent with applicable
requirements under the 1940 Act for shareholder and/or approval of the Funds'
Board; provided, however, that no increase in such rates shall be made during
the first calendar year of this Agreement.
(d) Pro Rata Fee. If the Adviser should serve for less than
the whole of any calendar quarter, its compensation shall be determined as
provided above on the basis of the ending market value of the Account in the
month in which the termination occurs and shall be payable on a pro rata basis
for the period of the calendar quarter for which it has served as Adviser
hereunder.
9. BEST EFFORTS; NON-EXCLUSIVITY OF SERVICES
The Adviser shall devote its best efforts and such time as it
deems necessary to provide prompt and expert service to the Client. The services
of Adviser to be provided to Client hereunder are not to be deemed exclusive and
Adviser shall be free to provide similar services for its own account and the
accounts of other persons and to receive compensation for such services. Client
acknowledges that Adviser and its members, Affiliates and employees, and
Adviser's other clients may at any time, have, acquire, increase, decrease, or
dispose of positions in the same investments which are at the same time being
held, acquired for or disposed of under this Agreement for the Fund. Adviser
shall have no obligation to acquire or dispose of a position in any investment
pursuant to this Agreement simply because Adviser, its directors, members,
Affiliates or employees invest in such a position for its or their own accounts
or for the account of another client.
10. INSIDER TRADING POLICIES AND CODE OF ETHICS
Adviser hereby represents that it has adopted policies that
meet the requirements of Rule 17j-1 under the Investment Company Act of 1940.
Copies of such policies shall be delivered to the Client upon request, and any
material violation of such policies by personnel of the Adviser who are "access
persons" with respect to the Account shall be reported to the Client.
11. INSURANCE
At all times during the term of this Agreement, Adviser shall
maintain, at its own cost and expense, professional liability insurance for
errors, omissions, and negligent acts, in an amount and with such
VIA Fund Guidelines - March 1, 1999
<PAGE> 6
terms as are standard in the financial services industry for an investment
adviser managing the amount of aggregate assets managed by Adviser for Client
and for the Adviser's other clients.
VIA Fund Guidelines - March 1, 1999
<PAGE> 7
12. LIABILITY
In the absence of any gross negligence, malfeasance, or
willful violation of this Agreement, Adviser shall not be liable to Client for
honest mistakes of judgment or for action or inaction taken in good faith for a
purpose that the Adviser reasonably believes to be in the best interests of the
Client or the Fund. However, neither this provision nor any other provision of
this Agreement shall constitute a waiver or limitation of any rights which
Client may have under federal or state securities laws.
13. TERM
This Agreement shall be in effect for an initial term of two
years beginning on the Effective Date. This Agreement may be renewed thereafter
for successive one-year periods if such renewal is approved annually by the
majority of the Fund's Board of Directors, provided that in such event,
continuance shall also be approved by a vote of those members of the Funds'
Board of Directors who are not "interested persons" as that term is defined in
the Investment Company Act of 1940.
14. TERMINATION
This Agreement may be terminated by either party hereto,
without the payment of any penalty, immediately upon notice to the other in the
event of a material breach of any provision thereof by the party so notified if
such breach shall not have been cured within a twenty (20) day period after
notice of such breach, or otherwise by Adviser upon sixty (60) days' written
notice to the Client or by Client upon 30 days' written notice to Adviser,
except that this Agreement shall automatically terminate in the event of its
assignment, as provided in Paragraph 19, at the discretion of the Client in the
event of Adviser's change in control as provided in Paragraph 19, upon the
termination of the Funds, or upon termination of Client's advisory agreement
with the Funds. Any termination in accordance with the terms of this Agreement
shall not cause the payment of any penalty. Any such termination shall not
affect the status, obligations or liabilities of any party hereto to the other.
15. REPRESENTATIONS
(a) Adviser hereby confirms to Client that Adviser is
registered as an investment adviser under the Investment Advisers Act of 1940,
that it has full power and authority to enter into and perform fully the terms
of this Agreement and that the execution of this Agreement on behalf of Adviser
has been duly authorized and, upon execution and delivery, this Agreement will
be binding upon Adviser in accordance with its terms.
(b) Client hereby confirms to Adviser that it is registered as
an investment adviser under the Investment Advisers Act of 1940, that it has
full power and authority to enter into this Agreement and that the execution of
this Agreement on behalf of Client has been fully authorized and, upon execution
and delivery, this Agreement will be binding upon Client in accordance with its
terms.
16. NOTICES
Notices or other notifications given or sent under or pursuant
to this Agreement shall be in writing and be deemed to have been given or sent
if delivered to the party at its address listed below in person or by telex or
telecopy receipt of which is confirmed or by mail or by registered mail, return
receipt requested. The addresses of the parties are:
VIA Fund Guidelines - March 1, 1999
<PAGE> 8
CLIENT:
Vantagepoint Investment Advisers, LLC
Attention: Legal Department
c/o ICMA Retirement Corporation
777 North Capitol Street, NE, Ste. 600
Washington, D.C. 20002-4240
ADVISER:
Rowe-Price Fleming International, Inc.
Attention: Henry H. Hopkins, Esq.
c/o T. Rowe Price Associates, Inc.
100 E. Pratt Street
Baltimore, MD 21202
Each party may change its address by giving notice as herein
required.
17. SOLE INSTRUMENT
This instrument constitutes the sole and only agreement of the
parties to it relating to its object and correctly sets forth the rights,
duties, and obligations of each party to the other as of its date. Any prior
agreements, promises, negotiations or representations not expressly set forth in
this Agreement are of no force or effect.
18. WAIVER OR MODIFICATION
No waiver or modification of this Agreement shall be effective
unless reduced to a written document signed by the party to be charged. No
failure to exercise and no delay in exercising, on the part of any party hereto,
of any right, remedy, power or privilege hereunder, shall operate as a waiver
thereof. Only the Chief Executive Officer, has authority on behalf of Client to
modify or waive any of the provisions of the Agreement. It is understood that
certain material amendments may require approval of the Funds shareholders.
19. ASSIGNMENT AND CHANGE IN CONTROL
This Agreement shall automatically terminate in the event of
its assignment. Adviser agrees to provide immediate written notice in the event
of a change in control. Such a change in control will entitle, but not require,
the Client to terminate the Agreement immediately or upon notice.
20. COUNTERPARTS
This Agreement may be executed in counterparts each of which
shall be deemed to be an original and all of which, taken together, shall be
deemed to constitute one and the same instrument.
VIA Fund Guidelines - March 1, 1999
<PAGE> 9
21. CHOICE OF LAW
This Agreement shall be governed by, and the rights of the
parties arising hereunder construed in accordance with, the laws of the State of
Delaware without reference to principles of conflict of laws and the 1940 Act.
To the extent that the applicable laws of the State of Delaware conflict with
the applicable provisions of the 1940 Act, the latter shall control.
22. YEAR 2000 STATEMENT
Adviser certifies that it has taken the steps to address the
Year 2000 problem that are set forth in Adviser's SEC Form ADV-Y2K, a copy of
which has been filed with the SEC and provided to Client. Any subsequent SEC
filings regarding this issue shall be provided to Client.
IN WITNESS WHEREOF, THE PARTIES HERETO EXECUTE THIS AGREEMENT ON March 1, 1999,
and make it effective on the date set forth.
CLIENT ADVISER
Vantagepoint Rowe-Price Fleming International, Inc.
Investment Advisers, LLC
by: by:
/s/ GIRARD MILLER /s/ HENRY H. HOPKINS
- ----------------------------- ----------------------------
(signature) (signature)
President Managing Director
- ----------------------------- ----------------------------
(name, title) (name, title)
Date: Date:
VIA Fund Guidelines - March 1, 1999
<PAGE> 10
ADDENDUM DATED _______________ TO THE
INVESTMENT ADVISORY AGREEMENT DATED March 1, 1999
This addendum modifies and forms a part of the Investment Advisory Agreement
(the "Agreement") dated March 1 1999, between Vantagepoint Investment
Advisers, LLC, a Delaware corporation ("Client"), and Rowe-Price Fleming
International, Inc. ("Adviser"), relating to the Vantagepoint Funds ("VF").
All terms used in this Addendum have the same meaning given to them in the
Agreement unless specifically noted otherwise.
1. The assets of the Account to be managed by the Adviser under the Agreement
and this Addendum are assets of the International Fund (the "Fund"), a portfolio
of VF. For purposes of Section 8 (Fees) and Schedule C, all payments due to
Adviser shall be solely made from the assets of the Fund.
2. All references in the Agreement and this Addendum to the Investment Policies
to be followed by Adviser in managing the assets of the Fund are hereby deemed
to include the Investment Policies set forth in the Agreement and any Schedules
to the Agreement, as well as the Fund's current prospectus and statement of
additional information as on file with the Securities and Exchange Commission.
3. The activities of the Client and the Adviser in managing the assets of the
Fund pursuant to the Agreement and this Addendum shall in all instances be
conducted subject to the supervision and direction of the Board of Directors of
VF.
4. For purposes of Sections 8 (Fees), 12 (Liability), 13 (Term), 14
(Termination), 15 (Representation), 16 (Notices), 18 (Waiver or Modification),
19 (Assignment and Change in Control), and 22 (Year 2000 Statement) of the
Agreement, as well as for purposes of Schedule C of the Agreement, VF is hereby
made a party to the Agreement and shall be entitled to all notices, protections
and rights set forth in those Sections and in Schedule C to which Client is
entitled.
5. For purposes of the Agreement and this Addendum, Client and Adviser hereby
agree to maintain all books and records relating to VF that are required to be
maintained in accordance with industry standards, applicable federal and state
securities laws, including the Investment Company Act of 1940 and or the
Investment Advisers Act of 1940, and such reasonable instructions as shall be
provided to Adviser by Client from time to time.
6. Adviser shall furnish Client and the Board of Directors of VF such periodic
and special reports and information as either of them may request, including
such information as shall be reasonably necessary to evaluate the terms of any
advisory agreement between Client and Adviser with respect to assets of VF.
7. For purposes of the Agreement and this Addendum, the value of the assets of
the Fund managed by Adviser shall be calculated by the Fund accountant in
accordance with the procedures for determining net asset value per share ("NAV")
set forth in the Fund's prospectus and statement of additional information.
8. Section 6 is hereby amended as follows:
a. 6(a) is amended beginning on line 8 and ending on line 9 by
deleting the parentheses and all language with in the
parentheses;
b. 6(b) is deleted in its entirety;
c. 6(c) is redesignated 6(b) Reconciliations, the first sentence
is deleted;
VIA Fund Guidelines - March 1, 1999
<PAGE> 11
d. 6(d) is changed to 6(c); and
e. 6(e) is deleted and 6(f) is changed to 6(d).
9. Section 8, Investment Fees, is amended by deleting 8(b) and 8(c) in their
entirety and by redesignating 8(d) as 8(b).
10. Section 15, Representations, is amended by the insertion of 15(c) below:
"(c) Adviser hereby acknowledges that VF is registered as an open end
investment company under the Investment Company Act of 1940 and is
subject to taxation as a regulated investment company under Subchapter
M and the regulations promulgated thereunder of the Internal Revenue
Code; Adviser hereby represents that it is familiar with the
requirements of such laws and the rules and regulations thereunder as
they apply to VF and has systems and procedures in place reasonably
designed to permit Adviser, Client, and VF to comply with such
requirement."
<PAGE> 12
SCHEDULE A
THE VANTAGEPOINT FUNDS
INTERNATIONAL FUND
STATEMENT OF INVESTMENT POLICIES
These Investment Policies and Guidelines have been adopted by the Vantagepoint
Funds (the "Funds") to govern the management and administration of the
International Fund by Vantagepoint Investment Advisers, LLC ("VIA"). They may be
reviewed and revised at the discretion of the Directors of the Vantagepoint
Funds (the "Directors"). VIA is responsible for the monitoring and appointment
of subadvisers to handle the day-to-day investment of assets assigned to them.
I. GENERAL DESCRIPTION AND GOALS
The International Fund seeks long-term growth of capital by investing
at least 65% of its total assets in securities of companies whose
principal place of business is located in countries other than in the
United States. The Fund will invest primarily in equity securities,
however, debt securities of foreign governments and private issuers are
permitted. The Fund may invest in securities payable in any currency
and may hold foreign currency.
II. STRUCTURE
The assets of the International Fund shall be managed by two or more
subadvisers. The subadvisers may be retained to manage separate
accounts under discretionary investment advisory contracts. Each
subadviser will be selected for its individual investment management
expertise and each will operate independently of the others. Each
subadviser must either be registered with the Securities and Exchange
Commission (SEC) under the Investment Advisers Act of 1940 or a Bank,
Insurance Company or Trust Company exempt as such from registration.
Each subadviser shall exercise complete management discretion over
assets of the Fund allocated to its account in a manner consistent with
these Investment Policies and Guidelines and with such further
investment limitations and conditions as may be recommended by VIA and
approved by the Directors. Subadvisers will be obligated to manage Fund
assets as if they were subject to the fiduciary duty of care that
applies under the Employee Retirement Income Security Act of 1974
(ERISA) governing pension and profit sharing assets.
VIA Fund Guidelines - March 1, 1999
<PAGE> 13
III. INVESTMENT Strategy
VIA shall select subadvisers that represent a variety of portfolio
management approaches and investment disciplines. These investment
approaches will be combined in a complementary manner to effectively
achieve the investment objective of the Fund. The Fund as a whole will
be more diversified than each individual subadviser's portfolio.
Investment philosophies incorporated in the International Fund may
include "top-down" approaches which focus on macro-economic and
political events. Judgment, quantitative models and purchasing power
parity models are among the factors used to identify currencies and
markets that are overvalued or undervalued relative to the U.S. dollar.
The Fund subadvisers may also use "bottom-up" strategies which
emphasize company and industry dynamics. The future prospects of growth
in earnings per share, security valuation and dividend considerations
of companies will be among the investment criteria of those
subadvisers. Investments may include:
- non-U.S. and U.S. equity securities of large-, mid-
and small-cap companies,
- equity securities in emerging markets,
- securities issued by companies that are "distressed"
or "out of favor",
- futures contracts.
The Fund's performance may be significantly affected by changes in
foreign currency exchange rates.
Certain of the above strategies are not permitted or their use is
limited under the Investment Guidelines for the individual subadvisers.
IV. PERFORMANCE BENCHMARKS
Performance benchmarks will be established for the Fund. These
benchmarks will be recommended by VIA and adopted by the Directors and
will be reviewed and revised as appropriate from time to time. The
current performance benchmarks for the Fund are appended to this
document as Exhibit I.
V. DIRECTOR REVIEW
VIA will report periodically to the Directors on performance of the
Fund against benchmarks and on subadviser results and will evaluate for
the Directors the overall performance of the Fund relative to its
objectives. The Directors will consider such reports and other relevant
factors in appraising the investment objectives and performance of the
Fund.
<PAGE> 14
INVESTMENT GUIDELINES
I. ELIGIBLE INVESTMENTS
A. EQUITY SECURITIES: Foreign and domestic common stock
(including shares of closed-end funds) or ordinary shares,
preferred stock, common stock equivalents (units of beneficial
interest), American Depository Receipts, convertible preferred
stocks, warrants, and other rights.
B. CASH/CASH EQUIVALENTS: Foreign and domestic fixed income
obligations with maturity less than one year, or short term
accounts managed by a custodian institution.
C. FIXED INCOME: Foreign and domestic fixed income and
convertible fixed income securities with maturities greater
than one year.
D. FINANCIAL FUTURES: Equity index and currency futures.
E. ELIGIBLE PRACTICES: There are no restrictions on subadvisers
as to the following:
- Portfolio turnover.
- Realized gains and losses.
F. ELIGIBLE INVESTMENT LIMITS
<TABLE>
<CAPTION>
MINIMUM NORMAL RANGE MAXIMUM
------- ------------ -------
<S> <C> <C> <C>
Non-U.S. equity securities 65% 85-100% 100%
U.S. equity securities 0% 0-15% 35%
Cash and cash equivalents 0% 0-15% 35%
Fixed income securities 0% 0-10% 25%
Convertible securities 0% 0-15% 25%
</TABLE>
II. PROHIBITED PRACTICES AND SECURITIES
A. Short sales
B. Options
C. Commodities (excluding financial and currency futures)
D. Securities for which there is no established trading market.
E. Securities issued by the subadviser of the Fund or its
affiliates.
F. General partner interests.
G. Direct investments in oil, gas, or other mineral exploration
or development programs.
H. Direct investments in real estate or interests in real estate;
this does not preclude investment in purchases of securities
of real estate investment trusts and other companies holding
real estate or interests in real estate.
14
<PAGE> 15
I. Commingled funds; this does not preclude investment in mutual
funds up to 10% of the Fund's market value at the time of
purchase.
J. Acquisition of securities that would cause exposure to a
single industry to exceed 25% of the Fund's market value at
the time of purchase.
K. In the absence of prior consent of VIA, acquisition securities
of an issuer that would cause more than 5% of the Fund to be
invested in such securities.
L. In the absence of prior consent of VIA, acquisition of more
than 5% of the outstanding shares of any class of equity
securities.
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in Section I or Section II
of these Investment Guidelines may be acquired or employed, as the case
may be, but only if explicitly approved in advance by VIA.
IV. SECURITIES LENDING
Nothing herein shall prevent loans of securities in the International
Fund pursuant to an established securities lending program conducted by
the Fund's custodian.
15
<PAGE> 16
EXHIBIT I
TO THE
STATEMENT OF INVESTMENT POLICIES AND GUIDELINES OF
THE INTERNATIONAL FUND
MARCH 1, 1999
The following standards will be used to measure the performance of the
International Fund:
A. BENCHMARKS
1. The performance benchmark for the Fund is the MSCI EUROPE,
AUSTRALIA, AND FAR EAST (EAFE) INDEX. This benchmark will be
used to measure the Fund's performance net of subadviser fees.
2. A peer group benchmark for the Fund will consist of mutual
funds with characteristics similar to the Fund. The peer group
will be used to measure the Fund's performance relative to
other funds with a similar investment approach. The peer group
benchmark will measure Fund performance net of all fees and
expenses except for plan administration fee.
3. The Lipper International Index, selected by Lipper Analytical
Services, will serve as the performance benchmark for
participant returns, net of all fees and expenses. In
assessing performance against this benchmark, it will be taken
into consideration that Lipper Analytical Services may change
the composition of the Index.
B. TIME HORIZON
The time horizon for performance measurement will be one, three, and
five years.
One Year:
Performance relative to any benchmark established for the International
Fund will vary widely over one-year periods; such variance over short
time periods is expected and acceptable. However, if such variance is
determined to be caused by systemic issues, action may be appropriate.
16
<PAGE> 17
Three and Five Years:
Performance of the International Fund should track market and universe
benchmarks more closely as the evaluation period lengthens. The ideal
performance objective for the International Fund is to exceed the
returns of all relevant benchmarks; however, shortfalls over various
time periods should be expected in some cases. Underperformance against
a single benchmark over an extended period may be acceptable,
particularly if other benchmarks have been exceeded.
C. INVESTMENT CHARACTERISTICS
The Fund may have investment characteristics which differ from the
general international equity market as measured by the MSCI EAFE index.
Because of the broad mandate given subadvisers in the International
Fund, investment characteristics may be expected to vary widely.
However, the beta of the Fund may be higher than the MSCI EAFE Index.
17
<PAGE> 18
SCHEDULE B
VANTAGEPOINT INVESTMENT ADVISERS, LLC
INTERNATIONAL FUND
INVESTMENT GUIDELINES
FOR
ROWE PRICE-FLEMING INTERNATIONAL, INC.
MARCH 1, 1999
Rowe Price-Fleming International Inc. uses fundamental research to select
companies with above average growth potential at a reasonable price. Country
exposures are based on a global economic outlook and the relative attractiveness
of opportunities within individual countries. The management team then
constructs a diversified portfolio using a combination of these top-down and
bottom-up approaches. The portfolio tends to remain fully invested.
I. ELIGIBLE INVESTMENTS
A. EQUITY SECURITIES: U.S. and non-U.S. common stock or ordinary
shares, preferred stock, common stock equivalents (units of
beneficial interest), American Depository Receipts and other
forms of depository equity securities, convertible preferred
stocks, warrants, and other rights.
B. CASH/CASH EQUIVALENTS: U.S. and non-U.S. fixed income
obligations with maturities less than one year, or short term
accounts or securities managed by the custodian institution.
C. FIXED INCOME: U.S. and non-U.S. fixed income and convertible
fixed income securities with maturities greater than one year.
D. OTHER INVESTMENTS: Options - forward contracts and futures
contracts for currency management.
E. ELIGIBLE INVESTMENT LIMITS:
<TABLE>
<CAPTION>
MINIMUM NORMAL RANGE MAXIMUM
------- ------------ -------
<S> <C> <C> <C>
Equity securities 80% 90%-100% 100%
Cash and cash equivalents 0% 0%-10% 15%
Fixed income securities 0% 0%-10% 15%
</TABLE>
II. PROHIBITED PRACTICES AND SECURITIES
A. Short sales.
B. Options unless used for currency management.
C. Commodities (including financial futures).
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<PAGE> 19
D. Securities for which there is no established trading market.
E. Margin purchases and other forms of borrowing; granting of
pledges or other security interests in assets of the
portfolio; use of futures to obtain market leverage.
F. Securities offered by the Adviser or its affiliates.
G. General partner interests.
H. Direct investments in oil, gas, or other mineral exploration
or development programs.
I. Direct investments in real estate or interests in real estate;
this does not preclude investment in purchases of securities
of real estate investment trusts and other companies holding
real estate or interests in real estate.
J. In the absence of prior consent of VIA, acquisition of
securities of an issuer that would cause more than 5% of the
portfolio at the time of purchase to be invested in such
securities.
K. In the absence of prior consent of VIA, acquisition of more
than 5% of the outstanding stock of an issuer.
L. In the absence of prior consent of VIA, acquisition of
securities that would cause exposure to a single industry to
exceed 25% of the portfolio at time of purchase.
M. In the absence of prior consent of VIA, acquisition of
securities that would cause exposure to a single country to
exceed 40% of the portfolio at time of purchase.
N. In the absence of prior consent of VIA, acquisition of
securities that would cause exposure to non-EAFE Index
countries (with the exception of Canada) to exceed 20% of the
portfolio.
O. Commingled and registered funds (except single-country funds
and passive foreign investment companies).
Exceptions to the above listed eligible investments and prohibited
securities or practices may be permitted with prior consent from VIA.
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in Section I or Section II
of these Investment Guidelines may be acquired or employed, as the case
may be, but only if explicitly approved in advance by VIA.
IV. PERFORMANCE BENCHMARK AND MONITORING CRITERIA
The standards outlined in this section are subject to review and
revision by VIA as and when appropriate.
A. PERFORMANCE BENCHMARKS
19
<PAGE> 20
The market benchmark for measuring investment performance for
the Adviser is the MSCI EAFE Index. The Adviser is expected to
outperform the benchmark net of Adviser fees over rolling
three and five-year periods.
B. PEER GROUPS
VIA will develop an appropriate peer group against which to
compare investment performance. The peer group will consist of
other managers with a similar investment approach. The
managers within the peer group will be reviewed periodically
for consistency of style and may be changed as and when deemed
appropriate by VIA. Such changes will be communicated to the
Adviser.
1. The peer group will consist primarily of mutual
funds, however separate account managers may be
included.
2. VIA will track relative net-of-fee performance
quarterly and evaluate performance on a trailing one,
three, and five-year basis.
3. VIA will compare the Adviser's net performance with
the one-year mean return of the peer group.
The current peer group consists of the following managers:
(under review)
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<PAGE> 21
SCHEDULE C
VANTAGEPOINT INVESTMENT ADVISERS, LLC
FEE SCHEDULE
FOR
ROWE-PRICE FLEMING INTERNATIONAL, INC.
The Advisor's quarterly fee shall be calculated based on the average daily
market value of the assets under management as provided by the Custodian, based
on the following annual rate.
$20 million 0.75 percent
Next $30 million 0.60 percent
Over $50 million 0.50 percent
* When portfolio assets are above $200 million, the annual fee will be .50% on
all portfolio assets.
EXAMPLE OF FEE CALCULATION (HYPOTHETICAL AMOUNTS)
January 1, 1999 $190,000,000 End-of-Day Market Value
January 2, 1999 $190,678,462 End-of-Day Market Value
January 3, 1999 $190,796,123 End-of-Day Market Value
. . .
March 29, 1999 $194,512,214 End-of-Day Market Value
March 30, 1999 $194,720,978 End-of-Day Market Value
March 31, 1999 $194,901,556 End-of-Day Market Value
Quarterly Daily Average $192,601,555
$100 million 0.50 percent $500,000
Next $100 million 0.45 percent $416,707
Over $200 million 0.40 percent --------
Annual Fee $916,707
One-Fourth Annual Fee $229,177
21
<PAGE> 1
(d)(9)
INVESTMENT ADVISORY AGREEMENT
This Investment Advisory Agreement is made as of the __________ day of
_______________, 1999 by and between VANTAGEPOINT INVESTMENT ADVISERS, LLC, a
Delaware limited liability company (hereafter "Client"), and FIDELITY MANAGEMENT
TRUST COMPANY at 82 Devonshire Street, Boston, Massachusetts 02109 (hereafter
"Adviser") and is effective as of March 1, 1999 (the "Effective Date").
WHEREAS, the Vantagepoint Funds (the "Funds") is a Delaware Business
Trust registered as an open-end management investment company under the
Investment Company Act of 1940;
WHEREAS, Client is party to an Investment Adviser Agreement with the
Funds for management of the investment operations of the Funds including the
establishment and operation of investment portfolios for the Funds and the
entering into of contracts with sub-advisers to assist in managing the
investment of the Funds property;
WHEREAS, Client and Adviser wish to enter into an agreement pursuant to
which Adviser will provide such assistance to Client.
AGREEMENTS:
In consideration of the performance by the Adviser as Investment Adviser
of certain assets held by the Funds, the Client has authorized the Adviser to
manage the securities and other assets as follows:
1. ACCOUNT
The account with respect to which the Adviser shall perform its services
shall consist of those assets of the Funds which the Client determines to assign
to an account with the Adviser, together with all income earned by those assets
and all realized and unrealized capital appreciation related to those assets
(the Small Company Growth Account, hereafter "Account"). From time to time, the
Client may, upon notice to the Adviser, make additions to the Account and may,
upon notice to the Adviser, make withdrawals from the Account.
2. APPOINTMENT STATUS, POWERS OF ADVISER
(a) Purchase and Sale. Client hereby appoints Adviser to manage the
Account on the terms and conditions set forth in this Agreement. Subject to the
restrictions set forth in this Agreement, and acting always in conformity with
the Investment Policies provided in Paragraph 4, Adviser shall supervise and
direct investment of the Account. Client hereby grants the Adviser complete,
unlimited and unrestricted discretion and authority to select portfolio
securities with respect to the Account including the power to acquire (by
purchase, exchange, subscription or otherwise), to hold and dispose (by sale,
exchange or otherwise). The Adviser will consult with Client, upon the request
of the Client, concerning any transactions it makes with respect to the
investment of the Account.
(b) Limitation on Authority. Except as expressly authorized herein or
hereafter from time to time, Adviser shall for all purposes be deemed an
independent contractor and shall have no authority to act for or to represent
the Client or the Funds in any way or otherwise to be an agent of the Client or
the Funds.
(c) Voting. Unless otherwise instructed by Client, Adviser shall have
discretion to take any action or render any advice with respect to the voting of
shares or the execution of proxies solicited from time to time by, or with
respect to, the issuers of securities held in the Account. Adviser will report
annually to Client regarding such voting.
<PAGE> 2
(d) Key Personnel. Adviser agrees that the following key personnel have
primary responsibility with respect to the investment management of the Account.
If the(se) individual(s) is unable to devote sufficient time to maintain primary
responsibility of the Account, the Adviser must give Client written advance
notice, or prompt notice within three (3) business days, of the name of the
person designated by the Adviser to replace or supplement the individual(s). In
addition, the Adviser will give Client prompt written notice of the replacement
of any employee of the Adviser who has direct supervisory responsibility for the
key personnel or who has responsibility for setting investment policy.
Key Personnel:
Kennedy P. Richardson
3. ACCEPTANCE OF APPOINTMENT
Adviser accepts the appointment as an investment adviser and agrees to
use its best efforts and professional judgment to make timely investment
transactions for the Client with respect to the investments of the Account, and
to provide the other services required of the Adviser under the provisions of
this Agreement.
4. INVESTMENT POLICIES
(a) Investment Objectives. The Adviser will adhere to the investment
objectives, guidelines, restrictions, and liquidity requirements of the Funds as
specified by the Client on SCHEDULE A hereto, and as restated or modified from
time to time by the Client in written notice to the Adviser.
(b) Funds' Agreement and Declaration of Trust. The Adviser will adhere to
all specific provisions established in the Funds' Agreement and Declaration of
Trust and Registration Statement as filed with the Securities and Exchange
Commission on Form N-1A ("Registration Statement), both of which are hereby
incorporated by reference and made a part of this Agreement. The Client shall
give written notice to the Adviser of any amendments to the Agreement and
Declaration of Trust or Registration Statement, which amendments, upon their
receipt by the Adviser, shall be binding on the Adviser.
(c) Investment Adviser Guidelines. The Adviser shall act in accordance
with the specific statement of Investment Adviser Guidelines, SCHEDULE B, as
restated or modified from time to time by the Client in written notice to the
Adviser. The Client retains the right, on written notice to the Adviser, to
modify any such objectives, guidelines, restrictions, and liquidity requirements
in any manner at any time. It is understood that Adviser will be permitted a
reasonable period of time to conform the Account to the modifications.
(d) Conflict in Policies. If a conflict in policies or guidelines
referenced herein occurs, the Registration Statement shall govern for purposes
of this Agreement.
5. CUSTODY, DELIVERY, RECEIPT OF SECURITIES
(a) Custody Responsibilities. The Client shall designate one or more
custodians to hold the Account. The Custodian, as designated by the Client will
be responsible for the custody, receipt and delivery of securities and other
assets of the Funds (including the Account), and the Adviser shall have no
authority, responsibility or obligation with respect to the custody, receipt or
delivery of securities or other assets of the Funds (including the Account). In
the event that any cash or securities of the Funds are delivered to the Adviser,
it will promptly deliver the same over to the Custodian, in the name of the
Funds.
2
<PAGE> 3
(b) Securities Transactions. All securities transactions for the Account
will be consummated by payment to or delivery by the Funds of cash or securities
due to or from the Account. The Adviser will notify the Custodian of all orders
to brokers for the Account by 9:00 am EST on the day following the trade date
and will affirm the trade within one (1) business day after the trade date
(T+1).
6. RECORD KEEPING AND REPORTING
(a) Records. Adviser will maintain proper and complete records relating
to the furnishing of services under this Agreement, including records with
respect to the acquisition, holding and disposition of securities for Client.
All records maintained pursuant to this Agreement shall be subject to
examination by Client and by persons authorized by it at all times upon
reasonable notice. Except as expressly authorized in this Agreement or as
required by applicable law, regulation or order of court or as directed by other
party in writing, Adviser and Client shall keep confidential the records and
other information obtained by reason of this Agreement (including, with respect
to Client, the investment information and transactions executed by Adviser).
Upon termination of this Agreement, Adviser shall promptly, upon demand, return
to Client all records Client reasonably believes are necessary in order to
discharge its responsibilities to the Funds. Adviser shall be entitled to retain
originals or copies of records pursuant to the requirements of applicable laws
or regulations.
(b) Quarterly Valuation Reports. Adviser shall use best efforts to
provide to the Client within TEN (10) business days after the end of each
calendar quarter a statement of the fair market value of the Account as of the
close of such quarter together with an itemized list of the assets in the
Account.
(c) Valuation Methodology. For purposes of this Agreement, fair market
value shall mean, as of a particular date, the value of the Account (determined
in accordance with generally accepted accounting principles consistently
applied), plus income accrued thereon less the liabilities related to the assets
in the Account. Adviser shall reconcile security and cash positions , and market
values, and report discrepancies to the Client.
(d) Loss Reimbursement. Adviser shall reimburse the Account for any loss
directly caused by Adviser's breach of the standard of care set forth in Section
12 that causes delay in the accurate daily pricing of the Fund, with the
understanding that Adviser will not be responsible for the actions of other
service providers on the Account, including broker-dealers, nor is Adviser
responsible for the daily pricing of the Fund.
(e) Monthly Reports. Adviser shall provide the Client an itemized report
as to the securities in the account, the fair market value thereof and the
accrued income thereon within FOUR (4) business days after the end of each
Calendar Month. The Adviser shall also use best efforts to provide, in writing,
preliminary performance numbers and a brief explanation of these results within
FIVE (5) business days after the end of each Calendar Month. The requested
format will be as mutually agreed by Adviser and Client. For purposes of this
Agreement, fair market value shall mean, as of a particular date, the value of
the Account plus income accrued thereon less the liabilities related to the
assets in the Account.
(f) Reports on Request. Adviser shall provide to Client promptly upon
request any information available in the records maintained by Adviser relating
to the Account.
7. PURCHASE AND SALE OF SECURITIES
(a) Selection of Brokers. Except to the extent otherwise instructed by
Client, (it being understood that Client may, in its absolute discretion, direct
portfolio transactions for which Adviser is responsible to any broker that
Client may see fit), Adviser shall place all orders for the purchase and sale of
securities on behalf of the Client with brokers or dealers selected by Adviser,
but not with a person affiliated
3
<PAGE> 4
with Adviser, as the term "affiliated person" is defined in the Investment
Company Act of 1940 (hereafter an "Affiliate"). Client shall provide Adviser
with a list of affiliated broker-dealers from time to time.
(b) Best Execution. In placing such orders, the Adviser will give primary
consideration to obtaining the most favorable price and efficient execution. In
evaluating the terms available for executing particular transactions for Client
and in selecting brokers and dealers to execute such transactions, the Adviser
may consider, in addition to commission cost and execution capabilities, the
financial stability and reputation of brokers and dealers and the brokerage and
research services (as those terms are defined in Section 28(e) of the Securities
Exchange Act of 1934, as amended) provided by brokers and dealers. Adviser is
authorized to pay a broker or dealer who provides such brokerage and research
services a commission for executing a transaction which is in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction if Adviser determines that such commission is reasonable in
relation to the value of the brokerage and research services provided by such
broker or dealer in discharging responsibilities with respect to the Account.
(c) Bunching Orders. Client agrees that Adviser may aggregate sales and
purchase orders of Account with similar orders being made simultaneously for
other accounts managed by Adviser, if in Adviser's reasonable judgment such
aggregation shall result in an overall economic benefit to the Account taking
into consideration the advantageous selling or purchase price, brokerage
commission and other expenses. Client acknowledges that the determination of
such economic benefit to Client by Adviser represents Adviser's evaluation that
client is benefited by relatively better purchase or sales prices, lower
commission expenses and beneficial timing of transactions or a combination of
these and other factors.
8. INVESTMENT FEES
(a) Fee Schedule. The compensation of the Adviser for its services under
this Agreement shall be calculated and paid by the Client from the assets of the
Account in accordance with SCHEDULE C hereto. The Adviser shall send a written
invoice to the Client within 30 days of the quarter end and shall be duly
compensated from the assets of the Account.
(b) Fee Computation. The Adviser's fee for each calendar quarter shall be
calculated as set forth in Schedule C.
(c) Fee Amendment. Fee rates may be changed from time to time by
agreement between the Client and the Adviser; provided, however, that no
increase in such rates shall be made during the first calendar year of this
Agreement.
(d) Pro Rata Fee. If the Adviser should serve for less than the whole of
any calendar quarter, its compensation shall be determined as provided above on
the basis of the ending market value of the Account in the month in which the
termination occurs and shall be payable on a pro rata basis for the period of
the calendar quarter for which it has served as Adviser hereunder.
9. BEST EFFORTS; NON-EXCLUSIVITY OF SERVICES
The Adviser shall devote its best efforts and such time as it deems
necessary to provide prompt and expert service to the Client. The services of
Adviser to be provided to Client hereunder are not to be deemed exclusive and
Adviser shall be free to provide similar services for its own account and the
accounts of other persons and to receive compensation for such services. Client
acknowledges that Adviser and its members, Affiliates and employees, and
Adviser's other clients may at any time, have, acquire, increase, decrease, or
dispose of positions in the same investments which are at the same time being
held, acquired for or disposed of under this Agreement for the Client. Adviser
shall have no obligation to acquire or dispose of a position in any investment
pursuant to this Agreement simply because Adviser, its directors,
4
<PAGE> 5
members, Affiliates or employees invest in such a position for its or their own
accounts or for the account of another client.
10. INSIDER TRADING POLICIES AND CODE OF ETHICS
Adviser hereby represents that it has adopted policies that meet the
requirements of Rule 17j-1 under the Investment Company Act of 1940. Copies of
such policies shall be delivered to the Client, and any material violation of
such policies with respect to the Account by personnel of the Adviser shall be
reported to the Client.
11. INSURANCE
At all times during the term of this Agreement, Adviser shall maintain,
at its own cost and expense, professional liability insurance for errors,
omissions, and negligent acts, in an amount and with such terms as are standard
in the financial services industry for an investment adviser managing the amount
of aggregate assets managed by Adviser for Client and for the Adviser's other
clients.
12. LIABILITY
Adviser shall not be liable to Client for honest mistakes of judgment or
for action or inaction taken in good faith for a purpose that the Adviser
reasonably believes to be in the best interests of the Client. Adviser shall be
liable to Client for any liability, and the direct damages or expenses of Client
arising out of the gross negligence, willful misconduct or bad faith by Adviser
or any of its officers, employees or Affiliates in providing management under
this Agreement. However, neither this provision nor any other provision of this
Agreement shall constitute a waiver or limitation of any rights which Client may
have under federal or state securities laws.
13. TERM
This Agreement shall be in effect for an initial term of two years
beginning on the Effective Date. This Agreement may be renewed thereafter for
successive one-year periods if such renewal is approved annually by the majority
of those members of the Funds' Board of Directors who are not "interested
persons" as that term is defined in the Investment Company Act of 1940.
14. TERMINATION
This Agreement may be terminated by either party hereto, without the
payment of any penalty, immediately upon notice to the other in the event of a
breach of any provision thereof by the party so notified, or otherwise by
Adviser upon sixty (60) days' written notice to the Client or by Client upon 30
days' written notice to Adviser, except that this Agreement shall automatically
terminate in the event of its assignment, as provided in Paragraph 19, at the
discretion of the Client in the event of Adviser's ownership change as provided
in Paragraph 19, or upon the termination of the Funds. Any termination in
accordance with the terms of this Agreement shall not cause the payment of any
penalty. Any such termination shall not affect the status, obligations or
liabilities of any party hereto to the other.
15. REPRESENTATIONS
(a) Adviser represents that it is a bank as defined in the Investment
Advisers Act of 1940 and that it has full power and authority to enter into this
Agreement.
(b) Client hereby confirms to Adviser that it has full power and
authority to enter into this Agreement and that the execution of this Agreement
on behalf of Client has been fully authorized and, upon execution and delivery,
this Agreement will be binding upon Client in accordance with its terms.
5
<PAGE> 6
16. NOTICES
Notices or other notifications given or sent under or pursuant to this
Agreement shall be in writing and be deemed to have been given or sent if
delivered to the party at its address listed below in person or by telex or
telecopy receipt of which is confirmed or by mail or by registered mail, return
receipt requested. The addresses of the parties are:
CLIENT:
Vantagepoint Investment Advisers, LLC
Attention: Legal Department
c/o ICMA Retirement Corporation
777 North Capitol Street, NE, Ste. 600
Washington, D.C. 20002-4240
ADVISER:
Fidelity Management Trust Company
82 Devonshire Street
Boston, Massachusetts 02109
Attn: Reuel Stanley
Each party may change its address by giving notice as herein required.
17. SOLE INSTRUMENT
This instrument constitutes the sole and only agreement of the parties to
it relating to its object and correctly sets forth the rights, duties, and
obligations of each party to the other as of its date. Any prior agreements,
promises, negotiations or representations not expressly set forth in this
Agreement are of no force or effect.
18. WAIVER OR MODIFICATION
No waiver or modification of this Agreement shall be effective unless
reduced to a written document signed by the party to be charged. No failure to
exercise and no delay in exercising, on the part of any party hereto, of any
right, remedy, power or privilege hereunder, shall operate as a waiver thereof.
Only the Chief Executive Officer, has authority on behalf of Client to modify or
waive any of the provisions of the Agreement.
19. ASSIGNMENT AND OWNERSHIP CHANGE
This Agreement shall automatically terminate in the event of its
assignment. Adviser agrees to provide immediate written notice in the event of
an ownership change. Such an ownership change will entitle, but not require, the
Client to terminate the Agreement immediately or upon notice.
20. COUNTERPARTS
This Agreement may be executed in counterparts each of which shall be
deemed to be an original and all of which, taken together, shall be deemed to
constitute one and the same instrument.
21. CHOICE OF LAW
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<PAGE> 7
This Agreement shall be governed by, and the rights of the parties
arising hereunder construed in accordance with, the laws of the State of
Delaware without reference to principles of conflict of laws.
22. YEAR 2000 WARRANTY
Adviser currently has an initiative in place to achieve seamless
processing for systems and applications and uninterrupted service to customers.
Adviser agrees, upon request, to send Client copies of its Year 2000 bulletins,
notices or similar communications which Adviser distributes in the ordinary
course of business on an ongoing basis. Adviser is currently following and will
continue to follow reasonable and industry appropriate procedures and processes
to achieve Year 2000 capability in that (i) the year fields in all software
components of Adviser-owned systems and applications will be designed in such a
way that services furnished under this Agreement can distinguish between the
year 2000 AD and the year 1900 AD, and (ii) all time-and-date related codes and
internal programs involved in the furnishing of services under this Agreement
will continue to operate beyond December 31, 1999 with at least the same
functionality as would otherwise be provided in the absence of such date change.
23. CONFIDENTIAL INFORMATION
Any information or recommendations supplied by Adviser which are not
otherwise in the public domain or previously known to Client in connection with
the performance of Adviser's obligations hereunder, are to be regarded as
confidential and for use only by the Client, the Custodian, or such persons the
Client may designate in connection with the Account. Nothing in this Agreement
shall be construed to prevent the Adviser from giving other entities investment
advice about, or trading on their behalf, in the securities of the Client.
However, the Adviser will maintain the strictest confidence with respect to any
financial or other information relating to the Client and not publicly disclosed
which it obtain in its capacity hereunder.
IN WITNESS WHEREOF, THE PARTIES HERETO EXECUTE THIS AGREEMENT ON February 26
, 1999 and make it effective on the date set forth.
CLIENT ADVISER
Vantagepoint Fidelity Management Trust Company
Investment Advisers, LLC
by: by:
/s/ GIRARD MILLER /s/ JOHN P. O'REILLY, JR.
- ------------------------- -------------------------
(signature) (signature)
Executive Vice President
- ------------------------- -------------------------
Girard Miller, President (name, title)
Date: Date:
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<PAGE> 8
ADDENDUM DATED _______________ TO THE
INVESTMENT ADVISORY AGREEMENT DATED March 1, 1999
This addendum modifies and forms a part of the Investment Advisory Agreement
(the "Agreement") dated March 1, 1999 1999, between Vantagepoint Investment
Advisers, LLC, a Delaware corporation ("Client"), and Fidelity Management Trust
Company ("Adviser"), relating to the Vantagepoint Funds ("VF").
All terms used in this Addendum have the same meaning given to them in the
Agreement unless specifically noted otherwise.
1. The assets of the Account to be managed by the Adviser under the Agreement
and this Addendum are assets of the Small Company Growth Account of the
Vantagepoint Growth Fund (the "Fund"), a portfolio of VF. For purposes of
Section 8 (Fees) and Schedule C, all payments due to Adviser shall be solely
made from the assets of the Fund.
2. All references in the Agreement and this Addendum to the Investment Policies
to be followed by Adviser in managing the assets of the Fund are hereby deemed
to include the Investment Policies set forth in the Agreement and any Schedules
to the Agreement, as well as the Fund's current prospectus and statement of
additional information as on file with the Securities and Exchange Commission.
3. The activities of the Client and the Adviser in managing the assets of the
Fund pursuant to the Agreement and this Addendum shall in all instances be
conducted subject to the supervision and direction of the Board of Directors of
VF.
4. For purposes of Sections 8 (Fees), 12 (Liability), 13 (Term), 14
(Termination), 15 (Representation), 16 (Notices), 18 (Waiver or Modification),
19 (Assignment and Ownership Change), and 22 (Year 2000 Warranty) of the
Agreement, as well as for purposes of Schedule C of the Agreement, VF is hereby
made a party to the Agreement and shall be entitled to all notices, protections
and rights set forth in those Sections and in Schedule C to which Client is
entitled.
5. For purposes of the Agreement and this Addendum, Client and Adviser hereby
agree to maintain all books and records relating to the Account assets managed
by Adviser for VF that are required to be maintained in accordance with good
practice, applicable federal and state securities laws, including the Investment
Company Act of 1940 and or the Investment Advisers Act of 1940, and such
reasonable instructions as shall be provided to Adviser by Client from time to
time.
6. Adviser shall furnish Client and the Board of Directors of VF such reports
and information as either of them may reasonably request, including such
information as shall be reasonably necessary to evaluate the terms of any
advisory agreement between Client and Adviser with respect to assets of VF.
7. For purposes of the Agreement and this Addendum, the value of the assets of
the Fund managed by Adviser shall be calculated in accordance with the
procedures for determining net asset value per share ("NAV") set forth in the
Fund's prospectus and statement of additional information, with the
understanding that the Adviser is not responsible for calculating the NAV.
8. Section 6 is hereby amended as follows:
a. 6(a) is amended beginning on line 8 and ending on line 9 by deleting
the parentheses and all language with in the parentheses;
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<PAGE> 9
b. 6(b) is deleted in its entirety;
c. 6(c) is redesignated 6(b) Reconciliations, the first sentence is
deleted;
d. 6(d) is changed to 6(c); and
e. 6(e) is deleted and 6(f) is changed to 6(d).
9. Section 8, Investment Fees, is amended by deleting 8(b) and 8(c) in their
entirety and by redesignating 8(d) as 8(b).
10. Section 15, Representations, is amended by the insertion of 15(c) below:
"(c) Adviser hereby acknowledges that VF is registered as an open end
investment company under the Investment Company Act of 1940 and is
subject to taxation as a regulated investment company under the
Internal Revenue Code; Adviser hereby represents that it is familiar
with the requirements of such laws and the rules and regulations
thereunder as they apply to the Account assets managed by Adviser for
VF and has systems and procedures in place reasonably designed to
permit Adviser to comply with its obligations."
11. Adviser shall have no responsibility for the failure by the Custodian to
make timely settlement of transactions in securities that have been loaned from
the Account by the Custodian pursuant to a securities lending program authorized
and approved by the Client. Client further acknowledges that the Adviser shall
have no responsibility to vote proxies for securities loaned from the Account by
the Custodian.
<PAGE> 10
THE VANTAGEPOINT FUNDS
GROWTH FUND
STATEMENT OF INVESTMENT POLICIES
These Investment Policies and Guidelines have been adopted by the Vantagepoint
Funds (the "Funds") to govern the management and administration of the Growth
Fund by Vantagepoint Investment Advisers, LLC ("VIA"). They may be reviewed and
revised at the discretion of the Directors of the Vantagepoint Funds (the
"Directors"). VIA is responsible for the monitoring and appointment of
subadvisers to handle the day-to-day investment of assets assigned to them.
I. GENERAL DESCRIPTION AND GOALS
The Growth Fund seeks long-term growth of capital by investing
primarily in common stocks with above average growth potential.
Dividend income is incidental to the overall growth objective.
II. STRUCTURE
The assets of the Growth Fund shall be managed by two or more
subadvisers. The subadvisers may be retained to manage separate
accounts under discretionary investment advisory contracts. Each
subadviser will be selected for its individual investment management
expertise and each will operate independently of the others. Each
subadviser must either be registered with the Securities and Exchange
Commission (SEC) under the Investment Advisers Act of 1940 or a Bank,
Insurance Company or Trust Company exempt as such from registration.
Each subadviser shall exercise complete management discretion over
assets of the Fund allocated to its account in a manner consistent with
these Investment Policies and Guidelines and with such further
investment limitations and conditions as may be recommended by VIA and
approved by the Directors. Subadvisers will be obligated to manage Fund
assets as if they were subject to the fiduciary duty of care that
applies under the Employee Retirement Income Security Act of 1974
(ERISA) governing pension and profit sharing assets.
III. INVESTMENT STRATEGY
VIA shall select subadvisers that represent a variety of portfolio
management approaches and investment disciplines. These investment
approaches will be combined in a complementary manner to effectively
achieve the investment objective of the Fund. The Fund as a whole will
be more diversified than each individual subadviser's portfolio.
Investment strategies employed by the subadvisers included in the
Growth Fund may may focus on past patterns as well as future prospects
for growth in corporate earnings per share. For example, earnings
growth may result from changes in a company's management, an industry
trend, a cyclical recovery, unit growth, new products, and product
expansion. Investments may include:
- equity securities of large established growth companies,
medium size firms, and smaller emerging growth companies,
- securities issued by companies that are "distressed" or "out
of favor",
- securities issued by foreign companies, and
- futures contracts.
10
<PAGE> 11
Certain of the above strategies are not permitted or their use is
limited under the Investment Guidelines for the individual subadvisers.
IV. PERFORMANCE BENCHMARKS
Performance benchmarks will be established for the Fund. These
benchmarks will be recommended by VIA and adopted by the Directors and
will be reviewed and revised as appropriate from time to time. The
current performance benchmarks for the Fund are appended to this
document as Exhibit I.
V. DIRECTOR REVIEW
VIA will report periodically to the Directors on performance of the
Fund against benchmarks and on subadviser results and will evaluate for
the Directors the overall performance of the Fund relative to its
objectives. The Directors will consider such reports and other relevant
factors in appraising the investment objectives and performance of the
Fund.
INVESTMENT GUIDELINES
I. ELIGIBLE INVESTMENTS
A. EQUITY SECURITIES: U.S. and non-U.S. common stock (including
shares of closed-end funds), preferred stock, common stock
equivalents (units of beneficial interest), American
Depository Receipts, convertible preferred stocks, warrants,
and other rights.
B. CASH/CASH EQUIVALENTS: Fixed income obligations with maturity
less than one year, or short term accounts managed by a
custodian institution.
C. FIXED INCOME: Fixed income and convertible fixed income
securities with maturities greater than one year.
D. FINANCIAL FUTURES: Equity index futures.
E. ELIGIBLE PRACTICES: There are no restrictions on subadvisers
as to the following:
- Portfolio turnover.
- Realized gains and losses.
F. ELIGIBLE INVESTMENT LIMITS
<TABLE>
<CAPTION>
MINIMUM NORMAL RANGE MAXIMUM
------- ------------ --------
<S> <C> <C> <C>
U.S. equity securities 65% 80-100% 100%
Non-U.S. equity securities 0% 0-10% 20%
Cash and cash equivalents 0% 0-10% 35%
Fixed income securities 0% 0-5% 10%
</TABLE>
11
<PAGE> 12
II. PROHIBITED PRACTICES AND SECURITIES
A. Short sales
B. Options
C. Commodities (excluding financial futures).
D. Securities for which there is no established trading market.
E. Securities issued by the subadvisers of the Fund or their
affiliates.
General partner interests.
F. Direct investments in oil, gas, or other mineral exploration
or development programs.
G. Direct investments in real estate or interests in real estate;
this does not preclude investment in purchases of securities
of real estate investment trusts and other companies holding
real estate or interests in real estate.
H. Commingled funds; this does not preclude investment in mutual
funds up to 10% of the Fund's market value at the time of
purchase.
I. Acquisition of securities that would cause exposure to
non-equity holdings to exceed 35% of the Fund's market value
at the time of purchase.
J. Acquisition of securities that would cause exposure to a
single industry to exceed 25% of the Fund's market value at
the time of purchase.
K. In the absence of prior consent of VIA, acquisition of
securities of an issuer that would cause more than 5% of the
Fund to be invested in such securities.
L. In the absence of prior consent of VIA, acquisition of more
than 5% of the outstanding shares of any class of equity
securities.
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in Section I or Section II
of these Investment Guidelines may be acquired or employed, as the case
may be, but only if explicitly approved in advance by VIA.
IV. SECURITIES LENDING
Nothing herein shall prevent loans of securities in the Fund pursuant
to an established securities lending program conducted by the Fund's
custodian.
12
<PAGE> 13
EXHIBIT I
TO THE
STATEMENT OF INVESTMENT POLICIES AND GUIDELINES OF
THE GROWTH FUND
OCTOBER 1, 1999
The following standards will be used to measure the performance of the Growth
Fund:
A. BENCHMARKS
1. The performance benchmark for the Fund is the WILSHIRE 5000
INDEX. This benchmark will be used to measure the Fund's
performance net of subadviser fees.
2. A peer group benchmark for the Fund will consist of mutual
funds with characteristics similar to the Fund. The peer group
will be used to measure the Fund's performance relative to
other funds with a similar investment approach. The peer group
benchmark will measure Fund performance net of all fees and
expenses except for the plan administration fee.
3. The Lipper Growth Index, selected by Lipper Analytical
Services, will serve as the performance benchmark for
participant returns, net of all fees and expenses. In
assessing performance against this benchmark, it will be taken
into consideration that Lipper Analytical Services may change
the composition of the Index.
B. TIME HORIZON
The time horizon for performance measurement will be one, three, and
five years.
One Year:
Performance relative to any benchmark established for the Fund will
vary over one year periods; such variance over short time periods is
expected and acceptable. However, if such variance is determined to be
caused by systemic issues, action may be appropriate.
Three and Five Years:
Performance of the Fund should track market and universe benchmarks
more closely as the evaluation period lengthens. The ideal performance
objective for the Fund is to exceed the returns of all relevant
benchmarks; however, shortfalls over various time periods should be
expected in some cases. Underperformance against a single benchmark
over an extended period may be acceptable, particularly if other
benchmarks have been exceeded.
C. INVESTMENT CHARACTERISTICS
The Growth Fund may have investment characteristics which differ from
the general market, as measured by the Standard & Poor's 500 Index. For
the total Fund, these would include, but are not limited to:
13
<PAGE> 14
<TABLE>
<CAPTION>
CHARACTERISTIC RELATIVE TO WILSHIRE 5000 INDEX
<S> <C>
Beta Higher
Capitalization Lower
Dividend Yield Lower
Hist. 5 year EPS Growth Higher
Price to Earnings Ratio Higher
Standard Deviation Higher
</TABLE>
14
<PAGE> 15
SCHEDULE B
VANTAGEPOINT INVESTMENT ADVISERS, LLC
GROWTH FUND
INVESTMENT GUIDELINES
FOR
FIDELITY MANAGEMENT TRUST COMPANY
FIDELITY AGGRESSIVE EQUITY PORTFOLIO
MARCH 1, 1999
Fidelity Aggressive Equity Portfolio focuses primarily on small-to-medium
capitalization stocks to create a broadly diversified growth portfolio. Emerging
industry, social, and demographic trends are analyzed and used to select
established, well-managed companies whose earnings will benefit directly from
such trends. The portfolio may invest in small and less seasoned companies. The
portfolio tends to remain fully invested at all times.
I. ELIGIBLE INVESTMENTS
A. EQUITY SECURITIES: Common stock, preferred stock,
common stock equivalents (units of beneficial interest),
American Depository Receipts, convertible preferred stocks,
warrants, and other rights.
B. CASH/CASH EQUIVALENTS: Fixed income obligations with
maturities less than one year, or short-term accounts or
securities managed by the custodian institution.
C. FIXED INCOME: Fixed income and convertible fixed
income securities with maturities greater than one year.
D. ELIGIBLE INVESTMENT LIMITS:
<TABLE>
<CAPTION>
Minimum Normal Range Maximum
<S> <C> <C> <C>
Equity securities 80% 90%-100% 100%
Cash and cash equivalents 0% 0%-10% 15%
Fixed income securities 0% 0%-5% 10%
</TABLE>
II. PROHIBITED PRACTICES AND SECURITIES
A. Short sales.
B. Options.
C. Commodities (including financial futures).
D. Securities for which there is no established trading market.
E. Foreign securities unless listed and traded in the U.S.
F. Margin purchases and other forms of borrowing; granting of
pledges or other security interests in assets of the portfolio;
use of futures to obtain market leverage.
G. Securities offered by the manager or its affiliates.
H. General partner interests.
I. Direct investments in oil, gas, or other mineral exploration or
development programs.
J. Direct investments in real estate or interests in real estate;
this does not preclude investment in purchases of securities of
real estate investment trusts and other companies holding real
estate or interests in real estate.
K. Acquisition of securities of an issuer that would cause more than
5% of the portfolio at the time of purchase to be invested in
such securities.
L. Acquisition of more than 5% of the outstanding stock of any
issuer.
15
<PAGE> 16
M. Acquisition of securities that would cause exposure to a single
industry to exceed 25% of the portfolio at the time of purchase.
N. Commingled and registered mutual funds.
Exceptions to the above listed eligible investments and prohibited
securities or practices may be permitted with prior consent from VIA.
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in Section I or Section II
of these Investment Guidelines may be acquired or employed, as the case
may be, but only if explicitly approved in advance by VIA.
IV. PERFORMANCE BENCHMARK AND MONITORING CRITERIA
The standards outlined in this section are subject to review by VIA as
and when appropriate.
A. PERFORMANCE BENCHMARKS
The market benchmark for measuring investment performance for
the manager is the Standard & Poor's/BARRA MidCap Growth
Index. The manager is expected to outperform the benchmark net
of management fees over rolling three and five-year periods.
B. PEER GROUPS
The Retirement Corporation will develop an appropriate peer
group against which to compare investment performance. The
peer group will consist of other managers with a similar
investment approach. The managers within the peer group will
be reviewed periodically for consistency of style and may be
changed as and when deemed appropriate by the Retirement
Corporation. Such changes will be communicated to the manager.
1. The peer group will consist primarily of mutual funds,
however separate account managers may be included.
2. The Retirement Corporation will track relative
net-of-fee performance quarterly and evaluate
performance on a trailing one, three and five-year
basis.
3. The Retirement Corporation will compare the manager's
net performance with the one-year mean return of the
peer group.
4. The current peer group consists of the following four
managers:
(The peer group is under construction.)
16
<PAGE> 17
SCHEDULE C
VANTAGEPOINT INVESTMENT ADVISERS, LLC
FEE SCHEDULE
FOR
FIDELITY MANAGEMENT TRUST COMPANY
The Advisor's quarterly fee shall be calculated based on the average daily net
assets of the assets under management as provided by the Custodian, based on the
following annual rate.
$25 million 0.80 percent
Over $25 million 0.60 percent
EXAMPLE OF FEE CALCULATION (HYPOTHETICAL AMOUNTS)
<TABLE>
<S> <C> <C>
January 1, 1999 $627,757,268 End-of-Day Net Assets
January 2, 1999 $625,678,462 End-of-Day Net Assets
January 3, 1999 $625,796,123 End-of-Day Net Assets
March 29, 1999 $629,512,214 End-of-Day Net Assets
March 30, 1999 $629,720,978 End-of-Day Net Assets
March 31, 1999 $629,901,556 End-of-Day Net Assets
Quarterly Daily Average $628,601,555
$25 million 0.80 percent $200,000
Over $25 million 0.60 percent $3,621,609
- - - - - - -
Annual Fee $3,821,609
One-Fourth Annual Fee $955,402
</TABLE>
17
<PAGE> 1
(d)(10)
INVESTMENT ADVISORY AGREEMENT
This Investment Advisory Agreement is made as of the __________ day of
_______________, 1999, by and between VANTAGEPOINT INVESTMENT ADVISERS, LLC, a
Delaware limited liability company (hereafter "Client"), and TCW FUNDS
MANAGEMENT, INC., at 865 S. Figueroa Street, Los Angeles, California
90017(hereafter "Adviser") and is effective as of March 1, 1999 (the
"Effective Date").
WHEREAS, the Vantagepoint Funds (the "Funds") is a Delaware Business
Trust registered as an open-end management investment company under the
Investment Company Act of 1940, as amended (the "Investment Company Act");
WHEREAS, Client is party to an Investment Adviser Agreement with the
Funds for management of the investment operations of the Funds including the
establishment and operation of investment portfolios for the Funds and the
entering into of contracts with sub-advisers to assist in managing the
investment of the Funds property;
WHEREAS, Client and Adviser wish to enter into an agreement pursuant to
which Adviser will provide such assistance to Client.
AGREEMENTS:
In consideration of the performance by the Adviser as investment
adviser of certain assets held by the Funds, the Client has authorized the
Adviser to manage the securities and other assets as follows:
1. ACCOUNT
The account with respect to which the Adviser shall perform its
services shall consist of those assets of the Funds which the Client determines
to assign to an account with the Adviser, together with all income earned by
those assets and all realized and unrealized capital appreciation related to
those assets (hereafter "Account"). From time to time, the Client may, upon
notice to the Adviser, make additions to the Account and may, upon notice to the
Adviser, make withdrawals from the Account.
2. APPOINTMENT STATUS, POWERS OF ADVISER
(a) Purchase and Sale. Client hereby appoints Adviser to manage the
Account on the terms and conditions set forth in this Agreement. Subject to the
restrictions set forth in this Agreement, and acting always in conformity with
the Investment Policies provided in Paragraph 4, Adviser shall supervise and
direct investment of the Account. Client hereby grants the Adviser complete,
unlimited and unrestricted discretion and authority to select portfolio
securities with respect to the Account including the power to acquire (by
purchase, exchange, subscription or otherwise), to hold and dispose (by sale,
exchange or otherwise). The Adviser will consult with Client, upon the request
of the Client, concerning any transactions it makes with respect to the
investment of the Account.
(b) Limitation on Authority. Except as expressly authorized herein or
hereafter from time to time, Adviser shall for all purposes be deemed an
independent contractor and shall have no authority to act for or to represent
the Client or the Funds in any way or otherwise to be an agent of the Client or
the Funds.
(c) Voting. Unless otherwise instructed by Client, Adviser shall have
discretion to take any action or render any advice with respect to the voting of
shares or the execution of proxies solicited from time to time by, or with
respect to, the issuers of securities held in the Account. Adviser will report
annually to Client regarding such voting.
<PAGE> 2
(d) Key Personnel. Adviser agrees that the following key personnel have
primary responsibility with respect to the investment management of the Account.
If the(se) individual(s) is unable to devote sufficient time to maintain primary
responsibility of the Account, the Adviser must give Client written advance
notice, or prompt notice within three (3) business days, of the name of the
person designated by the Adviser to replace or supplement the individual(s). In
addition, the Adviser will give Client prompt written notice of the replacement
of any employee of the Adviser who has direct supervisory responsibility for the
key personnel or who has responsibility for setting investment policy.
Key Personnel:
Chris Ainley
Douglas Foreman
Charles Larsen
3. ACCEPTANCE OF APPOINTMENT
Adviser accepts the appointment as an investment adviser and agrees to
use its best efforts and professional judgment to make timely investment
transactions for the Client with respect to the investments of the Account, and
to provide the other services required of the Adviser under the provisions of
this Agreement.
4. INVESTMENT POLICIES
(a) Investment Objectives. The Adviser will adhere to the investment
objectives, guidelines, restrictions, and liquidity requirements of the Funds as
specified by the Client on SCHEDULE A hereto, and as restated or modified from
time to time by the Client in written notice to the Adviser.
(b) Agreement. The Adviser will adhere to all specific provisions
established in the Agreement and in the Registration Statement as filed with the
Securities and Exchange Commission on Form N-1A ("Registration Statement), which
is hereby incorporated by reference and made a part of this Agreement. The
Client shall give written notice to the Adviser of any amendments to the
Registration Statement, which amendments, upon their receipt by the Adviser,
shall be binding on the Adviser.
(c) Investment Adviser Guidelines. The Adviser shall act in accordance
with the specific statement of Investment Adviser Guidelines, SCHEDULE B, as
restated or modified from time to time by the Client in written notice to the
Adviser. The Client retains the right, on written notice to the Adviser, to
modify any such objectives, guidelines, restrictions, and liquidity requirements
in any manner at any time.
(d) Conflict in Policies. If a conflict in policies or guidelines
referenced herein occurs, the Registration Statement shall govern for purposes
of this Agreement.
5. CUSTODY, DELIVERY, RECEIPT OF SECURITIES
(a) Custody Responsibilities. The Client shall designate one or more
custodians to hold the Account. The Custodian, as designated by the Client will
be responsible for the custody, receipt and delivery of securities and other
assets of the Funds (including the Account), and the Adviser shall have no
authority, responsibility or obligation with respect to the custody, receipt or
delivery of securities or other assets of the Funds (including the Account). In
the event that any cash or securities of the Funds are delivered to the Adviser,
it will promptly deliver the same over to the Custodian, in the name of the
Funds.
(b) Securities Transactions. All securities transactions for the
Account will be consummated by payment to or delivery by the Funds of cash or
securities due to or from the Account. The Adviser will notify the Custodian of
all orders to brokers for the Account by 11:00 am EST on the day
2
<PAGE> 3
following the trade date and will affirm the trade or fax trade authorization
within one (1) business day after the trade date (T+1).
(c) Tri-Party Agreement. The Adviser is authorized to enter into
Tri-Party Repurchase Agreements and sign the standard PSA tri-party agreement
(the "Tri-Party Agreement") on behalf of the Client and the subcustodian
thereunder is authorized to act as a subcustodian for the Account's assets
involved in any tri-party repurchase agreement pursuant to such Tri-Party
Agreement.
6. RECORD KEEPING AND REPORTING
(a) Records. Adviser will maintain proper and complete records relating
to the furnishing of services under this Agreement, including records with
respect to the acquisition, holding and disposition of securities for Client.
All records maintained pursuant to this Agreement shall be subject to
examination by Client and by persons authorized by it at all times upon
reasonable notice. Except as expressly authorized in this Agreement or as
required by applicable law, regulation or order of court or as directed by other
party in writing, Adviser and Client shall keep confidential the records and
other information obtained by reason of this Agreement (including, with respect
to Client, the investment information and transactions executed by Adviser).
Upon termination of this Agreement, Adviser shall promptly, upon demand, return
to Client all records Client reasonably believes are necessary in order to
discharge its responsibilities to the Funds. Adviser shall be entitled to retain
originals or copies of records pursuant to the requirements of applicable laws
or regulations.
(b) Quarterly Valuation Reports. Adviser shall use best efforts to
provide to the Client within TEN (10) business days after the end of each
calendar quarter a statement of the fair market value of the Account as of the
close of such quarter together with an itemized list of the assets in the
Account, as that information is reported on Adviser's recordkeeping system.
(c) Valuation Methodology. For purposes of this Agreement, fair market
value shall mean, as of a particular date, the value of the Account (determined
in accordance with generally accepted accounting principles consistently
applied), plus income accrued thereon less the liabilities related to the assets
in the Account. Adviser shall reconcile security and cash positions , and market
values, and report discrepancies to the Client.
(d) Loss Reimbursement. Adviser shall reimburse the Account for any
material loss directly caused by Adviser's breach of the standard of care set
forth in Section 12 that causes a material delay in the accurate daily pricing
of the Fund, providing such material loss was not the result of action or
inaction of other service providers to the Client or the Fund in failing to
observe the instructions of the Adviser. It is expressly understood that Adviser
has no responsibility for performing the daily pricing of the Fund(s).
(e) Monthly Reports. Adviser shall provide the Client an itemized
report as to the securities in the account, the fair market value thereof and
the accrued income thereon, as that information is reported on Adviser's
recordkeeping system, within FOUR (4) business days after the end of each
Calendar Month. The Adviser shall also use best efforts to provide, in writing,
preliminary performance numbers and a brief explanation of these results within
FIVE (5) business days after the end of each Calendar Month. The requested
format will be as mutually agreed by Adviser and Client. For purposes of this
Agreement, fair market value shall mean, as of a particular date, the value of
the Account plus income accrued thereon less the liabilities related to the
assets in the Account.
(f) Reports on Request. Adviser shall provide to Client promptly upon
request any information available in the records maintained by Adviser relating
to the Account.
3
<PAGE> 4
7. PURCHASE AND SALE OF SECURITIES
(a) Selection of Brokers. Except to the extent otherwise instructed by
Client, (it being understood that Client may, in its absolute discretion, direct
portfolio transactions for which Adviser is responsible to any broker that
Client may see fit), Adviser shall place all orders for the purchase and sale of
securities on behalf of the Client with brokers or dealers selected by Adviser,
but not with a person affiliated with Adviser, as the term "affiliated person"
is defined in the Investment Company Act of 1940 (hereafter an "Affiliate").
(b) Best Execution. In placing such orders, the Adviser will give
primary consideration to obtaining the most favorable price and efficient
execution. In evaluating the terms available for executing particular
transactions for Client and in selecting brokers and dealers to execute such
transactions, the Adviser may consider, in addition to commission cost and
execution capabilities, the financial stability and reputation of brokers and
dealers and the brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934, as amended) provided by
brokers and dealers. Adviser is authorized to pay a broker or dealer who
provides such brokerage and research services a commission for executing a
transaction which is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if Adviser determines
that such commission is reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer in discharging
responsibilities with respect to the Account.
(c) Bunching Orders. Client agrees that Adviser may aggregate sales and
purchase orders of Account with similar orders being made simultaneously for
other accounts managed by Adviser, if in Adviser's reasonable judgment such
aggregation shall result in an overall economic benefit to the Account taking
into consideration the advantageous selling or purchase price, brokerage
commission and other expenses. Client acknowledges that the determination of
such economic benefit to Client by Adviser represents Adviser's evaluation that
client is benefited by relatively better purchase or sales prices, lower
commission expenses and beneficial timing of transactions or a combination of
these and other factors.
8. INVESTMENT FEES
(a) Fee Schedule. The compensation of the Adviser for its services
under this Agreement shall be calculated and paid by the Client from the assets
of the Account in accordance with SCHEDULE C hereto. The Adviser shall send a
written invoice to the Client within 30 days of the quarter end and shall be
duly compensated from the assets of the Account.
(b) Fee Computation. The Adviser's fee for each calendar quarter shall
be calculated as set forth in Schedule C.
(c) Fee Amendment. Fee rates may be changed from time to time by
agreement between the Client and the Adviser; provided, however, that no
increase in such rates shall be made during the first calendar year of this
Agreement.
(d) Pro Rata Fee. If the Adviser should serve for less than the whole
of any calendar quarter, its compensation shall be determined as provided above
on the basis of the ending market value of the Account in the month in which the
termination occurs and shall be payable on a pro rata basis for the period of
the calendar quarter for which it has served as Adviser hereunder.
9. BEST EFFORTS; NON-EXCLUSIVITY OF SERVICES
4
<PAGE> 5
The Adviser shall devote its best efforts and such time as it deems
necessary to provide prompt and expert service to the Client. The services of
Adviser to be provided to Client hereunder are not to be deemed exclusive and
Adviser shall be free to provide similar services for its own account and the
accounts of other persons and to receive compensation for such services. Client
acknowledges that Adviser and its members, Affiliates and employees, and
Adviser's other clients may at any time, have, acquire, increase, decrease, or
dispose of positions in the same investments which are at the same time being
held, acquired for or disposed of under this Agreement for the Client. Adviser
shall have no obligation to acquire or dispose of a position in any investment
pursuant to this Agreement simply because Adviser, its directors, members,
Affiliates or employees invest in such a position for its or their own accounts
or for the account of another client.
10. INSIDER TRADING POLICIES AND CODE OF ETHICS
Adviser hereby represents that it has adopted policies that meet the
requirements of Rule 17j-1 under the Investment Company Act. Copies of such
policies shall be delivered to the Client, and any violation of such policies by
personnel of the Adviser shall be reported to the Client.
11. INSURANCE
At all times during the term of this Agreement, Adviser shall maintain,
at its own cost and expense, professional liability insurance for errors,
omissions, and negligent acts, in an amount and with such terms as are standard
in the financial services industry for an investment adviser managing the amount
of aggregate assets managed by Adviser for Client and for the Adviser's other
clients.
12. LIABILITY
Adviser shall not be liable to Client for honest mistakes of judgment
or for action or inaction taken in good faith for a purpose that the Adviser
reasonably believes to be in the best interests of the Client. Adviser shall be
liable to Client for any liability, damages or expenses of Client arising out of
the negligence, malfeasance or violation of applicable law by Adviser or any of
its officers, employees or Affiliates in providing management under this
Agreement. However, neither this provision nor any other provision of this
Agreement shall constitute a waiver or limitation of any rights which Client may
have under federal or state securities laws.
13. TERM
This Agreement shall be in effect for an initial term of two years
beginning on the Effective Date. This Agreement may be renewed thereafter for
successive one-year periods if such renewal is approved annually by the majority
of those members of the Funds' Board of Directors who are not "interested
persons" as that term is defined in the Investment Company Act.
14. TERMINATION
This Agreement may be terminated by either party hereto, without the
payment of any penalty, immediately upon notice to the other in the event of a
breach of any provision thereof by the party so notified, or otherwise by
Adviser upon sixty (60) days' written notice to the Client or by Client upon 30
days' written notice to Adviser, except that this Agreement shall automatically
terminate in the event of its assignment, as provided in Paragraph 19, at the
discretion of the Client in the event of Adviser's ownership change as provided
in Paragraph 19, or upon the termination of the Funds. Any termination in
accordance with the terms of this Agreement shall not cause the payment of any
penalty. Any such termination shall not affect the status, obligations or
liabilities of any party hereto to the other. In the event of termination for a
breach of this Agreement, any trades executed but not yet settled at the time of
notice of termination shall be settled.
5
<PAGE> 6
15. REPRESENTATIONS
(a) Adviser hereby confirms to Client that Adviser is registered as an
investment adviser under the Investment Advisers Act of 1940, as amended, that
it has full power and authority to enter into and perform fully the terms of
this Agreement and that the execution of this Agreement on behalf of Adviser has
been duly authorized and, upon execution and delivery, this Agreement will be
binding upon Adviser in accordance with its terms.
(b) Client hereby confirms to Adviser that it has full power and
authority to enter into this Agreement and that the execution of this Agreement
on behalf of Client has been fully authorized and, upon execution and delivery,
this Agreement will be binding upon Client in accordance with its terms.
16. NOTICES
Notices or other notifications given or sent under or pursuant to this
Agreement shall be in writing and be deemed to have been given or sent if
delivered to the party at its address listed below in person or by telex or
telecopy receipt of which is confirmed or by mail or by registered mail, return
receipt requested. The addresses of the parties are:
CLIENT:
Vantagepoint Investment Advisers, LLC
Attention: Legal Department
c/o ICMA Retirement Corporation
777 North Capitol Street, NE, Ste. 600
Washington, D.C. 20002-4240
ADVISER:
TCW Funds Management, Inc.
865 S. Figueroa Street
Los Angeles, CA 90017
Attn: Mr. Don Benson (with a copy to General Counsel)
Each party may change its address by giving notice as herein required.
17. SOLE INSTRUMENT
This instrument constitutes the sole and only agreement of the parties
to it relating to its object and correctly sets forth the rights, duties, and
obligations of each party to the other as of its date. Any prior agreements,
promises, negotiations or representations not expressly set forth in this
Agreement are of no force or effect.
18. WAIVER OR MODIFICATION
No waiver or modification of this Agreement shall be effective unless
reduced to a written document signed by the party to be charged. No failure to
exercise and no delay in exercising, on the part of any party hereto, of any
right, remedy, power or privilege hereunder, shall operate as a waiver thereof.
Only the Chief Executive Officer, has authority on behalf of Client to modify or
waive any of the provisions of the Agreement.
19. ASSIGNMENT AND OWNERSHIP CHANGE
6
<PAGE> 7
This Agreement shall automatically terminate in the event of its
assignment. Adviser agrees to provide immediate written notice in the event of
an ownership change. Such an ownership change will entitle, but not require, the
Client to terminate the Agreement immediately or upon notice.
20. COUNTERPARTS
This Agreement may be executed in counterparts each of which shall be
deemed to be an original and all of which, taken together, shall be deemed to
constitute one and the same instrument.
21. CHOICE OF LAW
This Agreement shall be governed by, and the rights of the parties
arising hereunder construed in accordance with, the laws of the State of
Delaware without reference to principles of conflict of laws.
22. YEAR 2000 WARRANTY
Adviser will use commercially reasonable efforts to prevent any
material problems from and after January 1, 2000 relating to the date function
or functions impacted by the date in its computer systems, auto-dialer system or
other date processing or information management systems used by it with respect
to the Client and the Account.
IN WITNESS WHEREOF, THE PARTIES HERETO EXECUTE THIS AGREEMENT ON
, 199 and make it effective on the date set forth.
CLIENT ADVISER
Vantagepoint TCW Funds Management, Inc.
Investment Advisers, LLC
by: by:
/s/ GIRARD MILLER /s/ MICHAEL E. CAHILL
- ------------------------- -------------------------
(signature) (signature)
Managing Director
- ------------------------- -------------------------
Gillard Miller, President (name, title)
/s/ PATRICIA M. NAVIS
-------------------------
(signature)
Vice President
-------------------------
(name, title)
Date: Date:
ADDENDUM DATED March 1, 1999 TO THE
7
<PAGE> 8
INVESTMENT ADVISORY AGREEMENT DATED _____________
This addendum modifies and forms a part of the Investment Advisory Agreement
(the "Agreement") dated _______________ 1999, between Vantagepoint Investment
Advisers, LLC, a Delaware corporation ("Client"), and TCW Funds Management, Inc.
("Adviser"), relating to the Vantagepoint Funds ("VF").
All terms used in this Addendum have the same meaning given to them in the
Agreement unless specifically noted otherwise.
1. The assets of the Account to be managed by the Adviser under the Agreement
and this Addendum are assets of the Aggressive Opportunities Fund (the "Fund"),
a portfolio of VF. For purposes of Section 8 (Fees) and Schedule C, all payments
due to Adviser shall be solely made from the assets of the Fund.
2. All references in the Agreement and this Addendum to the Investment Policies
to be followed by Adviser in managing the assets of the Fund are hereby deemed
to include the Investment Policies set forth in the Agreement and any Schedules
to the Agreement, as well as the Fund's current prospectus and statement of
additional information as on file with the Securities and Exchange Commission.
3. The activities of the Client and the Adviser in managing the assets of the
Fund pursuant to the Agreement and this Addendum shall in all instances be
conducted subject to the supervision and direction of the Board of Directors of
VF.
4. For purposes of Sections 8 (Fees), 12 (Liability), 13 (Term), 14
(Termination), 15 (Representation), 16 (Notices), 18 (Waiver or Modification),
19 (Assignment and Ownership Change), and 22 (Year 2000 Warranty) of the
Agreement, as well as for purposes of Schedule C of the Agreement, VF is hereby
made a party to the Agreement and shall be entitled to all notices, protections
and rights set forth in those Sections and in Schedule C to which Client is
entitled.
5. For purposes of the Agreement and this Addendum, Client and Adviser hereby
agree to maintain all books and records relating to VF that are required to be
maintained in accordance with good practice, applicable federal and state
securities laws, including the Investment Company Act of 1940 and or the
Investment Advisers Act of 1940, and such reasonable instructions as shall be
provided to Adviser by Client from time to time.
6. Adviser shall furnish Client and the Board of Directors of VF such periodic
and special reports and information as either of them may request, including
such information as shall be reasonably necessary to evaluate the terms of any
advisory agreement between Client and Adviser with respect to assets of VF.
7. For purposes of the Agreement and this Addendum, the value of the assets of
the Fund managed by Adviser shall be calculated in accordance with the
procedures for determining net asset value per share ("NAV") set forth in the
Fund's prospectus and statement of additional information.
8. Section 6 is hereby amended as follows:
a. 6(a) is amended beginning on line 8 and ending on line 9 by deleting
the parentheses and all language with in the parentheses;
b. 6(b) is deleted in its entirety;
c. 6(c) is redesignated 6(b) Reconciliations, the first sentence is
deleted;
d. 6(d) is changed to 6(c); and
e. 6(e) is deleted and 6(f) is changed to 6(d).
8
<PAGE> 9
9. Section 8, Investment Fees, is amended by deleting 8(b) and 8(c) in their
entirety and by redesignating 8(d) as 8(b).
10. Section 15, Representations, is amended by the insertion of 15(c) below:
"(c) Adviser hereby acknowledges that VF is registered as an open end
investment company under the Investment Company Act of 1940 and is
subject to taxation as a regulated investment company under the
Internal Revenue Code; Adviser hereby represents that it is familiar
with the requirements of such laws and the rules and regulations
thereunder as they apply to VF and has systems and procedures in place
reasonably designed to permit Adviser, Client, and VF to comply with
such requirement."
<PAGE> 10
SCHEDULE A
THE VANTAGEPOINT FUNDS
GROWTH FUND
STATEMENT OF INVESTMENT POLICIES
These Investment Policies and Guidelines have been adopted by the Vantagepoint
Funds (the "Funds") to govern the management and administration of the Growth
Fund by Vantagepoint Investment Advisers, LLC ("VIA"). They may be reviewed and
revised at the discretion of the Directors of the Vantagepoint Funds (the
"Directors"). VIA is responsible for the monitoring and appointment of
subadvisers to handle the day-to-day investment of assets assigned to them.
I. GENERAL DESCRIPTION AND GOALS
The Growth Fund seeks long-term growth of capital by investing
primarily in common stocks with above average growth potential.
Dividend income is incidental to the overall growth objective.
II. STRUCTURE
The assets of the Growth Fund shall be managed by two or more
subadvisers. The subadvisers may be retained to manage separate
accounts under discretionary investment advisory contracts. Each
subadviser will be selected for its individual investment management
expertise and each will operate independently of the others. Each
subadviser must either be registered with the Securities and Exchange
Commission (SEC) under the Investment Advisers Act of 1940 or a Bank,
Insurance Company or Trust Company exempt as such from registration.
Each subadviser shall exercise complete management discretion over
assets of the Fund allocated to its account in a manner consistent with
these Investment Policies and Guidelines and with such further
investment limitations and conditions as may be recommended by VIA and
approved by the Directors. Subadvisers will be obligated to manage Fund
assets as if they were subject to the fiduciary duty of care that
applies under the Employee Retirement Income Security Act of 1974
(ERISA) governing pension and profit sharing assets.
III. INVESTMENT STRATEGY
VIA shall select subadvisers that represent a variety of portfolio
management approaches and investment disciplines. These investment
approaches will be combined in a complementary manner to effectively
achieve the investment objective of the Fund. The Fund as a whole will
be more diversified than each individual subadviser's portfolio.
Investment strategies employed by the subadvisers included in the
Growth Fund may may focus on past patterns as well as future prospects
for growth in corporate earnings per share. For example, earnings
growth may result from changes in a company's management, an industry
trend, a cyclical recovery, unit growth, new products, and product
expansion. Investments may include:
- equity securities of large established growth companies, medium
size firms, and smaller emerging growth companies,
- securities issued by companies that are "distressed" or "out of
favor",
- securities issued by foreign companies, and
10
<PAGE> 11
- futures contracts.
Certain of the above strategies are not permitted or their use is
limited under the Investment Guidelines for the individual subadvisers.
IV. PERFORMANCE BENCHMARKS
Performance benchmarks will be established for the Fund. These
benchmarks will be recommended by VIA and adopted by the Directors and
will be reviewed and revised as appropriate from time to time. The
current performance benchmarks for the Fund are appended to this
document as Exhibit I.
V. DIRECTOR REVIEW
VIA will report periodically to the Directors on performance of the
Fund against benchmarks and on subadviser results and will evaluate for
the Directors the overall performance of the Fund relative to its
objectives. The Directors will consider such reports and other relevant
factors in appraising the investment objectives and performance of the
Fund.
11
<PAGE> 12
INVESTMENT GUIDELINES
I. ELIGIBLE INVESTMENTS
A. EQUITY SECURITIES: U.S. and non-U.S. common stock (including
shares of closed-end funds), preferred stock, common stock
equivalents (units of beneficial interest), American
Depository Receipts, convertible preferred stocks, warrants,
and other rights.
B. CASH/CASH EQUIVALENTS: Fixed income obligations with maturity
less than one year, or short term accounts managed by a
custodian institution.
C. FIXED INCOME: Fixed income and convertible fixed income
securities with maturities greater than one year.
D. FINANCIAL FUTURES: Equity index futures.
E. ELIGIBLE PRACTICES: There are no restrictions on subadvisers
as to the following:
- Portfolio turnover.
- Realized gains and losses.
F. ELIGIBLE INVESTMENT LIMITS
<TABLE>
<CAPTION>
MINIMUM NORMAL RANGE MAXIMUM
<S> <C> <C> <C>
U.S. equity securities 65% 80-100% 100%
Non-U.S. equity securities 0% 0-10% 20%
Cash and cash equivalents 0% 0-10% 35%
Fixed income securities 0% 0-5% 10%
</TABLE>
II. PROHIBITED PRACTICES AND SECURITIES
A. Short sales
B. Options
C. Commodities (excluding financial futures).
D. Securities for which there is no established trading market.
E. Securities issued by the subadvisers of the Fund or their
affiliates.
F. General partner interests.
G. Direct investments in oil, gas, or other mineral exploration
or development programs.
H. Direct investments in real estate or interests in real estate;
this does not preclude investment in purchases of securities
of real estate investment trusts and other companies holding
real estate or interests in real estate.
12
<PAGE> 13
I. Commingled funds; this does not preclude investment in mutual
funds up to 10% of the Fund's market value at the time of
purchase.
J. Acquisition of securities that would cause exposure to
non-equity holdings to exceed 35% of the Fund's market value
at the time of purchase.
K. Acquisition of securities that would cause exposure to a
single industry to exceed 25% of the Fund's market value at
the time of purchase.
L. In the absence of prior consent of VIA, acquisition of
securities of an issuer that would cause more than 5% of the
Fund to be invested in such securities.
M. In the absence of prior consent of VIA, acquisition of more
than 5% of the outstanding shares of any class of equity
securities.
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in Section I or Section II
of these Investment Guidelines may be acquired or employed, as the case
may be, but only if explicitly approved in advance by VIA.
IV. SECURITIES LENDING
Nothing herein shall prevent loans of securities in the Fund pursuant
to an established securities lending program conducted by the Fund's
custodian.
13
<PAGE> 14
EXHIBIT I
TO THE
STATEMENT OF INVESTMENT POLICIES AND GUIDELINES OF
THE GROWTH FUND
OCTOBER 1, 1999
The following standards will be used to measure the performance of the Growth
Fund:
A. BENCHMARKS
1. The performance benchmark for the Fund is the WILSHIRE 5000
INDEX. This benchmark will be used to measure the Fund's
performance net of subadviser fees.
2. A peer group benchmark for the Fund will consist of mutual
funds with characteristics similar to the Fund. The peer group
will be used to measure the Fund's performance relative to
other funds with a similar investment approach. The peer group
benchmark will measure Fund performance net of all fees and
expenses except for the plan administration fee.
3. The Lipper Growth Index, selected by Lipper Analytical
Services, will serve as the performance benchmark for
participant returns, net of all fees and expenses. In
assessing performance against this benchmark, it will be taken
into consideration that Lipper Analytical Services may change
the composition of the Index.
B. TIME HORIZON
The time horizon for performance measurement will be one, three, and
five years.
One Year:
Performance relative to any benchmark established for the Fund will
vary over one year periods; such variance over short time periods is
expected and acceptable. However, if such variance is determined to be
caused by systemic issues, action may be appropriate.
Three and Five Years:
Performance of the Fund should track market and universe benchmarks
more closely as the evaluation period lengthens. The ideal performance
objective for the Fund is to exceed the returns of all relevant
benchmarks; however, shortfalls over various time periods should be
expected in some cases. Underperformance against a single benchmark
over an extended period may be acceptable, particularly if other
benchmarks have been exceeded.
C. INVESTMENT CHARACTERISTICS
The Growth Fund may have investment characteristics which differ from
the general market, as measured by the Standard & Poor's 500 Index. For
the total Fund, these would include, but are not limited to:
14
<PAGE> 15
<TABLE>
<CAPTION>
CHARACTERISTIC RELATIVE TO WILSHIRE 5000 INDEX
<S> <C>
Beta Higher
Capitalization Lower
Dividend Yield Lower
Hist. 5 year EPS Growth Higher
Price to Earnings Ratio Higher
Standard Deviation Higher
</TABLE>
15
<PAGE> 16
SCHEDULE B-I
VANTAGEPOINT INVESTMENT ADVISERS, LLC
GROWTH FUND
INVESTMENT GUIDELINES
FOR
TCW FUNDS MANAGEMENT, INC.
OCTOBER 1, 1999
TCW Funds Management, Inc. selects stocks of high quality companies with
long-term growth characteristics selling at attractive valuations in relation to
the fundamental prospects of the underlying companies. Companies chosen are
believed to have strong and enduring business strategies and inherent advantages
over their competitors. The manager also considers a company's prospects for
capitalizing on broad investment and economic trends, based on a top-down
appraisal of the US economy. The portfolio is moderately concentrated in
generally 20 to 40 holdings and is normally fully invested in equities at all
times.
I. ELIGIBLE INVESTMENTS
A. EQUITY SECURITIES: Common stock, preferred stock, common stock
equivalents (units of beneficial interest), American
Depository Receipts, convertible preferred stocks, warrants,
and other rights.
B. CASH/CASH EQUIVALENTS: Fixed income obligations with
maturities less than one year, or short term accounts or
securities managed by the custodian institution.
C. FIXED INCOME: Fixed income and convertible fixed income
securities with maturities greater than one year.
D. ELIGIBLE INVESTMENT LIMITS:
<TABLE>
<CAPTION>
MINIMUM NORMAL RANGE MAXIMUM
<S> <C> <C> <C>
U.S. Equity securities 80% 90%-100% 100%
Non-U.S. Equity securities 0% 0%-5% 10%
Cash and cash equivalents 0% 0%-10% 15%
Fixed income securities 0% 0%-5% 10%
</TABLE>
16
<PAGE> 17
II. PROHIBITED PRACTICES AND SECURITIES
A. Short sales.
B. Options.
C. Commodities (including financial futures).
D. Securities for which there is no established trading market.
E. Foreign securities unless listed and traded in the U.S.
F. Margin purchases and other forms of borrowing; granting of
pledges or other security interests in assets of the
portfolio; use of futures to obtain market leverage.
G. Securities offered by the Adviser or its affiliates.
H. General partner interests.
I. Direct investments in oil, gas, or other mineral exploration
or development programs.
J. Direct investments in real estate or interests in real estate;
this does not preclude investment in purchases of securities
of real estate investment trusts and other companies holding
real estate or interests in real estate.
K. Acquisition of securities of an issuer that would cause more
than 7.5% of the portfolio at the time of purchase to be
invested in such securities.
L. Acquisition of more than 5% of the outstanding stock of any
issuer.
M. Acquisition of securities that would cause exposure to a
single industry to exceed 25% of the portfolio at the time of
purchase.
N. Commingled and registered mutual funds.
Exceptions to the above listed eligible investments and prohibited
securities or practices may be permitted with prior consent from VIA.
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in Section I or Section II
of these Investment Guidelines may be acquired or employed, as the case
may be, but only if explicitly approved in advance by VIA.
IV. PERFORMANCE BENCHMARK AND MONITORING CRITERIA
The standards outlined in this section are subject to review by VIA as
and when appropriate.
17
<PAGE> 18
A. PERFORMANCE BENCHMARKS
The market benchmark for measuring investment performance for
the Adviser is the STANDARD & POOR'S 500 INDEX. The Adviser is
expected to outperform the benchmark net of Adviser fees over
rolling three and five-year periods.
B. PEER GROUPS
VIA will develop an appropriate peer group against which to
compare investment performance. The peer group will consist of
other managers with a similar investment approach. The
managers within the peer group will be reviewed periodically
for consistency of style and may be changed as and when deemed
appropriate by VIA. Such changes will be communicated to the
Adviser.
1. The peer group will consist primarily of mutual funds,
however separate account managers may be included.
2. VIA will track relative net-of-fee performance
quarterly and evaluate performance on a trailing one,
three and five-year basis.
3. VIA will compare the Adviser's net performance with the
one-year mean return of the peer group.
18
<PAGE> 19
SCHEDULE C
VANTAGEPOINT INVESTMENT ADVISERS, LLC
FEE SCHEDULE
FOR
TCW FUNDS MANAGEMENT INC.
The Adviser's quarterly fee shall be calculated based on the average daily
market value of the assets under management as provided by the Custodian, based
on the following annual rate.
<TABLE>
<S> <C>
First $25 million 0.70 percent
Next $25 million 0.50 percent
Next $50 million 0.45 percent
Next $400 million 0.40 percent
Over $500 million 0.35 percent
</TABLE>
EXAMPLE OF QUARTERLY FEE CALCULATION (HYPOTHETICAL AMOUNTS)
<TABLE>
<S> <C> <C>
January 1, 1999 $675,000,000 End-of-Day Market Value
January 2, 1999 $675,678,462 End-of-Day Market Value
January 3, 1999 $675,796,123 End-of-Day Market Value
March 29, 1999 $681,512,214 End-of-Day Market Value
March 30, 1999 $681,720,978 End-of-Day Market Value
March 31, 1999 $681,901,556 End-of-Day Market Value
Quarterly Daily Average $680,601,555
First $25 million 0.70 percent $175,000
Next $25 million 0.50 percent $125,000
Next $50 million 0.45 percent $225,000
Next $400 million 0.40 percent $1,600,000
Over $500 million 0.35 percent $632,105
- - - - - - -
Annual Fee $2,757,105
One-Fourth Annual Fee $689,276
</TABLE>
19
<PAGE> 1
EXHIBIT (d)(14)
INVESTMENT ADVISORY AGREEMENT
This Investment Advisory Agreement is made as of the
__________ day of _______________, 1999, by and between VANTAGEPOINT INVESTMENT
ADVISERS, LLC, a Delaware limited liability company (hereafter "Client"), and
CAPITAL GUARDIAN TRUST COMPANY, a California corporation, with offices at 333
South Hope Street, Los Angeles, California 90071 (hereafter "Sub-Adviser") and
is effective as of March 1 ,1999, (the "Effective Date").
WHEREAS, the Vantagepoint Funds (the "Funds") is a Delaware
Business Trust registered as an open-end management investment company under the
Investment Company Act of 1940;
WHEREAS, Client is party to an Investment Adviser Agreement
with the Funds for management of the investment operations of the Funds
including the establishment and operation of investment portfolios for the Funds
and the entering into of contracts with sub-advisers to assist in managing the
investment of the Funds property;
WHEREAS, Client and Sub-Adviser wish to enter into an
agreement pursuant to which Sub-Adviser will provide such assistance to Client.
AGREEMENTS:
In consideration of the performance by the Sub-Adviser as
Investment Sub-Adviser of certain assets of the Vantagepoint Growth and Income
portfolio of the Funds, the Client has authorized the Sub-Adviser to manage the
securities and other assets as follows:
1. ACCOUNT
The account with respect to which the Sub-Adviser shall
perform its services shall consist of those assets of the Funds which the Client
determines to assign to an account with the Sub-Adviser, together with all
income earned by those assets and all realized and unrealized capital
appreciation related to those assets (hereafter "Account"). From time to time,
the Client may, upon notice to the Sub-Adviser, make additions to the Account
and may, upon reasonable advance notice to the Sub-Adviser, make withdrawals
from the Account.
2. APPOINTMENT STATUS, POWERS OF SUB-ADVISER
(a) Purchase and Sale. Client hereby appoints Sub-Adviser to
manage the Account on the terms and conditions set forth in this Agreement.
Subject to the restrictions set forth in this Agreement, and acting always in
conformity with the Investment Policies provided in Paragraph 4, Sub-Adviser
shall supervise and direct investment of the Account. Client hereby grants the
Sub-Adviser complete, unlimited and
<PAGE> 2
unrestricted discretion and authority to select portfolio securities with
respect to the Account including the power to acquire (by purchase, exchange,
subscription or otherwise), to hold and dispose (by sale, exchange or
otherwise). The Sub-Adviser will consult with Client, upon the request of the
Client, concerning any transactions it makes with respect to the investment of
the Account.
(b) Limitation on Authority. Except as expressly authorized
herein or hereafter from time to time, Sub-Adviser shall for all purposes be
deemed an independent contractor and shall have no authority to act for or to
represent the Client or the Funds in any way or otherwise to be an agent of the
Client or the Funds.
(c) Voting. Unless otherwise instructed by Client, Sub-Adviser
shall have discretion to take any action or render any advice with respect to
the voting of shares or the execution of proxies solicited from time to time by,
or with respect to, the issuers of securities held in the Account. Sub-Adviser
will report annually to Client regarding such voting, provided, however, Client
may terminate Sub-Adviser's discretion as above by providing written notice to
Sub-Adviser.
(d) Key Personnel. Sub-Adviser agrees that the following key
personnel have primary responsibility with respect to the investment management
of the Account. If the(se) individual(s) is unable to devote sufficient time to
maintain primary responsibility of the Account, the Sub-Adviser must give Client
written advance notice if practicable, or prompt notice within three (3)
business days, of the name of the person designated by the Sub-Adviser to
replace or supplement the individual(s). In addition, the Sub-Adviser will give
Client prompt written notice of the replacement of any employee of the
Sub-Adviser who has direct supervisory responsibility for the key personnel or
who has responsibility for setting investment policy.
Key Personnel:
Donnalisa Barnum
Ted Samuels
Gene Stein
Bryan Jacobowski
Michael Ericksen
David Fisher
3. ACCEPTANCE OF APPOINTMENT
Sub-Adviser accepts the appointment as an investment
Sub-Adviser and agrees to use its best efforts and professional judgment to make
timely investment transactions for the Client with respect to the investments of
the Account, and to provide the other services required of the Sub-Adviser under
the provisions of this Agreement.
4. INVESTMENT POLICIES
2
<PAGE> 3
(a) Investment Objectives. The Sub-Adviser will adhere to the
investment objectives, guidelines, restrictions, and liquidity requirements of
the Funds as specified by the Client on SCHEDULE A hereto, and as restated or
modified from time to time by the Client in advance written notice to the
Sub-Adviser of at least ten (10) business days, subject to the Sub-Adviser's
review.
(b) Funds' Agreement and Declaration of Trust. The Sub-Adviser
will adhere to all applicable provisions established in the Funds' Agreement and
Declaration of Trust and Registration Statement as filed with the Securities and
Exchange Commission on Form N-1A ("Registration Statement) as are identified to
be the Sub-Adviser's specific duties under the Fund Compliance Manual (if any)
or as mutually agreed upon between Client and Sub-Adviser, all of which are
hereby incorporated by reference and made a part of this Agreement. The Client
shall give written notice to the Sub-Adviser of any amendments to the Agreement
and Declaration of Trust or Registration Statement, which amendments, upon their
receipt and acknowledgement by the Sub-Adviser, shall be binding on the
Sub-Adviser.
(c) Investment Sub-Adviser Guidelines. The Sub-Adviser shall
act in accordance with the specific statement of Investment Sub-Adviser
Guidelines, SCHEDULE B, as restated or modified from time to time by the Client
in written notice to the Sub-Adviser. The Client retains the right, on advance
written notice to the Sub-Adviser, to modify any such objectives, guidelines,
restrictions, and liquidity requirements in any manner at any time.
(d) Conflict in Policies. If a conflict in policies or
guidelines referenced herein occurs, the Registration Statement shall govern for
purposes of this Agreement.
5. CUSTODY, DELIVERY, RECEIPT OF SECURITIES
(a) Custody Responsibilities. The Client shall designate one
or more custodians to hold the Account. The Custodian, as designated by the
Client will be responsible for the custody, receipt and delivery of securities
and other assets of the Funds (including the Account), and the Sub-Adviser shall
have no authority, responsibility or obligation with respect to the custody,
receipt or delivery of securities or other assets of the Funds (including the
Account). In the event that any cash or securities of the Funds are delivered to
the Sub-Adviser, it will promptly deliver the same over to the Custodian, in the
name of the Funds.
(b) Securities Transactions. All securities transactions for
the Account will be consummated by payment to or delivery by the Funds of cash
or securities due to or from the Account or in accordance with local market
practices. The Sub-Adviser will notify the Custodian of all orders to brokers
for the Account by 9:00 am EST on the day following the trade date and will
affirm the trade within one (1) business day after the trade date (T+1).
3
<PAGE> 4
6. RECORD KEEPING AND REPORTING
(a) Records. Sub-Adviser will maintain proper and complete
records relating to the furnishing of services under this Agreement, including
records with respect to the acquisition, holding and disposition of securities
for Client. All records maintained pursuant to this Agreement shall be subject
to examination by Client and by persons authorized by it at all times upon
reasonable notice. Except as expressly authorized in this Agreement or as
required by applicable law, regulation or order of court or as directed by other
party in writing, Sub-Adviser and Client shall keep confidential the records and
other information obtained by reason of this Agreement (including, with respect
to Client, the investment information and transactions executed by Sub-Adviser).
Upon termination of this Agreement, Sub-Adviser shall promptly, upon demand,
return to Client all records Client reasonably believes are necessary in order
to discharge its responsibilities to the Funds. Sub-Adviser shall be entitled to
retain originals or copies of records pursuant to the requirements of applicable
laws or regulations.
(b) Quarterly Valuation Reports. Sub-Adviser shall use best
efforts to provide to the Client within TEN (10) business days after the end of
each calendar quarter a statement of the fair market value of the Account as of
the close of such quarter together with an itemized list of the assets in the
Account.
(c) Valuation Methodology. For purposes of this Agreement,
fair market value shall be determined as per the provisions of Schedule C.
(d) Loss Reimbursement. Sub-Adviser shall reimburse the
Account for any material loss caused by Sub-Adviser's breach of the standard of
care set forth in Section 12 that directly and proximately causes delay in the
accurate daily pricing of the Fund(s), providing such material loss was not the
result of action or inaction of other service providers to the Client or the
Fund in failing to observe the instructions of the Sub-Adviser. It is expressly
understood that Sub-Adviser has no responsibility with respect to the daily
pricing of the Fund(s).
(e) Monthly Reports. Sub-Adviser shall provide the Client an
itemized report as to the securities in the account, the fair market value
thereof and the accrued income thereon within TEN (10) business days after the
end of each Calendar Month. The Sub-Adviser shall also use best efforts to
provide, in writing, preliminary performance numbers within FIVE (5) business
days after the end of each Calendar Month. A brief explanation of such results
will be provided quarterly. The requested format will be as mutually agreed by
Sub-Adviser and Client.
(f) Reports on Request. Sub-Adviser shall provide to Client
promptly upon request any information available in the records maintained by
Sub-Adviser relating to the Account.
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<PAGE> 5
7. PURCHASE AND SALE OF SECURITIES
(a) Selection of Brokers. Except to the extent otherwise
instructed by Client, (it being understood that Client may direct portfolio
transactions for which Sub-Adviser is responsible to any broker that Client may
see fit, subject to best execution), Sub-Adviser shall place all orders for the
purchase and sale of securities on behalf of the Client with brokers or dealers
selected by Sub-Adviser, but not with a person affiliated with Sub-Adviser, as
the term "affiliated person" is defined in the Investment Company Act of 1940
(hereafter an "Affiliate"). Client shall provide a list of "Affiliated Persons"
of Client which Sub-Adviser may rely upon.
(b) Best Execution. In placing such orders, the Sub-Adviser
will give primary consideration to obtaining the most favorable price and
efficient execution. In evaluating the terms available for executing particular
transactions for Client and in selecting brokers and dealers to execute such
transactions, the Sub-Adviser may consider, in addition to commission cost and
execution capabilities, the financial stability and reputation of brokers and
dealers and the brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934, as amended) provided by
brokers and dealers. Sub-Adviser is authorized to pay a broker or dealer who
provides such brokerage and research services a commission for executing a
transaction which is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if Sub-Adviser
determines that such commission is reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer in discharging
responsibilities with respect to the Account.
(c) Bunching Orders. Client agrees that Sub-Adviser may
aggregate sales and purchase orders of Account with similar orders being made
simultaneously for other accounts managed by Sub-Adviser, if in Sub-Adviser's
reasonable judgment such aggregation shall result in an overall economic benefit
to the Account over a reasonable period of time, taking into consideration the
advantageous selling or purchase price, brokerage commission and other expenses.
Client acknowledges that the determination of such economic benefit to Client by
Sub-Adviser represents Sub-Adviser's evaluation that client is benefited by
relatively better purchase or sales prices, lower commission expenses and
beneficial timing of transactions or a combination of these and other factors
over a reasonable period of time.
8. INVESTMENT FEES
(a) Fee Schedule. The compensation of the Sub-Adviser for its
services under this Agreement shall be calculated and paid by the Client from
the assets of the Account in accordance with SCHEDULE C hereto. The Sub-Adviser
shall send a written
5
<PAGE> 6
invoice to the Client within 30 days of the quarter end and shall be duly
compensated from the assets of the Account.
(b) Fee Computation. The Sub-Adviser's fee for each calendar
quarter shall be calculated as provided in SCHEDULE C.
(c) Fee Amendment. Fee rates may be changed from time to time
by agreement between the Client and the Sub-Adviser; provided, however, that no
increase in such rates shall be made during the first calendar year of this
Agreement.
(d) Pro Rata Fee. If the Sub-Adviser should serve for less
than the whole of any calendar quarter, its compensation shall be determined as
provided above on the basis of the ending market value of the Account in the
month in which the termination occurs and shall be payable on a pro rata basis
for the period of the calendar quarter for which it has served as Sub-Adviser
hereunder.
9. BEST EFFORTS; NON-EXCLUSIVITY OF SERVICES
The Sub-Adviser shall devote its best efforts and such time as
it deems necessary to provide prompt and expert service to the Client. The
services of Sub-Adviser to be provided to Client hereunder are not to be deemed
exclusive and Sub-Adviser shall be free to provide similar services for its own
account and the accounts of other persons and to receive compensation for such
services. Client acknowledges that Sub-Adviser and its members, Affiliates and
employees, and Sub-Adviser's other clients may at any time, have, acquire,
increase, decrease, or dispose of positions in the same investments which are at
the same time being held, acquired for or disposed of under this Agreement for
the Client. Sub-Adviser shall have no obligation to acquire or dispose of a
position in any investment pursuant to this Agreement simply because
Sub-Adviser, its directors, members, Affiliates or employees invest in such a
position for its or their own accounts or for the account of another client.
10. INSIDER TRADING POLICIES AND CODE OF ETHICS
Sub-Adviser hereby represents that it has adopted policies
that meet the requirements of Rule 17j-1 under the Investment Company Act of
1940. Copies of such policies shall be delivered to the Client upon request, and
any violation of such policies by personnel of the Sub-Adviser shall be reported
to the Client.
11. INSURANCE
At all times during the term of this Agreement, Sub-Adviser
shall maintain, at its own cost and expense, professional liability insurance
for errors, omissions, and negligent acts, in an amount and with such terms as
are reasonable within the financial
6
<PAGE> 7
services industry for an investment adviser managing the amount of aggregate
assets managed by Sub-Adviser for Client and for the Sub-Adviser's other
clients.
12. LIMITATION ON LIABILITY AND INDEMNIFICATION
Notwithstanding anything to the contrary herein, in the
absence of willful misconduct, bad faith, or gross negligence in the performance
of its obligations and duties under this Agreement, the Sub-Adviser shall not be
subject to liability to Client or any shareholders of Client or any other person
for any act or omission in the course of rendering services under this Agreement
or for losses sustained in connection with the matters to which this Agreement
relates. However, neither this provision nor any other provision of this
Agreement shall constitute a waiver or limitation of any rights which Client may
have under federal or state securities laws.
Sub-Adviser agrees to indemnify and hold harmless Client, any
affiliated person within the meaning of Section 2(a)(3) of the Investment
Company Act of 1940 ("affiliated person" and the "1940 Act", respectively) of
Client (other than the Sub-Adviser) and each person, if any, who, within the
meaning of Section 15 of the Securities Act of 1933 (the "1933 Act"), controls
the Client ("controlling person") against any an all losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses) to
which the Client, or such affiliated person or controlling person may become
subject under the 1933 Act, the 1940 Act, the Investment Advisers Act of 1940
(the "Advisers Act"), or under any other statute, at common law or otherwise,
which may be based upon the willful misconduct, bad faith or gross negligence by
the Sub-Adviser, provided, however, that no indemnity by the Sub-Adviser is
required for any matter which requires the Client to provide an indemnity under
the paragraph directly below.
Client agrees to indemnify and hold harmless Sub-Adviser, its
affiliates and their respective directors, officers, employees and affiliated
persons and controlling persons (collectively, the "Indemnified Sub-Adviser
Parties") against any and all losses, claims, damages, liabilities or litigation
(including reasonable legal and other expenses) to which any of the Indemnified
Sub-Adviser Parties may become subject under the 1933 Act, the 1940 Act, the
Advisers Act, or under any other statute, at common law or otherwise, which does
not require the Sub-Adviser to provide an indemnity under the paragraph directly
preceding this one, provided that none of the Indemnified Sub-Adviser Parties
has acted in a manner that involves willful misconduct, bad faith or negligence
in the performance of its duties and obligations under this Agreement or under
any law applicable to Sub-Adviser.
13. TERM
This Agreement shall be in effect for an initial term of two
years beginning on the Effective Date. This Agreement may be renewed thereafter
for successive one-year periods if such renewal is approved annually by the
majority of those members of
7
<PAGE> 8
the Funds' Board of Directors who are not "interested persons" as that term is
defined in the Investment Company Act of 1940.
14. TERMINATION
This Agreement may be terminated by either party hereto,
without the payment of any penalty, immediately upon notice to the other in the
event of a breach of any provision thereof by the party so notified, or
otherwise by Sub-Adviser upon sixty (60) days' written notice to the Client or
by Client upon 30 days' written notice to Sub-Adviser, except that this
Agreement shall automatically terminate in the event of its assignment, as
provided in Paragraph 19, at the discretion of the Client in the event of
Sub-Adviser's ownership change as provided in Paragraph 19, or upon the
termination of the Funds. Any termination in accordance with the terms of this
Agreement shall not cause the payment of any penalty. Any such termination shall
not affect the status, obligations or liabilities of any party hereto to the
other.
15. REPRESENTATIONS
(a) Sub-Adviser hereby confirms to Client that Sub-Adviser is
a "bank" under Section (202)(a)(2) of the Investment Advisers Act of 1940, and
is therefore exempt under that Act from the registration and annual Form ADV
filing requirements for investment advisers, that it has full power and
authority to enter into and perform fully the terms of this Agreement, and that
the execution of this Agreement on behalf of Sub-Adviser has been duly
authorized and, upon execution and delivery, this Agreement will be binding upon
Sub-Adviser in accordance with its terms.
(b) Client hereby warrants and represents to Sub-Adviser that
(a) it has obtained all applicable licenses, permits, registrations and
approvals that may be required in order to serve in its designated capacities
with respect to the Funds, and shall continue to keep current such licenses,
permit, registrations and approvals for so long as this Agreement is in effect;
(b) it is not prohibited by the 1940 Act or other applicable laws and
regulations from performing the services contemplated by this Agreement; (c) it
will immediately notify that Sub-Adviser of the occurrence of any event that
would disqualify it from serving in its designated capacities with respect to
the Funds; and (d) this Agreement has been duly and validly authorized, executed
and delivered on behalf of Client and is a valid and binding agreement of the
Client enforceable in accordance with its terms .
16. NOTICES
Notices or other notifications given or sent under or pursuant
to this Agreement shall be in writing and be deemed to have been given or sent
if delivered to the party at its address listed below in person or by telex or
telecopy receipt of which is
8
<PAGE> 9
confirmed or by mail or by registered mail, return receipt requested. The
addresses of the parties are:
CLIENT:
Vantagepoint Investment Advisers, LLC
Attention: Legal Department
c/o ICMA Retirement Corporation
777 North Capitol Street, NE, Ste. 600
Washington, D.C. 20002-4240
SUB-ADVISER:
Capital Guardian Trust Company
333 South Hope Street
Los Angeles, California 90071
Attention: Treasurer
Each party may change its address by giving notice as herein
required.
17. SOLE INSTRUMENT
This instrument constitutes the sole and only agreement of the
parties to it relating to its object and correctly sets forth the rights,
duties, and obligations of each party to the other as of its date. Any prior
agreements, promises, negotiations or representations not expressly set forth in
this Agreement are of no force or effect.
18. WAIVER OR MODIFICATION
No waiver or modification of this Agreement shall be effective
unless reduced to a written document signed by the party to be charged. No
failure to exercise and no delay in exercising, on the part of any party hereto,
of any right, remedy, power or privilege hereunder, shall operate as a waiver
thereof.
19. ASSIGNMENT AND OWNERSHIP CHANGE
This Agreement shall automatically terminate in the event of
its assignment. Sub-Adviser agrees to provide immediate written notice in the
event of an ownership change. Such an ownership change will entitle, but not
require, the Client to terminate the Agreement immediately or upon notice.
20. USE OF NAME
The parties agree that the name "Capital Guardian Trust
Company", the names of the Sub-Adviser's affiliates within the Capital Group
Companies, Inc., and any
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<PAGE> 10
derivative or logo or trade or service mark, are valuable property of the
Sub-Adviser and its affiliates are the valuable property of the Sub-Adviser and
its affiliates. Except as may otherwise be required by applicable law or
regulation, the Funds and the Client shall have the right to use such name(s),
derivatives, logos, trade or service marks only with the prior written approval
of the Sub-Adviser, which approval shall not be unreasonably withheld so long as
this Agreement is in effect. Upon termination of this Agreement, the Funds and
the Client shall forthwith cease to use such name(s), derivatives, logos, trade
or service marks. The Funds and the Client agree that they will review with the
Sub-Adviser any advertisement, sales literature, or notice prior to its use that
makes reference to the Sub -Adviser so that the Sub-Adviser may review the
context in which it is referred to, it being agreed that he Sub-Adviser shall
have no responsibility to ensure the adequacy of the form or content of such
materials for purposes of the 1940 Act or other applicable laws and regulations.
If the Funds or the Client makes any unauthorized use of the Sub-Adviser's
name(s), derivatives, logos, trade or service marks, the parties acknowledge
that the Sub-Adviser shall suffer irreparable harm for which monetary damages
are inadequate, and thus the Sub-Adviser shall be entitled to injunctive relief.
21. COUNTERPARTS
This Agreement may be executed in counterparts each of which
shall be deemed to be an original and all of which, taken together, shall be
deemed to constitute one and the same instrument.
22. CHOICE OF LAW
This Agreement shall be governed by, and the rights of the
parties arising hereunder construed in accordance with, the laws of the State of
Delaware without reference to principles of conflict of laws.
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<PAGE> 11
23. YEAR 2000 READINESS
Adviser represents that it has taken, and during the term of
this Agreement will continue to take, commercially reasonable steps designed to
ensure that all mission-critical software or other information technology used
by Adviser in the performance of Adviser's obligations under this Agreement will
be Year 2000 compliant in all material respects prior to the end of 1999.
Adviser represents that it has taken or is taking steps to obtain assurances
from its major service providers that similar efforts were or are being made by
those service providers. Adviser further represents that it will continue
periodically to update Client, upon request, on its Year 2000 readiness efforts.
IN WITNESS WHEREOF, THE PARTIES HERETO EXECUTE THIS AGREEMENT ON March 1, 1999
and make it effective on the date set forth.
CLIENT SUB-ADVISER
Vantagepoint Capital Guardian Trust Company
Investment Advisers, LLC
by: by:
/s/ GIRARD MILLER /s/ MICHAEL BUREK
- --------------------------- -----------------------------
(signature) (signature)
President Vice President
- --------------------------- -------------------------
(name, title) (name, title)
Date: Date:
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<PAGE> 12
ADDENDUM DATED _______________ TO THE
INVESTMENT ADVISORY AGREEMENT DATED March 1, 1999
This addendum modifies and forms a part of the Investment Advisory Agreement
(the "Agreement") dated March 1 1999, between Vantagepoint Investment
Advisers, LLC, a Delaware corporation ("Client"), and Capital Guardian Trust
Company ("Adviser"), relating to the Vantagepoint Funds ("VF").
All terms used in this Addendum have the same meaning given to them in the
Agreement unless specifically noted otherwise.
1. The assets of the Account to be managed by the Adviser under the Agreement
and this Addendum are assets of the International Fund (the "Fund"), a portfolio
of VF. For purposes of Section 8 (Fees) and Schedule C, all payments due to
Adviser shall be solely made from the assets of the Fund.
2. All references in the Agreement and this Addendum to the Investment Policies
to be followed by Adviser in managing the assets of the Fund are hereby deemed
to include the Investment Policies set forth in the Agreement and any Schedules
to the Agreement, as well as the Fund's current prospectus and statement of
additional information as on file with the Securities and Exchange Commission.
This paragraph is not intended to supersede Section 4 of the Agreement.
3. The activities of the Client and the Adviser in managing the assets of the
Fund pursuant to the Agreement and this Addendum shall in all instances be
conducted subject to the supervision and direction of the Board of Directors of
VF.
4. For purposes of Sections 8 (Fees), 12 (Limitation on Liability and
Indemnification), 13 (Term), 14 (Termination), 15 (Representation), 16
(Notices), 18 (Waiver or Modification), 19 (Assignment and Ownership Change),
and 23 (Year 2000 Readiness) of the Agreement, as well as for purposes of
Schedule C of the Agreement, VF is hereby made a party to the Agreement and
shall be entitled to all notices, protections and rights set forth in those
Sections and in Schedule C to which Client is entitled.
5. For purposes of the Agreement and this Addendum, Client and Adviser hereby
agree to maintain all books and records relating to VF that are required to be
maintained in accordance with good practice, applicable federal and state
securities laws, including the Investment Company Act of 1940 and or the
Investment Advisers Act of 1940, and such reasonable instructions as shall be
provided to Adviser by Client from time to time.
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<PAGE> 13
6. Adviser shall furnish Client and the Board of Directors of VF such periodic
and special reports and information as either of them may reasonably request,
including such information as shall be reasonably necessary to evaluate the
terms of any advisory agreement between Client and Adviser with respect to
assets of VF.
7. For purposes of the Agreement and this Addendum, the value of the assets of
the Fund managed by Adviser shall be calculated in accordance with the
procedures for determining net asset value per share ("NAV") set forth in the
Fund's prospectus and statement of additional information.
8. Section 6 is hereby amended as follows:
a. 6(a) is amended beginning on line 8 and ending on line 9 by
deleting the parentheses and all language with in the
parentheses;
b. 6(b) is deleted in its entirety;
c. 6(c) is deleted;
d. 6(d) is changed to 6(b); and
e. 6(e) is deleted and 6(f) is changed to 6(c).
9. Section 8, Investment Fees, is amended by deleting 8(b) and 8(c) in their
entirety and by redesignating 8(d) as 8(b).
10. Section 15, Representations, is amended by the insertion of 15(c) below:
"(c) Adviser hereby acknowledges that VF is registered as an open end
investment company under the Investment Company Act of 1940 and is
subject to taxation as a regulated investment company under the
Internal Revenue Code; Adviser hereby represents that it is familiar
with the requirements of such laws and the rules and regulations
thereunder.
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SCHEDULE A
THE VANTAGEPOINT FUNDS
GROWTH & INCOME FUND
STATEMENT OF INVESTMENT POLICIES
These Investment Policies and Guidelines have been adopted by the Vantagepoint
Funds (the "Funds") to govern the management and administration of the Growth &
Income Fund by Vantagepoint Investment Advisers, LLC ("VIA"). They may be
reviewed and revised at the discretion of the Directors of the Vantagepoint
Funds (the "Directors"). VIA is responsible for the monitoring and appointment
of subadvisers to handle the day-to-day investment of assets assigned to them.
I. GENERAL DESCRIPTION AND GOALS
The Growth & Income Fund seeks long-term capital growth by investing
primarily (at least 65 percent) in common stocks that offer the
potential for high total return through a combination of capital
appreciation and current income. The Fund may also invest in other
equity-type securities (e.g., convertible securities and preferred
stocks) and in bonds.
II. STRUCTURE
The assets of the Growth & Income Fund shall be managed by two or more
subadvisers. The subadvisers may be retained to manage separate
accounts under discretionary investment advisory contracts. Each
subadviser will be selected for its individual investment management
expertise and each will operate independently of the others. Each
subadviser must either be registered with the Securities and Exchange
Commission (SEC) under the Investment Advisers Act of 1940 or a Bank,
Insurance Company or Trust Company exempt as such from registration.
Each subadviser shall exercise complete management discretion over
assets of the Fund allocated to its account in a manner consistent with
these Investment Policies and Guidelines and with such further
investment limitations and conditions as may be established by VIA and
approved by the Directors. Subadvisers will be obligated to manage Fund
assets as if they were subject to the fiduciary duty of care that
applies under the Employee Retirement Income Security Act of 1974
(ERISA) governing pension and profit sharing assets.
III. INVESTMENT STRATEGY
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<PAGE> 15
VIA shall select subadvisers that represent a variety of portfolio
management approaches and investment disciplines. These investment
approaches will be combined in a complementary manner to effectively
achieve the investment objective of the Fund. The Fund as a whole will
be more diversified than each individual subadviser's portfolio.
Investment strategies employed by the subadvisers included in the
Growth & Income Fund may involve:
- a focus on past patterns as well as future prospects
for growth in corporate earnings per share.
- an emphasis on securities that pay current dividends
and offer potential earnings growth
- debt and equity securities which may not currently
pay dividends, but offer prospects for capital
appreciation or future income.
- production of long-term capital growth by investing
in securities that the subadviser believes to be
undervalued at the time of purchase where the
production of income is a secondary objective,
- the ability to emphasize a growth or income-oriented
strategy opportunistically.
IV. PERFORMANCE BENCHMARKS
Performance benchmarks will be established for the Fund. These
benchmarks will be recommended by VIA and adopted by the Directors and
will be reviewed and revised as appropriate from time to time. The
current performance benchmarks for the Fund are appended to this
document as Exhibit I.
V. DIRECTOR REVIEW
VIA will report periodically to the Directors on performance of the
Fund against benchmarks and on subadviser results and will evaluate for
the Directors the overall performance of the Fund relative to its
objectives. The Directors will consider such reports and other relevant
factors in appraising the investment objectives and performance of the
Fund.
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INVESTMENT GUIDELINES
I. ELIGIBLE INVESTMENTS
A. EQUITY SECURITIES: Common stock, preferred stock, common stock
equivalents (units of beneficial interest), American
Depository Receipts, convertible preferred stocks, warrants,
and other rights.
B. CASH/CASH EQUIVALENTS: Fixed income obligations with maturity
less than one year, or short-term accounts or securities
managed by a custodian institution.
C. FIXED INCOME: Fixed income and convertible fixed income
securities with maturities greater than one year.
D. FINANCIAL FUTURES: Equity index futures.
E ELIGIBLE PRACTICES: There are no restrictions on subadvisers
as to the following:
- Portfolio turnover.
- Realized gains and losses.
F. ELIGIBLE INVESTMENT LIMITS
<TABLE>
<CAPTION>
MINIMUM NORMAL MAXIMUM
------- ------ -------
RANGE
-----
<S> <C> <C> <C>
U.S. equity securities 65% 80-100% 100%
Non-U.S. equity securities 0% 0-10% 20%
Cash and cash equivalents 0% 0-15% 25%
Fixed income securities 0% 0-15% 25%
Convertible securities 0% 0-20% 35%
</TABLE>
II. PROHIBITED PRACTICES AND SECURITIES
A. Short sales
B. Options
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<PAGE> 17
C. Commodities (excluding financial futures).
D. Securities for which there is no established trading market.
E. Margin purchases and other forms of borrowing; granting of
pledges or other security interests in assets of the Fund; use
of futures to obtain market leverage.
F. Securities issued by the subadvisers of the Fund or their
affiliates.
G. General partner interests.
H. Direct investments in oil, gas, or other mineral exploration
or development programs.
I. Direct investments in real estate or interests in real estate;
this does not preclude investment in purchases of securities
of real estate investment trusts and other companies holding
real estate or interests in real estate.
J. Commingled funds; this does not preclude investment in mutual
funds up to 10% of the Fund's market value at the time of
purchase.
K. Acquisition of securities that would cause exposure to
non-equity holdings to exceed 35% of the Fund's market value
at the time of purchase.
L. Acquisition of securities that would cause exposure to a
single industry to exceed 25% of the Fund's market value at
the time of purchase.
M. In the absence of prior consent of VIA, acquisition of
securities of an issuer that would cause more than 5% of the
Fund to be invested in such securities.
N. In the absence of prior consent of VIA, acquisition of more
than 5% of the outstanding shares of any class of equity
securities.
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in Section I or Section II
of these Investment Guidelines may be acquired or employed, as the case
may be, but only if explicitly approved in advance by VIA.
IV. SECURITIES LENDING
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<PAGE> 18
Nothing herein shall prevent loans of securities in the Growth & Income
Fund pursuant to an established securities lending program conducted by
the Fund's custodian.
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<PAGE> 19
EXHIBIT I
TO THE
STATEMENT OF INVESTMENT POLICIES AND GUIDELINES OF
THE GROWTH & INCOME FUND
MARCH 1, 1999
The following standards will be used to measure the performance of the Growth &
Income Fund:
A. BENCHMARKS
1. The performance benchmark for the Fund is the S&P 500 INDEX
("S&P 500 Index"). The benchmark will be used to measure the
Fund's performance net of subadviser fees.
2. A peer group benchmark for the Fund will consist of mutual
funds with characteristics similar to the Fund. The peer group
will be used to measure the Fund's performance relative to
other funds with a similar investment approach. The peer group
benchmark will measure Fund performance net of all fees and
expenses except for the plan administration fee.
3. The Lipper Growth & Income Fund Index, selected by Lipper
Analytical Services, will serve as the performance benchmark
for participant returns, net of all fees and expenses. In
assessing performance against this benchmark, it will be taken
into consideration that Lipper Analytical Services may change
the composition of the Index.
B. TIME HORIZON
The time horizon for performance measurement will be one, three, and
five years.
One Year:
Performance relative to any benchmark established for the Fund will
vary widely over one-year periods; such variance over short time
periods is expected and acceptable. However, if such variance is
determined to be caused by systemic issues, action may be appropriate.
Three and Five Years:
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<PAGE> 20
Performance of the Fund should track market and universe benchmarks
more closely as the evaluation period lengthens. The ideal performance
objective for the Growth & Income Fund is to exceed the returns of all
relevant benchmarks; however, shortfalls over various time periods
should be expected in some cases. Underperformance against a single
benchmark over an extended period may be acceptable, particularly if
other benchmarks have been exceeded.
C. INVESTMENT CHARACTERISTICS
The Fund may have investment characteristics which differ from the
general market, as measured by the Standard & Poor's 500 Index. For the
total Fund, these would include, but are not limited to:
<TABLE>
<CAPTION>
CHARACTERISTIC RELATIVE TO S&P 500 INDEX
<S> <C>
Beta Similar
Capitalization Somewhat Lower
Dividend Yield Similar
Hist. 5 year EPS Growth Similar
Price to Earnings Ratio Similar
Standard Deviation Similar
</TABLE>
21
<PAGE> 21
SCHEDULE B
VANTAGEPOINT INVESTMENT ADVISERS, LLC
GROWTH & INCOME FUND
INVESTMENT GUIDELINES
FOR
CAPITAL GUARDIAN TRUST COMPANY
MARCH 1, 1999
Capital Guardian Trust Company seeks to achieve long-term growth of capital and
income. Capital Guardian's investment approach is a blend of value and growth,
offering the opportunity for superior returns primarily through stock selection,
including special situations.
A team methodology is used to manage the portfolio, which allows the portfolio
managers to run concentrated portfolios. Since the managers and research
analysts have different areas of expertise, the overall portfolio is well
diversified.
The firm uses only its own, independent research. The managers focus on a
long-term outlook (four to five years) that allows them to take advantage of
short-term price moves.
I. ELIGIBLE INVESTMENTS
A. EQUITY SECURITIES: Common stock, preferred stock, common stock
equivalents (units of beneficial interest), American
Depository Receipts, convertible preferred stocks, warrants,
and other rights.
B. CASH/CASH EQUIVALENTS: Fixed income obligations with
maturities less than one year, or short term accounts or
securities managed by the custodian institution.
C. FIXED INCOME: Fixed income and convertible fixed income
securities with maturities greater than one year.
22
<PAGE> 22
D. ELIGIBLE INVESTMENT LIMITS:
<TABLE>
<CAPTION>
MINIMUM NORMAL RANGE
------- ------------
MAXIMUM
-------
<S> <C> <C> <C>
Equity securities 65% 80%-100% 100%
Cash and cash equivalents 0% 0%-10% 15%
Fixed income securities 0% 0%-10% 15%
</TABLE>
II. PROHIBITED PRACTICES AND SECURITIES
A. Short sales.
B. Options.
C. Commodities (including financial futures).
D. Securities for which there is no established trading market.
E. Foreign securities unless listed and traded in the U.S.
F. Margin purchases and other forms of borrowing; granting of
pledges or other security interests in assets of the
portfolio; use of futures to obtain market leverage.
G. Securities offered by the Adviser or its affiliates.
H. General partner interests.
I. Direct investments in oil, gas, or other mineral exploration
or development programs.
J. Direct investments in real estate or interests in real estate;
this does not preclude investment in purchases of securities
of real estate investment trusts and other companies holding
real estate or interests in real estate.
K. Acquisition of securities of an issuer that would cause more
than 5% of the portfolio at the time of purchase to be
invested in such securities.
L. Acquisition of more than 5% of the outstanding stock of any
issuer.
23
<PAGE> 23
M. Acquisition of securities that would cause exposure to a
single industry to exceed 25% of the portfolio at the time of
purchase.
N. Commingled and registered mutual funds.
Exceptions to the above listed eligible investments and prohibited
securities or practices may be permitted with prior consent from VIA.
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in Section I or Section II
of these Investment Guidelines may be acquired or employed, as the case
may be, but only if explicitly approved in advance by VIA.
IV. PERFORMANCE BENCHMARK AND MONITORING CRITERIA
The standards outlined in this section are subject to review by VIA as
and when appropriate.
A. PERFORMANCE BENCHMARKS
The market benchmark for measuring investment performance for
the Adviser is the STANDARD & POOR'S 500 INDEX. The Adviser is
expected to outperform the benchmark net of Adviser fees over
rolling three and five-year periods.
B. PEER GROUPS
VIA will develop an appropriate peer group against which to
compare investment performance. The peer group will consist of
other managers with a similar investment approach. The
managers within the peer group will be reviewed periodically
for consistency of style and may be changed as and when deemed
appropriate by VIA. Such changes will be communicated to the
Adviser.
1. The peer group will consist primarily of mutual
funds, however separate account managers may be
included.
2. VIA will track relative net-of-fee performance
quarterly and evaluate performance on a trailing one,
three and five-year basis.
3. VIA will compare the Adviser's net performance with
the one-year mean return of the peer group.
24
<PAGE> 24
The current peer group consists of the following managers:
(under review)
25
<PAGE> 25
FEE SCHEDULE
FOR
CAPITAL GUARDIAN TRUST COMPANY
The Advisor's quarterly fee shall be calculated based on the average daily
market value of the assets under management as provided by the Custodian, based
on the following annual rate.
<TABLE>
<CAPTION>
Growth & Income*
<S> <C>
$25 million 0.55 percent
Next $25 million 0.40 percent
Over $50 million 0.23 percent
</TABLE>
<TABLE>
<CAPTION>
International*
<S> <C>
$25 million 0.75 percent
Next $25 million 0.60 percent
Next $200 million 0.43 percent
Over $250 million 0.38 percent
</TABLE>
* For purposes of calculating the fee, all accounts under management will be
aggregated and a fee discount shall be applied.
EXAMPLE OF FEE CALCULATION (HYPOTHETICAL AMOUNTS)
<TABLE>
<S> <C> <C>
January 1, 1999 $190,000,000 End-of-Day Market Value
January 2, 1999 $190,678,462 End-of-Day Market Value
January 3, 1999 $190,796,123 End-of-Day Market Value
. . .
March 29, 1999 $194,512,214 End-of-Day Market Value
March 30, 1999 $194,720,978 End-of-Day Market Value
March 31, 1999 $194,901,556 End-of-Day Market Value
Quarterly Daily Average $192,601,555
$100 million 0.50 percent $500,000
Next $100 million 0.45 percent $416,707
Over $200 million 0.40 percent --------
Annual Fee $916,707
One-Fourth Annual Fee $229,177
</TABLE>
26
<PAGE> 1
(d)(15)
INVESTMENT ADVISORY AGREEMENT
This Investment Advisory Agreement is made as of the __________ day of
_______________, 1999 by and between VANTAGEPOINT INVESTMENT ADVISERS, LLC, a
Delaware limited liability company (hereafter "Client"), and PUTNAM INVESTMENT
MANAGEMENT, INC., at One Post Office Square, Boston, Massachusetts 02109
(hereafter "Adviser") and is effective as of March 1, 1999 (the
"Effective Date").
WHEREAS, the Vantagepoint Funds (the "Funds") is a Delaware Business
Trust registered as an open-end management investment company under the
Investment Company Act of 1940;
WHEREAS, Client is party to an Investment Adviser Agreement with the
Funds for management of the investment operations of the Funds including the
establishment and operation of investment portfolios for the Funds and the
entering into of contracts with sub-advisers to assist in managing the
investment of the Funds property;
WHEREAS, Client and Adviser wish to enter into an agreement pursuant to
which Adviser will provide such assistance to Client.
AGREEMENTS:
In consideration of the performance by the Adviser as Investment Adviser
of certain assets held by the Funds, the Client has authorized the Adviser to
manage the securities and other assets as follows:
1. ACCOUNT
The account with respect to which the Adviser shall perform its services
shall consist of those assets of the Funds which the Client determines to assign
to an account with the Adviser, together with all income earned by those assets
and all realized and unrealized capital appreciation related to those assets
(hereafter "Account"). From time to time, the Client may, upon notice to the
Adviser, make additions to the Account and may, upon notice to the Adviser, make
withdrawals from the Account.
2. APPOINTMENT STATUS, POWERS OF ADVISER
(a) Purchase and Sale. Client hereby appoints Adviser to manage the
Account on the terms and conditions set forth in this Agreement. Subject to the
restrictions set forth in this Agreement, and acting always in conformity with
the Investment Policies provided in Paragraph 4, Adviser shall supervise and
direct investment of the Account. Client hereby grants the Adviser complete,
unlimited and unrestricted discretion and authority to select portfolio
securities with respect to the Account including the power to acquire (by
purchase, exchange, subscription or otherwise), to hold and dispose (by sale,
exchange or otherwise). The Adviser will consult with Client, upon the request
of the Client, concerning any transactions it makes with respect to the
investment of the Account.
(b) Limitation on Authority. Except as expressly authorized herein or
hereafter from time to time, Adviser shall for all purposes be deemed an
independent contractor and shall have no authority to act for or to represent
the Client or the Funds in any way or otherwise to be an agent of the Client or
the Funds.
(c) Voting. Unless otherwise instructed by Client, Adviser shall have
discretion to take any action or render any advice with respect to the voting of
shares or the execution of proxies solicited from time to time by, or with
respect to, the issuers of securities held in the Account. Adviser will report
annually to Client regarding such voting.
<PAGE> 2
(d) Key Personnel. Adviser agrees that the following key personnel
have primary responsibility with respect to the investment management of the
Account. If the(se) individual(s) is unable to devote sufficient time to
maintain primary responsibility of the Account, the Adviser must give Client
written advance notice, or prompt notice within three (3) business days, of the
name of the person designated by the Adviser to replace or supplement the
individual(s). In addition, the Adviser will give Client prompt written notice
of the replacement of any employee of the Adviser who has direct supervisory
responsibility for the key personnel or who has responsibility for setting
investment policy.
Key Personnel:
Manuel Weiss Herrerro
3. ACCEPTANCE OF APPOINTMENT
Adviser accepts the appointment as an investment adviser and agrees to
use its best efforts and professional judgment to make timely investment
transactions for the Client with respect to the investments of the Account, and
to provide the other services required of the Adviser under the provisions of
this Agreement.
4. INVESTMENT POLICIES
(a) Investment Objectives. The Adviser will adhere to the investment
objectives, guidelines, restrictions, and liquidity requirements of the Funds as
specified by the Client on SCHEDULE A hereto, and as restated or modified from
time to time by the Client in written notice to the Adviser. Schedule A, and any
amendments thereto, shall be derived by the Client from the Fund's Registration
Statement as filed with the Securities and Exchange Commission on Form N-1A
("Registration Statement"), as it may be amended from time to time.
(b) Investment Adviser Guidelines. The Adviser shall act in
accordance with the specific statement of Investment Adviser Guidelines,
SCHEDULE B, as restated or modified from time to time by the Client in written
notice to the Adviser. The Client retains the right, on written notice to the
Adviser, to modify any such objectives, guidelines, restrictions, and liquidity
requirements in any manner at any time.
(c) Conflict in Policies. If a conflict in policies or guidelines
referenced herein occurs, the Registration Statement shall govern the Client in
resolving such conflict.
5. CUSTODY, DELIVERY, RECEIPT OF SECURITIES
(a) Custody Responsibilities. The Client shall designate one or more
custodians to hold the Account. The Custodian, as designated by the Client will
be responsible for the custody, receipt and delivery of securities and other
assets of the Funds (including the Account), and the Adviser shall have no
authority, responsibility or obligation with respect to the custody, receipt or
delivery of securities or other assets of the Funds (including the Account). In
the event that any cash or securities of the Funds are delivered to the Adviser,
it will promptly deliver the same over to the Custodian, in the name of the
Funds.
(b) Securities Transactions. All securities transactions for the
Account will be consummated by payment to or delivery by the Funds of cash or
securities due to or from the Account. The Adviser will notify the Custodian of
all orders to brokers for the Account by 9:00 am EST on the day following the
trade date and will affirm the trade within one (1) business day after the trade
date (T+1).
2
<PAGE> 3
6. RECORD KEEPING AND REPORTING
(a) Records. Adviser will maintain proper and complete records
relating to the furnishing of services under this Agreement, including records
with respect to the acquisition, holding and disposition of securities for
Client. All records maintained pursuant to this Agreement shall be subject to
examination by Client and by persons authorized by it at all times upon
reasonable notice. Except as expressly authorized in this Agreement or as
required by applicable law, regulation or order of court or as directed by other
party in writing, Adviser and Client shall keep confidential the records and
other information obtained by reason of this Agreement (including, with respect
to Client, the investment information and transactions executed by Adviser).
Upon termination of this Agreement, Adviser shall promptly, upon demand, return
to Client all records Client reasonably believes are necessary in order to
discharge its responsibilities to the Funds. Adviser shall be entitled to retain
originals or copies of records pursuant to the requirements of applicable laws
or regulations.
(b) Quarterly Valuation Reports. Adviser shall use best efforts to
provide to the Client within TEN (10) business days after the end of each
calendar quarter a statement of the fair market value of the Account as of the
close of such quarter together with an itemized list of the assets in the
Account.
(c) Valuation Methodology. For purposes of this Agreement, fair
market value shall mean, as of a particular date, the value of the Account
(determined in accordance with generally accepted accounting principles
consistently applied), plus income accrued thereon less the liabilities related
to the assets in the Account. Adviser shall reconcile security and cash
positions , and market values, and report discrepancies to the Client.
(d) Loss Reimbursement. Adviser shall reimburse the Account for any
material loss caused by Adviser's breach of the standard of care set forth in
Section 12 that causes a delay in the accurate daily pricing of the Fund, with
the understanding that Adviser is not responsible for the actions of other
service providers to the Fund, including the actions of broker-dealers, nor is
Adviser responsible for the daily pricing of the Fund.
(e) Monthly Reports. Adviser shall provide the Client an itemized
report as to the securities in the account, the fair market value thereof and
the accrued income thereon within FOUR (4) business days after the end of each
Calendar Month. The Adviser shall also use best efforts to provide, in writing,
preliminary performance numbers and a brief explanation of these results within
FIVE (5) business days after the end of each Calendar Month. The requested
format will be as mutually agreed by Adviser and Client. For purposes of this
Agreement, fair market value shall mean, as of a particular date, the value of
the Account plus income accrued thereon less the liabilities related to the
assets in the Account.
(f) Reports on Request. Adviser shall provide to Client promptly upon
request any information available in the records maintained by Adviser relating
to the Account.
7. PURCHASE AND SALE OF SECURITIES
(a) Selection of Brokers. Except to the extent otherwise instructed
by Client, (it being understood that Client may, in its absolute discretion,
direct portfolio transactions for which Adviser is responsible to any broker
that Client may see fit), Adviser shall place all orders for the purchase and
sale of securities on behalf of the Client with brokers or dealers selected by
Adviser, but not with a person affiliated with Adviser, as the term "affiliated
person" is defined in the Investment Company Act of 1940 (hereafter an
"Affiliate").
(b) Best Execution. In placing such orders, the Adviser will give
primary consideration to obtaining the most favorable price and efficient
execution. In evaluating the terms available for executing particular
transactions for Client and in selecting brokers and dealers to execute such
transactions, the
3
<PAGE> 4
Adviser may consider, in addition to commission cost and execution capabilities,
the financial stability and reputation of brokers and dealers and the brokerage
and research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934, as amended) provided by brokers and dealers.
Adviser is authorized to pay a broker or dealer who provides such brokerage and
research services a commission for executing a transaction which is in excess of
the amount of commission another broker or dealer would have charged for
effecting that transaction if Adviser determines that such commission is
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer in discharging responsibilities with respect
to the Account.
(c) Bunching Orders. Client agrees that Adviser may aggregate sales
and purchase orders of Account with similar orders being made simultaneously for
other accounts managed by Adviser, if in Adviser's reasonable judgment such
aggregation shall result in an overall economic benefit to the Account taking
into consideration the advantageous selling or purchase price, brokerage
commission and other expenses. Client acknowledges that the determination of
such economic benefit to Client by Adviser represents Adviser's evaluation that
client is benefited by relatively better purchase or sales prices, lower
commission expenses and beneficial timing of transactions or a combination of
these and other factors.
8. INVESTMENT FEES
(a) Fee Schedule. The compensation of the Adviser for its services
under this Agreement shall be calculated and paid by the Client from the assets
of the Account in accordance with SCHEDULE C hereto. The Adviser shall send a
written invoice to the Client within 30 days of the quarter end and shall be
duly compensated from the assets of the Account.
(b) Fee Computation. The Adviser's fee for each calendar quarter
shall be calculated based as set forth in Schedule C.
(c) Fee Amendment. Fee rates may be changed from time to time by
agreement between the Client and the Adviser; provided, however, that no
increase in such rates shall be made during the first calendar year of this
Agreement.
(d) Pro Rata Fee. If the Adviser should serve for less than the whole
of any calendar quarter, its compensation shall be determined as provided above
on the basis of the ending market value of the Account in the month in which the
termination occurs and shall be payable on a pro rata basis for the period of
the calendar quarter for which it has served as Adviser hereunder.
9. BEST EFFORTS; NON-EXCLUSIVITY OF SERVICES
The Adviser shall devote its best efforts and such time as it deems
necessary to provide prompt and expert service to the Client. The services of
Adviser to be provided to Client hereunder are not to be deemed exclusive and
Adviser shall be free to provide similar services for its own account and the
accounts of other persons and to receive compensation for such services. Client
acknowledges that Adviser and its members, Affiliates and employees, and
Adviser's other clients may at any time, have, acquire, increase, decrease, or
dispose of positions in the same investments which are at the same time being
held, acquired for or disposed of under this Agreement for the Client. Adviser
shall have no obligation to acquire or dispose of a position in any investment
pursuant to this Agreement simply because Adviser, its directors, members,
Affiliates or employees invest in such a position for its or their own accounts
or for the account of another client.
10. INSIDER TRADING POLICIES AND CODE OF ETHICS
4
<PAGE> 5
Adviser hereby represents that it has adopted policies that meet the
requirements of Rule 17j-1 under the Investment Company Act of 1940. Copies of
such policies shall be delivered to the Client, and any violation of such
policies by personnel of the Adviser that involves the Account, directly or
indirectly, shall be reported to the Client as periodically requested by Client.
11. INSURANCE
At all times during the term of this Agreement, Adviser shall maintain,
at its own cost and expense, professional liability insurance for errors,
omissions, and negligent acts, in an amount and with such terms as are standard
in the financial services industry for an investment adviser managing the amount
of aggregate assets managed by Adviser for Client and for the Adviser's other
clients.
12. LIABILITY
Adviser shall not be liable to Client for honest mistakes of judgment or
for action or inaction taken in good faith for a purpose that the Adviser
reasonably believes to be in the best interests of the Client. Adviser shall be
liable to Client for any liability, damages or expenses of Client arising out of
the negligence, malfeasance or violation of applicable law by Adviser or any of
its officers, employees or Affiliates in providing management under this
Agreement for the Account. Client acknowledges and agrees that Adviser's
responsibilities pertain solely to management of the Account pursuant to the
guidelines set forth in Schedules A and B, without regard to other assets of the
Funds, and that Adviser is not responsible for administration or compliance of
the Funds portfolio as a whole with requirements set forth in the Funds'
Registration Statement or arising under applicable tax or securities laws.
However, neither this provision nor any other provision of this Agreement shall
constitute a waiver or limitation of any rights which Client may have under
federal or state securities laws.
13. TERM
This Agreement shall be in effect for an initial term of two years
beginning on the Effective Date. This Agreement may be renewed thereafter for
successive one-year periods if such renewal is approved annually by the majority
of those members of the Funds' Board of Directors who are not "interested
persons" as that term is defined in the Investment Company Act of 1940.
14. TERMINATION
This Agreement may be terminated by either party hereto, without the
payment of any penalty, immediately upon notice to the other in the event of a
breach of any provision thereof by the party so notified, or otherwise by
Adviser upon sixty (60) days' written notice to the Client or by Client upon 30
days' written notice to Adviser, except that this Agreement shall automatically
terminate in the event of its assignment, as provided in Paragraph 19, at the
discretion of the Client in the event of Adviser's ownership change as provided
in Paragraph 19, or upon the termination of the Funds. Any termination in
accordance with the terms of this Agreement shall not cause the payment of any
penalty. Any such termination shall not affect the status, obligations or
liabilities of any party hereto to the other.
15. REPRESENTATIONS
(a) Adviser hereby confirms to Client that Adviser is registered as
an investment adviser under the Investment Advisers Act of 1940, that it has
full power and authority to enter into and perform fully the terms of this
Agreement and that the execution of this Agreement on behalf of Adviser has been
duly authorized and, upon execution and delivery, this Agreement will be binding
upon Adviser in accordance with its terms.
5
<PAGE> 6
(b) Client hereby confirms to Adviser that it has full power and
authority to enter into this Agreement and that the execution of this Agreement
on behalf of Client has been fully authorized by the Funds in accordance with
the Investment Company Act of 1940 and other applicable law and, upon execution
and delivery, this Agreement will be binding upon Client in accordance with its
terms.
16. NOTICES
Notices or other notifications given or sent under or pursuant to this
Agreement shall be in writing and be deemed to have been given or sent if
delivered to the party at its address listed below in person or by telex or
telecopy receipt of which is confirmed or by mail or by registered mail, return
receipt requested. The addresses of the parties are:
CLIENT:
Vantagepoint Investment Advisers, LLC
Attention: Legal Department
c/o ICMA Retirement Corporation
777 North Capitol Street, NE, Ste. 600
Washington, D.C. 20002-4240
ADVISER:
Putnam Investment Management, Inc.
One Post Office Square
Boston, Massachusetts 02109
Each party may change its address by giving notice as herein required.
17. SOLE INSTRUMENT
This instrument constitutes the sole and only agreement of the parties
to it relating to its object and correctly sets forth the rights, duties, and
obligations of each party to the other as of its date. Any prior agreements,
promises, negotiations or representations not expressly set forth in this
Agreement are of no force or effect.
18. WAIVER OR MODIFICATION
No waiver or modification of this Agreement shall be effective unless
reduced to a written document signed by the party to be charged. No failure to
exercise and no delay in exercising, on the part of any party hereto, of any
right, remedy, power or privilege hereunder, shall operate as a waiver thereof.
19. ASSIGNMENT AND OWNERSHIP CHANGE
This Agreement shall automatically terminate in the event of its
assignment. Adviser agrees to provide immediate written notice in the event of
an ownership change. Such an ownership change will entitle, but not require, the
Client to terminate the Agreement immediately or upon notice.
20. COUNTERPARTS
This Agreement may be executed in counterparts each of which shall be
deemed to be an original and all of which, taken together, shall be deemed to
constitute one and the same instrument.
21. CHOICE OF LAW
6
<PAGE> 7
This Agreement shall be governed by, and the rights of the parties
arising hereunder construed in accordance with, the laws of the State of
Delaware without reference to principles of conflict of laws.
22. YEAR 2000 STATEMENT
(a) Adviser is scheduled to complete all Year 2000 compliance changes
by the first quarter of 1999, based on its Year 2000 Certification Guidelines.
Adviser hereby represents that all of its internally developed core systems
directly affecting client operations will be fully tested and operational prior
to December 31, 1999 to ensure that they will function without material
disruption of its ability to provide investment advisory services in the Year
2000 and beyond. In addition, Adviser represents that it is actively working
with its outside vendors to ensure their commitment to dealing with the Year
2000 issue. Adviser cannot, however, make any representations that software
provided by independent vendors will function in the Year 2000 and beyond.
(b) To the extent that Adviser fails to detect and correct a Year
2000 problem within any of its core systems, and such failure leads to a
material disruption of its internally developed core systems that directly and
adversely affects the service provided to Client, Adviser shall indemnify and
hold Client harmless from and against any cost, loss, damage or expense
(including reasonable attorney fees) incurred by Client as a result of a breach
of subsection (a) of this section 22.
IN WITNESS WHEREOF, THE PARTIES HERETO EXECUTE THIS AGREEMENT ON March 1
, 1999 and make it effective on the date set forth.
CLIENT ADVISER
Vantagepoint Putnam Investment Management, Inc.
Investment Advisers, LLC
by: by:
/s/ GIRARD MILLER /s/ JOHN R. VERANI
- ------------------------- ----------------------------
(signature) (signature)
Sr. Vice President
- ------------------------- ----------------------------
Girard Miller, President (name, title)
Date: Date:
7
<PAGE> 8
ADDENDUM DATED March 1, 1999 TO THE
INVESTMENT ADVISORY AGREEMENT DATED _____________
This addendum modifies and forms a part of the Investment Advisory Agreement
(the "Agreement") dated March 1, 1999, between Vantagepoint Investment
Advisers, LLC, a Delaware corporation ("Client"), and Putnam Investment
Management, Inc. ("Adviser"), relating to the Vantagepoint Funds ("VF").
All terms used in this Addendum have the same meaning given to them in the
Agreement unless specifically noted otherwise.
1. The assets of the Account to be managed by the Adviser under the Agreement
and this Addendum are assets of the Growth and Income Fund (the "Fund"), a
portfolio of VF. For purposes of Section 8 (Fees) and Schedule C, all payments
due to Adviser shall be solely made from the assets of the Fund.
2. All references in the Agreement and this Addendum to the Investment Policies
to be followed by Adviser in managing the assets of the Fund are hereby deemed
to include the Investment Policies set forth in the Agreement and any Schedules
to the Agreement.
3. The activities of the Client and the Adviser in managing the assets of the
Fund pursuant to the Agreement and this Addendum shall in all instances be
conducted subject to the supervision and direction of the Board of Directors of
VF.
4. For purposes of Sections 8 (Fees), 12 (Liability), 13 (Term), 14
(Termination), 15 (Representation), 16 (Notices), 18 (Waiver or Modification),
19 (Assignment and Ownership Change), and 22 (Year 2000 Statement) of the
Agreement, as well as for purposes of Schedule C of the Agreement, VF is hereby
made a party to the Agreement and shall be entitled to all protections and
rights set forth in those Sections and in Schedule C to which Client is
entitled.
5. For purposes of the Agreement and this Addendum, Client and Adviser hereby
agree to maintain all books and records relating to VF that are required to be
maintained in accordance with good practice, applicable federal and state
securities laws, including the Investment Company Act of 1940 and or the
Investment Advisers Act of 1940, and such reasonable instructions as shall be
provided to Adviser by Client from time to time.
6. Adviser shall furnish Client and the Board of Directors of VF such periodic
and special reports and information as either of them may reasonably request,
including such information as shall be reasonably necessary to evaluate the
terms of any advisory agreement between Client and Adviser with respect to
assets of VF..
7. Section 6 is hereby amended as follows:
a. 6(a) is amended beginning on line 8 and ending on line 9 by deleting
the parentheses and all language with in the parentheses;
b. 6(b) is deleted in its entirety.
c. 6(c) is deleted.
d. 6(d) is changed to 6(b); and
e. 6(e) is deleted and 6(f) is changed to 6(c).
8
<PAGE> 9
8. Section 8, Investment Fees, is amended by deleting 8(b) and 8(c) in their
entirety and by redesignating 8(d) as 8(b).
9. Client and VF will not refer to Adviser in any prospectus, proxy statement or
sales literature except with the written permission of Adviser.
9
<PAGE> 10
SCHEDULE A
THE VANTAGEPOINT FUNDS
GROWTH & INCOME FUND
STATEMENT OF INVESTMENT POLICIES
These Investment Policies and Guidelines have been adopted by the Vantagepoint
Funds (the "Funds") to govern the management and administration of the Growth &
Income Fund by Vantagepoint Investment Advisers, LLC ("VIA"). They may be
reviewed and revised at the discretion of the Directors of the Vantagepoint
Funds (the "Directors"). VIA is responsible for the monitoring and appointment
of subadvisers to handle the day-to-day investment of assets assigned to them.
I. GENERAL DESCRIPTION AND GOALS
The Growth & Income Fund seeks long-term capital growth by investing
primarily (at least 65 percent) in common stocks that offer the
potential for high total return through a combination of capital
appreciation and current income. The Fund may also invest in other
equity-type securities (e.g., convertible securities and preferred
stocks) and in bonds.
II. STRUCTURE
The assets of the Growth & Income Fund shall be managed by two or
more subadvisers. The subadvisers may be retained to manage separate
accounts under discretionary investment advisory contracts. Each
subadviser will be selected for its individual investment management
expertise and each will operate independently of the others. Each
subadviser must either be registered with the Securities and
Exchange Commission (SEC) under the Investment Advisers Act of 1940
or a Bank, Insurance Company or Trust Company exempt as such from
registration.
Each subadviser shall exercise complete management discretion over
assets of the Fund allocated to its account in a manner consistent
with these Investment Policies and Guidelines and with such further
investment limitations and conditions as may be established by VIA
and approved by the Directors. Subadvisers will be obligated to
manage Fund assets as if they were subject to the fiduciary duty of
care that applies under the Employee Retirement Income Security Act
of 1974 (ERISA) governing pension and profit sharing assets.
III. INVESTMENT STRATEGY
VIA shall select subadvisers that represent a variety of portfolio
management approaches and investment disciplines. These investment
approaches will be combined in a complementary manner to effectively
achieve the investment objective of the Fund. The Fund as a whole
will be more diversified than each individual subadviser's
portfolio.
Investment strategies employed by the subadvisers included in the
Growth & Income Fund may involve:
- a focus on past patterns as well as future prospects for
growth in corporate earnings per share.
- an emphasis on securities that pay current dividends and
offer potential earnings growth
- debt and equity securities which may not currently pay
dividends, but offer prospects for capital appreciation or
future income.
- production of long-term capital growth by investing in
securities that the subadviser believes to be undervalued
at the time of purchase where the production of income is a
secondary objective,
10
<PAGE> 11
- the ability to emphasize a growth or income-oriented
strategy opportunistically.
IV. PERFORMANCE BENCHMARKS
Performance benchmarks will be established for the Fund. These
benchmarks will be recommended by VIA and adopted by the Directors
and will be reviewed and revised as appropriate from time to time.
The current performance benchmarks for the Fund are appended to this
document as Exhibit I.
V. DIRECTOR REVIEW
VIA will report periodically to the Directors on performance of the
Fund against benchmarks and on subadviser results and will evaluate
for the Directors the overall performance of the Fund relative to
its objectives. The Directors will consider such reports and other
relevant factors in appraising the investment objectives and
performance of the Fund.
INVESTMENT GUIDELINES
I. ELIGIBLE INVESTMENTS
A. EQUITY SECURITIES: Common stock, preferred stock, common stock
equivalents (units of beneficial interest), American Depository
Receipts, convertible preferred stocks, warrants, and other
rights.
B. CASH/CASH EQUIVALENTS: Fixed income obligations with maturity
less than one year, or short-term accounts or securities managed
by a custodian institution.
C. FIXED INCOME: Fixed income and convertible fixed income
securities with maturities greater than one year.
D. FINANCIAL FUTURES: Equity index futures.
E ELIGIBLE PRACTICES: There are no restrictions on subadvisers as
to the following:
- Portfolio turnover.
- Realized gains and losses.
F. ELIGIBLE INVESTMENT LIMITS
<TABLE>
<CAPTION>
MINIMUM NORMAL RANGE MAXIMUM
------- ------------ -------
<S> <C> <C> <C>
U.S. equity securities 65% 80-100% 100%
Non-U.S. equity securities 0% 0-10% 20%
Cash and cash equivalents 0% 0-15% 25%
Fixed income securities 0% 0-15% 25%
Convertible securities 0% 0-20% 35%
</TABLE>
II. PROHIBITED PRACTICES AND SECURITIES
A. Short sales
B. Options
C. Commodities (excluding financial futures).
11
<PAGE> 12
D. Securities for which there is no established trading market.
E. Margin purchases and other forms of borrowing; granting of
pledges or other security interests in assets of the Fund; use of
futures to obtain market leverage.
F. Securities issued by the subadvisers of the Fund or their
affiliates.
G. General partner interests.
H. Direct investments in oil, gas, or other mineral exploration or
development programs.
I. Direct investments in real estate or interests in real estate;
this does not preclude investment in purchases of securities of
real estate investment trusts and other companies holding real
estate or interests in real estate.
J. Commingled funds; this does not preclude investment in mutual
funds up to 10% of the Fund's market value at the time of
purchase.
K. Acquisition of securities that would cause exposure to non-equity
holdings to exceed 35% of the Fund's market value at the time of
purchase.
L. Acquisition of securities that would cause exposure to a single
industry to exceed 25% of the Fund's market value at the time of
purchase.
M. In the absence of prior consent of VIA, acquisition of securities
of an issuer that would cause more than 5% of the Fund to be
invested in such securities.
N. In the absence of prior consent of VIA, acquisition of more than
5% of the outstanding shares of any class of equity securities.
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in Section I or Section
II of these Investment Guidelines may be acquired or employed, as
the case may be, but only if explicitly approved in advance by VIA.
12
<PAGE> 13
IV. SECURITIES LENDING
Nothing herein shall prevent loans of securities in the Growth &
Income Fund pursuant to an established securities lending program
conducted by the Fund's custodian.
13
<PAGE> 14
EXHIBIT I
TO THE
STATEMENT OF INVESTMENT POLICIES AND GUIDELINES OF
THE GROWTH & INCOME FUND
MARCH 1, 1999
The following standards will be used to measure the performance of the Growth &
Income Fund:
A. BENCHMARKS
1. The performance benchmark for the Fund is the S&P 500 INDEX
("S&P 500 Index"). The benchmark will be used to measure the
Fund's performance net of subadviser fees.
2. A peer group benchmark for the Fund will consist of mutual
funds with characteristics similar to the Fund. The peer
group will be used to measure the Fund's performance relative
to other funds with a similar investment approach. The peer
group benchmark will measure Fund performance net of all fees
and expenses except for the plan administration fee.
3. The Lipper Growth & Income Fund Index, selected by Lipper
Analytical Services, will serve as the performance benchmark
for participant returns, net of all fees and expenses. In
assessing performance against this benchmark, it will be
taken into consideration that Lipper Analytical Services may
change the composition of the Index.
B. TIME HORIZON
The time horizon for performance measurement will be one, three, and
five years.
One Year:
Performance relative to any benchmark established for the Fund will
vary widely over one-year periods; such variance over short time
periods is expected and acceptable. However, if such variance is
determined to be caused by systemic issues, action may be
appropriate.
Three and Five Years:
Performance of the Fund should track market and universe benchmarks
more closely as the evaluation period lengthens. The ideal
performance objective for the Growth & Income Fund is to exceed the
returns of all relevant benchmarks; however, shortfalls over various
time periods should be expected in some cases. Underperformance
against a single benchmark over an extended period may be
acceptable, particularly if other benchmarks have been exceeded.
C. INVESTMENT CHARACTERISTICS
The Fund may have investment characteristics which differ from the
general market, as measured by the Standard & Poor's 500 Index.
For the total Fund, these would include, but are not limited to:
14
<PAGE> 15
<TABLE>
<CAPTION>
CHARACTERISTIC RELATIVE TO S&P 500 INDEX
<S> <C>
Beta Similar
Capitalization Somewhat Lower
Dividend Yield Similar
Hist. 5 year EPS Growth Similar
Price to Earnings Ratio Similar
Standard Deviation Similar
</TABLE>
15
<PAGE> 16
SCHEDULE B
VANTAGEPOINT INVESTMENT ADVISERS, LLC
GROWTH & INCOME FUND
INVESTMENT GUIDELINES
FOR
PUTNAM INVESTMENT MANAGEMENT
MARCH 1, 1999
Putnam Investment Management seeks to achieve superior long-term performance,
while maintaining a risk profile commensurate with a typical core growth equity
manager. The firm combines traditional fundamental analysis with a systematic
stock selection process to identify attractive core growth stocks. The portfolio
is normally fully invested with no more than 25% invested in any one industry.
I. ELIGIBLE INVESTMENTS
A. EQUITY SECURITIES: Common stock, preferred stock, common stock
equivalents (units of beneficial interest), American Depository
Receipts, convertible preferred stocks, warrants, and other
rights.
B. CASH/CASH EQUIVALENTS: Fixed income obligations with
maturities less than one year, or short term accounts or
securities managed by the custodian institution.
C. FIXED INCOME: Fixed income and convertible fixed income
securities with maturities greater than one year.
D. ELIGIBLE INVESTMENT LIMITS:
<TABLE>
<CAPTION>
MINIMUM NORMAL RANGE MAXIMUM
------- ------------ -------
<S> <C> <C> <C>
Equity securities 65% 80%-100% 100%
Cash and cash equivalents 0% 0%-10% 15%
Fixed income securities 0% 0%-10% 15%
</TABLE>
II. PROHIBITED PRACTICES AND SECURITIES
A. Short sales.
B. Options.
C. Commodities (including financial futures).
D. Securities for which there is no established trading market.
E. Foreign securities unless listed and traded in the U.S.
F. Margin purchases and other forms of borrowing; granting of
pledges or other security interests in assets of the portfolio;
use of futures to obtain market leverage.
16
<PAGE> 17
G. Securities offered by the Adviser or its affiliates.
H. General partner interests.
I. Direct investments in oil, gas, or other mineral exploration or
development programs.
J. Direct investments in real estate or interests in real estate;
this does not preclude investment in purchases of securities of
real estate investment trusts and other companies holding real
estate or interests in real estate.
K. Acquisition of securities of an issuer that would cause more than
5% of the portfolio at the time of purchase to be invested in
such securities.
L. Acquisition of more than 5% of the outstanding stock of any
issuer.
M. Acquisition of securities that would cause exposure to a single
industry to exceed 25% of the portfolio at the time of purchase.
N. Commingled and registered mutual funds.
Exceptions to the above listed eligible investments and prohibited
securities or practices may be permitted with prior consent from
VIA.
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in Section I or Section
II of these Investment Guidelines may be acquired or employed, as
the case may be, but only if explicitly approved in advance by VIA.
IV. PERFORMANCE BENCHMARK AND MONITORING CRITERIA
The standards outlined in this section are subject to review by VIA
as and when appropriate.
A. PERFORMANCE BENCHMARKS
The market benchmark for measuring investment performance for
the Adviser is the STANDARD & POOR'S 500 INDEX. The Adviser is
expected to outperform the benchmark net of Adviser fees over
rolling three and five-year periods.
B. PEER GROUPS
VIA will develop an appropriate peer group against which to
compare investment performance. The peer group will consist of
other managers with a similar investment approach. The managers
within the peer group will be reviewed periodically for
consistency of style and may be changed as and when deemed
appropriate by VIA. Such changes will be communicated to the
Adviser.
1. The peer group will consist primarily of mutual funds,
however separate account managers may be included.
17
<PAGE> 18
2. VIA will track relative net-of-fee performance quarterly and
evaluate performance on a trailing one, three and five-year
basis.
3. VIA will compare the Adviser's net performance with the
one-year mean return of the peer group.
The current peer group consists of the following five managers:
American Century-Twentieth Century Ultra (Investor Class)(TWCGX)
Harbor Capital Appreciation (HACAX)
MFS Massachusetts Investors Growth A (MIGFX)
Putnam Investors A (PINVX)
Vanguard Index Growth (VIGRX)
18
<PAGE> 19
FEE SCHEDULE
FOR
PUTNAM INVESTMENT MANAGEMENT
The Advisor's quarterly fee shall be calculated based on the average daily
market value of the assets under management as provided by the Custodian, based
on the following annual rate.
$15 million 0.55 percent
Next $35 million 0.40 percent
Next $50 million 0.30 percent
Over $100 million 0.25 percent
EXAMPLE OF FEE CALCULATION (HYPOTHETICAL AMOUNTS)
January 1, 1999 $190,000,000 End-of-Day Market Value
January 2, 1999 $190,678,462 End-of-Day Market Value
January 3, 1999 $190,796,123 End-of-Day Market Value
. . .
March 29, 1999 $194,512,214 End-of-Day Market Value
March 30, 1999 $194,720,978 End-of-Day Market Value
March 31, 1999 $194,901,556 End-of-Day Market Value
Quarterly Daily Average $192,601,555
$100 million 0.50 percent $500,000
Next $100 million 0.45 percent $416,707
Over $200 million 0.40 percent ---------
Annual Fee $916,707
One-Fourth Annual Fee $229,177
19
<PAGE> 1
(d)(16)
INVESTMENT SUBADVISORY AGREEMENT
This Investment Subadvisory Agreement is made by and between
VANTAGEPOINT INVESTMENT ADVISERS, LLC, a Delaware limited liability company
(hereafter "Client"), WELLINGTON MANAGEMENT COMPANY, LLP, 75 State Street,
Boston, Massachusetts 02109 (hereafter "Subadviser"), and, as set forth in
Section 23, THE VANTAGEPOINT FUNDS, a Delaware business trust, and is effective
as of March 28, 2000 (the "Effective Date").
WHEREAS, the Vantagepoint Funds (the "Funds") is a Delaware Business
Trust registered as an open-end management investment company under the
Investment Company Act of 1940 (the "1940 Act");
WHEREAS, Client is party to an Investment Adviser Agreement with the
Funds for management of the investment operations of the Funds including the
establishment and operation of investment portfolios for the Funds and the
entering into of contracts with sub-advisers to assist in managing the
investment of the Funds property;
WHEREAS, Client and Subadviser wish to enter into a sub-advisory
agreement pursuant to which Subadviser will provide such assistance to Client.
AGREEMENTS:
In consideration of the performance by the Subadviser as Investment
Subadviser of certain assets held by the Funds, the Client has authorized the
Subadviser to manage the securities and other assets as follows:
1. ACCOUNT
The account with respect to which the Subadviser shall perform its
services shall consist of those assets of the Vantagepoint Growth & Income Fund
which the Client determines to assign to an account with the Subadviser,
together with all income earned by those assets and all realized and unrealized
capital appreciation related to those assets (hereafter "Account"). From time to
time, the Client may, upon notice to the Subadviser, make additions to the
Account and may, upon notice to the Subadviser, make withdrawals from the
Account.
2. APPOINTMENT STATUS, POWERS OF SUBADVISER
(a) Purchase and Sale. Client hereby appoints Subadviser to manage
the Account on the terms and conditions set forth in this Agreement. Subject to
the restrictions set forth in this Agreement, and acting always in conformity
with the Investment Policies provided in Paragraph 4, Subadviser shall supervise
and direct investment of the Account. Client hereby grants the Subadviser
complete, unlimited and unrestricted discretion and authority to select
portfolio securities with respect to the Account including the power to acquire
(by purchase, exchange, subscription or otherwise), to hold and dispose (by
sale, exchange or otherwise). The Subadviser will consult with Client, upon the
request of the Client, concerning any transactions it makes with respect to the
investment of the Account.
(b) Limitation on Authority. Except as expressly authorized herein or
hereafter from time to time, Subadviser shall for all purposes be deemed an
independent contractor and shall have no authority to act for or to represent
the Client or the Funds in any way or otherwise to be an agent of the Client or
the Funds. The activities of Client and Subadviser in managing the assets of the
Fund Vantagepoint Growth & Income Fund shall in all instances be conducted
subject to the supervision and direction of the Board of Directors of the
Vantagepoint Funds.
(c) Voting. Unless otherwise instructed by Client, Subadviser shall
have discretion to take any action or render any advice with respect to the
voting of shares or the execution of proxies solicited
<PAGE> 2
from time to time by, or with respect to, the issuers of securities held in the
Account. Subadviser will report annually to Client regarding such voting.
(d) Key Personnel. Subadviser agrees that the following key personnel
have primary responsibility with respect to the investment management of the
Account. If the(se) individual(s) is unable to devote sufficient time to
maintain primary responsibility of the Account, the Subadviser must give Client
written advance notice, or prompt notice within three (3) business days, of the
name of the person designated by the Subadviser to replace or supplement the
individual(s). In addition, the Subadviser will give Client written notice of
the replacement of any employee of the Subadviser who has direct supervisory
responsibility for the key personnel or who has responsibility for setting
investment policy as soon as reasonably practicable.
Key Personnel: John Ryan
3. ACCEPTANCE OF APPOINTMENT
Subadviser accepts the appointment as an investment Subadviser and
agrees to use its best efforts and professional judgment to make timely
investment transactions for the Client with respect to the investments of the
Account, and to provide the other services required of the Subadviser under the
provisions of this Agreement.
4. INVESTMENT POLICIES
(a) Investment Objectives. Subject to the supervision of the Fund's
Board of Directors and the Client, the Subadviser shall direct the investments
of the Account in accordance with the Fund's investment objectives, policies,
and restrictions as provided in the Fund's Prospectus and Statement of
Additional Information as filed with the Securities and Exchange Commission on
Form N-1A ("Registration Statement"), as currently in effect and as amended or
supplemented from time to time, and such other limitations as the Fund or Client
may reasonably impose by written notice to the Subadviser or as set forth in
SCHEDULE A. Client shall give Subadviser copies of the Fund's Prospectus and
Statement of Additional Information, and any amendments or supplements thereto,
as soon a practicable after such documents become available.
(b) Funds' Agreement and Declaration of Trust. The Subadviser will
adhere to all specific provisions relating to the investment of the Account
established in the Funds' Agreement and Declaration of Trust and Registration
Statement, both of which are hereby incorporated by reference and made a part of
this Agreement. The Client shall give written notice to the Subadviser of any
amendments to the Agreement and Declaration of Trust or Registration Statement,
which amendments, upon their receipt by the Subadviser, shall be binding on the
Subadviser.
(c) Investment Subadviser Guidelines. The Subadviser shall act in
accordance with the Fund's Prospectus and Statement of Additional Information,
and in accordance with the limitations set forth in the specific statement of
Investment Adviser Guidelines, SCHEDULE B, as restated or modified from time to
time by the Client in written notice to the Subadviser. The Client retains the
right, on written notice to the Subadviser, to modify any such objectives,
guidelines, restrictions, and liquidity requirements in any manner at any time
as may be allowed pursuant to the 1940 Act.
(d) Conflict in Policies. If a conflict in policies or guidelines
referenced herein occurs, the Registration Statement shall govern for purposes
of this Agreement.
2
<PAGE> 3
5. CUSTODY, DELIVERY, RECEIPT OF SECURITIES
(a) Custody Responsibilities. The Client shall designate one or more
custodians to hold the Account. The Custodian, as designated by the Client will
be responsible for the custody, receipt and delivery of securities and other
assets of the Funds (including the Account), and the Subadviser shall have no
authority, responsibility or obligation with respect to the custody, receipt or
delivery of securities or other assets of the Funds (including the Account). In
the event that any cash or securities of the Funds are delivered to the
Subadviser, it will promptly deliver the same over to the Custodian, in the name
of the Funds.
(b) Securities Transactions. Unless otherwise required by local
custom, all securities transactions for the Account will be consummated by
payment to or delivery by the Funds of cash or securities due to or from the
Account. The Subadviser will make all reasonable efforts to notify the Custodian
of all orders to brokers for the Account by 9:00 am EST on the day following the
trade date and will affirm the trade within the close of business one (1)
business day after the trade date (T+1).
(c) Tri-Party Agreement. The Subadviser is authorized to enter into
Tri-Party Repurchase Agreements and sign the standard PSA tri-party agreement
(the "Tri-Party Agreement") on behalf of the Client and the subcustodian
thereunder is authorized to act as a subcustodian for the Account's assets
involved in any tri-party repurchase agreement pursuant to such Tri-Party
Agreement.
6. RECORD KEEPING AND REPORTING
(a) Records. Subadviser will maintain proper and complete records
relating to the furnishing of services under this Agreement, including records
with respect to the acquisition, holding and disposition of securities for
Client that are required of an investment adviser to a registered investment
company pursuant to the 1940 Act and the Investment Advisers Act of 1940, and
the rules thereunder, and in accordance with such reasonable instructions as
shall be provided to Subadviser by Client from time to time. All records
maintained pursuant to this Agreement shall be subject to examination by Client
and by persons authorized by it during normal business hours upon reasonable
notice. Except as expressly authorized in this Agreement or as required by
applicable law, regulation or order of court or as directed by other party in
writing, Subadviser and Client shall keep confidential the records and other
information obtained by reason of this Agreement. Upon termination of this
Agreement, Subadviser shall promptly, upon demand, return to Client all records
Client reasonably believes are necessary in order to discharge its
responsibilities to the Funds. Subadviser shall be entitled to retain originals
or copies of records pursuant to the requirements of applicable laws or
regulations.
(b) Reconciliations. Subadviser shall reconcile security and cash
positions, and market values on a monthly basis to the Custodian's records and
report discrepancies to the Client by ten (10) business days after the end of
the month.
(c) Loss Reimbursement. Subadviser shall reimburse the Account for
any material error to the Fund's net asset value caused by Subadviser's breach
of its standard of care set forth in Section 12 that is a direct cause of a
delay in the accurate daily pricing of the Fund(s), provided such loss was not
the result of action or inaction of other service providers to the Client or the
Fund.
(d) Reports. Subadviser shall furnish Client and the Board of
Directors of the Vantagepoint Funds such periodic and special reports and
information as either of them may request, including such information as shall
be reasonably necessary to evaluate the terms of any advisory agreement between
Client and Subadviser with respect to the assets of the Vantagepoint Growth &
Income Fund.
3
<PAGE> 4
(e) Other Reports on Request. Subadviser shall provide to Client
promptly upon request any information available in the records maintained by
Subadviser relating to the Account.
(f) Review of Materials. During the term of this Agreement, the
Client shall furnish to the Subadviser at its principal office all prospectuses,
statements of additional information, proxy statements, reports to shareholders,
advertising and sales literature or other material prepared for distribution to
Fund shareholders or the public, which refer to the Subadviser or its clients in
any way, prior to the use thereof, and the Client shall not use any such
materials if the Subadviser reasonably objects in writing within ten (10)
business days (or such other time as may be mutually agreed) after receipt
thereof. The Client shall ensure that materials prepared by employees or agents
of the Client or its affiliates that refer to the Subadviser or its clients in
any way are consistent with those materials previously approved by the
Subadviser as referenced in the preceding sentence.
7. PURCHASE AND SALE OF SECURITIES
(a) Selection of Brokers. Except to the extent otherwise instructed
in writing by Client in acting on behalf of the Fund, (it being understood that
Client, acting on behalf of the Fund, may, in its absolute discretion and
consistent with the requirements of the 1940 Act and applicable federal
securities laws, direct portfolio transactions for which Subadviser is
responsible to any broker that Client may see fit), Subadviser shall place all
orders for the purchase and sale of securities on behalf of the Client with
brokers or dealers selected by Subadviser, but not with a person affiliated with
Subadviser, as the term "affiliated person" is defined in the Investment Company
Act of 1940 (hereafter an "Affiliate"), unless the transaction is in compliance
with Rules 17e-1 or 10f-3 under the 1940 Act, as applicable, and the Fund's
policies and procedures thereunder, copies of which shall be provided to
Subadviser.
(b) Best Execution. In placing such orders, the Subadviser will give
primary consideration to obtaining the most favorable price and efficient
execution reasonably available under the circumstances. In evaluating the terms
available for executing particular transactions for Client and in selecting
brokers and dealers to execute such transactions, the Subadviser may consider,
in addition to commission cost and execution capabilities, the financial
stability and reputation of brokers and dealers and the brokerage and research
services (as those terms are defined in Section 28(e) of the Securities Exchange
Act of 1934, as amended) provided by brokers and dealers. Subadviser is
authorized to pay a broker or dealer who provides such brokerage and research
services a commission for executing a transaction which is in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction if Subadviser determines in good faith that such commission is
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer in discharging responsibilities with respect
to the Account or to other client accounts as to which it exercises investment
discretion.
(c) Bunching Orders. Client agrees that Subadviser may aggregate
sales and purchase orders of Account with similar orders being made
simultaneously for other accounts managed by Subadviser, if in Subadviser's
reasonable judgment such aggregation shall result in an overall economic benefit
or more efficient execution to the Account taking into consideration the
advantageous selling or purchase price, brokerage commission and other expenses.
Client acknowledges that the determination of such economic benefit to the Fund
by Subadviser represents Subadviser's evaluation that the Account is benefited
by relatively better purchase or sales prices, lower commission expenses and
beneficial timing of transactions or a combination of these and other factors.
In such event, allocation of the securities so purchased or sold, as well as
expenses incurred in the transaction, will be made by the Subadviser in a manner
the Subadviser considers to be most equitable and consistent with its fiduciary
obligations to the Fund and to its other clients.
4
<PAGE> 5
8. INVESTMENT FEES
(a) Fee Schedule. The compensation of the Subadviser for its services
under this Agreement shall be calculated and paid by the Client from the assets
of the Account in accordance with SCHEDULE C hereto.
(b) For purposes of this section 8 and Schedule C, all payments due
to Subadviser shall be solely made from the assets of the Vantagepoint Growth &
Income Fund, a portfolio of the Vantagepoint Funds.
(c) Pro Rata Fee. If the Subadviser should serve for less than the
whole of any calendar quarter, its compensation shall be determined as provided
above on the basis of the ending market value of the Account in the month in
which the termination occurs and shall be payable on a pro rata basis for the
period of the calendar quarter for which it has served as Subadviser hereunder.
9. BEST EFFORTS; NON-EXCLUSIVITY OF SERVICES
The Subadviser shall devote its best efforts and such time as it deems
necessary to provide prompt and expert service to the Client. The services of
Subadviser to be provided to Client hereunder are not to be deemed exclusive and
Subadviser shall be free to provide similar services for its own account and the
accounts of other persons and to receive compensation for such services. Client
acknowledges that Subadviser and its members, Affiliates and employees, and
Subadviser's other clients may at any time, have, acquire, increase, decrease,
or dispose of positions in the same investments which are at the same time being
held, acquired for or disposed of under this Agreement for the Fund. Subadviser
shall have no obligation to acquire or dispose of a position in any investment
pursuant to this Agreement simply because Subadviser, its directors, members,
Affiliates or employees invest in such a position for its or their own accounts
or for the account of another client.
10. INSIDER TRADING POLICIES AND CODE OF ETHICS
Subadviser hereby represents that it has adopted policies that meet the
requirements of Rule 17j-1 under the Investment Company Act of 1940. Copies of
such policies shall be delivered to the Client upon request, and any material
violation of such policies by personnel of the Subadviser who are "access
persons" with respect to the Account shall be reported to the Client.
11. INSURANCE
At all times during the term of this Agreement, Subadviser shall
maintain, at its own cost and expense, professional liability insurance for
errors, omissions, and negligent acts, in an amount and with such terms as are
standard in the financial services industry for an investment adviser managing
the amount of aggregate assets managed by Subadviser for Client and for the
Subadviser's other clients.
12. LIABILITY
In the absence of any gross negligence, malfeasance, or willful
violation of this Agreement, Subadviser shall not be liable to Client for honest
mistakes of judgment or for action or inaction taken in good faith for a purpose
that the Subadviser reasonably believes to be in the best interests of the
Client or the Fund. However, neither this provision nor any other provision of
this Agreement shall constitute a waiver or limitation of any rights which
Client may have under federal or state securities laws.
13. TERM
5
<PAGE> 6
This Agreement shall be in effect for an initial term of two years
beginning on the Effective Date. This Agreement may be renewed thereafter for
successive one-year periods if such renewal is approved annually by the majority
of the Fund's Board of Directors, provided that in such event, continuance shall
also be approved by a vote of those members of the Funds' Board of Directors who
are not "interested persons" as that term is defined in the Investment Company
Act of 1940.
14. TERMINATION
This Agreement may be terminated by either party hereto, without the
payment of any penalty, immediately upon notice to the other in the event of a
material breach of any provision thereof by the party so notified if such breach
shall not have been cured within a twenty (20) day period after notice of such
breach, or otherwise by Subadviser upon sixty (60) days' written notice to the
Client or by Client upon 30 days' written notice to Subadviser, except that this
Agreement shall automatically terminate in the event of its assignment, as
provided in Paragraph 19, at the discretion of the Client in the event of
Subadviser's change in control as provided in Paragraph 19, upon the termination
of the Funds, or upon termination of Client's advisory agreement with the Funds.
Any termination in accordance with the terms of this Agreement shall not cause
the payment of any penalty. Any such termination shall not affect the status,
obligations or liabilities of any party hereto to the other.
15. REPRESENTATIONS
(a) Subadviser hereby confirms to Client that Subadviser is
registered as an investment adviser under the Investment Advisers Act of 1940,
that it has full power and authority to enter into and perform fully the terms
of this Agreement and that the execution of this Agreement on behalf of
Subadviser has been duly authorized and, upon execution and delivery, this
Agreement will be binding upon Subadviser in accordance with its terms.
(b) Client hereby confirms to Subadviser that it is registered as an
investment adviser under the Investment Advisers Act of 1940, that it has full
power and authority to enter into this Agreement and that the execution of this
Agreement on behalf of Client has been fully authorized and, upon execution and
delivery, this Agreement will be binding upon Client in accordance with its
terms.
(c) Subadviser hereby acknowledges that the Vantagepoint Funds is
registered as an open-end investment company under the 1940 Act and is subject
to taxation as a regulated investment company under Subchapter M and the
regulations promulgated thereunder of the Internal Revenue Code. Subadviser
hereby represents that it is familiar with the requirements of such laws and the
rules and regulations thereunder as they apply to the Vantagepoint Funds and has
systems and procedures in place reasonably designed to permit Subadviser,
Client, and the Vantagepoint Funds to comply with such requirement.
16. NOTICES
Notices or other notifications given or sent under or pursuant to this
Agreement shall be in writing and be deemed to have been given or sent if
delivered to the party at its address listed below in person or by telex or
telecopy receipt of which is confirmed or by mail or by registered mail, return
receipt requested. The addresses of the parties are:
CLIENT:
Vantagepoint Investment Advisers, LLC
Attention: Legal Department
c/o ICMA Retirement Corporation
777 North Capitol Street, NE, Ste. 600
6
<PAGE> 7
Washington, D.C. 20002-4240
SUBADVISER:
Wellington Management Company, LLP
Attention: Regulatory Affairs Department
75 State Street
Boston, MA 02109
Each party may change its address by giving notice as herein required.
17. SOLE INSTRUMENT
This instrument constitutes the sole and only agreement of the parties
to it relating to its object and correctly sets forth the rights, duties, and
obligations of each party to the other as of its date. Any prior agreements,
promises, negotiations or representations not expressly set forth in this
Agreement are of no force or effect.
18. WAIVER OR MODIFICATION
No waiver or modification of this Agreement shall be effective unless
reduced to a written document signed by the party to be charged. No failure to
exercise and no delay in exercising, on the part of any party hereto, of any
right, remedy, power or privilege hereunder, shall operate as a waiver thereof.
Only the Chief Executive Officer, has authority on behalf of Client to modify or
waive any of the provisions of the Agreement. It is understood that certain
material amendments may require approval of the Funds shareholders.
19. ASSIGNMENT AND CHANGE IN CONTROL
This Agreement shall automatically terminate in the event of its
assignment. Subadviser agrees to provide immediate written notice in the event
of a change in control. Such a change in control will entitle, but not require,
the Client to terminate the Agreement immediately or upon notice.
20. COUNTERPARTS
This Agreement may be executed in counterparts each of which shall be
deemed to be an original and all of which, taken together, shall be deemed to
constitute one and the same instrument.
21. CHOICE OF LAW
This Agreement shall be governed by, and the rights of the parties
arising hereunder construed in accordance with, the laws of the State of
Delaware without reference to principles of conflict of laws and the 1940 Act.
To the extent that the applicable laws of the State of Delaware conflict with
the applicable provisions of the 1940 Act, the latter shall control.
22. YEAR 2000 STATEMENT
Subadviser certifies that it has taken the steps to address the Year
2000 problem that are set forth in Subadviser's SEC Form ADV-Y2K, a copy of
which has been filed with the SEC and provided to Client. Any subsequent SEC
filings regarding this issue shall be provided to Client.
23. VANTAGEPOINT FUNDS AS PARTY TO AGREEMENT
7
<PAGE> 8
For purposes of Sections 8 (Fees), 12 (Liability), 13 (Term), 14
(Termination), 15 Representations), 16 (Notices), 18 (Waiver or Modification),
19 (Assignment and Change in Control), and 22 (Year 2000 Statement) of the
Agreement, as well as for purposes of Schedule C of the Agreement, the
Vantagepoint Funds is hereby made a party to the Agreement and shall be entitled
to all notices, protections and rights set forth in those Sections and in
Schedule C to which Client is entitled.
IN WITNESS WHEREOF, THE PARTIES HERETO EXECUTE THIS AGREEMENT ON
March 28, 2000 and make it effective on the date set forth.
CLIENT SUBADVISER
Vantagepoint Wellington Management Company, LLP
Investment Advisers, LLC
by: by:
/s/ GIRARD MILLER /s/ JOHN H. GOOCH
- ------------------------- --------------------------
(signature) (signature)
President Sr. Vice President
- ------------------------- --------------------------
Girard Miller, President (name, title)
Date: Date: March 29, 2000
FUNDS
The Vantagepoint Funds
by:
/s/ GIRARD MILLER
- -------------------------
Girard Miller, President
Date: March 28, 2000
8
<PAGE> 9
SCHEDULE A
THE VANTAGEPOINT FUNDS
GROWTH & INCOME FUND
STATEMENT OF INVESTMENT POLICIES
These Investment Policies and Guidelines have been adopted by the Vantagepoint
Funds (the "Funds") to govern the management and administration of the Growth &
Income Fund by Vantagepoint Investment Advisers, LLC ("VIA"). They may be
reviewed and revised at the discretion of the Directors of the Vantagepoint
Funds (the "Directors"). VIA is responsible for the monitoring and appointment
of subadvisers to handle the day-to-day investment of assets assigned to them.
I. GENERAL DESCRIPTION AND GOALS
The Growth & Income Fund seeks long-term capital growth by investing
primarily (at least 65 percent) in common stocks that offer the
potential for high total return through a combination of capital
appreciation and current income. The Fund may also invest in other
equity-type securities (e.g., convertible securities and preferred
stocks) and in bonds.
II. STRUCTURE
The assets of the Growth & Income Fund shall be managed by two or
more subadvisers. The subadvisers may be retained to manage separate
accounts under discretionary investment advisory contracts. Each
subadviser will be selected for its individual investment management
expertise and each will operate independently of the others. Each
subadviser must either be registered with the Securities and
Exchange Commission (SEC) under the Investment Advisers Act of 1940
or a Bank, Insurance Company or Trust Company exempt as such from
registration.
Each subadviser shall exercise complete management discretion over
assets of the Fund allocated to its account in a manner consistent
with these Investment Policies and Guidelines and with such further
investment limitations and conditions as may be established by VIA
and approved by the Directors. Subadvisers will be obligated to
manage Fund assets as if they were subject to the fiduciary duty of
care that applies under the Employee Retirement Income Security Act
of 1974 (ERISA) governing pension and profit sharing assets.
III. INVESTMENT STRATEGY
VIA shall select subadvisers that represent a variety of portfolio
management approaches and investment disciplines. These investment
approaches will be combined in a complementary manner to effectively
achieve the investment objective of the Fund. The Fund as a whole
will be more diversified than each individual subadviser's
portfolio.
Investment strategies employed by the subadvisers included in the
Growth & Income Fund may involve:
- a focus on past patterns as well as future prospects for
growth in corporate earnings per share.
- an emphasis on securities that pay current dividends and
offer potential earnings growth
9
<PAGE> 10
- debt and equity securities which may not currently pay
dividends, but offer prospects for capital appreciation or
future income.
- production of long-term capital growth by investing in
securities that the subadviser believes to be undervalued at
the time of purchase where the production of income is a
secondary objective,
- the ability to emphasize a growth or income-oriented strategy
opportunistically.
IV. PERFORMANCE BENCHMARKS
Performance benchmarks will be established for the Fund. These
benchmarks will be recommended by VIA and adopted by the Directors
and will be reviewed and revised as appropriate from time to time.
The current performance benchmarks for the Fund are appended to this
document as Exhibit I.
V. DIRECTOR REVIEW
VIA will report periodically to the Directors on performance of the
Fund against benchmarks and on subadviser results and will evaluate
for the Directors the overall performance of the Fund relative to
its objectives. The Directors will consider such reports and other
relevant factors in appraising the investment objectives and
performance of the Fund.
INVESTMENT GUIDELINES
I. ELIGIBLE INVESTMENTS
A. EQUITY SECURITIES: Common stock, preferred stock, common stock
equivalents (units of beneficial interest), American Depository
Receipts, convertible preferred stocks, warrants, and other
rights.
B. CASH/CASH EQUIVALENTS: Fixed income obligations with maturity
less than one year, or short-term accounts or securities managed
by a custodian institution.
C. FIXED INCOME: Fixed income and convertible fixed income
securities with maturities greater than one year.
D. FINANCIAL FUTURES: Equity index futures.
E ELIGIBLE PRACTICES: There are no restrictions on subadvisers as
to the following:
- Portfolio turnover.
- Realized gains and losses.
F. ELIGIBLE INVESTMENT LIMITS
<TABLE>
<CAPTION>
MINIMUM NORMAL RANGE MAXIMUM
------- ------------ -------
<S> <C> <C> <C>
U.S. equity securities 65% 80-100% 100%
Non-U.S. equity securities 0% 0-10% 20%
Cash and cash equivalents 0% 0-15% 25%
Fixed income securities 0% 0-15% 25%
Convertible securities 0% 0-20% 35%
</TABLE>
10
<PAGE> 11
II. PROHIBITED PRACTICES AND SECURITIES
A. Short sales
B. Options
C. Commodities (excluding financial futures).
D. Securities for which there is no established trading market.
E. Margin purchases and other forms of borrowing; granting of
pledges or other security interests in assets of the Fund; use of
futures to obtain market leverage.
F. Securities issued by the subadvisers of the Fund or their
affiliates.
G. General partner interests.
H. Direct investments in oil, gas, or other mineral exploration or
development programs.
I. Direct investments in real estate or interests in real estate;
this does not preclude investment in purchases of securities of
real estate investment trusts and other companies holding real
estate or interests in real estate.
J. Commingled funds; this does not preclude investment in mutual
funds up to 10% of the Fund's market value at the time of
purchase.
K. Acquisition of securities that would cause exposure to non-equity
holdings to exceed 35% of the Fund's market value at the time of
purchase.
L. Acquisition of securities that would cause exposure to a single
industry to exceed 25% of the Fund's market value at the time of
purchase.
M. In the absence of prior consent of VIA, acquisition of securities
of an issuer that would cause more than 5% of the Fund to be
invested in such securities.
N. In the absence of prior consent of VIA, acquisition of more than
5% of the outstanding shares of any class of equity securities.
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in Section I or Section
II of these Investment Guidelines may be acquired or employed, as
the case may be, but only if explicitly approved in advance by VIA.
IV. SECURITIES LENDING
Nothing herein shall prevent loans of securities in the Growth &
Income Fund pursuant to an established securities lending program
conducted by the Fund's custodian.
11
<PAGE> 12
EXHIBIT I
TO THE
STATEMENT OF INVESTMENT POLICIES AND GUIDELINES OF
THE GROWTH & INCOME FUND
MARCH 1, 1999
The following standards will be used to measure the performance of the Growth &
Income Fund:
A. BENCHMARKS
1. The performance benchmark for the Fund is the S&P 500 INDEX
("S&P 500 Index"). The benchmark will be used to measure the
Fund's performance net of subadviser fees.
2. A peer group benchmark for the Fund will consist of mutual
funds with characteristics similar to the Fund. The peer group
will be used to measure the Fund's performance relative to
other funds with a similar investment approach. The peer group
benchmark will measure Fund performance net of all fees and
expenses except for the plan administration fee.
3. The Lipper Growth & Income Fund Index, selected by Lipper
Analytical Services, will serve as the performance benchmark
for participant returns, net of all fees and expenses. In
assessing performance against this benchmark, it will be taken
into consideration that Lipper Analytical Services may change
the composition of the Index.
B. TIME HORIZON
The time horizon for performance measurement will be one, three, and
five years.
One Year:
Performance relative to any benchmark established for the Fund will vary
widely over one-year periods; such variance over short time periods is
expected and acceptable. However, if such variance is determined to be
caused by systemic issues, action may be appropriate.
Three and Five Years:
Performance of the Fund should track market and universe benchmarks more
closely as the evaluation period lengthens. The ideal performance
objective for the Growth & Income Fund is to exceed the returns of all
relevant benchmarks; however, shortfalls over various time periods
should be expected in some cases. Underperformance against a single
benchmark over an extended period may be acceptable, particularly if
other benchmarks have been exceeded.
C. INVESTMENT CHARACTERISTICS
The Fund may have investment characteristics which differ from the
general market, as measured by the Standard & Poor's 500 Index. For the
total Fund, these would include, but are not limited to:
12
<PAGE> 13
<TABLE>
<CAPTION>
CHARACTERISTIC RELATIVE TO S&P 500 INDEX
<S> <C>
Beta Similar
Capitalization Somewhat Lower
Dividend Yield Similar
Hist. 5 year EPS Growth Similar
Price to Earnings Ratio Similar
Standard Deviation Similar
</TABLE>
13
<PAGE> 14
SCHEDULE B
VANTAGEPOINT INVESTMENT ADVISERS, LLC
GROWTH & INCOME FUND
INVESTMENT GUIDELINES
FOR
WELLINGTON MANAGEMENT COMPANY, LLP
DECEMBER 1, 1999
These Investment Guidelines refer to the portion of the Vantagepoint Growth &
Income Fund managed by WELLINGTON MANAGEMENT COMPANY, LLP. Investment Guidelines
for the Fund are an integral part of these guidelines.
The WELLINGTON MANAGEMENT - VALUE/YIELD PRODUCT reflects the portfolio
management approach of seeking financially sound companies that are temporarily
out of favor and targeting those that offer above-average potential total
returns and sell at below-average price-to-earnings multiples. Investment
decisions are based primarily on detailed, in-house fundamental research and
security valuations (as measured by a security's relative return/appreciation
potential). The portfolio is managed through a team approach and is invested in
a diversified basket of 70-90 securities, with the exposure to a single stock
limited to 7 percent at market. Portfolio weights may vary from S&P 500 weights
subject to a maximum industry exposure of 25 percent.
The Adviser must comply with the Fund Investment Guidelines (see Schedule A)
except where noted in the sections that follow: I. ELIGIBLE INVESTMENTS and II.
PROHIBITED PRACTICES AND SECURITIES.
I. ELIGIBLE INVESTMENTS
A. EQUITY SECURITIES: Common stock, preferred stock, common stock
equivalents (units of beneficial interest), American Depository
Receipts, convertible preferred stocks, warrants, and other rights.
B. CASH/CASH EQUIVALENTS: Fixed income obligations with maturities
less than one year, or short-term accounts or securities managed
by the custodian institution.*
C. FIXED INCOME: Fixed income and convertible fixed income securities
with maturities greater than one year.
D. FINANCIAL FUTURES: Futures are not permitted.
[*NOTE: THESE INSTRUCTIONS DIFFER FROM SCHEDULE A, INVESTMENT
GUIDELINES, SECTION I.D.]
E ELIGIBLE PRACTICES: There are no restrictions on subadvisers as to
the following:
- Portfolio turnover.
- Realized gains and losses.
14
<PAGE> 15
F. ELIGIBLE INVESTMENT LIMITS:
<TABLE>
<CAPTION>
MINIMUM NORMAL RANGE MAXIMUM
------- ------------ --------
<S> <C> <C> <C>
U. S. equity securities 65% 80%-100% 100%
Non-U.S. equity securities 0% 0-5% 10%**
(Defined as the security of a company headquartered outside the U.S.)
Cash and cash equivalents* 0% 0%-10% 20%
U.S. Fixed income securities* 0% 0%-10% 20%
</TABLE>
[*NOTE: THESE INSTRUCTIONS DIFFER FROM SCHEDULE A, INVESTMENT GUIDELINES,
SECTION I.F.]
[** NON-U.S. SECURITIES THAT ARE NEITHER LISTED NOR TRADED IN THE U.S. CANNOT
EXCEED 5%]
II. PROHIBITED PRACTICES AND SECURITIES
A. Short sales.
B. Options.
C. Commodities.
D. Securities for which there is no established trading market.
E. Margin purchases and other forms of borrowing; granting of pledges
or other security interests in assets of the portfolio; use of
futures to obtain market leverage.
F. Securities offered by the Adviser or its affiliates.
G. General partner interests.
H. Direct investments in oil, gas, or other mineral exploration or
development programs.
I. Direct investments in real estate or interests in real estate; this
does not preclude investment in purchases of securities of real
estate investment trusts and other companies holding real estate or
interests in realestate.
J. Acquisition of securities that would cause exposure to a single
industry to exceed 25% of the portfolio at the time of purchase.
K. In the absence of prior consent of VIA, acquisition of securities of
an issuer that would cause more than 5% of the Fund to be invested in
such securities.
L. In the absence of prior consent of VIA, acquisition of more than 5%
of the outstanding stock of any issuer.
M. Commingled and registered mutual funds.
[*NOTE: THESE INSTRUCTIONS DIFFER FROM SCHEDULE A, INVESTMENT GUIDELINES,
SECTION II.J.]
N. Foreign securities unless listed and traded in the U.S.*
15
<PAGE> 16
[*NOTE: THESE INSTRUCTIONS DIFFER FROM SCHEDULE A, INVESTMENT GUIDELINES,
SECTION II.]
Exceptions to the above listed eligible investments and prohibited
securities or practices may be permitted with prior consent from VIA.
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in Section I or Section II of
these Investment Guidelines may be acquired or employed, as the case may
be, but only if explicitly approved in advance by VIA.
IV. PERFORMANCE BENCHMARK AND MONITORING CRITERIA
[Note: The standards outlined in this section are subject to review by
VIA as and when appropriate.]
A. PERFORMANCE BENCHMARKS
Two benchmarks are used to track the Adviser's relative
performance:
1. The LIPPER GROWTH & INCOME INDEX is used to evaluate
performance relative to the average of similar mutual funds.
2. The S&P/BARRA VALUE INDEX is used to measure
performance relative to a market benchmark of "value" stocks.
The Adviser is tracked over one-, three- and five-year periods with
the expectation that the Adviser will outperform the benchmark (net
of Adviser fees).
B. PEER GROUP
VIA will also compare investment performance to a peer group of
other managers with similar investment approaches.
VIA tracks the Adviser's net performance over one-, three- and
five-year periods with the expectation that the Adviser will
outperform the median return of the peer group for all periods.
16
<PAGE> 17
SCHEDULE C
VANTAGEPOINT INVESTMENT ADVISERS, LLC
VANTAGEPOINT GROWTH & INCOME FUND
FEE SCHEDULE
FOR
WELLINGTON MANAGEMENT COMPANY, LLP
The Adviser's quarterly fee shall be calculated based on the average daily net
assets of the assets under management as provided by the Custodian, based on the
following annual rate.
First $ 50 million 0.40 percent
Next $ 50 million 0.30 percent
Over $ 100 million 0.25 percent
EXAMPLE OF FEE CALCULATION (HYPOTHETICAL AMOUNTS)
January 1, 2000 $70,000,000 End-of-Day Net Assets
January 2, 2000 $70,630,000 End-of-Day Net Assets
January 3, 2000 $70,644,126 End-of-Day Net Assets
March 29, 2000 $71,541,900 End-of-Day Net Assets
March 30, 2000 $71,577,671 End-of-Day Net Assets
March 31, 2000 $71,606,302 End-of-Day Net Assets
Quarterly Daily Average $71,000,000
First $ 50 million 0.40 percent $50,000
Next $ 50 million 0.30 percent $15,750
Over $100 million 0.25 percent $0
Annual Fee $263,000
One-Fourth Annual Fee $65,750
17
<PAGE> 1
EXHIBIT (d)(17)
INVESTMENT ADVISORY AGREEMENT
This Investment Advisory Agreement is made as of the __________ day
of _______________, 1999, by and between VANTAGEPOINT INVESTMENT ADVISERS, LLC,
a Delaware limited liability company (hereafter "Client"), and BARROW, HANLEY,
MEWHINNEY & STRAUSS, INC., at 3232 McKinney Avenue, 15th Floor, One McKinney
Plaza, Dallas, Texas 75204 (hereafter "Adviser") and is effective as of
July 30, 1999, (the "Effective Date").
WHEREAS, the Vantagepoint Funds (the "Funds") is a Delaware Business
Trust registered as an open-end management investment company under the
Investment Company Act of 1940 (the "1940 Act");
WHEREAS, Client is party to an Investment Adviser Agreement with the
Funds for management of the investment operations of the Funds including the
establishment and operation of investment portfolios for the Funds and the
entering into of contracts with sub-advisers to assist in managing the
investment of the Funds property;
WHEREAS, Client and Adviser wish to enter into a sub-advisory
agreement pursuant to which Adviser will provide such assistance to Client.
AGREEMENTS:
In consideration of the performance by the Adviser as Investment
Adviser of certain assets held by the Funds, the Client has authorized the
Adviser to manage the securities and other assets as follows:
1. ACCOUNT
The account with respect to which the Adviser shall perform its
services shall consist of those assets of the Vantagepoint Equity Income
Fund which the Client determines to assign to an account with the Adviser,
together with all income earned by those assets and all realized and unrealized
capital appreciation related to those assets (hereafter "Account"). From time to
time, the Client may, upon notice to the Adviser, make additions to the Account
and may, upon notice to the Adviser, make withdrawals from the Account.
2. APPOINTMENT STATUS, POWERS OF ADVISER
(a) Purchase and Sale. Client hereby appoints Adviser to manage
the Account on the terms and conditions set forth in this Agreement.
Subject to the restrictions set forth in this Agreement, and acting always in
conformity with the Investment Policies provided in Paragraph 4, Adviser shall
supervise and direct investment of the Account. Client hereby grants the Adviser
complete, unlimited and unrestricted discretion and authority to select
portfolio securities with respect to the
<PAGE> 2
Account including the power to acquire (by purchase, exchange, subscription or
otherwise), to hold and dispose (by sale, exchange or otherwise). The Adviser
will consult with Client, upon the request of the Client, concerning any
transactions it makes with respect to the investment of the Account.
(b) Limitation on Authority. Except as expressly authorized herein
or hereafter from time to time, Adviser shall for all purposes be deemed an
independent contractor and shall have no authority to act for or to represent
the Client or the Funds in any way or otherwise to be an agent of the Client or
the Funds. The activities of Client and Adviser in managing the assets of the
Fund Vantagepoint Equity Income Fund shall in all instances be conducted subject
to the supervision and direction of the Board of Directors of the Vantagepoint
Funds.
(c) Voting. Unless otherwise instructed by Client, Adviser shall
have discretion to take any action or render any advice with respect to the
voting of shares or the execution of proxies solicited from time to time by, or
with respect to, the issuers of securities held in the Account. Adviser will
report annually to Client regarding such voting.
(d) Key Personnel. Adviser agrees that the following key personnel
have primary responsibility with respect to the investment management of
the Account. If the(se) individual(s) is unable to devote sufficient time to
maintain primary responsibility of the Account, the Adviser must give Client
written advance notice, or prompt notice within three (3) business days, of the
name of the person designated by the Adviser to replace or supplement the
individual(s). In addition, the Adviser will give Client written notice of the
replacement of any employee of the Adviser who has direct supervisory
responsibility for the key personnel or who has responsibility for setting
investment policy as soon as reasonably practicable.
Key Personnel: James P. Barrow
Bryant M. Hanley
Richard A. Englander
J. Ray Nixon, Jr.
Robert J. Chambers
Timothy J. Culler
3. ACCEPTANCE OF APPOINTMENT
Adviser accepts the appointment as an investment adviser and agrees
to use its best efforts and professional judgment to make timely investment
transactions for the Client with respect to the investments of the Account,
and to provide the other services required of the Adviser under the provisions
of this Agreement.
4. INVESTMENT POLICIES
2
<PAGE> 3
(a) Investment Objectives. Subject to the supervision of the
Fund's Board of Directors and the Client, the Adviser shall direct the
investments of the Account in accordance with the Fund's investment objectives,
policies, and restrictions as provided in the Fund's Prospectus and Statement of
Additional Information as filed with the Securities and Exchange Commission on
Form N-1A ("Registration Statement"), as currently in effect and as amended or
supplemented from time to time, and such other limitations as the Fund or Client
may reasonably impose by written notice to the Adviser or as set forth in
SCHEDULE A. Client shall give Adviser copies of the Fund's Prospectus and
Statement of Additional Information, and any amendments or supplements thereto,
as soon a practicable after such documents become available.
(b) Funds' Agreement and Declaration of Trust. The Adviser will
adhere to all specific provisions relating to the investment of the Account
established in the Funds' Agreement and Declaration of Trust and Registration
Statement, both of which are hereby incorporated by reference and made a part of
this Agreement. The Client shall give written notice to the Adviser of any
amendments to the Agreement and Declaration of Trust or Registration Statement,
which amendments, upon their receipt by the Adviser, shall be binding on the
Adviser.
(c) Investment Adviser Guidelines. The Adviser shall act in
accordance with the Fund's Prospectus and Statement or Additional Information,
and in accordance with the limitations set forth in the specific statement of
Investment Adviser Guidelines, SCHEDULE B, as restated or modified from time to
time by the Client in written notice to the Adviser. The Client retains the
right, on written notice to the Adviser, to modify any such objectives,
guidelines, restrictions, and liquidity requirements in any manner at any time
as may be allowed pursuant to the 1940 Act.
(d) Conflict in Policies. If a conflict in policies or guidelines
referenced herein occurs, the Registration Statement shall govern for purposes
of this Agreement.
5. CUSTODY, DELIVERY, RECEIPT OF SECURITIES
(a) Custody Responsibilities. The Client shall designate one or more
custodians to hold the Account. The Custodian, as designated by the Client will
be responsible for the custody, receipt and delivery of securities and other
assets of the Funds (including the Account), and the Adviser shall have no
authority, responsibility or obligation with respect to the custody, receipt or
delivery of securities or other assets of the Funds (including the Account). In
the event that any cash or securities of the Funds are delivered to the Adviser,
it will promptly deliver the same over to the Custodian, in the name of the
Funds.
(b) Securities Transactions. Unless otherwise required by local
custom, all securities transactions for the Account will be consummated by
payment to or delivery by
3
<PAGE> 4
the Funds of cash or securities due to or from the Account. The Adviser will
make all reasonable efforts to notify the Custodian of all orders to brokers for
the Account by 9:00 am EST on the day following the trade date and will affirm
the trade within the close of business one (1) business day after the trade date
(T+1).
(c) Tri-Party Agreement. The Adviser is authorized to enter into
Tri-Party Repurchase Agreements and sign the standard PSA tri-party agreement
(the "Tri-Party Agreement") on behalf of the Client and the subcustodian
thereunder is authorized to act as a subcustodian for the Account's assets
involved in any tri-party repurchase agreement pursuant to such Tri-Party
Agreement.
6. RECORD KEEPING AND REPORTING
(a) Records. Adviser will maintain proper and complete records
relating to the furnishing of services under this Agreement, including records
with respect to the acquisition, holding and disposition of securities for
Client that are required of an investment adviser to a registered investment
company pursuant to the 1940 Act and the Investment Advisers Act of 1940, and
the rules thereunder, and in accordance with such reasonable instructions as
shall be provided to Adviser by Client from time to time. All records maintained
pursuant to this Agreement shall be subject to examination by Client and by
persons authorized by it during normal business hours upon reasonable notice.
Except as expressly authorized in this Agreement or as required by applicable
law, regulation or order of court or as directed by other party in writing,
Adviser and Client shall keep confidential the records and other information
obtained by reason of this Agreement. Upon termination of this Agreement,
Adviser shall promptly, upon demand, return to Client all records Client
reasonably believes are necessary in order to discharge its responsibilities to
the Funds. Adviser shall be entitled to retain originals or copies of records
pursuant to the requirements of applicable laws or regulations.
(b) Reconciliations. Adviser shall reconcile security and cash
positions, and market values on a monthly basis to the Custodian's records
and report discrepancies to the Client by ten (10) business days after the end
of the month.
(c) Loss Reimbursement. Adviser shall reimburse the Account for
any material error to the Fund's net asset value caused by Adviser's breach of
its standard of care set forth in Section 12 that is a direct cause of a delay
in the accurate daily pricing of the Fund(s), provided such loss was not the
result of action or inaction of other service providers to the Client or the
Fund in failing to observe the instructions of the Adviser.
(d) Reports. Adviser shall furnish Client and the Board of
Directors of the Vantagepoint Funds such periodic and special reports and
information as either of them may request, including such information as shall
be reasonably necessary to evaluate the terms of any advisory agreement between
Client and Adviser with respect to the assets of the Vantagepoint Equity Income
Fund.
4
<PAGE> 5
(e) Other Reports on Request. Adviser shall provide to Client
promptly upon request any information available in the records maintained by
Adviser relating to the Account.
(f) Review of Materials. During the term of this Agreement, the
Client shall furnish to the Adviser at its principal office all prospectuses,
statements of additional information, proxy statements, reports to shareholders,
advertising and sales literature or other material prepared for distribution to
Fund shareholders or the public, which refer to the Adviser or its clients in
any way, prior to the use thereof, and the Client shall not use any such
materials if the Adviser reasonably objects in writing within ten (10) business
days (or such other time as may be mutually agreed) after receipt thereof. The
Client shall ensure that materials prepared by employees or agents of the Client
or its affiliates that refer to the Adviser or its clients in any way are
consistent with those materials previously approved by the Adviser as referenced
in the preceding sentence.
7. PURCHASE AND SALE OF SECURITIES
(a) Selection of Brokers. Except to the extent otherwise instructed
in writing by Client in acting on behalf of the Fund, (it being understood that
Client, acting on behalf of the Fund, may, in its absolute discretion and
consistent with the requirements of the 1940 Act and applicable federal
securities laws, direct portfolio transactions for which Adviser is responsible
to any broker that Client may see fit), Adviser shall place all orders for the
purchase and sale of securities on behalf of the Client with brokers or dealers
selected by Adviser, but not with a person affiliated with Adviser, as
the term "affiliated person" is defined in the Investment Company Act of 1940
(hereafter an "Affiliate"), unless the transaction is in compliance with Rules
17e-1 or 10f-3 under the 1940 Act, as applicable, and the Fund's policies and
procedures thereunder, copies of which shall be provided to Adviser.
(b) Best Execution. In placing such orders, the Adviser will give
primary consideration to obtaining the most favorable price and efficient
execution reasonably available under the circumstances. In evaluating the terms
available for executing particular transactions for Client and in selecting
brokers and dealers to execute such transactions, the Adviser may consider, in
addition to commission cost and execution capabilities, the financial stability
and reputation of brokers and dealers and the brokerage and research services
(as those terms are defined in Section 28(e) of the Securities Exchange Act of
1934, as amended) provided by brokers and dealers. Adviser is authorized to pay
a broker or dealer who provides such brokerage and research services a
commission for executing a transaction which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if Adviser determines in good faith that such commission is
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer in discharging
5
<PAGE> 6
responsibilities with respect to the Account or to other client accounts as to
which it exercises investment discretion.
(c) Bunching Orders. Client agrees that Adviser may aggregate
sales and purchase orders of Account with similar orders being made
simultaneously for other accounts managed by Adviser, if in Adviser's
reasonable judgment such aggregation shall result in an overall economic benefit
or more efficient execution to the Account taking into consideration the
advantageous selling or purchase price, brokerage commission and other expenses.
Client acknowledges that the determination of such economic benefit to the Fund
by Adviser represents Adviser's evaluation that the Account is benefited by
relatively better purchase or sales prices, lower commission expenses and
beneficial timing of transactions or a combination of these and other factors.
In such event, allocation of the securities so purchased or sold, as well as
expenses incurred in the transaction, will be made by the Adviser in a manner
the Adviser considers to be most equitable and consistent with its fiduciary
obligations to the Fund and to its other clients.
8. INVESTMENT FEES
(a) Fee Schedule. The compensation of the Adviser for its services
under this Agreement shall be calculated and paid by the Client from the assets
of the Account in accordance with SCHEDULE C hereto.
(b) For purposes of this section 8 and Schedule C, all payments due
to Adviser shall be solely made from the assets of the Vantagepoint Equity
Income Fund.
(c) Pro Rata Fee. If the Adviser should serve for less than the
whole of any calendar quarter, its compensation shall be determined as provided
above on the basis of the ending market value of the Account in the month in
which the termination occurs and shall be payable on a pro rata basis for the
period of the calendar quarter for which it has served as Adviser hereunder.
9. BEST EFFORTS; NON-EXCLUSIVITY OF SERVICES
The Adviser shall devote its best efforts and such time as it deems
necessary to provide prompt and expert service to the Client. The services of
Adviser to be provided to Client hereunder are not to be deemed exclusive and
Adviser shall be free to provide similar services for its own account and the
accounts of other persons and to receive compensation for such services. Client
acknowledges that Adviser and its members, Affiliates and employees, and
Adviser's other clients may at any time, have, acquire, increase, decrease, or
dispose of positions in the same investments which are at the same time being
held, acquired for or disposed of under this Agreement for the Fund. Adviser
shall have no obligation to acquire or dispose of a position in any investment
pursuant to this Agreement simply because Adviser, its directors, members,
Affiliates or
6
<PAGE> 7
employees invest in such a position for its or their own accounts or for the
account of another client.
10. INSIDER TRADING POLICIES AND CODE OF ETHICS
Adviser hereby represents that it has adopted policies that meet the
requirements of Rule 17j-1 under the Investment Company Act of 1940. Copies of
such policies shall be delivered to the Client upon request, and any material
violation of such policies by personnel of the Adviser who are "access persons"
with respect to the Account shall be reported to the Client.
11. INSURANCE
At all times during the term of this Agreement, Adviser shall
maintain, at its own cost and expense, professional liability insurance
for errors, omissions, and negligent acts, in an amount and with such terms as
are standard in the financial services industry for an investment adviser
managing the amount of aggregate assets managed by Adviser for Client and for
the Adviser's other clients.
12. LIABILITY
In the absence of any gross negligence, malfeasance, or willful
violation of this Agreement, Adviser shall not be liable to Client for honest
mistakes of judgment or for action or inaction taken in good faith for a
purpose that the Adviser reasonably believes to be in the best interests
of the Client or the Fund. However, neither this provision nor any other
provision of this Agreement shall constitute a waiver or limitation of any
rights which Client may have under federal or state securities laws.
13. TERM
This Agreement shall be in effect for an initial term of two years
beginning on the Effective Date. This Agreement may be renewed thereafter for
successive one-year periods if such renewal is approved annually by the majority
of the Fund's Board of Directors, provided that in such event, continuance shall
also be approved by a vote of those members of the Funds' Board of Directors
who are not "interested persons" as that term is defined in the Investment
Company Act of 1940.
14. TERMINATION
This Agreement may be terminated by either party hereto, without the
payment of any penalty, immediately upon notice to the other in the event of a
material breach of any provision thereof by the party so notified if such breach
shall not have been cured within a twenty (20) day period after notice of such
breach, or otherwise by Adviser upon sixty (60) days' written notice to the
Client or by Client upon 30 days' written notice
7
<PAGE> 8
to Adviser, except that this Agreement shall automatically terminate in
the event of its assignment, as provided in Paragraph 19, at the discretion of
the Client in the event of Adviser's change in control as provided in Paragraph
19, upon the termination of the Funds, or upon termination of Client's advisory
agreement with the Funds. Any termination in accordance with the terms of this
Agreement shall not cause the payment of any penalty. Any such termination shall
not affect the status, obligations or liabilities of any party hereto to the
other.
15. REPRESENTATIONS
(a) Adviser hereby confirms to Client that Adviser is registered as
an investment adviser under the Investment Advisers Act of 1940, that it has
full power and authority to enter into and perform fully the terms of this
Agreement and that the execution of this Agreement on behalf of Adviser has been
duly authorized and, upon execution and delivery, this Agreement will be binding
upon Adviser in accordance with its terms.
(b) Client hereby confirms to Adviser that it is registered as an
investment adviser under the Investment Advisers Act of 1940, that it has full
power and authority to enter into this Agreement and that the execution of this
Agreement on behalf of Client has been fully authorized and, upon execution and
delivery, this Agreement will be binding upon Client in accordance with its
terms.
(c) Adviser hereby acknowledges that the Vantagepoint Funds is
registered as an open-end investment company under the 1940 Act and is subject
to taxation as a regulated investment company under Subchapter M and the
regulations promulgated thereunder of the Internal Revenue Code. Adviser hereby
represents that it is familiar with the requirements of such laws and the rules
and regulations thereunder as they apply to the Vantagepoint Funds and has
systems and procedures in place reasonably designed to permit Adviser, Client,
and the Vantagepoint Funds to comply with such requirement.
16. NOTICES
Notices or other notifications given or sent under or pursuant to
this Agreement shall be in writing and be deemed to have been given or sent if
delivered to the party at its address listed below in person or by telex or
telecopy receipt of which is confirmed or by mail or by registered mail, return
receipt requested. The addresses of the parties are:
CLIENT:
Vantagepoint Investment Advisers, LLC
Attention: Legal Department
c/o ICMA Retirement Corporation
8
<PAGE> 9
777 North Capitol Street, NE, Ste. 600
Washington, D.C. 20002-4240
ADVISER:
Barrow, Hanley, Mewhinney & Strauss, Inc.
Attention: Rich Englander
3232 McKinney Avenue, 15th Floor
McKinney Plaza
Dallas, Texas 75204
Each party may change its address by giving notice as herein
required.
17. SOLE INSTRUMENT
This instrument constitutes the sole and only agreement of the
parties to it relating to its object and correctly sets forth the rights,
duties, and obligations of each party to the other as of its date. Any prior
agreements, promises, negotiations or representations not expressly set forth in
this Agreement are of no force or effect.
18. WAIVER OR MODIFICATION
No waiver or modification of this Agreement shall be effective
unless reduced to a written document signed by the party to be charged. No
failure to exercise and no delay in exercising, on the part of any party hereto,
of any right, remedy, power or privilege hereunder, shall operate as a waiver
thereof. Only the Chief Executive Officer, has authority on behalf of Client to
modify or waive any of the provisions of the Agreement. It is understood that
certain material amendments may require approval of the Funds shareholders.
19. ASSIGNMENT AND CHANGE IN CONTROL
This Agreement shall automatically terminate in the event of its
assignment. Adviser agrees to provide immediate written notice in the event of
a change in control. Such a change in control will entitle, but not require,
the Client to terminate the Agreement immediately or upon notice.
20. COUNTERPARTS
This Agreement may be executed in counterparts each of which shall
be deemed to be an original and all of which, taken together, shall be deemed to
constitute one and the same instrument.
21. CHOICE OF LAW
9
<PAGE> 10
This Agreement shall be governed by, and the rights of the parties
arising hereunder construed in accordance with, the laws of the State of
Delaware without reference to principles of conflict of laws and the 1940 Act.
To the extent that the applicable laws of the State of Delaware conflict with
the applicable provisions of the 1940 Act, the latter shall control.
22. YEAR 2000 STATEMENT
Adviser certifies that it has taken the steps to address the Year
2000 problem that are set forth in Adviser's SEC Form ADV-Y2K, a copy of which
has been filed with the SEC and provided to Client. Any subsequent SEC filings
regarding this issue shall be provided to Client.
23. VANTAGEPOINT FUNDS AS PARTY TO AGREEMENT
For purposes of Sections 8 (Fees), 12 (Liability), 13 (Term), 14
(Termination), 15 (Representations), 16 (Notices), 18 (Waiver or Modification),
19 (Assignment and Change in Control), and 22 (Year 2000 Statement) of the
Agreement, as well as for purposes of Schedule C of the Agreement, the
Vantagepoint Funds is hereby made a party to the Agreement and shall be entitled
to all notices, protections and rights set forth in those Sections and in
Schedule C to which Client is entitled.
10
<PAGE> 11
IN WITNESS WHEREOF, THE PARTIES HERETO EXECUTE THIS AGREEMENT ON
, 199 and make it effective on the date set forth.
CLIENT ADVISER
Vantagepoint Barrow, Hanley, Mewhinny & Strauss, Inc.
Investment Advisers, LLC
by: by:
/s/ GIRARD MILLER /s/ BRYANT M. HAMLET, JR.
- ------------------------ -------------------------
(signature) (signature)
President
- ------------------------ -------------------------
Girard Miller, President (name, title)
Date: Date: July 22, 1999
FUNDS
The Vantagepoint Funds
by:
/s/ GIRARD MILLER
- -------------------
Girard Miller, President
Date: July 22, 1999
11
<PAGE> 12
SCHEDULE A
THE VANTAGEPOINT FUNDS
EQUITY INCOME FUND
STATEMENT OF INVESTMENT POLICIES
These Investment Policies and Guidelines have been adopted by the Vantagepoint
Funds (the "Funds") to govern the management and administration of the Equity
Income Fund by Vantagepoint Investment Advisers, LLC ("VIA"). They may be
reviewed and revised at the discretion of the Directors of the Vantagepoint
Funds (the "Directors"). VIA is responsible for the monitoring and appointment
of subadvisers to handle the day-to-day investment of assets assigned to them.
I. GENERAL DESCRIPTION AND GOALS
The Equity Income Fund seeks long-term, stable growth of capital by
investing primarily in dividend-paying, common stocks of
well-established companies. The Fund may also invest in other
equity-type securities (e.g., convertible securities and preferred
stocks) and in bonds.
II. STRUCTURE
The assets of the Equity Income Fund are to be managed by two or
more subadvisers. The subadvisers are retained to manage separate
accounts under discretionary investment advisory contracts. Each
subadviser is selected for its individual investment management
expertise, and each operates independently of the others. Each
subadviser must either be an investment adviser registered with the
Securities and Exchange Commission (SEC) under the Investment
Advisers Act of 1940, or be a Bank, Insurance Company or Trust
Company exempt as such from registration.
Each subadviser shall exercise complete management discretion over
assets of the Fund allocated to its account in a manner consistent
with these Investment Policies and Guidelines and with such further
investment limitations and conditions as may be established by VIA
and approved by the Directors. Subadvisers are obligated to manage
Fund assets as if they were subject to the fiduciary duty of care
that applies under the Employee Retirement Income Security Act of
1974 (ERISA) governing pension and profit sharing assets.
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<PAGE> 13
III. INVESTMENT STRATEGY
VIA selects subadvisers that represent a variety of portfolio
management approaches and investment disciplines. These investment
approaches are combined in a complementary manner to effectively
achieve the investment objective of the Fund. The Fund as a whole
will be more diversified than each individual subadviser's
portfolio.
While the subadvisers employ different strategies, each has in
common the objective of providing total return from capital
appreciation and current income. The Fund will tend to be
concentrated in higher-yielding industries including, for example,
utilities, energy, financial, and cyclical companies. In addition it
is likely, because of the Fund's income and established company
requirements, that larger companies will dominate.
IV. PERFORMANCE BENCHMARKS
Performance benchmarks are established for the Fund. These
benchmarks are recommended by VIA and adopted by the Directors and
will be reviewed periodically and revised as appropriate. The
current performance benchmarks for the Fund are appended to this
document as Exhibit I.
V. DIRECTOR REVIEW
VIA reports periodically to the Directors on performance of the Fund
against the benchmarks and on subadviser results and will evaluate
for the Directors the overall performance of the Fund relative to
its objectives. The Directors will consider such reports and other
relevant factors in appraising the investment objectives and
performance of the Fund.
13
<PAGE> 14
INVESTMENT GUIDELINES
I. ELIGIBLE INVESTMENTS
A. EQUITY SECURITIES: Common stock, preferred stock, common stock
equivalents (units of beneficial interest), American Depository
Receipts, convertible preferred stocks, warrants, and other
rights.
B. CASH/CASH EQUIVALENTS: Fixed-income obligations with maturity
less than one year, registered money market mutual funds within
applicable limits, or short-term accounts or securities managed
by a custodian institution.
C. FIXED INCOME: Fixed income and convertible fixed income
securities with maturities greater than one year.
D. FINANCIAL FUTURES: Equity-index futures, but not to obtain
market leverage.
E ELIGIBLE PRACTICES: There are no restrictions on subadvisers
as to the following:
- Portfolio turnover.
- Realized gains and losses.
F. ELIGIBLE INVESTMENT LIMITS
<TABLE>
<CAPTION>
MINIMUM NORMAL RANGE MAXIMUM
------- ------------ -------
<S> <C> <C> <C>
U.S. Equity securities 65% 80-100% 100%
Non-U.S. equity securities 0% 0-10% 20%
Cash and cash equivalents 0% 0-15% 25%
Fixed income securities 0% 0-15% 25%
Convertible securities 0% 0-20% 35%
</TABLE>
II. PROHIBITED PRACTICES AND SECURITIES
A. Short Sales
B. Options
14
<PAGE> 15
C. Commodities (excluding financial futures).
D. Securities for which there is no established trading market.
E. Margin purchases and other forms of borrowing; granting of
pledges of other security interests in assets of the Fund; use
of futures to obtain market leverage.
F. Securities issued by the subadvisers of the Fund or their
affiliates.
G. General partner interests.
H. Direct investments in oil, gas, or other mineral exploration or
development programs.
I. Direct investments in real estate or interests in real estate;
this does not preclude investment in purchases of securities of
real estate investment trusts and other companies holding real
estate or interests in real estate.
J. Acquisition of securities that would cause exposure to a single
industry to exceed 25% of the Fund's market value at the time
of purchase.
K. In the absence of prior consent of VIA, acquisition of
securities of an issuer that would cause more than 5% of the
Fund to be invested in such securities.
L. In the absence of prior consent of VIA, acquisition of more
than 5% of the outstanding of stock of any issuer
M. Commingled funds; this does not preclude investment in
registered mutual funds up to 5% per fund. Investments in
registered mutual funds overall are limited to 10% of the
Fund's market value at the time of purchase.
N. Acquisition of securities that would cause exposure to
non-equity holdings to exceed 35% of the Fund's market value at
the time of purchase.
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
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<PAGE> 16
Any securities or practices not enumerated in Section I or Section
II of these Investment Guidelines may be acquired or employed, as
the case may be, but only if explicitly approved in advance by VIA.
IV. SECURITIES LENDING
Nothing herein shall prevent loans of securities in the Equity
Income Fund pursuant to an established securities lending program
conducted by the Fund's custodian.
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<PAGE> 17
EXHIBIT I
TO THE
STATEMENT OF INVESTMENT POLICIES AND GUIDELINES OF
THE EQUITY INCOME FUND
MARCH 1, 1999
The following standards will be used to measure the performance of the Equity
Income Fund:
A. BENCHMARKS
1. The performance benchmark for the Fund is the S&P/BARRA VALUE
INDEX. This benchmark is used to measure the Fund's
performance net of subadviser fees.
2. The Lipper Equity Income Fund Index, maintained by Lipper
Analytical Services, serves as the performance benchmark for
participant returns, net of all fees and expenses. In assessing
performance against this benchmark, it is taken into
consideration that Lipper Analytical Services may change the
composition of the Index.
3. A peer group benchmark for the Fund consists of mutual funds
with characteristics similar to the Equity Income Fund.
The peer group is used to measure the Fund's performance
relative to other funds with a similar investment approach.
The peer group benchmark measures Fund performance net of all
fees and expenses except for the plan administration fee.
B. TIME HORIZON
The time horizons for performance measurement are one, three, and
five years.
One Year:
Performance relative to any benchmark established for the Fund can
vary widely over one-year periods; such variance over short time
periods is expected and acceptable. However, if such variance is
determined to be caused by factors that are not related to the
market, action may be appropriate.
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<PAGE> 18
Three and Five Years:
Performance of the Fund should track market and universe benchmarks
more closely as the evaluation period lengthens. The ideal
performance objective for the Equity Income Fund is to exceed the
returns of all relevant benchmarks; however, shortfalls over various
time periods are expected in some cases. Underperformance against a
single benchmark over an extended period may be acceptable,
particularly if other benchmarks have been exceeded.
C. INVESTMENT CHARACTERISTICS
The Equity Income Fund may have investment characteristics which
differ from the general market, as measured by the Standard & Poor's
500 Index. For the total Fund, these would include, but are not
limited to:
<TABLE>
<CAPTION>
<S> <C>
CHARACTERISTIC RELATIVE TO S&P 500 INDEX
Beta Lower
Capitalization Somewhat Lower
Dividend Yield Higher
Hist. 5 year EPS Growth Lower
Price to Earnings Ratio Lower
Standard Deviation Lower
</TABLE>
18
<PAGE> 19
SCHEDULE B
VANTAGEPOINT INVESTMENT ADVISERS, LLC
VANTAGEPOINT EQUITY INCOME FUND
INVESTMENT GUIDELINES
FOR
BARROW, HANLEY, MEWHINNEY & STRAUSS
JULY 28, 1999
These Investment Guidelines refer to the portion of the Vantagepoint Equity
Income Fund managed by BARROW, HANLEY, MEWHINNEY & STRAUS, INC. Investment
Guidelines for the Fund are an integral part of these guidelines.
The BARROW, HANLEY, MEWHINNEY & STRAUSS, INC. - LARGE CAP VALUE PRODUCT reflects
the firm's philosophy that companies with high or improving levels of
profitability will eventually be rewarded with price appreciation. Portfolio
characteristics consistently reflect three traditional value characteristics: a
low price/earnings ratio, a low price/book ratio and a high dividend yield. The
firm believes that these characteristics reflect a low risk strategy. Portfolio
holdings are concentrated (35-50 stocks) and are determined by quantitative and
qualitative screening following a bottom-up approach. The portfolio is normally
fully invested with no more than 25% of the portfolio invested in any one
industry.
The Advisor must comply with the Fund Investment Guidelines (see Schedule A)
except where noted in the sections that follow: I. ELIGIBLE INVESTMENTS and
II. PROHIBITED PRACTICES AND SECURITIES.
I. ELIGIBLE INVESTMENTS
A. EQUITY SECURITIES: Common stock, preferred stock, common stock
equivalents (units of beneficial interest), American Depository
Receipts, convertible preferred stocks, warrants, and other
rights.
B. CASH/CASH EQUIVALENTS: Fixed income obligations with
maturities less than one year, or short term accounts or
securities managed by the custodian institution.*
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<PAGE> 20
[*NOTE: THESE INSTRUCTIONS DIFFER FROM SCHEDULE A, INVESTMENT
GUIDELINES, SECTION I.B.]
C. FIXED INCOME: Fixed income and convertible fixed income
securities with maturities greater than one year.
D. FINANCIAL FUTURES: Futures are not permitted.
[*NOTE: THESE INSTRUCTIONS DIFFER FROM SCHEDULE A, INVESTMENT
GUIDELINES, SECTION I.D.]
E ELIGIBLE PRACTICES: There are no restrictions on subadvisers
as to the following:
- Portfolio turnover.
- Realized gains and losses.
F. ELIGIBLE INVESTMENT LIMITS:
<TABLE>
<CAPTION>
MINIMUM NORMAL RANGE MAXIMUM
------- ------------ -------
<S> <C> <C> <C>
U. S. equity securities* 65% 80%-100% 100%
Non-U.S. equity securities 0% 0-5% 10%
(ADRs only)*
Cash and cash equivalents* 0% 0%-10% 20%
Fixed income securities* 0% 0%-10% 20%
</TABLE>
[*NOTE: THESE INSTRUCTIONS DIFFER FROM SCHEDULE A, INVESTMENT
GUIDELINES, SECTION I.F.]
II. PROHIBITED PRACTICES AND SECURITIES
A. Short sales.
B. Options.
C. Commodities.
D. Securities for which there is no established trading market.
20
<PAGE> 21
E. Margin purchases and other forms of borrowing; granting of
pledges or other security interests in assets of the portfolio;
use of futures to obtain market leverage.
F. Securities offered by the Adviser or its affiliates.
G. General partner interests.
H. Direct investments in oil, gas, or other mineral exploration or
development programs.
I. Direct investments in real estate or interests in real estate;
this does not preclude investment in purchases of securities of
real estate investment trusts and other companies holding real
estate or interests in real estate.
J. Acquisition of securities that would cause exposure to a single
industry to exceed 25% of the portfolio at the time of
purchase.
K. In the absence of prior consent of VIA, acquisition of
securities of an issuer that would cause more than 5% of the
Fund to be invested in such securities.
L. In the absence of prior consent of VIA, acquisition of more
than 5% of the outstanding stock of any issuer.
M. Commingled and registered mutual funds.
[*NOTE: THESE INSTRUCTIONS DIFFER FROM SCHEDULE A, INVESTMENT
GUIDELINES, SECTION II.M.]
N. Foreign securities unless listed and traded in the U.S.*
[*NOTE: THESE INSTRUCTIONS DIFFER FROM SCHEDULE A, INVESTMENT
GUIDELINES, SECTION II.]
Exceptions to the above listed eligible investments and prohibited
securities or practices may be permitted with prior consent from
VIA.
21
<PAGE> 22
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in Section I or Section
II of these Investment Guidelines may be acquired or employed, as
the case may be, but only if explicitly approved in advance by VIA.
IV. PERFORMANCE BENCHMARK AND MONITORING CRITERIA
[Note: The standards outlined in this section are subject to review
by VIA as and when appropriate.]
A. PERFORMANCE BENCHMARKS
Two benchmarks are used to track the Adviser's relative
performance:
1. The LIPPER EQUITY INCOME INDEX is used to evaluate
performance relative to the average of similar mutual
funds.
2. The S&P/BARRA VALUE INDEX is used to measure performance
relative to a market benchmark of "value" stocks.
The Adviser is tracked over one-, three- and five-year periods
with the expectation that the Adviser will outperform the
benchmark (net of Adviser fees).
B. PEER GROUP
VIA will also compare investment performance to a peer group of
other managers with similar investment approaches.
VIA tracks the Adviser's net performance over one-, three- and
five-year periods with the expectation that the Adviser will outperform the
median return of the peer group for all periods.
The current peer group is THE WILSHIRE LARGE-CAP VALUE
universe.
22
<PAGE> 23
SCHEDULE C
VANTAGEPOINT INVESTMENT ADVISERS, LLC
VANTAGEPOINT EQUITY INCOME FUND
FEE SCHEDULE
FOR
BARROW, HANLEY, MEWHINNEY & STRAUSS
The Adviser's quarterly fee shall be calculated based on the average daily net
assets of the assets under management as provided by the Custodian, based on the
following annual rate:
<TABLE>
<CAPTION>
<S> <C>
First$ 10 million 0.75 percent
Next $ 15 million 0.50 percent
Next $ 175 million 0.25 percent
Next $ 600 million 0.20 percent
Next $ 200 million 0.15 percent
Over $1,000 million 0.13 percent
</TABLE>
EXAMPLE OF FEE CALCULATION (HYPOTHETICAL AMOUNTS)
<TABLE>
<CAPTION>
<S> <C> <C>
January 1, 1999 $190,000,000 End-of-Day Net Assets
January 2, 1999 $190,678,462 End-of-Day Net Assets
January 3, 1999 $190,796,123 End-of-Day Net Assets
. . .
March 29, 1999 $194,512,214 End-of-Day Net Assets
March 30, 1999 $194,720,978 End-of-Day Net Assets
March 31, 1999 $194,901,556 End-of-Day Net Assets
$192,601,555
QUARTERLY DAILY AVERAGE
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
First $10 million 0.75 percent $ 75,000
Next $15 million 0.50 percent $ 75,000
Next $175 million 0.25 percent $419,004
Annual Fee $569,004
One-Fourth Annual Fee $142,251
</TABLE>
23
<PAGE> 1
EXHIBIT (d)(18)
INVESTMENT ADVISORY AGREEMENT
This Investment Advisory Agreement is made as of the __________ day
of _______________, 1999, by and between VANTAGEPOINT INVESTMENT ADVISERS, LLC,
a Delaware limited liability company (hereafter "Client"), and T. ROWEPRICE
ASSOCIATES, INC., at 100 East Pratt Street, Baltimore, Maryland 21202 (hereafter
"Adviser") and is effective as of July 30,1999, (the "Effective Date").
WHEREAS, the Vantagepoint Funds (the "Funds") is a Delaware Business
Trust registered as an open-end management investment company under the
Investment Company Act of 1940 (the "1940 Act");
WHEREAS, Client is party to an Investment Adviser Agreement with the
Funds for management of the investment operations of the Funds including the
establishment and operation of investment portfolios for the Funds and the
entering into of contracts with sub-advisers to assist in managing the
investment of the Funds property;
WHEREAS, Client and Adviser wish to enter into a sub-advisory
agreement pursuant to which Adviser will provide such assistance to Client.
AGREEMENTS:
In consideration of the performance by the Adviser as Investment
Adviser of certain assets held by the Funds, the Client has authorized the
Adviser to manage the securities and other assets as follows:
1. ACCOUNT
The account with respect to which the Adviser shall perform its
services shall consist of those assets of the Vantagepoint Equity Income Fund
which the Client determines to assign to an account with the Adviser, together
with all income earned by those assets and all realized and unrealized capital
appreciation related to those assets (hereafter "Account"). From time to time,
the Client may, upon notice to the Adviser, make additions to the Account and
may, upon providing as much notice to the Adviser as reasonably practical, make
withdrawals from the Account.
2. APPOINTMENT STATUS, POWERS OF ADVISER
(a) Purchase and Sale. Client hereby appoints Adviser to manage
the Account on the terms and conditions set forth in this Agreement. Subject to
the restrictions set forth in this Agreement, and acting always in conformity
with the Investment Policies provided in Paragraph 4, Adviser shall supervise
and direct investment of the Account. Client hereby grants the Adviser complete,
unlimited and
<PAGE> 2
unrestricted discretion and authority to select portfolio securities with
respect to the Account including the power to acquire (by purchase, exchange,
subscription or otherwise), to hold and dispose (by sale, exchange or
otherwise). The Adviser will consult with Client, upon the request of the
Client, concerning any transactions it makes with respect to the investment of
the Account.
(b) Limitation on Authority. Except as expressly authorized herein
or hereafter from time to time, Adviser shall for all purposes be deemed an
independent contractor and shall have no authority to act for or to represent
the Client or the Funds in any way or otherwise to be an agent of the Client or
the Funds. The activities of Client and Adviser in managing the assets of the
Fund Vantagepoint Equity Income Fund shall in all instances be conducted subject
to the supervision and direction of the Board of Directors of the Vantagepoint
Funds.
(c) Voting. Unless otherwise instructed by Client, Adviser shall
have discretion to take any action or render any advice with respect to the
voting of shares or the execution of proxies solicited from time to time by, or
with respect to, the issuers of securities held in the Account. Adviser will
report annually to Client regarding such voting.
(d) Key Personnel. Adviser agrees that the following key personnel
have primary responsibility with respect to the investment management of the
Account. If the(se) individual(s) is unable to devote sufficient time to
maintain primary responsibility of the Account, the Adviser must give Client
written advance notice (if possible), or prompt notice within three (3) business
days, of the name of the person designated by the Adviser to replace or
supplement the individual(s). In addition, the Adviser will give Client written
notice of the replacement of any employee of the Adviser who has direct
supervisory responsibility for the key personnel or who has responsibility for
setting investment policy as soon as reasonably practicable.
Key Personnel: Brian C. Rogers
3. ACCEPTANCE OF APPOINTMENT
Adviser accepts the appointment as an investment adviser and agrees
to use its best efforts and professional judgment to make timely investment
transactions for the Client with respect to the investments of the Account, and
to provide the other services required of the Adviser under the provisions of
this Agreement.
4. INVESTMENT POLICIES
(a) Investment Objectives. Subject to the supervision of the
Fund's Board of Directors and the Client, the Adviser shall direct the
investments of the Account in accordance with the Fund's investment objectives,
policies, and restrictions as provided in the Fund's Prospectus and Statement of
Additional Information as filed with the Securities
2
<PAGE> 3
and Exchange Commission on Form N-1A ("Registration Statement"), as
currently in effect and as amended or supplemented from time to time, and such
other limitations as the Fund or Client may reasonably impose by written notice
to the Adviser or as set forth in SCHEDULE A. Client shall give Adviser as many
copies as Adviser may reasonably request of the Fund's Prospectus and Statement
of Additional Information, and any amendments or supplements thereto, as soon a
practicable after such documents become available.
(b) Funds' Agreement and Declaration of Trust. The Adviser will
adhere to all specific provisions relating to the investment of the Account
established in the Funds' Agreement and Declaration of Trust and Registration
Statement, both of which are hereby incorporated by reference and made a part of
this Agreement. The Client shall give written notice to the Adviser of any
amendments to the Agreement and Declaration of Trust or Registration Statement,
which amendments, upon their receipt by the Adviser, shall be binding on the
Adviser.
(c) Investment Adviser Guidelines. The Adviser shall act in
accordance with the Fund's Prospectus and Statement or Additional Information,
and in accordance with the limitations set forth in the specific statement of
Investment Adviser Guidelines, SCHEDULE B, as restated or modified from time to
time by the Client in written notice to the Adviser. The Client retains the
right, on written notice to the Adviser, to modify any such objectives,
guidelines, restrictions, and liquidity requirements in any manner at any time
as may be allowed pursuant to the 1940 Act.
(d) Conflict in Policies. If a conflict in policies or guidelines
referenced herein occurs, the Registration Statement shall govern for purposes
of this Agreement.
5. CUSTODY, DELIVERY, RECEIPT OF SECURITIES
(a) Custody Responsibilities. The Client shall designate one or
more custodians to hold the Account. The Custodian, as designated by the Client
will be responsible for the custody, receipt and delivery of securities and
other assets of the Funds (including the Account), and the Adviser shall have
no authority, responsibility or obligation with respect to the custody, receipt
or delivery of securities or other assets of the Funds (including the Account).
In the event that any cash or securities of the Funds are delivered to the
Adviser, it will promptly deliver the same over to the
Custodian, in the name of the Funds.
(b) Securities Transactions. Unless otherwise required by local
custom, all securities transactions for the Account will be consummated by
payment to or delivery by the Funds of cash or securities due to or from the
Account. The Adviser will make all reasonable efforts to notify the Custodian of
ll orders to brokers for the Account by 11:00 a.m. EST on the day following the
trade date and will affirm the trade within the close of
3
<PAGE> 4
business one (1) business day after the trade date (T+1) provided the
broker has also affirmed the trade.
(c) Tri-Party Agreement. The Adviser is authorized to enter into
Tri-Party Repurchase Agreements and sign the standard PSA tri-party agreement
(the "Tri-Party Agreement") on behalf of the Client and the subcustodian
thereunder is authorized to act as a subcustodian for the Account's assets
involved in any tri-party repurchase agreement pursuant to such Tri-Party
Agreement.
6. RECORD KEEPING AND REPORTING
(a) Records. Adviser will maintain proper and complete records
relating to the furnishing of services under this Agreement, including records
with respect to the acquisition, holding and disposition of securities for
Client that are required of an investment adviser to a registered investment
company pursuant to the 1940 Act and the Investment Advisers Act of 1940, and
the rules thereunder, and in accordance with such reasonable instructions as
shall be provided to Adviser by Client from time to time. All records maintained
pursuant to this Agreement shall be subject to examination by Client and by
persons authorized by it during normal business hours upon reasonable notice.
Except as expressly authorized in this Agreement or as required by applicable
law, regulation or order of court or as directed by other party in writing,
Adviser and Client shall keep confidential the records and other information
obtained by reason of this Agreement. Upon termination of this Agreement,
Adviser shall promptly, upon demand, return to Client all records Client
reasonably believes are necessary in order to discharge its responsibilities to
the Funds. Adviser shall be entitled to retain originals or copies of records
pursuant to the requirements of applicable laws or regulations.
(b) Reconciliations. Adviser shall reconcile security and cash
positions, and market values on a monthly basis to the Custodian's
records and report discrepancies to the Client by ten (10) business days after
the end of the month.
(c) Loss Reimbursement. Adviser shall reimburse the Account for
any material error to the Fund's net asset value caused by Adviser's breach of
its standard of care set forth in Section 12 that is a direct cause of a delay
in the accurate daily pricing of the Fund(s), provided such loss was not the
result of action or inaction of other service providers to the Client or the
Fund in failing to observe the instructions of the Adviser.
(d) Reports. Adviser shall furnish Client and the Board of
Directors of the Vantagepoint Funds such periodic and special reports and
information as either of them may reasonably request, including such information
as shall be reasonably necessary to evaluate the terms of any advisory agreement
between Client and Adviser with respect to the assets of the Vantagepoint Equity
Income Fund.
4
<PAGE> 5
(e) Other Reports on Request. Adviser shall provide to Client
promptly upon request any information available in the records maintained by
Adviser relating to the Account.
(f) Review of Materials. During the term of this Agreement, the
Client shall furnish to the Adviser at its principal office all prospectuses,
statements of additional information, proxy statements, reports to shareholders,
advertising and sales literature or other material prepared for distribution to
Fund shareholders or the public, which refer to the Adviser or its clients in
any way, prior to the use thereof, and the Client shall not use any such
materials if the Adviser reasonably objects in writing within ten (10)
business days (or such other time as may be mutually agreed) after receipt
thereof. The Client shall ensure that materials prepared by employees or agents
of the Client or its affiliates that refer to the Adviser or its clients in any
way are consistent with those materials previously approved by the Adviser as
referenced in the preceding sentence.
7. PURCHASE AND SALE OF SECURITIES
(a) Selection of Brokers. Except to the extent otherwise
instructed in writing by Client in acting on behalf of the Fund, (it being
understood that Client, acting on behalf of the Fund, may, in its absolute
discretion and consistent with the requirements of the 1940 Act and applicable
federal securities laws, direct portfolio transactions for which Adviser is
responsible to any broker that Client may see fit), Adviser shall place all
orders for the purchase and sale of securities on behalf of the Client with
brokers or dealers selected by Adviser, but not with a person affiliated with
Adviser, as the term "affiliated person" is defined in the Investment Company
Act of 1940 (hereafter an "Affiliate"), unless the transaction is in compliance
with Rules 17e-1 or 10f-3 under the 1940 Act, as applicable, and the Fund's
policies and procedures thereunder, copies of which shall be provided to Adviser
(b) Best Execution. In placing such orders, the Adviser will give
primary consideration to obtaining the most favorable price and efficient
execution reasonably available under the circumstances. In evaluating the terms
available for executing particular transactions for Client and in selecting
brokers and dealers to execute such transactions, the Adviser may consider, in
addition to commission cost and execution capabilities, the financial stability
and reputation of brokers and dealers and the brokerage and research services
(as those terms are defined in Section 28(e) of the Securities Exchange Act of
1934, as amended) provided by brokers and dealers. Adviser is authorized to pay
a broker or dealer who provides such brokerage and research services a
commission for executing a transaction which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if Adviser determines in good faith that such commission is
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer in discharging
5
<PAGE> 6
responsibilities with respect to the Account or to other client accounts
as to which it exercises investment discretion.
(c) Bunching Orders. Client agrees that Adviser may aggregate
sales and purchase orders of Account with similar orders being made
simultaneously for other accounts managed by Adviser, if in Adviser's reasonable
judgment such aggregation shall result in an overall economic benefit or more
efficient execution to the Account taking into consideration the advantageous
selling or purchase price, brokerage commission and other expenses. Client
acknowledges that the determination of such economic benefit to the Fund
by Adviser represents Adviser's evaluation that the Account is benefited by
relatively better purchase or sales prices, lower commission expenses and
beneficial timing of transactions or a combination of these and other factors.
In such event, allocation of the securities so purchased or sold, as well as
expenses incurred in the transaction, will be made by the Adviser in a manner
the Adviser considers to be most equitable and consistent with its fiduciary
obligations to the Fund and to its other clients.
8. INVESTMENT FEES
(a) Fee Schedule. The compensation of the Adviser for its services
under this Agreement shall be calculated and paid by the Client from the assets
of the Account in accordance with SCHEDULE C hereto.
(b) For purposes of this section 8 and Schedule C, all payments due
to Adviser shall be solely made from the assets of the Vantagepoint Equity
Income Fund.
(c) Pro Rata Fee. If the Adviser should serve for less than the
whole of any calendar quarter, its compensation shall be determined as provided
above on the basis of the ending market value of the Account in the month in
which the termination occurs and shall be payable on a pro rata basis for the
period of the calendar quarter for which it has served as Adviser hereunder.
9. BEST EFFORTS; NON-EXCLUSIVITY OF SERVICES
The Adviser shall devote its best efforts and such time as it deems
necessary to provide prompt and expert service to the Client. The services of
Adviser to be provided to Client hereunder are not to be deemed exclusive and
Adviser shall be free to provide similar services for its own account and the
accounts of other persons and to receive compensation for such services. Client
acknowledges that Adviser and its members, Affiliates and employees, and
Adviser's other clients may at any time, have, acquire, increase, decrease, or
dispose of positions in the same investments which are at the same time being
held, acquired for or disposed of under this Agreement for the Fund.
Adviser shall have no obligation to acquire or dispose of a position in any
investment pursuant to this Agreement simply because Adviser, its directors,
members, Affiliates or
6
<PAGE> 7
employees invest in such a position for its or their own accounts or for the
account of another client.
10. INSIDER TRADING POLICIES AND CODE OF ETHICS
Adviser hereby represents that it has adopted policies that meet the
requirements of Rule 17j-1 under the Investment Company Act of 1940. Copies of
such policies shall be delivered to the Client upon request, and any material
violation of such policies by personnel of the Adviser who are "access persons"
with respect to the Account shall be reported to the Client.
11. INSURANCE
At all times during the term of this Agreement, Adviser shall
maintain, at its own cost and expense, professional liability insurance for
errors, omissions, and negligent acts, in an amount and with such terms as are
standard in the financial services industry for an investment adviser managing
the amount of aggregate assets managed by Adviser for Client and for the
Adviser's other clients.
12. LIABILITY
In the absence of any gross negligence, malfeasance, or willful
violation of this Agreement, Adviser shall not be liable to Client for honest
mistakes of judgment or for action or inaction taken in good faith for a purpose
that the Adviser reasonably believes to be in the best interests of the Client o
r the Fund. However, neither this provision nor any other provision of this
Agreement shall constitute a waiver or limitation of any rights which Client may
have under federal or state securities laws.
13. TERM
This Agreement shall be in effect for an initial term of two years
beginning on the Effective Date. This Agreement may be renewed thereafter for
successive one-year periods if such renewal is approved annually by the majority
of the Fund's Board of Directors, provided that in such event, continuance shall
also be approved by a vote of those members of the Funds' Board of Directors who
are not "interested persons" as that term is defined in the Investment Company
Act of 1940.
14. TERMINATION
This Agreement may be terminated by either party hereto, without the
payment of any penalty, immediately upon notice to the other in the event of a
material breach of any provision thereof by the party so notified if such breach
shall not have been cured within a twenty (20) day period after notice of such
breach, or otherwise by Adviser
7
<PAGE> 8
upon sixty (60) days' written notice to the Client or by Client upon 30
days' written notice to Adviser, except that this Agreement shall automatically
terminate in the event of its assignment, as provided in Paragraph 19, upon the
termination of the Funds, or upon termination of Client's advisory agreement
with the Funds, and at the discretion of the Client in the event of Adviser's
change in control as provided in Paragraph 19. Any termination in accordance
with the terms of this Agreement shall not cause the payment of any penalty. Any
such termination shall not affect the status, obligations or liabilities of any
party hereto to the other.
15. REPRESENTATIONS
(a) Adviser hereby confirms to Client that Adviser is registered as
an investment adviser under the Investment Advisers Act of 1940, that it has
full power and authority to enter into and perform fully the terms of this
Agreement and that the execution of this Agreement on behalf of Adviser has been
duly authorized and, upon execution and delivery, this Agreement will be binding
upon Adviser in accordance with its terms.
(b) Client hereby confirms to Adviser that it is registered as an
investment adviser under the Investment Advisers Act of 1940, that it has full
power and authority to enter into this Agreement and that the execution of this
Agreement on behalf of Client has been fully authorized and, upon execution and
delivery, this Agreement will be binding upon Client in accordance with its
terms.
(c) Adviser hereby acknowledges that the Vantagepoint Funds is
registered as an open-end investment company under the 1940 Act and is subject
to taxation as a regulated investment company under Subchapter M and the
regulations promulgated thereunder of the Internal Revenue Code. Adviser hereby
represents that it is familiar with the requirements of such laws and the rules
and regulations thereunder as they apply to the Vantagepoint Funds and has
systems and procedures in place reasonably designed to permit Adviser, Client,
and the Vantagepoint Funds to comply with such requirement.
8
<PAGE> 9
16. NOTICES
Notices or other notifications given or sent under or pursuant to
this Agreement shall be in writing and be deemed to have been given or sent if
delivered to the party at its address listed below in person or by telex or
telecopy receipt of which is confirmed or by mail or by registered mail, return
receipt requested. Notice to the Client shall constitute notice to the
Vantagepoint Funds as required under Section 23 hereof. The addresses of the
parties are:
CLIENT:
Vantagepoint Investment Advisers, LLC
Attention: Legal Department
c/o ICMA Retirement Corporation
777 North Capitol Street, NE, Ste. 600
Washington, D.C. 20002-4240
ADVISER:
T. RowePrice Associates, Inc.
Attention: Henry H. Hopkins, Esq.
c/o T. Rowe Price Associates, Inc.
100 E. Pratt Street
Baltimore, MD 21202
Each party may change its address by giving notice as herein
required.
17. SOLE INSTRUMENT
This instrument constitutes the sole and only agreement of the
parties to it relating to its object and correctly sets forth the rights,
duties, and obligations of each party to the other as of its date. Any prior
agreements, promises, negotiations or representations not expressly set forth in
this Agreement are of no force or effect.
18. WAIVER OR MODIFICATION
No waiver or modification of this Agreement shall be effective
unless reduced to a written document signed by the party to be charged. No
failure to exercise and no delay in exercising, on the part of any party hereto,
of any right, remedy, power or privilege hereunder, shall operate as a waiver
thereof. Only the Chief Executive Officer, has authority on behalf of Client to
modify or waive any of the provisions of the Agreement. It is understood that
certain material amendments may require approval of the Funds shareholders.
19. ASSIGNMENT AND CHANGE IN CONTROL
9
<PAGE> 10
This Agreement shall automatically terminate in the event of its
assignment. Adviser agrees to provide immediate written notice in the event of
a change in control. Such a change in control will entitle, but not require,
the Client to terminate the Agreement immediately or upon notice.
20. COUNTERPARTS
This Agreement may be executed in counterparts each of which shall
be deemed to be an original and all of which, taken together, shall be deemed
to constitute one and the same instrument.
21. CHOICE OF LAW
This Agreement shall be governed by, and the rights of the parties
arising hereunder construed in accordance with, the laws of the State of
Delaware without reference to principles of conflict of laws and the 1940 Act.
To the extent that the applicable laws of the State of Delaware conflict with
the applicable provisions of the 1940 Act, the latter shall control.
22. YEAR 2000 STATEMENT
Adviser certifies that it has taken the steps to address the Year
2000 problem that are set forth in Adviser's SEC Form ADV-Y2K, a copy of which
has been filed with the SEC and provided to Client. Any subsequent SEC filings
regarding this issue shall be provided to Client.
23. VANTAGEPOINT FUNDS AS PARTY TO AGREEMENT
For purposes of Sections 8 (Fees), 12 (Liability), 13 (Term), 14
(Termination), 15 Representations), 16 (Notices), 18 (Waiver or Modification),
19 (Assignment and Change in Control), and 22 (Year 2000 Statement) of the
Agreement, as well as for purposes of Schedule C of the Agreement, the
Vantagepoint Funds is hereby made a party to the Agreement and shall be entitled
to all notices, protections and rights set forth in those Sections and in
Schedule C to which Client is entitled.
10
<PAGE> 11
IN WITNESS WHEREOF, THE PARTIES HERETO EXECUTE THIS AGREEMENT ON July 28
, 1999, and make it effective on the date set forth.
CLIENT ADVISER
Vantagepoint T. RowePrice Associates, Inc.
Investment Advisers, LLC
by: by:
/s/ GIRARD MILLER /s/ DARRELL N. BRAMAN
- ------------------------ --------------------------------
Girard Miller, President Darell N. Braman, Vice President
Date: Date:
FUNDS
The Vantagepoint Funds
by:
/s/ GIRARD MILLER
- ------------------------
Girard Miller, President
Date:
11
<PAGE> 12
SCHEDULE A
THE VANTAGEPOINT FUNDS
EQUITY INCOME FUND
STATEMENT OF INVESTMENT POLICIES
These Investment Policies and Guidelines have been adopted by the Vantagepoint
Funds (the "Funds") to govern the management and administration of the Equity
Income Fund by Vantagepoint Investment Advisers, LLC ("VIA"). They may be
reviewed and revised at the discretion of the Directors of the Vantagepoint
Funds (the "Directors"). VIA is responsible for the monitoring and appointment
of subadvisers to handle the day-to-day investment of assets assigned to them.
I. GENERAL DESCRIPTION AND GOALS
The Equity Income Fund seeks long-term, stable growth of capital by
investing primarily in dividend-paying, common stocks of
well-established companies. The Fund may also invest in other
equity-type securities (e.g., convertible securities and preferred
stocks) and in bonds.
II. STRUCTURE
The assets of the Equity Income Fund are to be managed by two or
more subadvisers. The subadvisers are retained to manage separate
accounts under discretionary investment advisory contracts. Each
subadviser is selected for its individual investment management
expertise, and each operates independently of the others. Each
subadviser must either be an investment adviser registered with the
Securities and Exchange Commission (SEC) under the Investment
Advisers Act of 1940, or be a Bank, Insurance Company or Trust
Company exempt as such from registration.
Each subadviser shall exercise complete management discretion over
assets of the Fund allocated to its account in a manner consistent
with these Investment Policies and Guidelines and with such further
investment limitations and conditions as may be established by VIA
and approved by the Directors. Subadvisers are obligated to manage
Fund assets as if they were subject to the fiduciary duty of care
that applies under the Employee Retirement Income Security Act of
1974 (ERISA) governing pension and profit sharing assets.
15
<PAGE> 13
III. INVESTMENT STRATEGY
VIA selects subadvisers that represent a variety of portfolio
management approaches and investment disciplines. These investment
approaches are combined in a complementary manner to effectively
achieve the investment objective of the Fund. The Fund as a whole
will be more diversified than each individual subadviser's
portfolio.
While the subadvisers employ different strategies, each has in
common the objective of providing total return from capital
appreciation and current income. The Fund will tend to be
concentrated in higher-yielding industries including, for example,
utilities, energy, financial, and cyclical companies. In addition it
is likely, because of the Fund's income and established company
requirements, that larger companies will dominate.
IV. PERFORMANCE BENCHMARKS
Performance benchmarks are established for the Fund. These
benchmarks are recommended by VIA and adopted by the Directors and
will be reviewed periodically and revised as appropriate. The
current performance benchmarks for the Fund are appended to this
document as Exhibit I.
V. DIRECTOR REVIEW
VIA reports periodically to the Directors on performance of the Fund
against the benchmarks and on subadviser results and will evaluate
for the Directors the overall performance of the Fund relative to
its objectives. The Directors will consider such reports and other
relevant factors in appraising the investment objectives and
performance of the Fund.
16
<PAGE> 14
INVESTMENT GUIDELINES
I. ELIGIBLE INVESTMENTS
A. EQUITY SECURITIES: Common stock, preferred stock, common stock
equivalents (units of beneficial interest), American Depository
Receipts, convertible preferred stocks, warrants, and other
rights.
B. CASH/CASH EQUIVALENTS: Fixed-income obligations with maturity
less than one year, registered money market mutual funds within
applicable limits, or short-term accounts or securities managed
by a custodian institution.
C. FIXED INCOME: Fixed income and convertible fixed income
securities with maturities greater than one year.
D. FINANCIAL FUTURES: Equity-index futures, but not to obtain
market leverage.
E ELIGIBLE PRACTICES: There are no restrictions on subadvisers
as to the following:
- Portfolio turnover.
- Realized gains and losses.
F. ELIGIBLE INVESTMENT LIMITS
<TABLE>
<CAPTION>
MINIMUM NORMAL RANGE MAXIMUM
------- ------------ -------
<S> <C> <C> <C>
U.S. Equity securities 65% 80-100% 100%
Non-U.S. equity securities 0% 0-10% 20%
Cash and cash equivalents 0% 0-15% 25%
Fixed income securities 0% 0-15% 25%
Convertible securities 0% 0-20% 35%
</TABLE>
II. PROHIBITED PRACTICES AND SECURITIES
A. Short Sales
B. Options
17
<PAGE> 15
C. Commodities (excluding financial futures).
D. Securities for which there is no established trading market.
E. Margin purchases and other forms of borrowing; granting of
pledges or other security interests in assets of the Fund; use
of futures to obtain market leverage.
F. Securities issued by the subadvisers of the Fund or their
affiliates.
G. General partner interests.
H. Direct investments in oil, gas, or other mineral exploration or
development programs.
I. Direct investments in real estate or interests in real estate;
this does not preclude investment in purchases of securities
of real estate investment trusts and other companies holding
real estate or interests in real estate.
J. Acquisition of securities that would cause exposure to a single
industry to exceed 25% of the Fund's market value at the time
of purchase.
K. In the absence of prior consent of VIA, acquisition of
securities of an issuer that would cause more than 5% of the
Fund to be invested in such securities.
L. In the absence of prior consent of VIA, acquisition of more
than 5% of the outstanding of stock of any issuer
M. Commingled funds; this does not preclude investment in
registered mutual funds up to 5% per fund. Investments in
registered mutual funds overall are limited to 10% of the
Fund's market value at the time of purchase.
N. Acquisition of securities that would cause exposure to
non-equity holdings to exceed 35% of the Fund's market value at
the time of purchase.
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
18
<PAGE> 16
Any securities or practices not enumerated in Section I or Section
II of these Investment Guidelines may be acquired or employed, as
the case may be, but only if explicitly approved in advance by VIA.
IV. SECURITIES LENDING
Nothing herein shall prevent loans of securities in the Equity
Income Fund pursuant to an established securities lending program
conducted by the Fund's custodian.
19
<PAGE> 17
EXHIBIT I
TO THE
STATEMENT OF INVESTMENT POLICIES AND GUIDELINES OF
THE EQUITY INCOME FUND
MARCH 1, 1999
The following standards will be used to measure the performance of the Equity
Income Fund:
A. BENCHMARKS
1. The performance benchmark for the Fund is the S&P/BARRA VALUE
INDEX. This benchmark is used to measure the Fund's
performance net of subadviser fees.
2. The Lipper Equity Income Fund Index, maintained by Lipper
Analytical Services, serves as the performance benchmark for
participant returns, net of all fees and expenses. In assessing
performance against this benchmark, it is taken into
consideration that Lipper Analytical Services may change the
composition of the Index.
3. A peer group benchmark for the Fund consists of mutual funds
with characteristics similar to the Equity Income Fund. The
peer group is used to measure the Fund's performance relative
to other funds with a similar investment approach. The peer
group benchmark measures Fund performance net of all fees and
expenses except for the plan administration fee.
B. TIME HORIZON
The time horizons for performance measurement are one, three, and
five years.
One Year:
Performance relative to any benchmark established for the Fund can
vary widely over one-year periods; such variance over short time
periods is expected and acceptable. However, if such variance is
determined to be caused by factors that are not related to the
market, action may be appropriate.
20
<PAGE> 18
Three and Five Years:
Performance of the Fund should track market and universe benchmarks
more closely as the evaluation period lengthens. The ideal
performance objective for the Equity Income Fund is to exceed the
returns of all relevant benchmarks; however, shortfalls over various
time periods are expected in some cases. Underperformance against a
single benchmark over an extended period may be acceptable,
particularly if other benchmarks have been exceeded.
C. INVESTMENT CHARACTERISTICS
The Equity Income Fund may have investment characteristics which
differ from the general market, as measured by the Standard & Poor's
500 Index. For the total Fund, these would include, but are not
limited to:
<TABLE>
<CAPTION>
<S> <C>
CHARACTERISTIC RELATIVE TO S&P 500 INDEX
Beta Lower
Capitalization Somewhat Lower
Dividend Yield Higher
Hist. 5 year EPS Growth Lower
Price to Earnings Ratio Lower
Standard Deviation Lower
</TABLE>
21
<PAGE> 19
SCHEDULE B
VANTAGEPOINT INVESTMENT ADVISERS, LLC
EQUITY INCOME FUND
INVESTMENT GUIDELINES
FOR
T. ROWE PRICE ASSOCIATES, INC.
JULY 28, 1999
These Investment Guidelines refer to the portion of the Vantagepoint Equity
Income Fund managed by T. ROWE PRICE ASSOCIATES, INC. Investment Guidelines for
the Fund are an integral part of these guidelines.
T. ROWE PRICE - LARGE CAP VALUE, RELATIVE YIELD STRATEGY, which reflects the
portfolio management philosophy that investing in a broadly diversified basket
of securities (60 to 100) which displays above-market yield and below market
valuation will result in superior performance and below market volatility. Risk
controls include security allocation limits with modest sector bets. The
portfolio is managed by a team led by Brian Rogers, a 14-year veteran in this
style at T. Rowe Price.
The Advisor must comply with the Fund Investment Guidelines (see Schedule A)
except where noted in the sections that follow: I. ELIGIBLE INVESTMENTS and
II. PROHIBITED PRACTICES AND SECURITIES.
I. ELIGIBLE INVESTMENTS
A. EQUITY SECURITIES: Common stock, preferred stock, common stock
equivalents (units of beneficial interest), American Depository
Receipts, convertible preferred stocks, warrants, and other
rights.
B. CASH/CASH EQUIVALENTS: Fixed income obligations with
maturities less than one year, or short term accounts or
securities managed by the custodian institution.*
[*NOTE: THESE INSTRUCTIONS DIFFER FROM SCHEDULE A, INVESTMENT
GUIDELINES, SECTION I.B.]
C. FIXED INCOME: Fixed income and convertible fixed income
securities with maturities greater than one year.
22
<PAGE> 20
D. FINANCIAL FUTURES: Futures are not permitted.
[*NOTE: THESE INSTRUCTIONS DIFFER FROM SCHEDULE A, INVESTMENT
GUIDELINES, SECTION I.D.]
E ELIGIBLE PRACTICES: There are no restrictions on subadvisers
as to the following:
- Portfolio turnover.
- Realized gains and losses.
F. ELIGIBLE INVESTMENT LIMITS:
<TABLE>
<CAPTION>
MINIMUM NORMAL RANGE MAXIMUM
------- ------------ -------
<S> <C> <C> <C>
U. S. equity securities* 65% 80%-100% 100%
Non-U.S. equity securities 0% 0-5% 10%
(ADRs only)*
Cash and cash equivalents* 0% 0%-10% 20%
Fixed income securities* 0% 0%-10% 20%
</TABLE>
[*NOTE: THESE INSTRUCTIONS DIFFER FROM SCHEDULE A, INVESTMENT
GUIDELINES, SECTION I.F.]
II. PROHIBITED PRACTICES AND SECURITIES
A. Short sales.
B. Options.
C. Commodities.
D. Securities for which there is no established trading market.
E. Margin purchases and other forms of borrowing; granting of
pledges or other security interests in assets of the portfolio;
use of futures to obtain market leverage.
F. Securities offered by the Adviser or its affiliates.
G. General partner interests.
23
<PAGE> 21
H. Direct investments in oil, gas, or other mineral exploration or
development programs.
I. Direct investments in real estate or interests in real estate;
this does not preclude investment in purchases of securities of
real estate investment trusts and other companies holding real
estate or interests in real estate.
J. Acquisition of securities that would cause exposure to a single
industry to exceed 25% of the portfolio at the time of
purchase.
K. In the absence of prior consent of VIA, acquisition of
securities of an issuer that would cause more than 5% of the
Fund to be invested in such securities.
L. In the absence of prior consent of VIA, acquisition of more
than 5% of the outstanding stock of any issuer.
M. Commingled and registered mutual funds.
[*NOTE: THESE INSTRUCTIONS DIFFER FROM SCHEDULE A, INVESTMENT
GUIDELINES, SECTION II.M.]
N. Foreign securities unless listed and traded in the U.S.*
[*NOTE: THESE INSTRUCTIONS DIFFER FROM SCHEDULE A, INVESTMENT
GUIDELINES, SECTION II.]
Exceptions to the above listed eligible investments and prohibited
securities or practices may be permitted with prior consent from
VIA.
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in Section I or Section
II of these Investment Guidelines may be acquired or employed, as
the case may be, but only if explicitly approved in advance by VIA.
24
<PAGE> 22
IV. PERFORMANCE BENCHMARK AND MONITORING CRITERIA
[Note: The standards outlined in this section are subject to review
by VIA as and when appropriate.]
A. PERFORMANCE BENCHMARKS
Two benchmarks are used to track the Adviser's relative
performance:
1. The LIPPER EQUITY INCOME INDEX is used to evaluate
performance relative to the average of similar mutual funds.
2. The S&P/BARRA VALUE INDEX is used to measure performance
relative to a market benchmark of "value" stocks.
The Adviser is tracked over one-, three- and five-year periods
with the expectation that the Adviser will outperform the
benchmark (net of Adviser fees).
B. PEER GROUP
VIA will also compare investment performance to a peer group of
other managers with similar investment approaches.
VIA tracks the Adviser's net performance over one-, three- and
five-year periods with the expectation that the Adviser will
outperform the median return of the peer group for all periods.
The current peer group is THE WILSHIRE LARGE-CAP VALUE
universe.
25
<PAGE> 23
SCHEDULE C
VANTAGEPOINT INVESTMENT ADVISERS, LLC
VANTAGEPOINT EQUITY INCOME FUND
FEE SCHEDULE
FOR
T. ROWE PRICE ASSOCIATES, INC.
The Advisor's quarterly fee shall be calculated based on the average daily net
assets value of the assets under management as provided by the Custodian, based
on the following annual rate.
<TABLE>
<CAPTION>
<S> <C>
First $ 500 million 0.40 percent
Over $ 500 million 0.375 percent
</TABLE>
EXAMPLE OF FEE CALCULATION (HYPOTHETICAL AMOUNTS)
<TABLE>
<CAPTION>
<S> <C> <C>
January 1, 1999 $190,000,000 End-of-Day Net Assets
January 2, 1999 $190,678,462 End-of-Day Net Assets
January 3, 1999 $190,796,123 End-of-Day Net Assets
. . .
March 29, 1999 $194,512,214 End-of-Day Net Assets
March 30, 1999 $194,720,978 End-of-Day Net Assets
March 31, 1999 $194,901,556 End-of-Day Net Assets
Quarterly Daily Average $192,601,555
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
$500 million 0.40 percent $770,406
Over $500 million 0.35 percent - - - - - -
Annual Fee $770,406
One-Fourth Annual Fee $192,602
</TABLE>
26
<PAGE> 1
EXHIBIT (d)(19)
INVESTMENT SUBADVISORY AGREEMENT
This Investment Subadvisory Agreement is made as of the
__________ day of _______________, 1999, by and between VANTAGEPOINT INVESTMENT
ADVISERS, LLC, a Delaware limited liability company (hereafter "Client"),
WELLINGTON MANAGEMENT COMPANY, LLP, 75 State Street, Boston, Massachusetts 02109
(hereafter "Subadviser"), and, as set forth in Section 23, THE VANTAGEPOINT
FUNDS, a Delaware business trust, and is effective as of July 30 ,1999 (the
"Effective Date").
WHEREAS, the Vantagepoint Funds (the "Funds") is a Delaware
Business Trust registered as an open-end management investment company under the
Investment Company Act of 1940 (the "1940 Act");
WHEREAS, Client is party to an Investment Adviser Agreement
with the Funds for management of the investment operations of the Funds
including the establishment and operation of investment portfolios for the Funds
and the entering into of contracts with sub-advisers to assist in managing the
investment of the Funds property;
WHEREAS, Client and Subadviser wish to enter into a
sub-advisory agreement pursuant to which Subadviser will provide such assistance
to Client.
AGREEMENTS:
In consideration of the performance by the Subadviser as
Investment Subadviser of certain assets held by the Funds, the Client has
authorized the Subadviser to manage the securities and other assets as follows:
1. ACCOUNT
The account with respect to which the Subadviser shall perform
its services shall consist of those assets of the Vantagepoint Equity Income
Fund which the Client determines to assign to an account with the Subadviser,
together with all income earned by those assets and all realized and unrealized
capital appreciation related to those assets (hereafter "Account"). From time to
time, the Client may, upon notice to the Subadviser, make additions to the
Account and may, upon notice to the Subadviser, make withdrawals from the
Account.
2. APPOINTMENT STATUS, POWERS OF SUBADVISER
(a) Purchase and Sale. Client hereby appoints Subadviser to
manage the Account on the terms and conditions set forth in this Agreement.
Subject to the restrictions set forth in this Agreement, and acting always in
conformity with the
<PAGE> 2
Investment Policies provided in Paragraph 4, Subadviser shall supervise and
direct investment of the Account. Client hereby grants the Subadviser complete,
unlimited and unrestricted discretion and authority to select portfolio
securities with respect to the Account including the power to acquire (by
purchase, exchange, subscription or otherwise), to hold and dispose (by sale,
exchange or otherwise). The Subadviser will consult with Client, upon the
request of the Client, concerning any transactions it makes with respect to the
investment of the Account.
(b) Limitation on Authority. Except as expressly authorized
herein or hereafter from time to time, Subadviser shall for all purposes be
deemed an independent contractor and shall have no authority to act for or to
represent the Client or the Funds in any way or otherwise to be an agent of the
Client or the Funds. The activities of Client and Subadviser in managing the
assets of the Fund Vantagepoint Equity Income Fund shall in all instances be
conducted subject to the supervision and direction of the Board of Directors of
the Vantagepoint Funds.
(c) Voting. Unless otherwise instructed by Client, Subadviser
shall have discretion to take any action or render any advice with respect to
the voting of shares or the execution of proxies solicited from time to time by,
or with respect to, the issuers of securities held in the Account. Subadviser
will report annually to Client regarding such voting.
(d) Key Personnel. Subadviser agrees that the following key
personnel have primary responsibility with respect to the investment management
of the Account. If the(se) individual(s) is unable to devote sufficient time to
maintain primary responsibility of the Account, the Subadviser must give Client
written advance notice, or prompt notice within three (3) business days, of the
name of the person designated by the Subadviser to replace or supplement the
individual(s). In addition, the Subadviser will give Client written notice of
the replacement of any employee of the Subadviser who has direct supervisory
responsibility for the key personnel or who has responsibility for setting
investment policy as soon as reasonably practicable.
Key Personnel: Stephen T. O'Brien
3. ACCEPTANCE OF APPOINTMENT
Subadviser accepts the appointment as an investment Subadviser
and agrees to use its best efforts and professional judgment to make timely
investment transactions for the Client with respect to the investments of the
Account, and to provide the other services required of the Subadviser under the
provisions of this Agreement.
4. INVESTMENT POLICIES
2
<PAGE> 3
(a) Investment Objectives. Subject to the supervision of the
Fund's Board of Directors and the Client, the Subadviser shall direct the
investments of the Account in accordance with the Fund's investment objectives,
policies, and restrictions as provided in the Fund's Prospectus and Statement of
Additional Information as filed with the Securities and Exchange Commission on
Form N-1A ("Registration Statement"), as currently in effect and as amended or
supplemented from time to time, and such other limitations as the Fund or Client
may reasonably impose by written notice to the Subadviser or as set forth in
SCHEDULE A. Client shall give Subadviser copies of the Fund's Prospectus and
Statement of Additional Information, and any amendments or supplements thereto,
as soon a practicable after such documents become available.
(b) Funds' Agreement and Declaration of Trust. The Subadviser
will adhere to all specific provisions relating to the investment of the Account
established in the Funds' Agreement and Declaration of Trust and Registration
Statement, both of which are hereby incorporated by reference and made a part of
this Agreement. The Client shall give written notice to the Subadviser of any
amendments to the Agreement and Declaration of Trust or Registration Statement,
which amendments, upon their receipt by the Subadviser, shall be binding on the
Subadviser.
(c) Investment Subadviser Guidelines. The Subadviser shall act
in accordance with the Fund's Prospectus and Statement of Additional
Information, and in accordance with the limitations set forth in the specific
statement of Investment Adviser Guidelines, SCHEDULE B, as restated or modified
from time to time by the Client in written notice to the Subadviser. The Client
retains the right, on written notice to the Subadviser, to modify any such
objectives, guidelines, restrictions, and liquidity requirements in any manner
at any time as may be allowed pursuant to the 1940 Act.
(d) Conflict in Policies. If a conflict in policies or
guidelines referenced herein occurs, the Registration Statement shall govern for
purposes of this Agreement.
5. CUSTODY, DELIVERY, RECEIPT OF SECURITIES
(a) Custody Responsibilities. The Client shall designate one
or more custodians to hold the Account. The Custodian, as designated by the
Client will be responsible for the custody, receipt and delivery of securities
and other assets of the Funds (including the Account), and the Subadviser shall
have no authority, responsibility or obligation with respect to the custody,
receipt or delivery of securities or other assets of the Funds (including the
Account). In the event that any cash or securities of the Funds are delivered to
the Subadviser, it will promptly deliver the same over to the Custodian, in the
name of the Funds.
(b) Securities Transactions. Unless otherwise required by
local custom, all securities transactions for the Account will be consummated by
payment to or delivery by
3
<PAGE> 4
the Funds of cash or securities due to or from the Account. The Subadviser will
make all reasonable efforts to notify the Custodian of all orders to brokers for
the Account by 9:00 am EST on the day following the trade date and will affirm
the trade within the close of business one (1) business day after the trade date
(T+1).
(c) Tri-Party Agreement. The Subadviser is authorized to enter
into Tri-Party Repurchase Agreements and sign the standard PSA tri-party
agreement (the "Tri-Party Agreement") on behalf of the Client and the
subcustodian thereunder is authorized to act as a subcustodian for the Account's
assets involved in any tri-party repurchase agreement pursuant to such Tri-Party
Agreement.
6. RECORD KEEPING AND REPORTING
(a) Records. Subadviser will maintain proper and complete
records relating to the furnishing of services under this Agreement, including
records with respect to the acquisition, holding and disposition of securities
for Client that are required of an investment adviser to a registered investment
company pursuant to the 1940 Act and the Investment Advisers Act of 1940, and
the rules thereunder, and in accordance with such reasonable instructions as
shall be provided to Subadviser by Client from time to time. All records
maintained pursuant to this Agreement shall be subject to examination by Client
and by persons authorized by it during normal business hours upon reasonable
notice. Except as expressly authorized in this Agreement or as required by
applicable law, regulation or order of court or as directed by other party in
writing, Subadviser and Client shall keep confidential the records and other
information obtained by reason of this Agreement. Upon termination of this
Agreement, Subadviser shall promptly, upon demand, return to Client all records
Client reasonably believes are necessary in order to discharge its
responsibilities to the Funds. Subadviser shall be entitled to retain originals
or copies of records pursuant to the requirements of applicable laws or
regulations.
(b) Reconciliations. Subadviser shall reconcile security and
cash positions, and market values on a monthly basis to the Custodian's records
and report discrepancies to the Client by ten (10) business days after the end
of the month.
(c) Loss Reimbursement. Subadviser shall reimburse the Account
for any material error to the Fund's net asset value caused by Subadviser's
breach of its standard of care set forth in Section 12 that is a direct cause of
a delay in the accurate daily pricing of the Fund(s), provided such loss was not
the result of action or inaction of other service providers to the Client or the
Fund.
(d) Reports. Subadviser shall furnish Client and the Board of
Directors of the Vantagepoint Funds such periodic and special reports and
information as either of them may request, including such information as shall
be reasonably necessary to
4
<PAGE> 5
evaluate the terms of any advisory agreement between Client and Subadviser with
respect to the assets of the Vantagepoint Equity Income Fund.
(e) Other Reports on Request. Subadviser shall provide to
Client promptly upon request any information available in the records maintained
by Subadviser relating to the Account.
(f) Review of Materials. During the term of this Agreement,
the Client shall furnish to the Subadviser at its principal office all
prospectuses, statements of additional information, proxy statements, reports to
shareholders, advertising and sales literature or other material prepared for
distribution to Fund shareholders or the public, which refer to the Subadviser
or its clients in any way, prior to the use thereof, and the Client shall not
use any such materials if the Subadviser reasonably objects in writing within
ten (10) business days (or such other time as may be mutually agreed) after
receipt thereof. The Client shall ensure that materials prepared by employees or
agents of the Client or its affiliates that refer to the Subadviser or its
clients in any way are consistent with those materials previously approved by
the Subadviser as referenced in the preceding sentence.
7. PURCHASE AND SALE OF SECURITIES
(a) Selection of Brokers. Except to the extent otherwise
instructed in writing by Client in acting on behalf of the Fund, (it being
understood that Client, acting on behalf of the Fund, may, in its absolute
discretion and consistent with the requirements of the 1940 Act and applicable
federal securities laws, direct portfolio transactions for which Subadviser is
responsible to any broker that Client may see fit), Subadviser shall place all
orders for the purchase and sale of securities on behalf of the Client with
brokers or dealers selected by Subadviser, but not with a person affiliated with
Subadviser, as the term "affiliated person" is defined in the Investment Company
Act of 1940 (hereafter an "Affiliate"), unless the transaction is in compliance
with Rules 17e-1 or 10f-3 under the 1940 Act, as applicable, and the Fund's
policies and procedures thereunder, copies of which shall be provided to
Subadviser.
(b) Best Execution. In placing such orders, the Subadviser
will give primary consideration to obtaining the most favorable price and
efficient execution reasonably available under the circumstances. In evaluating
the terms available for executing particular transactions for Client and in
selecting brokers and dealers to execute such transactions, the Subadviser may
consider, in addition to commission cost and execution capabilities, the
financial stability and reputation of brokers and dealers and the brokerage and
research services (as those terms are defined in Section 28(e) of the Securities
Exchange Act of 1934, as amended) provided by brokers and dealers. Subadviser is
authorized to pay a broker or dealer who provides such brokerage and research
services a commission for executing a transaction which is in excess of the
5
<PAGE> 6
amount of commission another broker or dealer would have charged for effecting
that transaction if Subadviser determines in good faith that such commission is
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer in discharging responsibilities with respect
to the Account or to other client accounts as to which it exercises investment
discretion.
(c) Bunching Orders. Client agrees that Subadviser may
aggregate sales and purchase orders of Account with similar orders being made
simultaneously for other accounts managed by Subadviser, if in Subadviser's
reasonable judgment such aggregation shall result in an overall economic benefit
or more efficient execution to the Account taking into consideration the
advantageous selling or purchase price, brokerage commission and other expenses.
Client acknowledges that the determination of such economic benefit to the Fund
by Subadviser represents Subadviser's evaluation that the Account is benefited
by relatively better purchase or sales prices, lower commission expenses and
beneficial timing of transactions or a combination of these and other factors.
In such event, allocation of the securities so purchased or sold, as well as
expenses incurred in the transaction, will be made by the Subadviser in a manner
the Subadviser considers to be most equitable and consistent with its fiduciary
obligations to the Fund and to its other clients.
8. INVESTMENT FEES
(a) Fee Schedule. The compensation of the Subadviser for its
services under this Agreement shall be calculated and paid by the Client from
the assets of the Account in accordance with SCHEDULE C hereto.
(b) For purposes of this section 8 and Schedule C, all
payments due to Subadviser shall be solely made from the assets of the
Vantagepoint Equity Income Fund, a portfolio of the Vantagepoint Funds.
(c) Pro Rata Fee. If the Subadviser should serve for less than
the whole of any calendar quarter, its compensation shall be determined as
provided above on the basis of the ending market value of the Account in the
month in which the termination occurs and shall be payable on a pro rata basis
for the period of the calendar quarter for which it has served as Subadviser
hereunder.
9. BEST EFFORTS; NON-EXCLUSIVITY OF SERVICES
The Subadviser shall devote its best efforts and such time as
it deems necessary to provide prompt and expert service to the Client. The
services of Subadviser to be provided to Client hereunder are not to be deemed
exclusive and Subadviser shall be free to provide similar services for its own
account and the accounts of other persons
6
<PAGE> 7
and to receive compensation for such services. Client acknowledges that
Subadviser and its members, Affiliates and employees, and Subadviser's other
clients may at any time, have, acquire, increase, decrease, or dispose of
positions in the same investments which are at the same time being held,
acquired for or disposed of under this Agreement for the Fund. Subadviser shall
have no obligation to acquire or dispose of a position in any investment
pursuant to this Agreement simply because Subadviser, its directors, members,
Affiliates or employees invest in such a position for its or their own accounts
or for the account of another client.
10. INSIDER TRADING POLICIES AND CODE OF ETHICS
Subadviser hereby represents that it has adopted policies that
meet the requirements of Rule 17j-1 under the Investment Company Act of 1940.
Copies of such policies shall be delivered to the Client upon request, and any
material violation of such policies by personnel of the Subadviser who are
"access persons" with respect to the Account shall be reported to the Client.
11. INSURANCE
At all times during the term of this Agreement, Subadviser
shall maintain, at its own cost and expense, professional liability insurance
for errors, omissions, and negligent acts, in an amount and with such terms as
are standard in the financial services industry for an investment adviser
managing the amount of aggregate assets managed by Subadviser for Client and for
the Subadviser's other clients.
12. LIABILITY
In the absence of any gross negligence, malfeasance, or
willful violation of this Agreement, Subadviser shall not be liable to Client
for honest mistakes of judgment or for action or inaction taken in good faith
for a purpose that the Subadviser reasonably believes to be in the best
interests of the Client or the Fund. However, neither this provision nor any
other provision of this Agreement shall constitute a waiver or limitation of any
rights which Client may have under federal or state securities laws.
13. TERM
This Agreement shall be in effect for an initial term of two
years beginning on the Effective Date. This Agreement may be renewed thereafter
for successive one-year periods if such renewal is approved annually by the
majority of the Fund's Board of Directors, provided that in such event,
continuance shall also be approved by a vote of
7
<PAGE> 8
those members of the Funds' Board of Directors who are not "interested persons"
as that term is defined in the Investment Company Act of 1940.
14. TERMINATION
This Agreement may be terminated by either party hereto,
without the payment of any penalty, immediately upon notice to the other in the
event of a material breach of any provision thereof by the party so notified if
such breach shall not have been cured within a twenty (20) day period after
notice of such breach, or otherwise by Subadviser upon sixty (60) days' written
notice to the Client or by Client upon 30 days' written notice to Subadviser,
except that this Agreement shall automatically terminate in the event of its
assignment, as provided in Paragraph 19, at the discretion of the Client in the
event of Subadviser's change in control as provided in Paragraph 19, upon the
termination of the Funds, or upon termination of Client's advisory agreement
with the Funds. Any termination in accordance with the terms of this Agreement
shall not cause the payment of any penalty. Any such termination shall not
affect the status, obligations or liabilities of any party hereto to the other.
15. REPRESENTATIONS
(a) Subadviser hereby confirms to Client that Subadviser is
registered as an investment adviser under the Investment Advisers Act of 1940,
that it has full power and authority to enter into and perform fully the terms
of this Agreement and that the execution of this Agreement on behalf of
Subadviser has been duly authorized and, upon execution and delivery, this
Agreement will be binding upon Subadviser in accordance with its terms.
(b) Client hereby confirms to Subadviser that it is registered
as an investment adviser under the Investment Advisers Act of 1940, that it has
full power and authority to enter into this Agreement and that the execution of
this Agreement on behalf of Client has been fully authorized and, upon execution
and delivery, this Agreement will be binding upon Client in accordance with its
terms.
(c) Subadviser hereby acknowledges that the Vantagepoint Funds
is registered as an open-end investment company under the 1940 Act and is
subject to taxation as a regulated investment company under Subchapter M and the
regulations promulgated thereunder of the Internal Revenue Code. Subadviser
hereby represents that it is familiar with the requirements of such laws and the
rules and regulations thereunder as they apply to the Vantagepoint Funds and has
systems and procedures in place reasonably designed to permit Subadviser,
Client, and the Vantagepoint Funds to comply with such requirement.
8
<PAGE> 9
16. NOTICES
Notices or other notifications given or sent under or pursuant
to this Agreement shall be in writing and be deemed to have been given or sent
if delivered to the party at its address listed below in person or by telex or
telecopy receipt of which is confirmed or by mail or by registered mail, return
receipt requested. The addresses of the parties are:
CLIENT:
Vantagepoint Investment Advisers, LLC
Attention: Legal Department
c/o ICMA Retirement Corporation
777 North Capitol Street, NE, Ste. 600
Washington, D.C. 20002-4240
SUBADVISER:
Wellington Management Company, LLP
Attention: Regulatory Affairs Department
75 State Street
Boston, MA 02109
Each party may change its address by giving notice as herein
required.
17. SOLE INSTRUMENT
This instrument constitutes the sole and only agreement of the
parties to it relating to its object and correctly sets forth the rights,
duties, and obligations of each party to the other as of its date. Any prior
agreements, promises, negotiations or representations not expressly set forth in
this Agreement are of no force or effect.
18. WAIVER OR MODIFICATION
No waiver or modification of this Agreement shall be effective
unless reduced to a written document signed by the party to be charged. No
failure to exercise and no delay in exercising, on the part of any party hereto,
of any right, remedy, power or privilege hereunder, shall operate as a waiver
thereof. Only the Chief Executive Officer, has authority on behalf of Client to
modify or waive any of the provisions of the Agreement. It is understood that
certain material amendments may require approval of the Funds shareholders.
19. ASSIGNMENT AND CHANGE IN CONTROL
9
<PAGE> 10
This Agreement shall automatically terminate in the event of
its assignment. Subadviser agrees to provide immediate written notice in the
event of a change in control. Such a change in control will entitle, but not
require, the Client to terminate the Agreement immediately or upon notice.
20. COUNTERPARTS
This Agreement may be executed in counterparts each of which
shall be deemed to be an original and all of which, taken together, shall be
deemed to constitute one and the same instrument.
21. CHOICE OF LAW
This Agreement shall be governed by, and the rights of the
parties arising hereunder construed in accordance with, the laws of the State of
Delaware without reference to principles of conflict of laws and the 1940 Act.
To the extent that the applicable laws of the State of Delaware conflict with
the applicable provisions of the 1940 Act, the latter shall control.
22. YEAR 2000 STATEMENT
Subadviser certifies that it has taken the steps to address
the Year 2000 problem that are set forth in Subadviser's SEC Form ADV-Y2K, a
copy of which has been filed with the SEC and provided to Client. Any subsequent
SEC filings regarding this issue shall be provided to Client.
23. VANTAGEPOINT FUNDS AS PARTY TO AGREEMENT
For purposes of Sections 8 (Fees), 12 (Liability), 13 (Term),
14 (Termination), 15 Representations), 16 (Notices), 18 (Waiver or
Modification), 19 (Assignment and Change in Control), and 22 (Year 2000
Statement) of the Agreement, as well as for purposes of Schedule C of the
Agreement, the Vantagepoint Funds is hereby made a party to the Agreement and
shall be entitled to all notices, protections and rights set forth in those
Sections and in Schedule C to which Client is entitled.
IN WITNESS WHEREOF, THE PARTIES HERETO EXECUTE THIS AGREEMENT ON July 30, 1999
and make it effective on the date set forth.
CLIENT SUBADVISER
10
<PAGE> 11
Vantagepoint Wellington Management Company, LLP
Investment Advisers, LLC
by: by:
/s/ GIRARD MILLER /s/ JOHN H. GOOCH
- ------------------------- --------------------------------
(signature) (signature)
- ------------------------- --------------------------------
Girard Miller, President (name, title)
Date: Date:
FUNDS
The Vantagepoint Funds
by:
/s/ GIRARD MILLER
- -----------------------------
Girard Miller, President
Date:
11
<PAGE> 12
SCHEDULE A
THE VANTAGEPOINT FUNDS
EQUITY INCOME FUND
STATEMENT OF INVESTMENT POLICIES
These Investment Policies and Guidelines have been adopted by the Vantagepoint
Funds (the "Funds") to govern the management and administration of the Equity
Income Fund by Vantagepoint Investment Advisers, LLC ("VIA"). They may be
reviewed and revised at the discretion of the Directors of the Vantagepoint
Funds (the "Directors"). VIA is responsible for the monitoring and appointment
of subadvisers to handle the day-to-day investment of assets assigned to them.
I. GENERAL DESCRIPTION AND GOALS
The Equity Income Fund seeks long-term, stable growth of capital by
investing primarily in dividend-paying, common stocks of
well-established companies. The Fund may also invest in other
equity-type securities (e.g., convertible securities and preferred
stocks) and in bonds.
II. STRUCTURE
The assets of the Equity Income Fund are to be managed by two or more
subadvisers. The subadvisers are retained to manage separate accounts
under discretionary investment advisory contracts. Each subadviser is
selected for its individual investment management expertise, and each
operates independently of the others. Each subadviser must either be an
investment adviser registered with the Securities and Exchange
Commission (SEC) under the Investment Advisers Act of 1940, or be a
Bank, Insurance Company or Trust Company exempt as such from
registration.
Each subadviser shall exercise complete management discretion over
assets of the Fund allocated to its account in a manner consistent with
these Investment Policies and Guidelines and with such further
investment limitations and conditions as may be established by VIA and
approved by the Directors. Subadvisers are obligated to manage Fund
assets as if they were subject to the fiduciary duty of care that
applies under the Employee Retirement Income Security Act of 1974
(ERISA) governing pension and profit sharing assets.
III. INVESTMENT STRATEGY
12
<PAGE> 13
VIA selects subadvisers that represent a variety of portfolio
management approaches and investment disciplines. These investment
approaches are combined in a complementary manner to effectively
achieve the investment objective of the Fund. The Fund as a whole will
be more diversified than each individual subadviser's portfolio.
While the subadvisers employ different strategies, each has in common
the objective of providing total return from capital appreciation and
current income. The Fund will tend to be concentrated in
higher-yielding industries including, for example, utilities, energy,
financial, and cyclical companies. In addition it is likely, because of
the Fund's income and established company requirements, that larger
companies will dominate.
IV. PERFORMANCE BENCHMARKS
Performance benchmarks are established for the Fund. These benchmarks
are recommended by VIA and adopted by the Directors and will be
reviewed periodically and revised as appropriate. The current
performance benchmarks for the Fund are appended to this document as
Exhibit I.
V. DIRECTOR REVIEW
VIA reports periodically to the Directors on performance of the Fund
against the benchmarks and on subadviser results and will evaluate for
the Directors the overall performance of the Fund relative to its
objectives. The Directors will consider such reports and other relevant
factors in appraising the investment objectives and performance of the
Fund.
13
<PAGE> 14
INVESTMENT GUIDELINES
I. ELIGIBLE INVESTMENTS
A. EQUITY SECURITIES: Common stock, preferred stock, common stock
equivalents (units of beneficial interest), American
Depository Receipts, convertible preferred stocks, warrants,
and other rights.
B. CASH/CASH EQUIVALENTS: Fixed-income obligations with maturity
less than one year, registered money market mutual funds
within applicable limits, or short-term accounts or securities
managed by a custodian institution.
C. FIXED INCOME: Fixed income and convertible fixed income
securities with maturities greater than one year.
D. FINANCIAL FUTURES: Equity-index futures, but not to obtain
market leverage.
E ELIGIBLE PRACTICES: There are no restrictions on subadvisers
as to the following:
- Portfolio turnover.
- Realized gains and losses.
F. ELIGIBLE INVESTMENT LIMITS
<TABLE>
<CAPTION>
MINIMUM NORMAL MAXIMUM
------- ------ -------
RANGE
-----
<S> <C> <C> <C>
U.S. Equity securities 65% 80-100% 100%
Non-U.S. equity securities 0% 0-10% 20%
Cash and cash equivalents 0% 0-15% 25%
Fixed income securities 0% 0-15% 25%
Convertible securities 0% 0-20% 35%
</TABLE>
II. PROHIBITED PRACTICES AND SECURITIES
A. Short Sales
B. Options
14
<PAGE> 15
C. Commodities (excluding financial futures).
D. Securities for which there is no established trading market.
E. Margin purchases and other forms of borrowing; granting of
pledges or other security interests in assets of the Fund; use
of futures to obtain market leverage.
F. Securities issued by the subadvisers of the Fund or their
affiliates.
G. General partner interests.
H. Direct investments in oil, gas, or other mineral exploration
or development programs.
I. Direct investments in real estate or interests in real estate;
this does not preclude investment in purchases of securities
of real estate investment trusts and other companies holding
real estate or interests in real estate.
J. Acquisition of securities that would cause exposure to a
single industry to exceed 25% of the Fund's market value at
the time of purchase.
K. In the absence of prior consent of VIA, acquisition of
securities of an issuer that would cause more than 5% of the
Fund to be invested in such securities.
L. In the absence of prior consent of VIA, acquisition of more
than 5% of the outstanding of stock of any issuer
M. Commingled funds; this does not preclude investment in
registered mutual funds up to 5% per fund. Investments in
registered mutual funds overall are limited to 10% of the
Fund's market value at the time of purchase.
N. Acquisition of securities that would cause exposure to
non-equity holdings to exceed 35% of the Fund's market value
at the time of purchase.
15
<PAGE> 16
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in Section I or Section II
of these Investment Guidelines may be acquired or employed, as the case
may be, but only if explicitly approved in advance by VIA.
IV. SECURITIES LENDING
Nothing herein shall prevent loans of securities in the Equity Income
Fund pursuant to an established securities lending program conducted by
the Fund's custodian.
16
<PAGE> 17
EXHIBIT I
TO THE
STATEMENT OF INVESTMENT POLICIES AND GUIDELINES OF
THE EQUITY INCOME FUND
MARCH 1, 1999
The following standards will be used to measure the performance of the Equity
Income Fund:
A. BENCHMARKS
1. The performance benchmark for the Fund is the S&P/BARRA VALUE
INDEX. This benchmark is used to measure the Fund's
performance net of subadviser fees.
2. The Lipper Equity Income Fund Index, maintained by Lipper
Analytical Services, serves as the performance benchmark for
participant returns, net of all fees and expenses. In
assessing performance against this benchmark, it is taken into
consideration that Lipper Analytical Services may change the
composition of the Index.
3. A peer group benchmark for the Fund consists of mutual funds
with characteristics similar to the Equity Income Fund. The
peer group is used to measure the Fund's performance relative
to other funds with a similar investment approach. The peer
group benchmark measures Fund performance net of all fees and
expenses except for the plan administration fee.
B. TIME HORIZON
The time horizons for performance measurement are one, three, and five
years.
One Year:
Performance relative to any benchmark established for the Fund can vary
widely over one-year periods; such variance over short time periods is
expected and acceptable. However, if such variance is determined to be
caused by factors that are not related to the market, action may be
appropriate.
17
<PAGE> 18
Three and Five Years:
Performance of the Fund should track market and universe benchmarks
more closely as the evaluation period lengthens. The ideal performance
objective for the Equity Income Fund is to exceed the returns of all
relevant benchmarks; however, shortfalls over various time periods are
expected in some cases. Underperformance against a single benchmark
over an extended period may be acceptable, particularly if other
benchmarks have been exceeded.
C. INVESTMENT CHARACTERISTICS
The Equity Income Fund may have investment characteristics which differ
from the general market, as measured by the Standard & Poor's 500
Index. For the total Fund, these would include, but are not limited to:
<TABLE>
<CAPTION>
CHARACTERISTIC RELATIVE TO S&P 500 INDEX
<S> <C>
Beta Lower
Capitalization Somewhat Lower
Dividend Yield Higher
Hist. 5 year EPS Growth Lower
Price to Earnings Ratio Lower
Standard Deviation Lower
</TABLE>
18
<PAGE> 19
SCHEDULE B
VANTAGEPOINT INVESTMENT ADVISERS, LLC
EQUITY INCOME FUND
INVESTMENT GUIDELINES
FOR
WELLINGTON MANAGEMENT COMPANY, LLP
JULY 28, 1999
These Investment Guidelines refer to the portion of the Vantagepoint Equity
Income Fund managed by WELLINGTON MANAGEMENT COMPANY, LLP. Investment Guidelines
for the Fund are an integral part of these guidelines.
The WELLINGTON MANAGEMENT - EQUITY INCOME PRODUCT reflects the portfolio
management approach of employing proprietary fundamental research to identify
large capitalization companies that are selling at attractive valuations
relative to their upside potential. Key components of the strategy include a
focus on value and catalysts for change, a belief that dividends matter, and an
aversion to reaching for yield. The portfolios are managed through a team
approach and are concentrated in 50-60 securities. The portfolio is normally
fully invested with no more than 25% of the portfolio invested in any one
industry.
The Advisor must comply with the Fund Investment Guidelines (see Schedule A)
except where noted in the sections that follow: I. ELIGIBLE INVESTMENTS and II.
PROHIBITED PRACTICES AND SECURITIES.
I. ELIGIBLE INVESTMENTS
A. EQUITY SECURITIES: Common stock, preferred stock, common stock
equivalents (units of beneficial interest), American
Depository Receipts, convertible preferred stocks, warrants,
and other rights.
B. CASH/CASH EQUIVALENTS: Fixed income obligations with
maturities less than one year, or short term accounts or
securities managed by the custodian institution.*
[*NOTE: THESE INSTRUCTIONS DIFFER FROM SCHEDULE A, INVESTMENT
GUIDELINES, SECTION I.B.]
19
<PAGE> 20
C. FIXED INCOME: Fixed income and convertible fixed income
securities with maturities greater than one year.
D. FINANCIAL FUTURES: Futures are not permitted.
[*NOTE: THESE INSTRUCTIONS DIFFER FROM SCHEDULE A, INVESTMENT
GUIDELINES, SECTION I.D.]
E ELIGIBLE PRACTICES: There are no restrictions on subadvisers
as to the following:
- Portfolio turnover.
- Realized gains and losses.
F. ELIGIBLE INVESTMENT LIMITS:
<TABLE>
<CAPTION>
MINIMUM NORMAL RANGE MAXIMUM
------- ------------ -------
<S> <C> <C> <C>
U. S. equity securities* 65% 80%-100% 100%
Non-U.S. equity securities 0% 0-5% 10%
(ADRs only)*
Cash and cash equivalents* 0% 0%-10% 20%
Fixed income securities* 0% 0%-10% 20%
</TABLE>
[*NOTE: THESE INSTRUCTIONS DIFFER FROM SCHEDULE A, INVESTMENT
GUIDELINES, SECTION I.F.]
II. PROHIBITED PRACTICES AND SECURITIES
A. Short sales.
B. Options.
C. Commodities.
D. Securities for which there is no established trading market.
E. Margin purchases and other forms of borrowing; granting of
pledges or other security interests in assets of the
portfolio; use of futures to obtain market leverage.
F. Securities offered by the Adviser or its affiliates.
20
<PAGE> 21
G. General partner interests.
H. Direct investments in oil, gas, or other mineral exploration
or development programs.
I. Direct investments in real estate or interests in real estate;
this does not preclude investment in purchases of securities
of real estate investment trusts and other companies holding
real estate or interests in real estate.
J. Acquisition of securities that would cause exposure to a
single industry to exceed 25% of the portfolio at the time of
purchase.
K. In the absence of prior consent of VIA, acquisition of
securities of an issuer that would cause more than 5% of the
Fund to be invested in such securities.
L. In the absence of prior consent of VIA, acquisition of more
than 5% of the outstanding stock of any issuer.
M. Commingled and registered mutual funds.
[*NOTE: THESE INSTRUCTIONS DIFFER FROM SCHEDULE A, INVESTMENT
GUIDELINES, SECTION II.M.]
N. Foreign securities unless listed and traded in the U.S.*
[*NOTE: THESE INSTRUCTIONS DIFFER FROM SCHEDULE A, INVESTMENT
GUIDELINES, SECTION II.]
Exceptions to the above listed eligible investments and prohibited
securities or practices may be permitted with prior consent from VIA.
21
<PAGE> 22
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in Section I or Section II
of these Investment Guidelines may be acquired or employed, as the case
may be, but only if explicitly approved in advance by VIA.
IV. PERFORMANCE BENCHMARK AND MONITORING CRITERIA
[Note: The standards outlined in this section are subject to review
by VIA as and when appropriate.]
A. PERFORMANCE BENCHMARKS
Two benchmarks are used to track the Adviser's relative
performance:
1. The LIPPER EQUITY INCOME INDEX is used to evaluate
performance relative to the average of similar mutual
funds.
2. The S&P/BARRA VALUE INDEX is used to measure
performance relative to a market benchmark of "value"
stocks.
The Adviser is tracked over one-, three- and five-year periods
with the expectation that the Adviser will outperform the
benchmark (net of Adviser fees).
B. PEER GROUP
VIA will also compare investment performance to a peer group
of other managers with similar investment approaches.
VIA tracks the Adviser's net performance over one-, three- and
five-year periods with the expectation that the Adviser will outperform the
median return of the peer group for all periods.
The current peer group is THE WILSHIRE LARGE-CAP VALUE
universe.
22
<PAGE> 23
SCHEDULE C
VANTAGEPOINT INVESTMENT ADVISERS, LLC
VANTAGEPOINT EQUITY INCOME FUND
FEE SCHEDULE
FOR
WELLINGTON MANAGEMENT COMPANY, LLP
The Adviser's quarterly fee shall be calculated based on the average daily net
assets of the assets under management as provided by the Custodian, based on the
following annual rate.
First$ 50 million 0.40 percent
Next $ 50 million 0.30 percent
Over $ 100 million 0.25 percent
EXAMPLE OF FEE CALCULATION (HYPOTHETICAL AMOUNTS)
January 1, 1999 $190,000,000 End-of-Day Net Assets
January 2, 1999 $190,678,462 End-of-Day Net Assets
January 3, 1999 $190,796,123 End-of-Day Net Assets
. . .
March 29, 1999 $194,512,214 End-of-Day Net Assets
March 30, 1999 $194,720,978 End-of-Day Net Assets
March 31, 1999 $194,901,556 End-of-Day Net Assets
Quarterly Daily Average $192,601,555
First $ 50 million 0.40 percent $200,000
Next $ 50 million 0.30 percent $150,000
Over $100 million 0.25 percent $231,504
Annual Fee $581,504
One-Fourth Annual Fee $145,376
23
<PAGE> 1
(d)(20)
INVESTMENT SUB-ADVISORY AGREEMENT
This Investment Sub-Advisory Agreement is made as of the
__________ day of _______________, 1999 by and between VANTAGEPOINT INVESTMENT
ADVISERS, LLC, a Delaware limited liability company (hereafter "Client"), and
AVATAR INVESTORS ASSOCIATES CORP. at 900 Third Avenue New York, New York
(hereafter "Adviser") and is effective as of March 1, 1999 (the "Effective
Date").
WHEREAS, the Vantagepoint Funds (the "Funds") is a Delaware
Business Trust registered as an open-end management investment company under
the Investment Company Act of 1940;
WHEREAS, Client is party to an Investment Adviser Agreement
with the Funds for management of the investment operations of the Funds
including the establishment and operation of investment portfolios for the
Funds and the entering into of contracts with sub-advisers to assist in
managing the investment of the Funds property;
WHEREAS, Client and Adviser wish to enter into an agreement
pursuant to which Adviser will provide such assistance to Client.
AGREEMENTS:
In consideration of the performance by the Adviser as
Investment Adviser of certain assets held by the Funds, the Client has
authorized the Adviser to manage the securities and other assets as follows:
1. ACCOUNT
The account with respect to which the Adviser shall perform
its services shall consist of those assets of the Funds which the Client
determines to assign to an account with the Adviser, together with all income
earned by those assets and all realized and unrealized capital appreciation
related to those assets (hereafter "Account"). From time to time, the Client
may, upon notice to the Adviser, make additions to the Account and may, upon
notice to the Adviser, make withdrawals from the Account.
2. APPOINTMENT STATUS, POWERS OF ADVISER
(a) Purchase and Sale. Client hereby appoints Adviser to
manage the Account on the terms and conditions set forth in this Agreement.
Subject to the restrictions set forth in this Agreement, and acting always in
conformity with the Investment Policies provided in Paragraph 4, Adviser shall
supervise and direct investment of the Account. Client hereby grants the
Adviser complete, unlimited and unrestricted discretion and authority to select
portfolio securities with respect to the
<PAGE> 2
Account including the power to acquire (by purchase, exchange, subscription or
otherwise), to hold and dispose (by sale, exchange or otherwise). The Adviser
will consult with Client, upon the request of the Client, concerning any
transactions it makes with respect to the investment of the Account.
(b) Limitation on Authority. Except as expressly authorized
herein or hereafter from time to time, Adviser shall for all purposes be deemed
an independent contractor and shall have no authority to act for or to represent
the Client or the Funds in any way or otherwise to be an agent of the Client or
the Funds.
(c) Voting. Unless otherwise instructed by Client, Adviser
shall have discretion to take any action or render any advice with respect to
the voting of shares or the execution of proxies solicited from time to time by
or with respect to, the issuers of securities held in the Account. Adviser will
report annually to Client regarding such voting.
(d) Key Personnel. Adviser agrees that the following key
personnel have primary responsibility with respect to the investment management
of the Account. If the(se) individual(s) is unable to devote sufficient time to
maintain primary responsibility of the Account, the Adviser must give Client
written advance notice, or prompt notice within three (3) business days, of the
name of the person designated by the Adviser to replace or supplement the
individual(s). In addition, the Adviser will give Client prompt written notice
of the replacement of any employee of the Adviser who has direct supervisory
responsibility for the key personnel or who has responsibility for setting
investment policy.
Key Personnel: Edward S. Babbitt, Jr.
Ted Theodore
Charles M. White
3. ACCEPTANCE OF APPOINTMENT
Adviser accepts the appointment as an investment adviser and
agrees to use its best efforts and professional judgment to make timely
investment transactions for the Client with respect to the investments of the
Account, and to provide the other services required of the Adviser under the
provisions of this Agreement.
4. INVESTMENT POLICIES
(a) Investment Objectives. The Adviser will adhere to the
investment objectives, guidelines, restrictions, and liquidity requirements of
the Funds as specified by the Client on SCHEDULE A hereto, and as restated or
modified from time to time by the Client in written notice to the Adviser.
2
<PAGE> 3
(b) Funds' Agreement and Declaration of Trust. The Adviser
will adhere to all specific provisions established in the Funds' Agreement and
Declaration of Trust and Registration Statement as filed with the Securities
and Exchange Commission on Form N-1A ("Registration Statement), both of which
are hereby incorporated by reference and made a part of this Agreement. The
Client shall give written notice to the Adviser of any amendments to the
Agreement and Declaration of Trust or Registration Statement, which amendments,
upon their receipt by the Adviser, shall be binding on the Adviser.
(c) Investment Adviser Guidelines. The Adviser shall act in
accordance with the specific statement of Investment Adviser Guidelines,
SCHEDULE B, as restated or modified from time to time by the Client in written
notice to the Adviser. The Client retains the right, on written notice to the
Adviser, to modify any such objectives, guidelines, restrictions, and liquidity
requirements in any manner at any time.
(d) Conflict in Policies. If a conflict in policies or
guidelines referenced herein occurs, the Registration Statement shall govern
for purposes of this Agreement.
5. CUSTODY, DELIVERY, RECEIPT OF SECURITIES
(a) Custody Responsibilities. The Client shall designate one
or more custodians to hold the Account. The Custodian, as designated by the
Client will be responsible for the custody, receipt and delivery of securities
and other assets of the Funds (including the Account), and the Adviser shall
have no authority, responsibility or obligation with respect to the custody,
receipt or delivery of securities or other assets of the Funds (including the
Account). In the event that any cash or securities of the Funds are delivered
to the Adviser, it will promptly deliver the same over to the Custodian, in the
name of the Funds.
(b) Securities Transactions. All securities transactions for
the Account will be consummated by payment to or delivery by the Funds of cash
or securities due to or from the Account. The Adviser will notify the Custodian
of all orders to brokers for the Account by 9:00 am EST on the day following
the trade date and will affirm the trade within one (1) business day after the
trade date (T+1).
(c) Tri-Party Agreement. The Adviser is authorized to enter
into Tri-Party Repurchase Agreements and sign the standard PSA tri-party
agreement (the "Tri-Party Agreement") on behalf of the Client and the
subcustodian thereunder is authorized to act as a subcustodian for the
Account's assets involved in any tri-party repurchase agreement pursuant to
such Tri-Party Agreement.
6. RECORD KEEPING AND REPORTING
3
<PAGE> 4
(a) Records. Adviser will maintain proper and complete
records relating to the furnishing of services under this Agreement, including
records with respect to the acquisition, holding and disposition of securities
for Client. All records maintained pursuant to this Agreement shall be subject
to examination by Client and by persons authorized by it at all times upon
reasonable notice. Except as expressly authorized in this Agreement or as
required by applicable law, regulation or order of court or as directed by
other party in writing, Adviser and Client shall keep confidential the records
and other information obtained by reason of this Agreement (including, with
respect to Client, the investment information and transactions executed by
Adviser). Upon termination of this Agreement, Adviser shall promptly, upon
demand, return to Client all records Client reasonably believes are necessary
in order to discharge its responsibilities to the Funds. Adviser shall be
entitled to retain originals or copies of records pursuant to the requirements
of applicable laws or regulations.
(b) Quarterly Valuation Reports. Adviser shall use best
efforts to provide to the Client within TEN (10) business days after the end of
each calendar quarter a statement of the fair market value of the Account as of
the close of such quarter together with an itemized list of the assets in the
Account.
(c) Valuation Methodology. For purposes of this Agreement,
fair market value shall mean, as of a particular date, the value of the
Account, plus income accrued thereon less the liabilities related to the assets
in the Account. Adviser shall reconcile security and cash positions , and
market values, and report discrepancies to the Client.
(d) Loss Reimbursement. Adviser shall reimburse the Account
for any loss caused by Adviser's actions that cause delay in the accurate daily
pricing of the Fund(s), it being understood that Adviser shall not be
responsible for such daily pricing.
(e) Monthly Reports. Adviser shall provide the Client an
itemized report as to the securities in the account, the fair market value
thereof and the accrued income thereon within FOUR (4) business days after the
end of each Calendar Month. The Adviser shall also use best efforts to provide,
in writing, preliminary performance numbers and a brief explanation of these
results within FIVE (5) business days after the end of each Calendar Month. The
requested format will be as mutually agreed by Adviser and Client. For purposes
of this Agreement, fair market value shall mean, as of a particular date, the
value of the Account plus income accrued thereon less the liabilities related
to the assets in the Account.
(f) Reports on Request. Adviser shall provide to Client
promptly upon request any information available in the records maintained by
Adviser relating to the Account.
7. PURCHASE AND SALE OF SECURITIES
4
<PAGE> 5
(a) Selection of Brokers. Except to the extent otherwise
instructed by Client, (it being understood that Client may, in its absolute
discretion, direct portfolio transactions for which Adviser is responsible to
any broker that Client may see fit), Adviser shall place all orders for the
purchase and sale of securities on behalf of the Client with brokers or dealers
selected by Adviser, but not with a person affiliated with Adviser, as the term
"affiliated person" is defined in the Investment Company Act of 1940 (hereafter
an "Affiliate").
(b) Best Execution. In placing such orders, the
Adviser will give primary consideration to obtaining the most favorable price
and efficient execution. In evaluating the terms available for executing
particular transactions for Client and in selecting brokers and dealers to
execute such transactions, the Adviser may consider, in addition to commission
cost and execution capabilities, the financial stability and reputation of
brokers and dealers and the brokerage and research services (as those terms are
defined in Section 28(e) of the Securities Exchange Act of 1934, as amended)
provided by brokers and dealers. Adviser is authorized to pay a broker or
dealer who provides such brokerage and research services a commission for
executing a transaction which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if Adviser
determines that such commission is reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer in
discharging responsibilities with respect to the Account.
(c) Bunching Orders. Client agrees that Adviser may aggregate
sales and purchase orders of Account with similar orders being made
simultaneously for other accounts managed by Adviser, if in Adviser's
reasonable judgment such aggregation shall result in an overall economic
benefit to the Account taking into consideration the advantageous selling or
purchase price, brokerage commission and other expenses. Client acknowledges
that the determination of such economic benefit to Client by Adviser represents
Adviser's evaluation that client is benefited by relatively better purchase or
sales prices, lower commission expenses and beneficial timing of transactions
or a combination of these and other factors.
5
<PAGE> 6
8. INVESTMENT FEES
(a) Fee Schedule. The compensation of the Adviser for its
services under this Agreement shall be calculated and paid by the Client from
the assets of the Account in accordance with SCHEDULE C hereto. The Adviser
shall send a written invoice to the Client within 30 days of the quarter end and
shall be duly compensated from the assets of the Account.
(b) Fee Computation. The Adviser's fee shall be
calculated as set forth in SCHEDULE C.
(c) Fee Amendment. Fee rates may be changed from time to time
by agreement between the Client and the Adviser; provided, however, that no
increase in such rates shall be made during the first calendar year of this
Agreement.
(d) Pro Rata Fee. If the Adviser should serve for less than
the whole of any calendar quarter, its compensation shall be determined as
provided above on the basis of the ending market value of the Account in the
month in which the termination occurs and shall be payable on a pro rata basis
for the period of the calendar quarter for which it has served as Adviser
hereunder.
9. BEST EFFORTS; NON-EXCLUSIVITY OF SERVICES
The Adviser shall devote its best efforts and such time as it
deems necessary to provide prompt and expert service to the Client. The
services of Adviser to be provided to Client hereunder are not to be deemed
exclusive and Adviser shall be free to provide similar services for its own
account and the accounts of other persons and to receive compensation for such
services. Client acknowledges that Adviser and its members, Affiliates and
employees, and Adviser's other clients may at any time, have, acquire,
increase, decrease, or dispose of positions in the same investments which are
at the same time being held, acquired for or disposed of under this Agreement
for the Client. Adviser shall have no obligation to acquire or dispose of a
position in any investment pursuant to this Agreement simply because Adviser,
its directors, members, Affiliates or employees invest in such a position for
its or their own accounts or for the account of another client.
10. INSIDER TRADING POLICIES AND CODE OF ETHICS
Adviser hereby represents that it has adopted policies that
meet the requirements of Rule 17j-1 under the Investment Company Act of 1940.
Copies of such policies shall be delivered to the Client, and any violation of
such policies by personnel of the Adviser shall be reported to the Client.
11. INSURANCE
6
<PAGE> 7
At all times during the term of this Agreement, Adviser shall
maintain, at its own cost and expense, professional liability insurance for
errors, omissions, and negligent acts, in an amount and with such terms as are
standard in the financial services industry for an investment adviser managing
the amount of aggregate assets managed by Adviser for Client and for the
Adviser's other clients.
12. LIABILITY
Adviser shall not be liable to Client for honest mistakes of
judgment or for action or inaction taken in good faith for a purpose that the
Adviser reasonably believes to be in the best interests of the Client. Adviser
shall be liable to Client for any liability, damages or expenses of Client
arising out of the negligence, malfeasance or violation of applicable law by
Adviser or any of its officers, employees or Affiliates in providing management
under this Agreement. However, neither this provision nor any other provision
of this Agreement shall constitute a waiver or limitation of any rights which
Client may have under federal or state securities laws.
13. TERM
This Agreement shall be in effect for an initial term of two
years beginning on the Effective Date. This Agreement may be renewed thereafter
for successive one-year periods if such renewal is approved annually by the
majority of those members of the Funds' Board of Directors who are not
"interested persons" as that term is defined in the Investment Company Act of
1940.
14. TERMINATION
This Agreement may be terminated by either party hereto,
without the payment of any penalty, immediately upon notice to the other in the
event of a breach of any provision thereof by the party so notified, or
otherwise by Adviser upon sixty (60) days' written notice to the Client or by
Client upon 30 days' written notice to Adviser, except that this Agreement
shall automatically terminate in the event of its assignment, as provided in
Paragraph 19, at the discretion of the Client in the event of Adviser's
ownership change as provided in Paragraph 19, or upon the termination of the
Funds. Any termination in accordance with the terms of this Agreement shall not
cause the payment of any penalty. Any such termination shall not affect the
status, obligations or liabilities of any party hereto to the other.
7
<PAGE> 8
15. REPRESENTATIONS
(a) Adviser hereby confirms to Client that Adviser is
registered as an investment adviser under the Investment Advisers Act of 1940,
that it has full power and authority to enter into and perform fully the terms
of this Agreement and that the execution of this Agreement on behalf of Adviser
has been duly authorized and, upon execution and delivery, this Agreement will
be binding upon Adviser in accordance with its terms.
(b) Client hereby confirms to Adviser that it has full power
and authority to enter into this Agreement and that the execution of this
Agreement on behalf of Client has been fully authorized and, upon execution and
delivery, this Agreement will be binding upon Client in accordance with its
terms.
16. RECIPROCAL INDEMNIFICATION
Client and Adviser each agree to indemnify and hold harmless
the other and each of its officers, directors and employees against any and all
losses, claims, damages, liabilities, or litigation (including reasonable
attorney fees and other expenses) to which the indemnified party becomes
subject, insofar as such matters arise out of, or are based upon, any material
breach of this Agreement by the indemnifying party.
17. NOTICES
Notices or other notifications given or sent under or
pursuant to this Agreement shall be in writing and be deemed to have been given
or sent if delivered to the party at its address listed below in person or by
telex or telecopy receipt of which is confirmed or by mail or by registered
mail, return receipt requested. The addresses of the parties are:
CLIENT:
Vantagepoint Investment Advisers, LLC
Attention: Legal Department
c/o ICMA Retirement Corporation
777 North Capitol Street, NE, Ste. 600
Washington, D.C. 20002-4240
ADVISER:
AVATAR Associates
Attention: Charles M. White
900 Third Avenue
New York, New York 10022
8
<PAGE> 9
Each party may change its address by giving notice as herein
required.
18. SOLE INSTRUMENT
This instrument constitutes the sole and only agreement of
the parties to it relating to its object and correctly sets forth the rights,
duties, and obligations of each party to the other as of its date. Any prior
agreements, promises, negotiations or representations not expressly set forth
in this Agreement are of no force or effect.
19. WAIVER OR MODIFICATION
No waiver or modification of this Agreement shall be
effective unless reduced to a written document signed by the party to be
charged. No failure to exercise and no delay in exercising, on the part of any
party hereto, of any right, remedy, power or privilege hereunder, shall operate
as a waiver thereof. Only the Chief Executive Officer, has authority on behalf
of Client to modify or waive any of the provisions of the Agreement.
20. ASSIGNMENT AND OWNERSHIP CHANGE
This Agreement shall automatically terminate in the event of
its assignment. Adviser agrees to provide immediate written notice in the event
of an ownership change. Such an ownership change will entitle, but not require,
the Client to terminate the Agreement immediately or upon notice.
21. COUNTERPARTS
This Agreement may be executed in counterparts each of which
shall be deemed to be an original and all of which, taken together, shall be
deemed to constitute one and the same instrument.
22. CHOICE OF LAW
This Agreement shall be governed by, and the rights of the
parties arising hereunder construed in accordance with, the laws of the State
of Delaware without reference to principles of conflict of laws.
23. YEAR 2000 WARRANTY
Adviser warrants that it has taken all reasonable actions to
ensure that all software or other information technology product used by
Adviser or by Adviser's vendors, subcontractors, or agents, that is to be used
in the performance of Adviser's obligations under this Agreement, is designed
to be used prior to, during, and after the calendar year 2000 A.D., including
without limitation making reasonable inquiries of its
9
<PAGE> 10
vendors and suppliers in order to ensure that said software or other
information technology product will operate during such time period without
error relating to date data, specifically including any error relating to, or
the product of, date data which represents or references different centuries or
more than one century.
IN WITNESS WHEREOF, THE PARTIES HERETO EXECUTE THIS AGREEMENT ON
March 1, 1999, and make it effective on the date set forth.
CLIENT ADVISER
Vantagepoint AVATAR Investors Associates Corp.
Investment Advisers, LLC.
by: by:
/s/ GIRARD MILLER
- --------------------------- --------------------------------
(signature) (signature)
President
- --------------------------- --------------------------------
(name, title) (name, title)
Date: Date:
10
<PAGE> 11
ADDENDUM DATED March 1, 1999 TO THE
INVESTMENT ADVISORY AGREEMENT DATED _____________
This addendum modifies and forms a part of the Investment Advisory Agreement
(the "Agreement") dated March 1 1999, between Vantagepoint Investment
Advisers, LLC, a Delaware corporation ("Client"), and Avatar Investor
Associates Corp. ("Adviser"), relating to the Vantagepoint Funds ("VF").
All terms used in this Addendum have the same meaning given to them in the
Agreement unless specifically noted otherwise.
1. The assets of the Account to be managed by the Adviser under the Agreement
and this Addendum are assets of the Asset Allocation Fund (the "Fund") a
portfolio of VF. For purposes of Section 8 (Fees) and Schedule C, all payments
due to Adviser shall be solely made from the assets of the Fund.
2. All references in the Agreement and this Addendum to the Investment Policies
to be followed by Adviser in managing the assets of the Fund are hereby deemed
to include the Investment Policies set forth in the Agreement and any Schedules
to the Agreement, as well as the Fund's current prospectus and statement of
additional information as on file with the Securities and Exchange Commission.
3. The activities of the Client and the Adviser in managing the assets of the
Fund pursuant to the Agreement and this Addendum shall in all instances be
conducted subject to the supervision and direction of the Board of Directors of
VF.
4. For purposes of Sections 8 (Fees), 12 (Liability), 13 (Term), 14
(Termination), 15 (Representation), 17 (Notices), 19 (Waiver or Modification),
20 (Assignment and Ownership Change), and 23 (Year 2000 Warranty) of the
Agreement, as well as for purposes of Schedule C of the Agreement, VF is hereby
made a party to the Agreement and shall be entitled to all notices, protections
and rights set forth in those Sections and in Schedule C to which Client is
entitled.
5. For purposes of the Agreement and this Addendum, Client and Adviser hereby
agree to maintain all books and records relating to VF that are required to be
maintained in accordance with good practice, applicable federal and state
securities laws, including the Investment Company Act of 1940 and or the
Investment Advisers Act of 1940, and such reasonable instructions as shall be
provided to Adviser by Client from time to time.
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<PAGE> 12
6. Adviser shall furnish Client and the Board of Directors of VF such periodic
and special reports and information as either of them may request, including
such information as shall be reasonably necessary to evaluate the terms of any
advisory agreement between Client and Adviser with respect to assets of VF.
7. For purposes of the Agreement and this Addendum, the value of the assets of
the Fund managed by Adviser shall be calculated in accordance with the
procedures for determining net asset value per share ("NAV") set forth in the
Fund's prospectus and statement of additional information.
8. Section 6 is hereby amended as follows:
a. 6(a) is amended beginning on line 8 and ending on line 9 by deleting
the parentheses and all language with in the parentheses;
b. 6(b) is deleted in its entirety;
c. 6(c) is redesignated 6(b) Reconciliations, the first sentence is
deleted;
d. 6(d) is changed to 6(c); and
e. 6(e) is deleted and 6(f) is changed to 6(d).
9. Section 8, Investment Fees, is amended by deleting 8(b) and 8(c) in their
entirety and by redesignating 8(d) as 8(b).
10.Section 15, Representations, is amended by the insertion of 15(c) below:
"(c) Adviser hereby acknowledges that VF is registered as an open end
investment company under the Investment Company Act of 1940 and is
subject to taxation as a regulated investment company under the
Internal Revenue Code; Adviser hereby represents that it is familiar
with the requirements of such laws and the rules and regulations
thereunder as they apply to VF and has systems and procedures in place
reasonably designed to permit Adviser, Client, and VF to comply with
such requirement."
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<PAGE> 13
SCHEDULE A
THE VANTAGEPOINT FUNDS
ASSET ALLOCATION FUND
STATEMENT OF INVESTMENT POLICIES
These Investment Policies and Guidelines have been adopted by the Vantagepoint
Funds (the "Funds") to govern the management and administration of the Asset
Allocation Fund by Vantagepoint Investment Advisers, LLC ("VIA"). They may be
reviewed and revised at the discretion of the Directors of the Vantagepoint
Funds (the "Directors"). VIA is responsible for the monitoring and appointment
of subadvisers to handle the day-to-day investment of assets assigned to them.
I. GENERAL DESCRIPTION AND GOALS
The Asset Allocation Fund seeks to maximize total return relative to
risk by varying the portfolio's exposure to common stocks, bonds and
money market instruments.
II. STRUCTURE
The assets of the Asset Allocation Fund shall be managed by two or more
subadvisers. The subadvisers may be retained to manage separate
accounts under discretionary investment advisory contracts. Each
subadviser will be selected for its individual investment management
expertise and each will operate independently of the others. Each
subadviser must either be registered with the Securities and Exchange
Commission (SEC) under the Investment Advisers Act of 1940 or a Bank,
Insurance Company or Trust Company exempt as such from registration.
Each subadviser shall exercise complete management discretion over
assets of the Fund allocated to its account in a manner consistent with
these Investment Policies and Guidelines and with such further
investment limitations and conditions as may be recommended by VIA and
approved by the Directors. Subadvisers will be obligated to manage Fund
assets as if they were subject to the fiduciary duty of care that
applies under the Employee Retirement Income Security Act of 1974
(ERISA) governing pension and profit sharing assets.
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<PAGE> 14
III. INVESTMENT STRATEGY
VIA will integrate the activities of the Fund's subadvisers to create a
framework in which overall Fund exposure to stocks, bonds, and cash
will be varied in response to changes in criteria including:
- Long-term expected returns
- Historical valuation levels
- Monetary, economic, and other indicators that can be quantified
and measured over long periods of time.
Subadvisers seek to add value by taking advantage of the changes in
relative value and risk among asset classes. Allocation among asset
classes may change dramatically over time. Allocation among asset
classes are often implemented by using futures contracts. Portfolio
management of assets representing each asset class may be active or
passive.
IV. PERFORMANCE BENCHMARKS
Performance benchmarks will be established for the Fund. These
benchmarks will be recommended by VIA and adopted by the Directors and
will be reviewed and revised as appropriate from time to time. The
current performance benchmarks for the Fund are appended to this
document as Exhibit I.
V. DIRECTOR REVIEW
VIA will report periodically to the Directors on performance of the
Fund against benchmarks and on subadviser results and will evaluate for
the Directors the overall performance of the Fund relative to its
objectives. The Directors will consider such reports and other relevant
factors in appraising the investment objectives and performance of the
Fund.
15
<PAGE> 15
INVESTMENT GUIDELINES
I. ELIGIBLE INVESTMENTS
A. EQUITY SECURITIES: U.S. common stock, preferred stock, common
stock equivalents (units of beneficial interest), American
Depository Receipts, convertible preferred stocks, warrants,
and other rights.
B. CASH/CASH EQUIVALENTS: Money market instruments.
C. FIXED INCOME: U.S. Treasury notes and bonds.
D. FINANCIAL FUTURES: S&P 500 Index futures contracts and U.S.
Treasury note and bond futures contracts.
E ELIGIBLE PRACTICES: There are no restrictions on subadvisers
as to the following:
- Portfolio turnover.
- Realized gains and losses.
F. ELIGIBLE INVESTMENT LIMITS
<TABLE>
<CAPTION>
MINIMUM NORMAL MAXIMUM
------- ------ -------
RANGE
------
<S> <C> <C> <C>
Equity securities 0% 45-80% 100%
Cash and cash equivalents 0% 5-40% 100%
Fixed income 0% 15-30% 50%
</TABLE>
II. PROHIBITED PRACTICES AND SECURITIES
A. Short sales; however, the use of S&P 500 Index futures contracts
and U.S. Treasury note and bond futures contracts to offset
existing exposures is permitted.
B. Options.
C. Commodities except for financial futures. Financial futures may
be used to vary asset class exposure but may not be used to obtain
market leverage or for any other purpose.
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<PAGE> 16
D. Securities for which there is no established trading market.
E. Foreign securities unless listed and traded in the U.S.
F. Margin purchases and other forms of borrowing; granting of pledges
or other security interests in assets of the Fund,
G. Securities issued by the subadvisers of the Fund or their
affiliates (except as provided in Section 2(a) of the Investment
Advisory Agreement).
H. General partner interests.
I. Direct investments in oil, gas, or other mineral exploration or
development programs.
J. Direct investments in real estate or interests in real estate;
this does not preclude investment in purchases of securities
of real estate investment trusts and other companies holding
real estate or interests in real estate.
K. Commingled funds; this does not preclude investment in mutual
funds up to 10% of the Fund's market value at the time of purchase.
L. Acquisition of securities that would cause exposure to non-equity
holdings to exceed 35% of the Fund's market value at the time of
purchase.
M. Acquisition of securities that would cause exposure to a single
industry to exceed 25% of the Fund's market value at the time of
purchase.
N. In the absence of prior consent of VIA, acquisition of securities
of an issuer that would cause more than 5% of the Fund to be
invested in such securities.
O. In the absence of prior consent of VIA, acquisition of more than
5% of the outstanding shares of any class of equity securities.
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in Section I or Section II
of these Investment Guidelines may be acquired or employed, as the case
may be, but only if explicitly approved in advance by VIA.
IV. SECURITIES LENDING
17
<PAGE> 17
Nothing herein shall prevent loans of securities in the Asset
Allocation Fund pursuant to an established securities lending program
conducted by the Fund's custodian.
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<PAGE> 18
EXHIBIT I
TO THE
STATEMENT OF INVESTMENT POLICIES AND GUIDELINES OF
THE ASSET ALLOCATION FUND
MARCH 1, 1999
The following standards will be used to measure the performance of the Asset
Allocation Fund:
A. BENCHMARKS
1. The performance benchmark for the Fund is a composite index
consisting of a 65% allocation to the STANDARD & POOR'S 500
INDEX, a 25% allocation to the LEHMAN LONG-TERM TREASURY INDEX
and a 10% allocation to the 91-DAY TREASURY BILL. This
benchmark will be used to measure the Fund's performance net
of subadviser fees.
2. A peer group benchmark for the Asset Allocation Fund will
consist of mutual funds with characteristics similar to those
of the Asset Allocation Fund. The peer group will be used to
measure the Fund's performance relative to other funds with a
similar investment approach. The peer group benchmark will
measure Fund performance net of all fees and expenses except
for the plan administration fee.
3. The Lipper Flexible Portfolio Index, selected by Lipper
Analytical Services, will serve as the performance benchmark
for participant returns, net of all fees and expenses. In
assessing performance against this benchmark, it will be taken
into consideration that Lipper Analytical Services may change
the composition of the Index.
B. TIME HORIZON
The time horizon for performance measurement will be one, three, and
five years.
One Year:
Performance relative to any benchmark established for the Fund will
vary over one-year periods; such variance over short time periods is
expected and acceptable. However, if such variance is determined to be
caused by systemic issues, action may be appropriate.
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<PAGE> 19
Three and Five Years:
Performance of the Fund should track market and universe benchmarks
more closely as the evaluation period lengthens. The ideal performance
objective for the Asset Allocation Fund is to exceed the returns of all
relevant benchmarks; however, shortfalls over various time periods
should be expected in some cases. Under-performance against a single
benchmark over an extended period may be acceptable, particularly if
other benchmarks have been exceeded.
C. INVESTMENT CHARACTERISTICS
The investment characteristics of the Asset Allocation Fund will depend
upon subadviser asset allocation, which is intended to maximize
risk-adjusted returns.
20
<PAGE> 20
SCHEDULE B
VANTAGEPOINT INVESTMENT ADVISERS, LLC
ASSET ALLOCATION FUND
INVESTMENT GUIDELINES
FOR
AVATAR ASSOCIATES
MARCH 1, 1999
Avatar Associates seeks to maximize risk-adjusted total return by shifting
assets between stocks and cash. Its strategy is based on a disciplined
quantitative framework incorporating economic, monetary, and market momentum
factors. At any given time, all or none of the assets may be allocated to either
stocks or cash, though shifts more typically occur in varied increments and may
occur frequently.
I. ELIGIBLE INVESTMENTS
A. EQUITY SECURITIES: Units of a portfolio designated by VIA that
fully replicates the S&P 500 Index.
B. CASH/CASH EQUIVALENTS: U.S. Treasury obligations with maturity
less than one year; money market portfolio designated by VIA; short
term accounts or securities managed by the custodian institution.
C. FINANCIAL FUTURES: Standard & Poor's 500 Index futures.
D. ELIGIBLE INVESTMENT LIMITS:
<TABLE>
<CAPTION>
MINIMUM NORMAL MAXIMUM
------- ------ -------
RANGE
-----
<S> <C> <C> <C>
Equity securities 0% 50-90% 100%
Cash and cash equivalents 0% 10-50% 100%
Fixed income 0% 0% 0%
</TABLE>
21
<PAGE> 21
II. PROHIBITED PRACTICES AND SECURITIES
A. Short sales; however, the use of S&P 500 Index futures contracts to
offset existing exposures is permitted.
B. Options.
C. Commodities except financial futures. Financial futures will be
used to vary asset class exposure but may not be used to obtain
market leverage or for any other purpose.
D. Securities for which there is no established trading market.
E. Foreign securities unless listed and traded in the U.S.
F. Margin purchases and other forms of borrowing; granting of pledges
or other security interests in assets of the portfolio; use of
futures to obtain market leverage.
G. Securities offered by the Adviser or its affiliates.
H. General partner interests.
I. Direct investments in oil, gas, or other mineral exploration or
development programs.
J. Direct investments in real estate or interests in real estate;
this does not preclude investment in purchases of securities
of real estate investment trusts and other companies holding
real estate or interests in real estate.
K. Acquisition of securities of an issuer that would cause more than
5% of the portfolio to be invested in such securities.
L. Acquisition of more than 5% of the outstanding shares of any class
of equity securities.
M. Acquisition of securities that would cause exposure to a single
industry to exceed 25% of the portfolio at the time of purchase.
N. Commingled and registered mutual funds.
Exceptions to the above listed eligible investments and
prohibited securities or practices may be permitted with prior consent from VIA.
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<PAGE> 22
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in Section I or Section II
of these Investment Guidelines may be acquired or employed, as the case
may be, but only if explicitly approved in advance by VIA.
IV. PERFORMANCE BENCHMARK AND MONITORING CRITERIA
The standards outlined in this section are subject to review by VIA as
and when appropriate.
A. PERFORMANCE BENCHMARKS
The market benchmark for measuring investment performance over
a market cycle for the Adviser is a blended stock/cash
benchmark represented by a 60% allocation to the STANDARD &
POOR'S 500 INDEX and a 40% allocation to the 91-DAY T-BILL
RATE. This benchmark will measure the Adviser's performance
net of Adviser fees.
B. PEER GROUPS
VIA will develop an appropriate peer group against which to
compare investment performance. The peer group will consist of
other managers with a similar investment approach. The
managers within the peer group will be reviewed periodically
for consistency of style and may be changed as and when deemed
appropriate by VIA. Such changes will be communicated to the
Adviser.
1. The peer group will consist primarily of mutual funds;
however, separate account managers may be included.
2. VIA will track relative net-of-fee performance quarterly
and evaluate performance on a trailing one-, three-, and
five-year basis.
3. VIA will compare the Adviser's net performance with the
one-year mean return of the peer group.
The current peer group consists of the following two managers:
Stagecoach Asset Allocation A
Zweig Managed Assets C
23
<PAGE> 23
SCHEDULE C
VANTAGEPOINT INVESTMENT ADVISERS, LLC
FEE SCHEDULE
FOR
AVATAR ASSOCIATES
The Advisor's quarterly fee shall be calculated based on the average daily
market value of the assets under management as provided by the Custodian, based
on the following annual rate.
$250 million 0.25 percent
Next $250 million 0.20 percent
Over $500 million 0.18 percent
EXAMPLE OF FEE CALCULATION (HYPOTHETICAL AMOUNTS)
<TABLE>
<S> <C> <C>
January 1, 1999 $190,000,000 End-of-Day Market Value
January 2, 1999 $190,678,462 End-of-Day Market Value
January 3, 1999 $190,796,123 End-of-Day Market Value
. . .
March 29, 1999 $194,512,214 End-of-Day Market Value
March 30, 1999 $194,720,978 End-of-Day Market Value
March 31, 1999 $194,901,556 End-of-Day Market Value
Quarterly Daily Average $192,601,555
$100 million 0.50 percent $500,000
Next $100 million 0.45 percent $416,707
Over $200 million 0.40 percent --------
Annual Fee $916,707
One-Fourth Annual Fee $229,177
</TABLE>
24
<PAGE> 1
EXHIBIT(d)(21)
INVESTMENT ADVISORY AGREEMENT
This Investment Advisory Agreement is made as of the __________ day of
_______________, 1999, by and between VANTAGEPOINT INVESTMENT ADVISERS, LLC,
a Delaware limited liability company (hereafter "Client"), and MELLON CAPITAL
MANAGEMENT CORPORATION at 595 Market Street, Suite 3000, San Francisco,
California 94105 (hereafter "Adviser") and is effective as of March 1
,1999, (the "Effective Date").
WHEREAS, the Vantagepoint Funds (the "Funds") is a Delaware Business
Trust registered as an open-end management investment company under the
Investment Company Act of 1940;
WHEREAS, Client is party to an Investment Adviser Agreement with the
Funds for management of the investment operations of the Funds including the
establishment and operation of investment portfolios for the Funds and the
entering into of contracts with sub-advisers to assist in managing the
investment of the Funds property;
WHEREAS, Client and Adviser wish to enter into an agreement pursuant to
which Adviser will provide such assistance to Client.
AGREEMENTS:
In consideration of the performance by the Adviser as Investment Adviser
of certain assets held by the Funds, the Client has authorized the Adviser to
manage the securities and other assets as follows:
1. ACCOUNT
The account with respect to which the Adviser shall perform its services
shall consist of those assets of the Funds which the Client determines to assign
to an account with the Adviser, together with all income earned by those assets
and all realized and unrealized capital appreciation related to those assets
(hereafter "Account"). From time to time, the Client may, upon reasonable notice
to the Adviser, make additions to the Account and may, upon notice to the
Adviser, make withdrawals from the Account.
2. APPOINTMENT STATUS, POWERS OF ADVISER
(a) Purchase and Sale. Client hereby appoints Adviser to manage the
Account on the terms and conditions set forth in this Agreement. Subject to the
restrictions set forth in this Agreement, and acting always in conformity with
the Investment Policies provided in Paragraph 4, Adviser shall supervise and
direct investment of the Account. Client hereby grants the Adviser complete,
unlimited and unrestricted discretion
<PAGE> 2
and authority to select portfolio securities with respect to the Account
including the power to acquire (by purchase, exchange, subscription or
otherwise), to hold and dispose (by sale, exchange or otherwise). To the extent
consistent with the Investment Policies described in Paragraph 4, Adviser may
purchase, hold and sell Mellon Bank Corporation stock which is a part of the S&P
500 Index and is the stock of an affiliate of Adviser. The Adviser will consult
with Client, upon the request of the Client, concerning any transactions it
makes with respect to the investment of the Account.
(b) Purchase and Sale of Commodity Futures Contracts. Client hereby
grants Adviser complete and unlimited discretion and authority with respect to
the Account to purchase, sell, trade or otherwise enter into transactions
involving S&P 500 Index futures contracts and U.S. Treasury bond futures
contracts. Client hereby represents and warrants that the account may invest in
futures contracts and consents to Adviser's use of the alternate disclosure and
recordkeeping standards under Commodity Futures Trading Commission Rule 4.7 with
respect to such futures trading, which alternate standards are available to
Adviser on account of the Fund's status as an investment company registered
under the Investment Company Act of 1940 with securities holdings of at least
$2,000,000.
(c) Limitation on Authority. Except as expressly authorized herein or
hereafter from time to time, Adviser shall for all purposes be deemed an
independent contractor and shall have no authority to act for or to represent
the Client or the Funds in any way or otherwise to be an agent of the Client or
the Funds.
(d) Voting. Unless otherwise instructed by Client, Adviser shall have
discretion to take any action or render any advice with respect to the voting of
shares or the execution of proxies solicited from time to time by, or with
respect to, the issuers of securities held in the Account. Adviser will report
annually to Client regarding such voting.
(e) Key Personnel. Adviser agrees that the following key personnel have
primary responsibility with respect to the investment management of the Account.
If the(se) individual(s) is unable to devote sufficient time to maintain primary
responsibility of the Account, the Adviser must give Client written advance
notice, or prompt notice within three (3) business days, of the name of the
person designated by the Adviser to replace or supplement the individual(s). In
addition, the Adviser will give Client prompt written notice of the replacement
of any employee of the Adviser who has direct supervisory responsibility for the
key personnel or who has responsibility for setting investment policy.
Key Personnel: Thomas B. Hazuka, Ph.D
Executive Vice President & Chief Investment Officer
2
<PAGE> 3
3. ACCEPTANCE OF APPOINTMENT
Adviser accepts the appointment as an investment adviser and agrees to
use its best efforts and professional judgment to make timely investment
transactions for the Client with respect to the investments of the Account, and
to provide the other services required of the Adviser under the provisions of
this Agreement.
4. INVESTMENT POLICIES
(a) Investment Objectives. With respect to the Account, the Adviser will
adhere to the investment objectives, guidelines, restrictions, and liquidity
requirements of the Funds as specified by the Client on SCHEDULE A hereto, and
as restated or modified from time to time by the Client in written notice to the
Adviser.
(b) Funds' Agreement and Declaration of Trust. With respect to the
Account, the Adviser will adhere to all specific provisions established in the
Funds' Agreement and Declaration of Trust and Registration Statement as filed
with the Securities and Exchange Commission on Form N-1A ("Registration
Statement), copies of which have been provided to Adviser and both of which are
hereby incorporated by reference and made a part of this Agreement. The Client
shall give written notice to the Adviser of any amendments to the Agreement and
Declaration of Trust or Registration Statement, which amendments, upon their
receipt by the Adviser, shall be binding on the Adviser. However, Adviser shall
only be required to adhere to such specific provisions of the Agreement and
Declaration of Trust and Registration Statement, and any amendments thereto,
that are applicable to Adviser and the Account and solely to the extent that
copies of such specific provisions have been provided and described to Adviser
by Client.
(c) Investment Adviser Guidelines. With respect to the Account, the
Adviser shall use act in accordance with the specific statement of Investment
Adviser Guidelines, SCHEDULE B, as restated or modified from time to time by the
Client and agreed to in writing by the Adviser. The Client retains the right,
upon written notice to the Adviser, to modify any such objectives, guidelines,
restrictions, and liquidity requirements in any manner at any time. If Adviser
does not agree with such modifications, Adviser may terminate this Agreement as
provided in Section 14, and during the sixty (60) day notice period Adviser
shall continue to manage the Account in accordance with the preexisting
guidelines that had been agreed to in writing by Client and Adviser.
(d) Conflict in Policies. If a conflict in policies or guidelines
referenced herein occurs, the Registration Statement shall govern for purposes
of this Agreement.
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<PAGE> 4
5. CUSTODY, DELIVERY, RECEIPT OF SECURITIES
(a) Custody Responsibilities. The Client shall designate one or more
custodians to hold the Account. The Custodian, as designated by the Client will
be responsible for the custody, receipt and delivery of securities and other
assets of the Funds (including the Account), and the Adviser shall have no
authority, responsibility or obligation with respect to the custody, receipt or
delivery of securities or other assets of the Funds (including the Account). In
the event that any cash or securities of the Funds are delivered to the Adviser,
it will promptly deliver the same over to the Custodian, in the name of the
Funds.
(b) Securities Transactions. All securities transactions for the Account
will be consummated by payment to or delivery by the Funds of cash or securities
due to or from the Account. The Adviser will notify the Custodian of all orders
to brokers for the Account by 9:00 am EST on the day following the trade date
and will affirm the trade within one (1) business day after the trade date
(T+1).
(c) Tri-Party Agreement. The Adviser is authorized to enter into
Tri-Party Repurchase Agreements and sign the standard PSA tri-party agreement
(the "Tri-Party Agreement") on behalf of the Client and the subcustodian
thereunder is authorized to act as a subcustodian for the Account's assets
involved in any tri-party repurchase agreement pursuant to such Tri-Party
Agreement.
6. RECORD KEEPING AND REPORTING
(a) Records. Adviser will maintain proper and complete records relating
to the furnishing of services under this Agreement, including records with
respect to the acquisition, holding and disposition of securities for Client.
All records maintained pursuant to this Agreement shall be subject to
examination by Client and by persons authorized by it during normal business
hours and upon reasonable notice. Except as expressly authorized in this
Agreement or as required by applicable law, regulation or order of court or as
directed by other party in writing, Adviser and Client shall keep confidential
the records and other information obtained by reason of this Agreement
(including, with respect to Client, the investment information and transactions
executed by Adviser). Upon termination of this Agreement, Adviser shall
promptly, upon demand, return to Client all records Client reasonably believes
are necessary in order to discharge its responsibilities to the Funds. Adviser
shall be entitled to retain originals or copies of records pursuant to the
requirements of applicable laws or regulations.
(b) Quarterly Valuation Reports. Adviser shall use best efforts to
provide to the Client as soon as practicable after the end of each calendar
quarter a statement of the fair market value of the Account as of the close of
such quarter together with an itemized list of the assets in the Account.
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<PAGE> 5
(c) Valuation Methodology. For purposes of this Agreement, fair market
value shall mean, as of a particular date, the value of the Account (determined
in accordance with generally accepted accounting principles consistently
applied), plus income accrued thereon less the liabilities related to the assets
in the Account. Adviser shall reconcile security and cash positions, and market
values, and report discrepancies to the Client.
(d) Loss Reimbursement. Adviser shall reimburse the Account for any
material loss caused by Adviser's breach of the standard of care set forth in
Section 12 that causes delay in the accurate daily pricing of the Fund, with the
understanding that Adviser is not responsible for the actions of other service
providers to the Fund, including the actions of broker-dealers, nor is Adviser
responsible for the daily pricing of the Funds..
(e) Monthly Reports. Adviser shall us its best efforts to provide the
Client an itemized report as to the securities in the account, the fair market
value thereof and the accrued income thereon as soon as practicable after the
end of each Calendar Month. Upon the request of Client, the Adviser shall also
use best efforts to provide, in writing, preliminary performance numbers and a
brief explanation of these results as soon as practicable after the end of each
Calendar Month. The requested format will be as mutually agreed by Adviser and
Client. For purposes of this Agreement, fair market value shall mean, as of a
particular date, the value of the Account plus income accrued thereon less the
liabilities related to the assets in the Account.
(f) Reports on Request. Adviser shall provide to Client promptly upon
request any information available in the records maintained by Adviser relating
to the Account.
7. PURCHASE AND SALE OF SECURITIES
(a) Selection of Brokers. Except to the extent otherwise instructed by
Client, (it being understood that Client may, in its absolute discretion, direct
portfolio transactions for which Adviser is responsible to any broker that
Client may see fit, provided that such direction is consistent with best
execution described below), Adviser shall place all orders for the purchase and
sale of securities on behalf of the Client with brokers or dealers selected by
Adviser, but not with a person affiliated with Adviser, as the term "affiliated
person" is defined in the Investment Company Act of 1940 (hereafter an
"Affiliate").
(b) Best Execution. In placing such orders, the Adviser will give primary
consideration to seeking to obtain a reasonable combination of favorable price
and efficient execution. In evaluating the terms available for executing
particular transactions for Client and in selecting brokers and dealers to
execute such transactions, the Adviser
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<PAGE> 6
may consider, in addition to commission cost and execution capabilities, the
financial stability and reputation of brokers and dealers and the brokerage and
research services (as those terms are defined in Section 28(e) of the Securities
Exchange Act of 1934, as amended) provided by brokers and dealers. Adviser is
authorized to pay a broker or dealer who provides such brokerage and research
services a commission for executing a transaction which is in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction if Adviser determines that such commission is reasonable in
relation to the value of the brokerage and research services provided by such
broker or dealer in discharging responsibilities with respect to the Account.
(c) Bunching Orders. Client agrees that Adviser may aggregate sales and
purchase orders of Account with similar orders being made simultaneously for
other accounts managed by Adviser, if in Adviser's reasonable judgment such
aggregation shall result in an overall economic benefit to the Account taking
into consideration the advantageous selling or purchase price, brokerage
commission and other expenses. Client acknowledges that the determination of
such economic benefit to Client by Adviser represents Adviser's evaluation that
client is benefited by relatively better purchase or sales prices, lower
commission expenses and beneficial timing of transactions or a combination of
these and other factors.
8. INVESTMENT FEES
(a) Fee Schedule. The compensation of the Adviser for its services under
this Agreement shall be calculated and paid by the Client from the assets of the
Account in accordance with SCHEDULE C hereto. The Adviser shall use its best
efforts to send a written invoice to the Client within 30 days of the quarter
end and shall be duly compensated from the assets of the Account.
(b) Fee Computation. The Adviser's fee for each calendar quarter shall be
calculated as set forth in SCHEDULE C.
(c) Fee Amendment. Fee rates may be changed from time to time by
agreement between the Client and the Adviser; provided, however, that no
increase in such rates shall be made during the first calendar year of this
Agreement.
(d) Pro Rata Fee. If the Adviser should serve for less than the whole of
any calendar quarter, its compensation shall be determined as provided above on
the basis of the ending market value of the Account in the month in which the
termination occurs and shall be payable on a pro rata basis for the period of
the calendar quarter for which it has served as Adviser hereunder.
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<PAGE> 7
9. BEST EFFORTS; NON-EXCLUSIVITY OF SERVICES
The Adviser shall devote its best efforts and such time as it deems
necessary to provide prompt and expert service to the Client. The services of
Adviser to be provided to Client hereunder are not to be deemed exclusive and
Adviser shall be free to provide similar services for its own account and the
accounts of other persons and to receive compensation for such services. Client
acknowledges that Adviser and its members, Affiliates and employees, and
Adviser's other clients may at any time, have, acquire, increase, decrease, or
dispose of positions in the same investments which are at the same time being
held, acquired for or disposed of under this Agreement for the Client. Adviser
shall have no obligation to acquire or dispose of a position in any investment
pursuant to this Agreement simply because Adviser, its directors, members,
Affiliates or employees invest in such a position for its or their own accounts
or for the account of another client.
10. INSIDER TRADING POLICIES AND CODE OF ETHICS
Adviser hereby represents that it has adopted a "Confidential Information
and Securities Trading Policy" and a "Code of Conduct". Copies of such policies
will be delivered to the Client upon Client's request, and any material
violation of such policies by key personnel of the Adviser responsible for the
Account or, with respect to the Account, by Adviser's "access persons", shall be
reported to the Client.
11. INSURANCE
At all times during the term of this Agreement, Adviser shall maintain,
at its own cost and expense, professional liability insurance for errors,
omissions, and negligent acts, in an amount and with such terms as are standard
in the financial services industry for an investment adviser managing the amount
of aggregate assets managed by Adviser for Client and for the Adviser's other
clients.
7
<PAGE> 8
12. LIABILITY
Adviser shall not be liable to Client for honest mistakes of judgment or
for action or inaction taken in good faith for a purpose that the Adviser
reasonably believes to be in the best interests of the Client. Adviser shall be
liable to Client for any liability, damages or expenses of Client arising out of
the negligence, malfeasance or violation of applicable law by Adviser or any of
its officers, employees or Affiliates in providing management under this
Agreement. Adviser may consult with counsel and with accountants in respect of
the Account and the Fund and be fully protected and justified in relying on the
advice or opinion of such counsel or accountants. Adviser shall not be
responsible for any loss incurred by reason of any act or omission of (i)
Client; (ii) any broker-dealer selected by Adviser with reasonable care; or
(iii) any custodian.
Adviser shall not be responsible nor liable for any losses to the Account
or Fund resulting from nationalization, expropriation, devaluation, seizure, or
similar action by any governmental authority, de facto or de jure; or enactment,
promulgation, imposition or enforcement by any such governmental authority of
currency restrictions, exchange controls, levies, or other changes affecting the
securities and other property; or act of war, terrorism, insurrection or
revolution; or acts of God; or any other similar event beyond the control of
Adviser or its agents. This Section shall survive the termination of this
Agreement.
Client agrees that Adviser, as sub-adviser to a portion of the Fund, is
not responsible nor liable for compliance with the policies, prohibitions,
restrictions, requirements and similar matters applicable to the entire Fund,
including, without limitation, the Fund's diversification and concentration
requirements for qualification of the Fund as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended. Client
further agrees that as the party with control over the entire Fund, it is
responsible for the Fund's compliance with such policies, prohibitions,
restrictions, requirements and similar matters applicable to the Fund.
However, neither this provision nor any other provision of this Agreement shall
constitute a waiver or limitation of any rights which Client may have under
federal or state securities laws.
13. TERM
This Agreement shall be in effect for an initial term of two years
beginning on the Effective Date. This Agreement may be renewed thereafter for
successive one-year periods if such renewal is approved annually by the majority
of those members of the Funds' Board of Directors who are not "interested
persons" as that term is defined in the Investment Company Act of 1940.
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<PAGE> 9
14. TERMINATION
This Agreement may be terminated by either party hereto, without the
payment of any penalty, immediately upon notice to the other in the event of a
breach of any provision thereof by the party so notified, or otherwise by
Adviser upon sixty (60) days' written notice to the Client or by Client upon 30
days' written notice to Adviser, except that this Agreement shall automatically
terminate in the event of its assignment, as provided in Paragraph 19, at the
discretion of the Client in the event of Adviser's ownership change as provided
in Paragraph 19, or upon the termination of the Funds. Any termination in
accordance with the terms of this Agreement shall not cause the payment of any
penalty. Any such termination shall not affect the status, obligations or
liabilities of any party hereto to the other.
15. REPRESENTATIONS
(a) Adviser hereby confirms to Client that Adviser is registered as an
investment adviser under the Investment Advisers Act of 1940, that it has full
power and authority to enter into and perform fully the terms of this Agreement
and that the execution of this Agreement on behalf of Adviser has been duly
authorized and, upon execution and delivery, this Agreement will be binding upon
Adviser in accordance with its terms.
(b) Client hereby confirms to Adviser that it has full power and
authority to enter into this Agreement and that the execution of this Agreement
on behalf of Client has been fully authorized and, upon execution and delivery,
this Agreement will be binding upon Client in accordance with its terms.
(c) Client hereby represents and warrants that it has reviewed the
registration requirements of the Commodity Exchange Act, as amended, and the
National Futures Association requirements applicable to commodity pool operators
and commodity trading advisers and has determined that the Fund and the Account
are in compliance with such requirements.
16. NOTICES AND DISCLOSURE STATEMENT
(a) Notices or other notifications given or sent under or pursuant to
this Agreement shall be in writing and be deemed to have been given or sent if
delivered to the party at its address listed below in person or by telex or
telecopy receipt of which is confirmed or by mail or by registered mail, return
receipt requested. The addresses of the parties are:
9
<PAGE> 10
CLIENT:
Vantagepoint Investment Advisers, LLC
Attention: Legal Department
c/o ICMA Retirement Corporation
777 North Capitol Street, NE, Ste. 600
Washington, D.C. 20002-4240
ADVISER:
MELLON CAPITAL MANAGEMENT CORPORATION
595 Market Street, Suite 3000
San Francisco, California 94105
Attn: Client Services Manager
Each party may change its address by giving notice as herein required.
(b) Client acknowledges receipt of Part II of Adviser's Form ADV, as
required by Rule 204-3 under the Investment Advisers Act of 1940.
17. SOLE INSTRUMENT
This instrument constitutes the sole and only agreement of the parties to
it relating to its object and correctly sets forth the rights, duties, and
obligations of each party to the other as of its date. Any prior agreements,
promises, negotiations or representations not expressly set forth in this
Agreement are of no force or effect.
18. WAIVER OR MODIFICATION
No waiver or modification of this Agreement shall be effective unless
reduced to a written document signed by the party to be charged. No failure to
exercise and no delay in exercising, on the part of any party hereto, of any
right, remedy, power or privilege hereunder, shall operate as a waiver thereof.
Only the Chief Executive Officer, has authority on behalf of Client to modify or
waive any of the provisions of the Agreement.
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<PAGE> 11
19. ASSIGNMENT AND OWNERSHIP CHANGE
This Agreement shall automatically terminate in the event of its
assignment. Adviser agrees to provide immediate written notice in the event of
an ownership change. Such an ownership change will entitle, but not require, the
Client to terminate the Agreement immediately or upon notice.
20. COUNTERPARTS
This Agreement may be executed in counterparts each of which shall be
deemed to be an original and all of which, taken together, shall be deemed to
constitute one and the same instrument.
21. CHOICE OF LAW
This Agreement shall be governed by, and the rights of the parties
arising hereunder construed in accordance with, the laws of the State of
Delaware without reference to principles of conflict of laws.
22. YEAR 2000 STATEMENT
Like other financial and business organizations and individuals around
the world, the Adviser's clients could be adversely affected if the computer
systems used by Adviser and its service providers do not properly process and
calculate date-related information and data from and after January 1, 2000. This
is commonly known as the "Year 2000 Problem". Adviser is taking steps to
adequately address the Year 2000 Problem with respect to the computer systems
that it uses and to obtain assurances that comparable steps are being taken by
its major service providers. At this time, however, there can be no absolute
assurance given that these steps will be sufficient to completely avoid any
impact to Adviser's clients from the Year 2000 Problem.
PURSUANT TO AN EXEMPTION FROM THE COMMODITY FUTURES TRADING COMMISSION IN
CONNECTION WITH ACCOUNTS OF QUALIFIED ELIGIBLE CLIENTS, THIS BROCHURE OR ACCOUNT
DOCUMENT IS NOT REQUIRED TO BE, AND HAS NOT BEEN, FILED WITH THE COMMISSION. THE
COMMODITY FUTURES TRADING COMMISSION DOES NOT PASS UPON THE MERITS OF
PARTICIPATING IN A TRADING PROGRAM OR UPON THE ADEQUACY OR ACCURACY OF COMMODITY
TRADING ADVISOR DISCLOSURE. CONSEQUENTLY, THE COMMODITY FUTURES TRADING
COMMISSION HAS NOT REVIEWED OR
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<PAGE> 12
APPROVED THIS TRADING PROGRAM OR THIS BROCHURE OR ACCOUNT DOCUMENT.
IN WITNESS WHEREOF, THE PARTIES HERETO EXECUTE THIS AGREEMENT ON February 25,
1999 and make it effective on the date set forth.
CLIENT ADVISER
Vantagepoint Mellon Capital Management Corporation
Investment Advisers, LLC
by: by:
/s/ GIRARD MILLER /s/ BARBARA DAUGHERTY
- ------------------------ ------------------------
(signature) (signature)
Sr. Vice President & Director of Client
President Services
- ------------------------ ---------------------------------------
(name, title) (name, title)
Date: Date:
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<PAGE> 13
ADDENDUM DATED March 1 TO THE
INVESTMENT ADVISORY AGREEMENT DATED _____________
This addendum modifies and forms a part of the Investment Advisory Agreement
(the "Agreement") dated March 1 1999, between Vantagepoint Investment
Advisers, LLC, a Delaware corporation ("Client"), and Mellon Capital Management
Corporation ("Adviser"), relating to the Vantagepoint Funds ("VF").
All terms used in this Addendum have the same meaning given to them in the
Agreement unless specifically noted otherwise.
1. The assets of the Account to be managed by the Adviser under the Agreement
and this Addendum are assets of the Asset Allocation Fund (the "Fund"), a
portfolio of VF. For purposes of Section 8 (Fees) and Schedule C, all payments
due to Adviser shall be solely made from the assets of the Fund.
2. All references in the Agreement and this Addendum to the Investment Policies
to be followed by Adviser in managing the assets of the Fund are hereby deemed
to include the Investment Policies set forth in the Agreement and any Schedules
to the Agreement, as well as the Fund's current prospectus and statement of
additional information as on file with the Securities and Exchange Commission.
3. The activities of the Client and the Adviser in managing the assets of the
Fund pursuant to the Agreement and this Addendum shall in all instances be
conducted subject to the supervision and direction of the Board of Directors of
VF.
4. For purposes of Sections 8 (Fees), 12 (Liability), 13 (Term), 14
(Termination), 15 (Representation), 16 (Notices and Disclosure Statement), 18
(Waiver or Modification), 19 (Assignment and Ownership Change), and 22 (Year
2000 Statement) of the Agreement, as well as for purposes of Schedule C of the
Agreement, VF is hereby made a party to the Agreement and shall be entitled to
all notices, protections and rights set forth in those Sections and in Schedule
C to which Client is entitled.
5. For purposes of the Agreement and this Addendum, Client and Adviser hereby
agree to maintain all books and records relating to VF that are required to be
maintained in accordance with good practice, applicable federal and state
securities laws, including the Investment Company Act of 1940 and or the
Investment Advisers Act of 1940, and such reasonable instructions as shall be
provided to Adviser by Client from time to time.
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<PAGE> 14
6. Adviser shall furnish Client and the Board of Directors of VF such periodic
and special reports and information as either of them may request, including
such information as shall be reasonably necessary to evaluate the terms of any
advisory agreement between Client and Adviser with respect to assets of VF.
7. For purposes of the Agreement and this Addendum, the value of the assets of
the Fund managed by Adviser shall be calculated in accordance with the
procedures for determining net asset value per share ("NAV") set forth in the
Fund's prospectus and statement of additional information.
8. Section 6 is hereby amended as follows:
a. 6(a) is amended beginning on line 8 and ending on line 9 by deleting the
parentheses and all language with in the parentheses;
b. 6(b) is deleted in its entirety;
c. 6(c) is redesignated 6(b) Reconciliations, the first sentence is deleted;
d. 6(d) is changed to 6(c); and
e. 6(e) is deleted and 6(f) is changed to 6(d).
9. Section 8, Investment Fees, is amended by deleting 8(b) and 8(c) in their
entirety and by redesignating 8(d) as 8(b).
10. Section 15, Representations, is amended by the insertion of 15(c) below:
"(c) Adviser hereby acknowledges that VF is registered as an open end
investment company under the Investment Company Act of 1940 and is
subject to taxation as a regulated investment company under the Internal
Revenue Code; Adviser hereby represents that it is familiar with the
requirements of such laws and the rules and regulations thereunder as
they apply to VF and has systems and procedures in place reasonably
designed to permit Adviser, Client, and VF to comply with such
requirement."
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SCHEDULE A
THE VANTAGEPOINT FUNDS
ASSET ALLOCATION FUND
STATEMENT OF INVESTMENT POLICIES
These Investment Policies and Guidelines have been adopted by the Vantagepoint
Funds (the "Funds") to govern the management and administration of the Asset
Allocation Fund by Vantagepoint Investment Advisers, LLC ("VIA"). They may be
reviewed and revised at the discretion of the Directors of the Vantagepoint
Funds (the "Directors"). VIA is responsible for the monitoring and appointment
of subadvisers to handle the day-to-day investment of assets assigned to them.
I. GENERAL DESCRIPTION AND GOALS
The Asset Allocation Fund seeks to maximize total return relative to risk
by varying the portfolio's exposure to common stocks, bonds and money
market instruments.
II. STRUCTURE
The assets of the Asset Allocation Fund shall be managed by two or more
subadvisers. The subadvisers may be retained to manage separate accounts
under discretionary investment advisory contracts. Each subadviser will
be selected for its individual investment management expertise and each
will operate independently of the others. Each subadviser must either be
registered with the Securities and Exchange Commission (SEC) under the
Investment Advisers Act of 1940 or a Bank, Insurance Company or Trust
Company exempt as such from registration.
Each subadviser shall exercise complete management discretion over assets
of the Fund allocated to its account in a manner consistent with these
Investment Policies and Guidelines and with such further investment
limitations and conditions as may be recommended by VIA and approved by
the Directors. Subadvisers will be obligated to manage Fund assets as if
they were subject to the fiduciary duty of care that applies under the
Employee Retirement Income Security Act of 1974 (ERISA) governing pension
and profit sharing assets.
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<PAGE> 16
III. INVESTMENT STRATEGY
VIA will integrate the activities of the Fund's subadvisers to create a
framework in which overall Fund exposure to stocks, bonds, and cash will
be varied in response to changes in criteria including:
- Long-term expected returns
- Historical valuation levels
- Monetary, economic, and other indicators that can be quantified
and measured over long periods of time.
Subadvisers seek to add value by taking advantage of the changes in
relative value and risk among asset classes. Allocation among asset
classes may change dramatically over time. Allocation among asset classes
are often implemented by using futures contracts. Portfolio management of
assets representing each asset class may be active or passive.
IV. PERFORMANCE BENCHMARKS
Performance benchmarks will be established for the Fund. These benchmarks
will be recommended by VIA and adopted by the Directors and will be
reviewed and revised as appropriate from time to time. The current
performance benchmarks for the Fund are appended to this document as
Exhibit I.
V. DIRECTOR REVIEW
VIA will report periodically to the Directors on performance of the Fund
against benchmarks and on subadviser results and will evaluate for the
Directors the overall performance of the Fund relative to its objectives.
The Directors will consider such reports and other relevant factors in
appraising the investment objectives and performance of the Fund.
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<PAGE> 17
INVESTMENT GUIDELINES
I. ELIGIBLE INVESTMENTS
A. EQUITY SECURITIES: U.S. common stock, preferred stock, common
stock equivalents (units of beneficial interest), American
Depository Receipts, convertible preferred stocks, warrants, and
other rights.
B. CASH/CASH EQUIVALENTS: Money market instruments.
C. FIXED INCOME: U.S. Treasury notes and bonds.
D. FINANCIAL FUTURES: S&P 500 Index futures contracts and U.S.
Treasury note and bond futures contracts.
E ELIGIBLE PRACTICES: There are no restrictions on subadvisers as to
the following:
- Portfolio turnover.
- Realized gains and losses.
F. ELIGIBLE INVESTMENT LIMITS
<TABLE>
<CAPTION>
MINIMUM NORMAL MAXIMUM
------- ------ -------
RANGE
------
<S> <C> <C> <C>
Equity securities 0% 45-80% 100%
Cash and cash equivalents 0% 5-40% 100%
Fixed income 0% 15-30% 50%
</TABLE>
II. PROHIBITED PRACTICES AND SECURITIES
A. Short sales; however, the use of S&P 500 Index futures contracts
and U.S. Treasury note and bond futures contracts to offset
existing exposures is permitted.
B. Options.
C. Commodities except for financial futures. Financial futures may be
used to vary asset class exposure but may not be used to obtain
market leverage or for any other purpose.
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<PAGE> 18
D. Securities for which there is no established trading market.
E. Foreign securities unless listed and traded in the U.S.
F. Margin purchases and other forms of borrowing; granting of pledges
or other security interests in assets of the Fund,
G. Securities issued by the subadvisers of the Fund or their
affiliates (except as provided in Section 2(a) of the Investment
Advisory Agreement).
H. General partner interests.
I. Direct investments in oil, gas, or other mineral exploration or
development programs.
J. Direct investments in real estate or interests in real estate;
this does not preclude investment in purchases of securities of
real estate investment trusts and other companies holding real
estate or interests in real estate.
K. Commingled funds; this does not preclude investment in mutual
funds up to 10% of the Fund's market value at the time of
purchase.
L. Acquisition of securities that would cause exposure to non-equity
holdings to exceed 35% of the Fund's market value at the time of
purchase.
M. Acquisition of securities that would cause exposure to a single
industry to exceed 25% of the Fund's market value at the time of
purchase.
N. In the absence of prior consent of VIA, acquisition of securities
of an issuer that would cause more than 5% of the Fund to be
invested in such securities.
O. In the absence of prior consent of VIA, acquisition of more than
5% of the outstanding shares of any class of equity securities.
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in Section I or Section II of
these Investment Guidelines may be acquired or employed, as the case may
be, but only if explicitly approved in advance by VIA.
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<PAGE> 19
IV. SECURITIES LENDING
Nothing herein shall prevent loans of securities in the Asset Allocation
Fund pursuant to an established securities lending program conducted by
the Fund's custodian.
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<PAGE> 20
EXHIBIT I
TO THE
STATEMENT OF INVESTMENT POLICIES AND GUIDELINES OF
THE ASSET ALLOCATION FUND
MARCH 1, 1999
The following standards will be used to measure the performance of the Asset
Allocation Fund:
A. BENCHMARKS
1. The performance benchmark for the Fund is a composite index
consisting of a 65% allocation to the STANDARD & POOR'S 500 INDEX,
a 25% allocation to the LEHMAN LONG-TERM TREASURY INDEX and a 10%
allocation to the 91-DAY TREASURY BILL. This benchmark will be
used to measure the Fund's performance net of subadviser fees.
2. A peer group benchmark for the Asset Allocation Fund will consist
of mutual funds with characteristics similar to those of the Asset
Allocation Fund. The peer group will be used to measure the Fund's
performance relative to other funds with a similar investment
approach. The peer group benchmark will measure Fund performance
net of all fees and expenses except for the plan administration
fee.
3. The Lipper Flexible Portfolio Index, selected by Lipper Analytical
Services, will serve as the performance benchmark for participant
returns, net of all fees and expenses. In assessing performance
against this benchmark, it will be taken into consideration that
Lipper Analytical Services may change the composition of the
Index.
B. TIME HORIZON
The time horizon for performance measurement will be one, three, and five
years.
One Year:
Performance relative to any benchmark established for the Fund will vary
over one-year periods; such variance over short time periods is expected
and acceptable. However, if such variance is determined to be caused by
systemic issues, action may be appropriate.
24
<PAGE> 21
Three and Five Years:
Performance of the Fund should track market and universe benchmarks more
closely as the evaluation period lengthens. The ideal performance
objective for the Asset Allocation Fund is to exceed the returns of all
relevant benchmarks; however, shortfalls over various time periods should
be expected in some cases. Under-performance against a single benchmark
over an extended period may be acceptable, particularly if other
benchmarks have been exceeded.
C. INVESTMENT CHARACTERISTICS
The investment characteristics of the Asset Allocation Fund will depend
upon subadviser asset allocation, which is intended to maximize
risk-adjusted returns.
25
<PAGE> 22
SCHEDULE B
VANTAGEPOINT INVESTMENT ADVISERS, LLC
ASSET ALLOCATION FUND
INVESTMENT GUIDELINES
FOR
MELLON CAPITAL MANAGEMENT
MARCH 1, 1999
Mellon Capital Management allocates assets between stocks, long-term U.S.
Treasury bonds, and cash. Its strategy takes advantage of perceived imbalances
in the relative pricing and fundamental valuation levels of these three asset
classes, while evaluating expected risk and return. Changes to the asset
allocations are normally implemented in small increments on a gradual basis.
I. ELIGIBLE INVESTMENTS
A. EQUITY SECURITIES: Units of a portfolio designated by VIA that
fully replicates the S&P 500 Index.
B. CASH/CASH EQUIVALENTS: U.S. Treasury obligations with maturity
less than one year; money market portfolio designated by VIA;
short term accounts or securities managed by the custodian
institution.
C. FIXED INCOME: U.S. Treasury notes and bonds.
D. FINANCIAL FUTURES: Standard & Poor's 500 Index futures; U.S.
Treasury note and bond futures.
E. ELIGIBLE INVESTMENT LIMITS:
<TABLE>
<CAPTION>
MINIMUM NORMAL MAXIMUM
------- ------ -------
RANGE
------
<S> <C> <C> <C>
Equity securities 0% 40-70% 100%
Cash and cash equivalents 0% 0-30% 100%
Fixed income 0% 30-60% 100%
</TABLE>
26
<PAGE> 23
II. PROHIBITED PRACTICES AND SECURITIES
A. Short sales; however, the use of S&P 500 Index futures contracts
and U.S. Treasury note and bond futures contracts to offset
existing exposures is permitted.
B. Options.
C. Commodities except financial futures. Financial futures will be
used to vary asset class exposure but may not be used to obtain
market leverage or for any other purpose.
D. Securities for which there is no established trading market.
E. Foreign securities unless listed and traded in the U.S.
F. Margin purchases and other forms of borrowing; granting of pledges
or other security interests in assets of the portfolio; use of
futures to obtain market leverage.
G. Securities offered by the Adviser or its affiliates (except as
provided in Section 2(a) of the Investment Advisory Agreement).
H. General partner interests.
I. Direct investments in oil, gas, or other mineral exploration or
development programs.
J. Direct investments in real estate or interests in real estate;
this does not preclude investment in purchases of securities of
real estate investment trusts and other companies holding real
estate or interests in real estate.
K. Acquisition of securities of an issuer that would cause more than
5% of the portfolio to be invested in such securities.
L. Acquisition of more than 5% of the outstanding shares of any class
of equity securities.
M. Acquisition of securities that would cause exposure to a single
industry to exceed 25% of the portfolio at the time of purchase.
N. Commingled and registered mutual funds.
27
<PAGE> 24
O. Exceptions to the above listed eligible investments and prohibited
securities or practices may be permitted with prior consent from
VIA.
28
<PAGE> 25
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in Section I or Section II of
these Investment Guidelines may be acquired or employed, as the case may
be, but only if explicitly approved in advance by VIA.
IV. MATURITY AND DURATION
The average maturity of the fixed income portion of the Portfolio,
including derivatives, will be maintained within the range of 15 to 30
years. The average duration, including derivatives, will be maintained
within the range of 5 to 25 years.
V. PERFORMANCE BENCHMARK AND MONITORING CRITERIA
The standards outlined in this section are subject to review by VIA as
and when appropriate.
A. PERFORMANCE BENCHMARKS
The market benchmark for measuring investment performance over a
market cycle for the Adviser is a composite index of a 65%
allocation to the STANDARD & POOR'S 500 INDEX, a 25% allocation to
the LEHMAN LONG-TERM TREASURY INDEX, and a 10% allocation to the
91-DAY TREASURY BILL. This benchmark will measure the Adviser's
performance net of Adviser fees.
B. PEER GROUPS
VIA will develop an appropriate peer group against which to
compare investment performance. The peer group will consist of
other investment managers with a similar investment approach. The
investment managers within the peer group will be reviewed
periodically for consistency of style and may be changed as and
when deemed appropriate by VIA. Such changes will be communicated
to the Adviser.
1. The peer group will consist primarily of mutual funds;
however, separate account managers may be included.
2. VIA will track relative net-of-fee performance quarterly
and evaluate performance on a trailing one-, three-, and
five-year basis.
3. VIA will compare the Adviser's net performance with the
one-year mean return of the peer group.
29
<PAGE> 26
SCHEDULE C
VANTAGEPOINT INVESTMENT ADVISERS, LLC
FEE SCHEDULE
FOR
MELLON CAPITAL MANAGEMENT
The Advisor's quarterly fee shall be calculated based on the average daily
market value of the assets under management as provided by the Custodian, based
on the following annual rate.
$200 million 0.375 percent
Over $200 million 0.200 percent
EXAMPLE OF FEE CALCULATION (HYPOTHETICAL AMOUNTS)
January 1, 1999 $190,000,000 End-of-Day Market Value
January 2, 1999 $190,678,462 End-of-Day Market Value
January 3, 1999 $190,796,123 End-of-Day Market Value
. . .
March 29, 1999 $194,512,214 End-of-Day Market Value
March 30, 1999 $194,720,978 End-of-Day Market Value
March 31, 1999 $194,901,556 End-of-Day Market Value
Quarterly Daily Average $192,601,555
$100 million 0.50 percent $500,000
Next $100 million 0.45 percent $416,707
Over $200 million 0.40 percent --------
Annual Fee $916,707
One-Fourth Annual Fee $229,177
31
<PAGE> 27
The current peer group consists of the following two managers:
Stagecoach Asset Allocation A
Zweig Managed Assets C
32
<PAGE> 1
EXHIBIT (d)(22)
INVESTMENT ADVISORY AGREEMENT
This Investment Advisory Agreement is made as of the __________ day
of _______________, 1999 by and between VANTAGEPOINT INVESTMENT ADVISERS, LLC, a
Delaware limited liability company (hereafter "Client"), and WILSHIRE ASSET
MANAGEMENT at 1299 Ocean Avenue, Santa Monica, California 90401 (hereafter
"Adviser") and is effective as of March 1,1999 (the "Effective Date").
WHEREAS, the Vantagepoint Funds (the "Funds") is a Delaware Business
Trust registered as an open-end management investment company under the
Investment Company Act of 1940;
WHEREAS, Client is party to an Investment Adviser Agreement with the
Funds for management of the investment operations of the Funds including the
establishment and operation of investment portfolios for the Funds and the
entering into of contracts with sub-advisers to assist in managing the
investment of the Funds property;
WHEREAS, Client and Adviser wish to enter into an agreement pursuant
to which Adviser will provide such assistance to Client.
AGREEMENTS:
In consideration of the performance by the Adviser as Investment
Adviser of certain assets held by the Funds, the Client has authorized the
Adviser to manage the securities and other assets as follows:
1. ACCOUNT
The account with respect to which the Adviser shall perform its
services shall consist of those assets of the Funds which the Client determines
to assign to an account with the Adviser, together with all income earned by
those assets and all realized and unrealized capital appreciation related to
those assets (hereafter "Account"). From time to time, the Client may, upon
notice to the Adviser, make additions to the Account and may, upon notice to the
Adviser, make withdrawals from the Account.
2. APPOINTMENT STATUS, POWERS OF ADVISER
(a) Purchase and Sale. Client hereby appoints Adviser to manage
the Account on the terms and conditions set forth in this Agreement. Subject to
the restrictions set forth in this Agreement, and acting always in conformity
with the Investment Policies provided in Paragraph 4, Adviser shall supervise
and direct investment of the Account. Client hereby grants the Adviser complete,
unlimited and unrestricted discretion and authority to select portfolio
securities with respect to the
<PAGE> 2
Account including the power to acquire (by purchase, exchange, subscription or
otherwise), to hold and dispose (by sale, exchange or otherwise). The Adviser
will consult with Client, upon the request of the Client, concerning any
transactions it makes with respect to the investment of the Account.
(b) Limitation on Authority. Except as expressly authorized herein
or hereafter from time to time, Adviser shall for all purposes be deemed
an independent contractor and shall have no authority to act for or to represent
the Client or the Funds in any way or otherwise to be an agent of the Client or
the Funds.
(c) Voting. Unless otherwise instructed by Client, Adviser shall
have discretion to take any action or render any advice with respect to the
voting of shares or the execution of proxies solicited from time to time by, or
with respect to, the issuers of securities held in the Account. Adviser will
report annually to Client regarding such voting.
(d) Key Personnel. Adviser agrees that the following key personnel
have primary responsibility with respect to the investment management of
the Account. If the(se) individual(s) is unable to devote sufficient time to
maintain primary responsibility of the Account, the Adviser must give Client
written advance notice, or prompt notice within three (3) business days, of the
name of the person designated by the Adviser to replace or supplement the
individual(s). In addition, the Adviser will give Client prompt written notice
of the replacement of any employee of the Adviser who has direct supervisory
responsibility for the key personnel or who has responsibility for setting
investment policy.
Key Personnel:
Thomas D. Stevens
3. ACCEPTANCE OF APPOINTMENT
Adviser accepts the appointment as an investment adviser and agrees
to use its best efforts and professional judgment to make timely investment
transactions for the Client with respect to the investments of the Account,
and to provide the other services required of the Adviser under the provisions
of this Agreement.
4. INVESTMENT POLICIES
(a) Investment Objectives. The Adviser will adhere to the
investment objectives, guidelines, restrictions, and liquidity requirements of
the Funds as specified by the Client on SCHEDULE A hereto, and as restated or
modified from time to time by the Client in written notice to the Adviser.
(b) Funds' Agreement and Declaration of Trust. The Adviser will
adhere to all specific provisions established in the Funds' Agreement and
Declaration of Trust and
2
<PAGE> 3
Registration Statement as filed with the Securities and Exchange Commission on
Form N-1A ("Registration Statement), both of which are hereby incorporated by
reference and made a part of this Agreement. The Client shall give written
notice to the Adviser of any amendments to the Agreement and Declaration of
Trust or Registration Statement, which amendments, upon their receipt by the
Adviser, shall be binding on the Adviser.
(c) Investment Adviser Guidelines. The Adviser shall use act in
accordance with the specific statement of Investment Adviser Guidelines,
SCHEDULE B, as restated or modified from time to time by the Client in
written notice to the Adviser. The Client retains the right, on written notice
to the Adviser, to modify any such objectives, guidelines, restrictions, and
liquidity requirements in any manner at any time.
(d) Conflict in Policies. If a conflict in policies or guidelines
referenced herein occurs, the Registration Statement shall govern for purposes
of this Agreement.
5. CUSTODY, DELIVERY, RECEIPT OF SECURITIES
(a) Custody Responsibilities. The Client shall designate one or more
custodians to hold the Account. The Custodian, as designated by the Client will
be responsible for the custody, receipt and delivery of securities and other
assets of the Funds (including the Account), and the Adviser shall have no
authority, responsibility or obligation with respect to the custody, receipt or
delivery of securities or other assets of the Funds (including the Account). In
the event that any cash or securities of the Funds are delivered to the Adviser,
it will promptly deliver the same over to the Custodian, in the name of the
Funds.
(b) Securities Transactions. All securities transactions for the
Account will be consummated by payment to or delivery by the Funds of cash or
securities due to or from the Account. The Adviser will notify the Custodian of
all orders to brokers for the Account by 9:00 am EST on the day following the
trade date and will affirm the trade within one (1) business day after the trade
date (T+1).
(c) Tri-Party Agreement. The Adviser is authorized to enter into
Tri-Party Repurchase Agreements and sign the standard PSA tri-party agreement
(the "Tri-Party Agreement") on behalf of the Client and the subcustodian
thereunder is authorized to act as a subcustodian for the Account's assets
involved in any tri-party repurchase agreement pursuant to such Tri-Party
Agreement.
6. RECORD KEEPING AND REPORTING
(a) Records. Adviser will maintain proper and complete records
relating to the furnishing of services under this Agreement, including records
with respect to the
3
<PAGE> 4
acquisition, holding and disposition of securities for Client. All records
maintained pursuant to this Agreement shall be subject to examination by
Client and by persons authorized by it at all times upon reasonable notice.
Except as expressly authorized in this Agreement or as required by applicable
law, regulation or order of court or as directed by other party in writing,
Adviser and Client shall keep confidential the records and other information
obtained by reason of this Agreement (including, with respect to Client, the
investment information and transactions executed by Adviser). Upon termination
of this Agreement, Adviser shall promptly, upon demand, return to Client all
records Client reasonably believes are necessary in order to discharge its
responsibilities to the Funds. Adviser shall be entitled to retain originals or
copies of records pursuant to the requirements of applicable laws or
regulations.
(b) Quarterly Valuation Reports. Adviser shall use best efforts to
provide to the Client within TEN (10) business days after the end of each
calendar quarter a statement of the fair market value of the Account as of the
close of such quarter together with an itemized list of the assets in the
Account.
(c) Valuation Methodology. For purposes of this Agreement, fair
market value shall mean, as of a particular date, the value of the Account
(determined in accordance with generally accepted accounting principles
consistently applied), plus income accrued thereon less the liabilities related
to the assets in the Account. Adviser shall reconcile security and cash
positions , and market values, and report discrepancies to the Client.
(d) Loss Reimbursement. Adviser shall reimburse the Account for
any loss caused by Adviser's actions that are a direct cause of a delay
in the accurate daily pricing of the Fund(s), provided such loss was not the
result of action or inaction of other service providers to the Client or the
Fund(s) in failing to observe the instructions of the Adviser.
(e) Monthly Reports. Adviser shall provide the Client an itemized
report as to the securities in the account, the fair market value thereof
and the accrued income thereon within FOUR (4) business days after the end of
each Calendar Month. The Adviser shall also use best efforts to provide, in
writing, preliminary performance numbers and a brief explanation of these
results within FIVE (5) business days after the end of each Calendar Month. The
requested format will be as mutually agreed by Adviser and Client. For purposes
of this Agreement, fair market value shall mean, as of a particular date, the
value of the Account plus income accrued thereon less the liabilities related to
the assets in the Account.
(f) Reports on Request. Adviser shall provide to Client promptly
upon request any information available in the records maintained by Adviser
relating to the Account.
4
<PAGE> 5
7. PURCHASE AND SALE OF SECURITIES
(a) Selection of Brokers. Except to the extent otherwise instructed
by Client, (it being understood that Client may, in its absolute discretion,
direct portfolio transactions for which Adviser is responsible to any broker
that Client may see fit), Adviser shall place all orders for the purchase
and sale of securities on behalf of the Client with brokers or dealers selected
by Adviser, but not with a person affiliated with Adviser, as the term
"affiliated person" is defined in the Investment Company Act of 1940 (hereafter
an "Affiliate").
(b) Best Execution. In placing such orders, the Adviser will give
primary consideration to obtaining the most favorable price and efficient
execution. In evaluating the terms available for executing particular
transactions for Client and in selecting brokers and dealers to execute such
transactions, the Adviser may consider, in addition to commission cost and
execution capabilities, the financial stability and reputation of brokers and
dealers and the brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934, as amended) provided by
brokers and dealers. Adviser is authorized to pay a broker or dealer who
provides such brokerage and research services a commission for executing a
transaction which is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if Adviser determines
that such commission is reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer in discharging
responsibilities with respect to the Account.
(c) Bunching Orders. Client agrees that Adviser may aggregate
sales and purchase orders of Account with similar orders being made
simultaneously for other accounts managed by Adviser, if in Adviser's reasonable
judgment such aggregation shall result in an overall economic benefit to the
Account taking into consideration the advantageous selling or purchase price,
brokerage commission and other expenses. Client acknowledges that the
determination of such economic benefit to Client by Adviser represents Adviser's
evaluation that client is benefited by relatively better purchase or sales
prices, lower commission expenses and beneficial timing of transactions or a
combination of these and other factors.
8. INVESTMENT FEES
(a) Fee Schedule. The compensation of the Adviser for its services
under this Agreement shall be calculated and paid by the Client from the
assets of the Account in accordance with SCHEDULE C hereto. The Adviser shall
send a written invoice to the Client within 30 days of the quarter end and shall
be duly compensated from the assets of the Account.
5
<PAGE> 6
(b) Fee Computation. The Adviser's fee for each calendar quarter
shall be calculated as set forth in Schedule C.
(c) Fee Amendment. Fee rates may be changed from time to time by
agreement between the Client and the Adviser; provided, however, that no
increase in such rates shall be made during the first calendar year of this
Agreement.
(d) Pro Rata Fee. If the Adviser should serve for less than the
whole of any calendar quarter, its compensation shall be determined as
provided above on the basis of the ending market value of the Account in the
month in which the termination occurs and shall be payable on a pro rata basis
for the period of the calendar quarter for which it has served as Adviser
hereunder.
9. BEST EFFORTS; NON-EXCLUSIVITY OF SERVICES
The Adviser shall devote its best efforts and such time as it deems
necessary to provide prompt and expert service to the Client. The services of
Adviser to be provided to Client hereunder are not to be deemed exclusive and
Adviser shall be free to provide similar services for its own account and the
accounts of other persons and to receive compensation for such services. Client
acknowledges that Adviser and its members, Affiliates and employees, and
Adviser's other clients may at any time, have, acquire, increase, decrease, or
dispose of positions in the same investments which are at the same time being
held, acquired for or disposed of under this Agreement for the Client. Adviser
shall have no obligation to acquire or dispose of a position in any investment
pursuant to this Agreement simply because Adviser, its directors, members,
Affiliates or employees invest in such a position for its or their own accounts
or for the account of another client.
10. INSIDER TRADING POLICIES AND CODE OF ETHICS
Adviser hereby represents that it has adopted policies that meet the
requirements of Rule 17j-1 under the Investment Company Act of 1940. Copies of
such policies shall be delivered to the Client, and any violation of such
policies by personnel of the Adviser shall be reported to the Client.
11. INSURANCE
At all times during the term of this Agreement, Adviser shall
maintain, at its own cost and expense, professional liability insurance
for errors, omissions, and negligent acts, in an amount and with such terms as
are standard in the financial services industry
6
<PAGE> 7
for an investment adviser managing the amount of aggregate assets managed
by Adviser for Client and for the Adviser's other clients.
12. LIABILITY
Adviser shall not be liable to Client for honest mistakes of
judgment or for action or inaction taken in good faith for a purpose that the
Adviser reasonably believes to be in the best interests of the Client.
Adviser shall be liable to Client for any liability, damages or expenses of
Client arising out of the negligence, malfeasance or violation of applicable law
by Adviser or any of its officers, employees or Affiliates in providing
management under this Agreement. However, neither this provision nor any other
provision of this Agreement shall constitute a waiver or limitation of any
rights which Client may have under federal or state securities laws.
13. TERM
This Agreement shall be in effect for an initial term of two years
beginning on the Effective Date. This Agreement may be renewed thereafter
for successive one-year periods if such renewal is approved annually by the
majority of those members of the Funds' Board of Directors who are not
"interested persons" as that term is defined in the Investment Company Act of
1940.
14. TERMINATION
This Agreement may be terminated by either party hereto, without the
payment of any penalty, immediately upon notice to the other in the event
of a breach of any provision thereof by the party so notified, or otherwise by
Adviser upon sixty (60) days' written notice to the Client or by Client upon 30
days' written notice to Adviser, except that this Agreement shall automatically
terminate in the event of its assignment, as provided in Paragraph 19, at the
discretion of the Client in the event of Adviser's ownership change as provided
in Paragraph 19, or upon the termination of the Funds. Any termination in
accordance with the terms of this Agreement shall not cause the payment of any
penalty. Any such termination shall not affect the status, obligations or
liabilities of any party hereto to the other.
15. REPRESENTATIONS
(a) Adviser hereby confirms to Client that Adviser is registered as
an investment adviser under the Investment Advisers Act of 1940, that it has
full power and authority to enter into and perform fully the terms of
this Agreement and that the
7
<PAGE> 8
execution of this Agreement on behalf of Adviser has been duly authorized and,
upon execution and delivery, this Agreement will be binding upon Adviser in
accordance with its terms.
(b) Client hereby confirms to Adviser that it has full power and
authority to enter into this Agreement and that the execution of this
Agreement on behalf of Client has been fully authorized and, upon execution and
delivery, this Agreement will be binding upon Client in accordance with its
terms.
16. NOTICES
Notices or other notifications given or sent under or pursuant to
this Agreement shall be in writing and be deemed to have been given or
sent if delivered to the party at its address listed below in person or by telex
or telecopy receipt of which is confirmed or by mail or by registered mail,
return receipt requested. The addresses of the parties are:
CLIENT:
Vantagepoint Investment Advisers, LLC
Attention: Legal Department
c/o ICMA Retirement Corporation
777 North Capitol Street, NE, Ste. 600
Washington, D.C. 20002-4240
ADVISER:
Wilshire Asset Management
1299 Ocean Avenue
Santa Monica, CA 90401
Each party may change its address by giving notice as herein
required.
17. SOLE INSTRUMENT
This instrument constitutes the sole and only agreement of the
parties to it relating to its object and correctly sets forth the rights,
duties, and obligations of each party to the other as of its date. Any prior
agreements, promises, negotiations or representations not expressly set forth in
this Agreement are of no force or effect.
18. WAIVER OR MODIFICATION
8
<PAGE> 9
No waiver or modification of this Agreement shall be effective
unless reduced to a written document signed by the party to be charged. No
failure to exercise and no delay in exercising, on the part of any party
hereto, of any right, remedy, power or privilege hereunder, shall operate as a
waiver thereof. Only the Chief Executive Officer, has authority on behalf of
Client to modify or waive any of the provisions of the Agreement.
19. ASSIGNMENT AND OWNERSHIP CHANGE
This Agreement shall automatically terminate in the event of its
assignment. Adviser agrees to provide immediate written notice in the
event of an ownership change. Such an ownership change will entitle, but not
require, the Client to terminate the Agreement immediately or upon notice.
20. COUNTERPARTS
This Agreement may be executed in counterparts each of which shall
be deemed to be an original and all of which, taken together, shall be
deemed to constitute one and the same instrument.
21. CHOICE OF LAW
This Agreement shall be governed by, and the rights of the parties
arising hereunder construed in accordance with, the laws of the State of
Delaware without reference to principles of conflict of laws.
22. YEAR 2000 WARRANTY
Adviser certifies that it has taken, or will take, the actions
referred to in its SEC Form ADV-Y2K with respect to the Year 2000 issue.
Adviser will provide Client with updates from time to time, as requested.
IN WITNESS WHEREOF, THE PARTIES HERETO EXECUTE THIS AGREEMENT ON February 25
, 1999 and make it effective on the date set forth.
CLIENT ADVISER
Vantagepoint Wilshire Asset Management
Investment Advisers, LLC
by: by:
9
<PAGE> 10
/s/ GIRARD MILLER /s/ THOMAS D. STEVENS
- ----------------------- --------------------------
(signature) (signature)
President Senior Vice President
- ----------------------- --------------------------
(name, title) (name, title)
Date: Date:
10
<PAGE> 11
ADDENDUM DATED March 1, 1999 TO THE
INVESTMENT ADVISORY AGREEMENT DATED _____________
This addendum modifies and forms a part of the Investment Advisory Agreement
(the "Agreement") dated March 1, 1999, between Vantagepoint Investment
Advisers, LLC, a Delaware corporation ("Client"), and Wilshire Asset Management
("Adviser"), relating to the Vantagepoint Funds ("VF").
All terms used in this Addendum have the same meaning given to them in the
Agreement unless specifically noted otherwise.
1. The assets of the Account to be managed by the Adviser under the Agreement
and this Addendum are assets of the Asset Allocation Fund (the "Fund"), a
portfolio of VF. For purposes of Section 8 (Fees) and Schedule C, all payments
due to Adviser shall be solely made from the assets of the Fund.
2. All references in the Agreement and this Addendum to the Investment Policies
to be followed by Adviser in managing the assets of the Fund are hereby deemed
to include the Investment Policies set forth in the Agreement and any Schedules
to the Agreement, as well as the Fund's current prospectus and statement of
additional information as on file with the Securities and Exchange Commission.
3. The activities of the Client and the Adviser in managing the assets of the
Fund pursuant to the Agreement and this Addendum shall in all instances be
conducted subject to the supervision and direction of the Board of Directors of
VF.
4. For purposes of Sections 8 (Fees), 12 (Liability), 13 (Term), 14
(Termination), 15 (Representation), 16 (Notices), 18 (Waiver or Modification),
19 (Assignment and Ownership Change), and 22 (Year 2000 Warranty) of the
Agreement, as well as for purposes of Schedule C of the Agreement, VF is hereby
made a party to the Agreement and shall be entitled to all notices, protections
and rights set forth in those Sections and in Schedule C to which Client is
entitled.
5. For purposes of the Agreement and this Addendum, Client and Adviser hereby
agree to maintain all books and records relating to VF that are required to be
maintained in accordance with good practice, applicable federal and state
securities laws, including the Investment Company Act of 1940 and or the
Investment Advisers Act of 1940, and such reasonable instructions as shall be
provided to Adviser by Client from time to time.
11
<PAGE> 12
6. Adviser shall furnish Client and the Board of Directors of VF such periodic
and special reports and information as either of them may request, including
such information as shall be reasonably necessary to evaluate the terms of any
advisory agreement between Client and Adviser with respect to assets of VF.
7. For purposes of the Agreement and this Addendum, the value of the assets of
the Fund managed by Adviser shall be calculated in accordance with the
procedures for determining net asset value per share ("NAV") set forth in the
Fund's prospectus and statement of additional information.
8. Section 6 is hereby amended as follows:
a. 6(a) is amended beginning on line 8 and ending on line 9 by
deleting the parentheses and all language with in the parentheses;
b. 6(b) is deleted in its entirety;
c. 6(c) is redesignated 6(b) Reconciliations, the first sentence is
deleted;
d. 6(d) is changed to 6(c); and
e. 6(e) is deleted and 6(f) is changed to 6(d).
9. Section 8, Investment Fees, is amended by deleting 8(b) and 8(c) in their
entirety and by redesignating 8(d) as 8(b).
10. Section 15, Representations, is amended by the insertion of 15(c) below:
"(c) Adviser hereby acknowledges that VF is registered as an open
end investment company under the Investment Company Act of 1940 and
is subject to taxation as a regulated investment company under the
Internal Revenue Code; Adviser hereby represents that it is familiar
with the requirements of such laws and the rules and regulations
thereunder as they apply to VF and has systems and procedures in
place reasonably designed to permit Adviser, Client, and VF to
comply with such requirement."
12
<PAGE> 13
SCHEDULE A
THE VANTAGEPOINT FUNDS
ASSET ALLOCATION FUND
STATEMENT OF INVESTMENT POLICIES
These Investment Policies and Guidelines have been adopted by the Vantagepoint
Funds (the "Funds") to govern the management and administration of the Asset
Allocation Fund by Vantagepoint Investment Advisers, LLC ("VIA"). They may be
reviewed and revised at the discretion of the Directors of the Vantagepoint
Funds (the "Directors"). VIA is responsible for the monitoring and appointment
of subadvisers to handle the day-to-day investment of assets assigned to them.
I. GENERAL DESCRIPTION AND GOALS
The Asset Allocation Fund seeks to maximize total return relative to
risk by varying the portfolio's exposure to common stocks, bonds and
money market instruments.
II. STRUCTURE
The assets of the Asset Allocation Fund shall be managed by two or
more subadvisers. The subadvisers may be retained to manage separate
accounts under discretionary investment advisory contracts. Each
subadviser will be selected for its individual investment management
expertise and each will operate independently of the others. Each
subadviser must either be registered with the Securities and
Exchange Commission (SEC) under the Investment Advisers Act of 1940
or a Bank, Insurance Company or Trust Company exempt as such from
registration.
Each subadviser shall exercise complete management discretion over
assets of the Fund allocated to its account in a manner consistent
with these Investment Policies and Guidelines and with such further
investment limitations and conditions as may be recommended by VIA
and approved by the Directors. Subadvisers will be obligated to
manage Fund assets as if they were subject to the fiduciary duty of
care that applies under the Employee Retirement Income Security Act
of 1974 (ERISA) governing pension and profit sharing assets.
14
<PAGE> 14
III. INVESTMENT STRATEGY
VIA will integrate the activities of the Fund's subadvisers to
create a framework in which overall Fund exposure to stocks, bonds,
and cash will be varied in response to changes in criteria
including:
- - Long-term expected returns
- - Historical valuation levels
- - Monetary, economic, and other indicators that can be quantified and
measured over long periods of time.
Subadvisers seek to add value by taking advantage of the changes in
relative value and risk among asset classes. Allocation among asset
classes may change dramatically over time. Allocation among asset
classes are often implemented by using futures contracts. Portfolio
management of assets representing each asset class may be active or
passive.
IV. PERFORMANCE BENCHMARKS
Performance benchmarks will be established for the Fund. These
benchmarks will be recommended by VIA and adopted by the Directors
and will be reviewed and revised as appropriate from time to time.
The current performance benchmarks for the Fund are appended to this
document as Exhibit I.
V. DIRECTOR REVIEW
VIA will report periodically to the Directors on performance of the
Fund against benchmarks and on subadviser results and will evaluate
for the Directors the overall performance of the Fund relative to
its objectives. The Directors will consider such reports and other
relevant factors in appraising the investment objectives and
performance of the Fund.
15
<PAGE> 15
INVESTMENT GUIDELINES
I. ELIGIBLE INVESTMENTS
A. EQUITY SECURITIES: U.S. common stock, preferred stock, common
stock equivalents (units of beneficial interest), American
Depository Receipts, convertible preferred stocks, warrants,
and other rights.
B. CASH/CASH EQUIVALENTS: Money market instruments.
C. FIXED INCOME: U.S. Treasury notes and bonds.
D. FINANCIAL FUTURES: S&P 500 Index futures contracts and U.S.
Treasury note and bond futures contracts.
E ELIGIBLE PRACTICES: There are no restrictions on subadvisers
as to the following:
- Portfolio turnover.
- Realized gains and losses.
F. ELIGIBLE INVESTMENT LIMITS
<TABLE>
<CAPTION>
MINIMUM NORMAL RANGE MAXIMUM
------- ------------ -------
<S> <C> <C> <C>
Equity securities 0% 45-80% 100%
Cash and cash equivalents 0% 5-40% 100%
Fixed income 0% 15-30% 50%
</TABLE>
II. PROHIBITED PRACTICES AND SECURITIES
A. Short sales; however, the use of S&P 500 Index futures
contracts and U.S. Treasury note and bond futures contracts to
offset existing exposures is permitted.
B. Options.
C. Commodities except for financial futures. Financial futures
may be used to vary asset class exposure but may not be used to
obtain market leverage or for any other purpose.
16
<PAGE> 16
D. Securities for which there is no established trading market.
E. Foreign securities unless listed and traded in the U.S.
F. Margin purchases and other forms of borrowing; granting of
pledges or other security interests in assets of the Fund,
G. Securities issued by the subadvisers of the Fund or their
affiliates (except as provided in Section 2(a) of the
Investment Advisory Agreement).
H. General partner interests.
I. Direct investments in oil, gas, or other mineral exploration or
development programs.
J. Direct investments in real estate or interests in real estate;
this does not preclude investment in purchases of securities of
real estate investment trusts and other companies holding real
estate or interests in real estate.
K. Commingled funds; this does not preclude investment in mutual
funds up to 10% of the Fund's market value at the time of
purchase.
L. Acquisition of securities that would cause exposure to
non-equity holdings to exceed 35% of the Fund's market value at
the time of purchase.
M. Acquisition of securities that would cause exposure to a single
industry to exceed 25% of the Fund's market value at the time
of purchase.
N. In the absence of prior consent of VIA, acquisition of
securities of an issuer that would cause more than 5% of the
Fund to be invested in such securities.
O. In the absence of prior consent of VIA, acquisition of more
than 5% of the outstanding shares of any class of equity
securities.
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in Section I or Section
II of these Investment Guidelines may be acquired or employed, as
the case may be, but only if explicitly approved in advance by VIA.
IV. SECURITIES LENDING
17
<PAGE> 17
Nothing herein shall prevent loans of securities in the Asset
Allocation Fund pursuant to an established securities lending
program conducted by the Fund's custodian.
18
<PAGE> 18
EXHIBIT I
TO THE
STATEMENT OF INVESTMENT POLICIES AND GUIDELINES OF
THE ASSET ALLOCATION FUND
MARCH 1, 1999
The following standards will be used to measure the performance of the Asset
Allocation Fund:
A. BENCHMARKS
1. The performance benchmark for the Fund is a composite index
consisting of a 65% allocation to the STANDARD & POOR'S 500
INDEX, a 25% allocation to the LEHMAN LONG-TERM TREASURY INDEX
and a 10% allocation to the 91-DAY TREASURY BILL. This
benchmark will be used to measure the Fund's performance net of
subadviser fees.
2. A peer group benchmark for the Asset Allocation Fund will
consist of mutual funds with characteristics similar to those
of the Asset Allocation Fund. The peer group will be used to
measure the Fund's performance relative to other funds with a
similar investment approach. The peer group benchmark will
measure Fund performance net of all fees and expenses except
for the plan administration fee.
3. The Lipper Flexible Portfolio Index, selected by Lipper
Analytical Services, will serve as the performance benchmark
for participant returns, net of all fees and expenses. In
assessing performance against this benchmark, it will be taken
into consideration that Lipper Analytical Services may change
the composition of the Index.
B. TIME HORIZON
The time horizon for performance measurement will be one, three, and
five years.
One Year:
Performance relative to any benchmark established for the Fund will
vary over one-year periods; such variance over short time periods is
expected and acceptable. However, if such variance is determined to
be caused by systemic issues, action may be appropriate.
19
<PAGE> 19
Three and Five Years:
Performance of the Fund should track market and universe benchmarks
more closely as the evaluation period lengthens. The ideal
performance objective for the Asset Allocation Fund is to exceed the
returns of all relevant benchmarks; however, shortfalls over various
time periods should be expected in some cases. Under-performance
against a single benchmark over an extended period may be
acceptable, particularly if other benchmarks have been exceeded.
C. INVESTMENT CHARACTERISTICS
The investment characteristics of the Asset Allocation Fund will
depend upon subadviser asset allocation, which is intended to
maximize risk-adjusted returns.
20
<PAGE> 20
SCHEDULE B
ASSET ALLOCATION FUND
INVESTMENT GUIDELINES
FOR
WILSHIRE ASSET MANAGEMENT
MARCH 1, 1999
Wilshire Asset Management passively manages the equity portion of the Asset
Allocation Fund utilized in the tactically allocating subadvisers' strategies.
The equity portfolio is managed using full replication of all securities
included in the S&P 500. Using cost-effective strategies, the portfolio tracks
the Index within acceptably small period-to-period variances, both positive and
negative.
I. ELIGIBLE INVESTMENTS
A. EQUITY SECURITIES: Common stock, preferred stock, common stock
equivalents (units of beneficial interest), American Depository
receipts, convertible preferred stock, warrants, and other
rights.
B. CASH/CASH EQUIVALENTS: U.S. Treasury obligations with maturity
less than one year; money market portfolio designated by VIA;
short term accounts or securities managed by the custodian
institution.
C. FINANCIAL FUTURES: Standard & Poor's 500 Index futures.
D. ELIGIBLE INVESTMENT LIMITS:
The index portion of the Asset Allocation Fund will be fully
invested at all times in a combination of equity securities
and equity index futures contracts to fully replicate the
holdings in the S&P 500 Index.
21
<PAGE> 21
II. PROHIBITED PRACTICES AND SECURITIES
A. Short sales; however, the use of S&P 500 Index futures
contracts to offset existing exposures is permitted.
B. Options.
C. Commodities except financial futures. Equity index futures may
be used to obtain temporary exposure for any cash balances.
D. Securities for which there is no established trading market.
E. Foreign securities unless listed and traded in the U.S.
F. Margin purchases and other forms of borrowing; granting of
pledges or other security interests in assets of the portfolio;
use of futures to obtain market leverage.
G. Securities offered by the Adviser or its affiliates.
H. General partner interests.
I. Direct investments in oil, gas, or other mineral exploration or
development programs.
J. Direct investments in real estate or interests in real estate;
this does not preclude investment in purchases of securities of
real estate investment trusts and other companies holding real
estate or interests in real estate.
K. Acquisition of securities of an issuer that would cause more
than 5% of the portfolio to be invested in such securities.
L. Acquisition of more than 5% of the outstanding shares of any
class of equity securities.
M. Acquisition of securities that would cause exposure to a single
industry to exceed 25% of the portfolio at the time of
purchase.
N. Commingled and registered mutual funds.
Exceptions to the above listed eligible investments and
prohibited securities or practices may be permitted with prior consent from VIA.
22
<PAGE> 22
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in Section I or Section
II of these Investment Guidelines may be acquired or employed, as
the case may be, but only if explicitly approved in advance by VIA.
IV. PERFORMANCE BENCHMARK AND MONITORING CRITERIA
The standards outlined in this section are subject to review by VIA
as and when appropriate.
A. PERFORMANCE BENCHMARKS
The performance of the Fund will be measured gross of
Adviser fees against the STANDARD & POOR'S 500 INDEX.
23
<PAGE> 23
SCHEDULE C
VANTAGEPOINT INVESTMENT ADVISERS, LLC
FEE SCHEDULE
FOR
WILSHIRE ASSET MANAGEMENT
The Advisor's quarterly fee shall be calculated based on the average daily
market value of the assets under management as provided by the Custodian, based
on the following annual rate.
<TABLE>
<CAPTION>
<S> <C>
$100 million 0.04 percent
Next $400 million 0.02 percent
Over $500 million 0.01 percent
</TABLE>
EXAMPLE OF FEE CALCULATION (HYPOTHETICAL AMOUNTS)
<TABLE>
<CAPTION>
<S> <C> <C>
January 1, 1999 $190,000,000 End-of-Day Market Value
January 2, 1999 $190,678,462 End-of-Day Market Value
January 3, 1999 $190,796,123 End-of-Day Market Value
. . .
March 29, 1999 $194,512,214 End-of-Day Market Value
March 30, 1999 $194,720,978 End-of-Day Market Value
March 31, 1999 $194,901,556 End-of-Day Market Value
Quarterly Daily Average $192,601,555
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
$100 million 0.50 percent $500,000
Next $100 million 0.45 percent $416,707
Over $200 million 0.40 percent - - - - -
Annual Fee $916,707
One-Fourth Annual Fee $229,177
</TABLE>
24
<PAGE> 1
EXHIBIT(d)(23)
INVESTMENT ADVISORY AGREEMENT
This Investment Advisory Agreement is made as of the __________ day of
_______________, 1999, by and between VANTAGEPOINT INVESTMENT ADVISERS, LLC, a
Delaware limited liability company (hereafter "Client"), and PAYDEN AND RYGEL at
333 South Grant Avenue, Suite 3250, Los Angeles, California 90071 (hereafter
"Adviser") and is effective as of March 1,1999 (the "Effective Date").
WHEREAS, the Vantagepoint Funds (the "Funds") is a Delaware Business
Trust registered as an open-end management investment company under the
Investment Company Act of 1940;
WHEREAS, Client is party to an Investment Adviser Agreement with the
Funds for management of the investment operations of the Funds including the
establishment and operation of investment portfolios for the Funds and the
entering into of contracts with sub-advisers to assist in managing the
investment of the Funds property;
WHEREAS, Client and Adviser wish to enter into an agreement pursuant to
which Adviser will provide such assistance to Client.
AGREEMENTS:
In consideration of the performance by the Adviser as Investment Adviser
of certain assets held by the Funds, the Client has authorized the Adviser to
manage the securities and other assets as follows:
1. ACCOUNT
The account with respect to which the Adviser shall perform its services
shall consist of those assets of the Funds which the Client determines to assign
to an account with the Adviser, together with all income earned by those assets
and all realized and unrealized capital appreciation related to those assets
(hereafter "Account"). From time to time, the Client may, upon notice to the
Adviser, make additions to the Account and may, upon notice to the Adviser, make
withdrawals from the Account.
2. APPOINTMENT STATUS, POWERS OF ADVISER
(a) Purchase and Sale. Client hereby appoints Adviser to manage the
Account on the terms and conditions set forth in this Agreement. Subject to the
restrictions set forth in this Agreement, and acting always in conformity with
the Investment Policies provided in Paragraph 4, Adviser shall supervise and
direct investment of the Account. Client hereby grants the Adviser complete,
unlimited and unrestricted discretion and authority to select portfolio
securities with respect to the
<PAGE> 2
Account including the power to acquire (by purchase, exchange, subscription or
otherwise), to hold and dispose (by sale, exchange or otherwise). The Adviser
will consult with Client, upon the request of the Client, concerning any
transactions it makes with respect to the investment of the Account.
(b) Limitation on Authority. Except as expressly authorized herein or
hereafter from time to time, Adviser shall for all purposes be deemed an
independent contractor and shall have no authority to act for or to represent
the Client or the Funds in any way or otherwise to be an agent of the Client or
the Funds.
(c) Voting. Unless otherwise instructed by Client, Adviser shall have
discretion to take any action or render any advice with respect to the voting of
shares or the execution of proxies solicited from time to time by, or with
respect to, the issuers of securities held in the Account. Adviser will report
annually to Client regarding such voting.
(d) Key Personnel. Adviser agrees that the following key personnel have
primary responsibility with respect to the investment management of the Account.
If the(se) individual(s) is unable to devote sufficient time to maintain primary
responsibility of the Account, the Adviser must give Client written advance
notice, or prompt notice within three (3) business days, of the name of the
person designated by the Adviser to replace or supplement the individual(s). In
addition, the Adviser will give Client prompt written notice of the replacement
of any employee of the Adviser who has direct supervisory responsibility for the
key personnel or who has responsibility for setting investment policy.
Key Personnel:
Joan A. Payden
Brian W. Mathews
Scott A. King
3. ACCEPTANCE OF APPOINTMENT
Adviser accepts the appointment as an investment adviser and agrees to
use its best efforts and professional judgment to make timely investment
transactions for the Client with respect to the investments of the Account, and
to provide the other services required of the Adviser under the provisions of
this Agreement.
4. INVESTMENT POLICIES
(a) Investment Objectives. The Adviser will adhere to the investment
objectives, guidelines, restrictions, and liquidity requirements of the Funds as
specified by the Client on SCHEDULE A hereto, and as restated or modified from
time to time by the Client in written notice to the Adviser.
2
<PAGE> 3
(b) Funds' Agreement and Declaration of Trust. The Adviser will adhere to
all specific provisions established in the Funds' Agreement and Declaration of
Trust and Registration Statement as filed with the Securities and Exchange
Commission on Form N-1A ("Registration Statement), both of which are hereby
incorporated by reference and made a part of this Agreement. The Client shall
give written notice to the Adviser of any amendments to the Agreement and
Declaration of Trust or Registration Statement, which amendments, upon their
receipt by the Adviser, shall be binding on the Adviser.
(c) Investment Adviser Guidelines. The Adviser shall use act in
accordance with the specific statement of Investment Adviser Guidelines,
SCHEDULE B, as restated or modified from time to time by the Client in written
notice to the Adviser. The Client retains the right, on written notice to the
Adviser, to modify any such objectives, guidelines, restrictions, and liquidity
requirements in any manner at any time.
(d) Conflict in Policies. If a conflict in policies or guidelines
referenced herein occurs, the Registration Statement shall govern for purposes
of this Agreement.
5. CUSTODY, DELIVERY, RECEIPT OF SECURITIES
(a) Custody Responsibilities. The Client shall designate one or more
custodians to hold the Account. The Custodian, as designated by the Client will
be responsible for the custody, receipt and delivery of securities and other
assets of the Funds (including the Account), and the Adviser shall have no
authority, responsibility or obligation with respect to the custody, receipt or
delivery of securities or other assets of the Funds (including the Account). In
the event that any cash or securities of the Funds are delivered to the Adviser,
it will promptly deliver the same over to the Custodian, in the name of the
Funds.
(b) Securities Transactions. All securities transactions for the Account
will be consummated by payment to or delivery by the Funds of cash or securities
due to or from the Account. The Adviser will notify the Custodian of all orders
to brokers for the Account by 9:00 am EST on the day following the trade date
and will affirm the trade within one (1) business day after the trade date
(T+1).
(c) Tri-Party Agreement. The Adviser is authorized to enter into
Tri-Party Repurchase Agreements and sign the standard PSA tri-party agreement
(the "Tri-Party Agreement") on behalf of the Client and the subcustodian
thereunder is authorized to act as a subcustodian for the Account's assets
involved in any tri-party repurchase agreement pursuant to such Tri-Party
Agreement.
6. RECORD KEEPING AND REPORTING
3
<PAGE> 4
(a) Records. Adviser will maintain proper and complete records relating
to the furnishing of services under this Agreement, including records with
respect to the acquisition, holding and disposition of securities for Client.
All records maintained pursuant to this Agreement shall be subject to
examination by Client and by persons authorized by it at all times upon
reasonable notice. Except as expressly authorized in this Agreement or as
required by applicable law, regulation or order of court or as directed by other
party in writing, Adviser and Client shall keep confidential the records and
other information obtained by reason of this Agreement (including, with respect
to Client, the investment information and transactions executed by Adviser).
Upon termination of this Agreement, Adviser shall promptly, upon demand, return
to Client all records Client reasonably believes are necessary in order to
discharge its responsibilities to the Funds. Adviser shall be entitled to retain
originals or copies of records pursuant to the requirements of applicable laws
or regulations.
(b) Quarterly Valuation Reports. Adviser shall use best efforts to
provide to the Client within TEN (10) business days after the end of each
calendar quarter a statement of the fair market value of the Account as of the
close of such quarter together with an itemized list of the assets in the
Account.
(c) Valuation Methodology. For purposes of this Agreement, fair market
value shall mean, as of a particular date, the value of the Account (determined
in accordance with generally accepted accounting principles consistently
applied), plus income accrued thereon less the liabilities related to the assets
in the Account. Adviser shall reconcile security and cash positions, and market
values, and report discrepancies to the Client.
(d) Loss Reimbursement. Adviser shall reimburse the Account for any loss
caused by Adviser's actions that cause delay in the accurate daily pricing of
the Fund(s).
(e) Monthly Reports. Adviser shall provide the Client an itemized report
as to the securities in the account, the fair market value thereof and the
accrued income thereon within FOUR (4) business days after the end of each
Calendar Month. The Adviser shall also use best efforts to provide, in writing,
preliminary performance numbers and a brief explanation of these results within
FIVE (5) business days after the end of each Calendar Month. The requested
format will be as mutually agreed by Adviser and Client. For purposes of this
Agreement, fair market value shall mean, as of a particular date, the value of
the Account plus income accrued thereon less the liabilities related to the
assets in the Account.
(f) Reports on Request. Adviser shall provide to Client promptly upon
request any information available in the records maintained by Adviser relating
to the Account.
4
<PAGE> 5
7. PURCHASE AND SALE OF SECURITIES
(a) Selection of Brokers. Except to the extent otherwise instructed by
Client, (it being understood that Client may, in its absolute discretion, direct
portfolio transactions for which Adviser is responsible to any broker that
Client may see fit), Adviser shall place all orders for the purchase and sale of
securities on behalf of the Client with brokers or dealers selected by Adviser,
but not with a person affiliated with Adviser, as the term "affiliated person"
is defined in the Investment Company Act of 1940 (hereafter an "Affiliate").
(b) Best Execution. In placing such orders, the Adviser will give primary
consideration to obtaining the most favorable price and efficient execution. In
evaluating the terms available for executing particular transactions for Client
and in selecting brokers and dealers to execute such transactions, the Adviser
may consider, in addition to commission cost and execution capabilities, the
financial stability and reputation of brokers and dealers and the brokerage and
research services (as those terms are defined in Section 28(e) of the Securities
Exchange Act of 1934, as amended) provided by brokers and dealers. Adviser is
authorized to pay a broker or dealer who provides such brokerage and research
services a commission for executing a transaction which is in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction if Adviser determines that such commission is reasonable in
relation to the value of the brokerage and research services provided by such
broker or dealer in discharging responsibilities with respect to the Account.
(c) Bunching Orders. Client agrees that Adviser may aggregate sales and
purchase orders of Account with similar orders being made simultaneously for
other accounts managed by Adviser, if in Adviser's reasonable judgment such
aggregation shall result in an overall economic benefit to the Account taking
into consideration the advantageous selling or purchase price, brokerage
commission and other expenses. Client acknowledges that the determination of
such economic benefit to Client by Adviser represents Adviser's evaluation that
client is benefited by relatively better purchase or sales prices, lower
commission expenses and beneficial timing of transactions or a combination of
these and other factors.
8. INVESTMENT FEES
(a) Fee Schedule. The compensation of the Adviser for its services under
this Agreement shall be calculated and paid by the Client from the assets of the
Account in accordance with SCHEDULE C hereto. The Adviser shall send a written
invoice to the Client within 30 days of the quarter end and shall be duly
compensated from the assets of the Account.
5
<PAGE> 6
(b) Fee Computation. The Adviser's fee for each calendar quarter shall be
calculated based on the market value of the average net assets under management
each month for the past four months as provided by the Custodian. The market
value of the net assets will be determined by the Custodian on the last business
day of each calendar month-end. (See example on Schedule C.) The fee will be
calculated at a rate equal to one-fourth of the annual rates specified in
Schedule C.
(c) Fee Amendment. Fee rates may be changed from time to time by
agreement between the Client and the Adviser; provided, however, that no
increase in such rates shall be made during the first calendar year of this
Agreement.
(d) Pro Rata Fee. If the Adviser should serve for less than the whole of
any calendar quarter, its compensation shall be determined as provided above on
the basis of the ending market value of the Account in the month in which the
termination occurs and shall be payable on a pro rata basis for the period of
the calendar quarter for which it has served as Adviser hereunder.
9. BEST EFFORTS; NON-EXCLUSIVITY OF SERVICES
The Adviser shall devote its best efforts and such time as it deems
necessary to provide prompt and expert service to the Client. The services of
Adviser to be provided to Client hereunder are not to be deemed exclusive and
Adviser shall be free to provide similar services for its own account and the
accounts of other persons and to receive compensation for such services. Client
acknowledges that Adviser and its members, Affiliates and employees, and
Adviser's other clients may at any time, have, acquire, increase, decrease, or
dispose of positions in the same investments which are at the same time being
held, acquired for or disposed of under this Agreement for the Client. Adviser
shall have no obligation to acquire or dispose of a position in any investment
pursuant to this Agreement simply because Adviser, its directors, members,
Affiliates or employees invest in such a position for its or their own accounts
or for the account of another client.
6
<PAGE> 7
10. INSIDER TRADING POLICIES AND CODE OF ETHICS
Adviser hereby represents that it has adopted policies that meet the
requirements of Rule 17j-1 under the Investment Company Act of 1940. Copies of
such policies shall be delivered to the Client, and any violation of such
policies by personnel of the Adviser shall be reported to the Client.
11. INSURANCE
At all times during the term of this Agreement, Adviser shall maintain,
at its own cost and expense, professional liability insurance for errors,
omissions, and negligent acts, in an amount and with such terms as are standard
in the financial services industry for an investment adviser managing the amount
of aggregate assets managed by Adviser for Client and for the Adviser's other
clients.
12. LIABILITY
Adviser shall not be liable to Client for honest mistakes of judgment or
for action or inaction taken in good faith for a purpose that the Adviser
reasonably believes to be in the best interests of the Client. Adviser shall be
liable to Client for any liability, damages or expenses of Client arising out of
the negligence, malfeasance or violation of applicable law by Adviser or any of
its officers, employees or Affiliates in providing management under this
Agreement. However, neither this provision nor any other provision of this
Agreement shall constitute a waiver or limitation of any rights which Client may
have under federal or state securities laws.
13. TERM
This Agreement shall be in effect for an initial term of two years
beginning on the Effective Date. This Agreement may be renewed thereafter for
successive one-year periods if such renewal is approved annually by the majority
of those members of the Funds' Board of Directors who are not "interested
persons" as that term is defined in the Investment Company Act of 1940.
14. TERMINATION
This Agreement may be terminated by either party hereto, without the
payment of any penalty, immediately upon notice to the other in the event of a
breach of any provision thereof by the party so notified, or otherwise by
Adviser upon sixty (60) days' written notice to the Client or by Client upon 30
days' written notice to Adviser, except that this Agreement shall automatically
terminate in the event of its assignment, as provided in Paragraph 19, at the
discretion of the Client in the event of Adviser's ownership change as provided
in Paragraph 19, or upon the termination of the Funds. Any termination in
accordance with the terms of this Agreement shall not cause the
7
<PAGE> 8
payment of any penalty. Any such termination shall not affect the status,
obligations or liabilities of any party hereto to the other.
15. REPRESENTATIONS
(a) Adviser hereby confirms to Client that Adviser is registered as an
investment adviser under the Investment Advisers Act of 1940, that it has full
power and authority to enter into and perform fully the terms of this Agreement
and that the execution of this Agreement on behalf of Adviser has been duly
authorized and, upon execution and delivery, this Agreement will be binding upon
Adviser in accordance with its terms.
(b) Client hereby confirms to Adviser that it has full power and
authority to enter into this Agreement and that the execution of this Agreement
on behalf of Client has been fully authorized and, upon execution and delivery,
this Agreement will be binding upon Client in accordance with its terms.
16. NOTICES
Notices or other notifications given or sent under or pursuant to this
Agreement shall be in writing and be deemed to have been given or sent if
delivered to the party at its address listed below in person or by telex or
telecopy receipt of which is confirmed or by mail or by registered mail, return
receipt requested. The addresses of the parties are:
CLIENT:
Vantagepoint Investment Advisers, LLC
Attention: Legal Department
c/o ICMA Retirement Corporation
777 North Capitol Street, NE, Ste. 600
Washington, D.C. 20002-4240
ADVISER:
Payden & Rygel
333 South Grand Avenue
Suite 3250
Los Angeles, California 90071
Attn: Brian Mathews
Each party may change its address by giving notice as herein required.
17. SOLE INSTRUMENT
8
<PAGE> 9
This instrument constitutes the sole and only agreement of the parties to
it relating to its object and correctly sets forth the rights, duties, and
obligations of each party to the other as of its date. Any prior agreements,
promises, negotiations or representations not expressly set forth in this
Agreement are of no force or effect.
18. WAIVER OR MODIFICATION
No waiver or modification of this Agreement shall be effective unless
reduced to a written document signed by the party to be charged. No failure to
exercise and no delay in exercising, on the part of any party hereto, of any
right, remedy, power or privilege hereunder, shall operate as a waiver thereof.
Only the Chief Executive Officer, has authority on behalf of Client to modify or
waive any of the provisions of the Agreement.
19. ASSIGNMENT AND OWNERSHIP CHANGE
This Agreement shall automatically terminate in the event of its
assignment. Adviser agrees to provide immediate written notice in the event of
an ownership change. Such an ownership change will entitle, but not require, the
Client to terminate the Agreement immediately or upon notice.
20. COUNTERPARTS
This Agreement may be executed in counterparts each of which shall be
deemed to be an original and all of which, taken together, shall be deemed to
constitute one and the same instrument.
21. CHOICE OF LAW
This Agreement shall be governed by, and the rights of the parties
arising hereunder construed in accordance with, the laws of the State of
Delaware without reference to principles of conflict of laws.
22. YEAR 2000 WARRANTY
Adviser represents that it is taking all reasonable steps to ensure that
its ability to provide services under this Agreement will not be affected by the
inability of any information technology product it uses to process date data
prior to, during, or after the calendar year 2000 A.D. Adviser has provided to
Client copies of Adviser's Form ADV-Y2K filed with the Securities and Exchange
Commission on December 7, 1998, and Adviser's Year 2000 Readiness Disclosure
dated December 8, 1998.
IN WITNESS WHEREOF, THE PARTIES HERETO EXECUTE THIS AGREEMENT ON March 1, 1999
, 199 and make it effective on the date set forth.
9
<PAGE> 10
CLIENT ADVISER
Vantagepoint Payden and Rygel
Investment Advisers, Inc.
by: by:
/s/ GIRARD MILLER /s/ BRIAN MATTHEWS
- --------------------------- ----------------------------
(signature) (signature)
President Principal
- --------------------------- ----------------------------
(name, title) (name, title)
Date: Date:
10
<PAGE> 11
ADDENDUM DATED March 1, 1999 TO THE
INVESTMENT ADVISORY AGREEMENT DATED _____________
This addendum modifies and forms a part of the Investment Advisory Agreement
(the "Agreement") dated _______________ 1999, between Vantagepoint Investment
Advisers, LLC, a Delaware corporation ("Client"), and Payden and Rygel
("Adviser"), relating to the Vantagepoint Funds ("VF").
All terms used in this Addendum have the same meaning given to them in the
Agreement unless specifically noted otherwise.
1. The assets of the Account to be managed by the Adviser under the Agreement
and this Addendum are assets of the Asset Allocation Fund (the "Fund"), a
portfolio of VF. For purposes of Section 8 (Fees) and Schedule C, all payments
due to Adviser shall be solely made from the assets of the Fund.
2. All references in the Agreement and this Addendum to the Investment Policies
to be followed by Adviser in managing the assets of the Fund are hereby deemed
to include the Investment Policies set forth in the Agreement and any Schedules
to the Agreement, as well as the Fund's current prospectus and statement of
additional information as on file with the Securities and Exchange Commission.
3. The activities of the Client and the Adviser in managing the assets of the
Fund pursuant to the Agreement and this Addendum shall in all instances be
conducted subject to the supervision and direction of the Board of Directors of
VF.
4. For purposes of Sections 8 (Fees), 12 (Liability), 13 (Term), 14
(Termination), 15 (Representation), 16 (Notices), 18 (Waiver or Modification),
19 (Assignment and Ownership Change), and 22 (Year 2000 Warranty) of the
Agreement, as well as for purposes of Schedule C of the Agreement, VF is hereby
made a party to the Agreement and shall be entitled to all notices, protections
and rights set forth in those Sections and in Schedule C to which Client is
entitled.
5. For purposes of the Agreement and this Addendum, Client and Adviser hereby
agree to maintain all books and records relating to VF that are required to be
maintained in accordance with good practice, applicable federal and state
securities laws, including the Investment Company Act of 1940 and or the
Investment Advisers Act of 1940, and such reasonable instructions as shall be
provided to Adviser by Client from time to time.
11
<PAGE> 12
6. Adviser shall furnish Client and the Board of Directors of VF such periodic
and special reports and information as either of them may request, including
such information as shall be reasonably necessary to evaluate the terms of any
advisory agreement between Client and Adviser with respect to assets of VF.
7. For purposes of the Agreement and this Addendum, the value of the assets of
the Fund managed by Adviser shall be calculated in accordance with the
procedures for determining net asset value per share ("NAV") set forth in the
Fund's prospectus and statement of additional information.
8. Section 6 is hereby amended as follows:
a. 6(a) is amended beginning on line 8 and ending on line 9 by deleting the
parentheses and all language with in the parentheses;
b. 6(b) is deleted in its entirety;
c. 6(c) is redesignated 6(b) Reconciliations, the first sentence is deleted;
d. 6(d) is changed to 6(c); and
e. 6(e) is deleted and 6(f) is changed to 6(d).
9. Section 8, Investment Fees, is amended by deleting 8(b) and 8(c) in their
entirety and by redesignating 8(d) as 8(b).
10. Section 15, Representations, is amended by the insertion of 15(c) below:
"(c) Adviser hereby acknowledges that VF is registered as an open end
investment company under the Investment Company Act of 1940 and is
subject to taxation as a regulated investment company under the Internal
Revenue Code; Adviser hereby represents that it is familiar with the
requirements of such laws and the rules and regulations thereunder as
they apply to VF and has systems and procedures in place reasonably
designed to permit Adviser, Client, and VF to comply with such
requirement."
12
<PAGE> 13
SCHEDULE A
THE VANTAGEPOINT FUNDS
ASSET ALLOCATION FUND
STATEMENT OF INVESTMENT POLICIES
These Investment Policies and Guidelines have been adopted by the Vantagepoint
Funds (the "Funds") to govern the management and administration of the Asset
Allocation Fund by Vantagepoint Investment Advisers, LLC ("VIA"). They may be
reviewed and revised at the discretion of the Directors of the Vantagepoint
Funds (the "Directors"). VIA is responsible for the monitoring and appointment
of subadvisers to handle the day-to-day investment of assets assigned to them.
I. GENERAL DESCRIPTION AND GOALS
The Asset Allocation Fund seeks to maximize total return relative to risk
by varying the portfolio's exposure to common stocks, bonds and money
market instruments.
II. STRUCTURE
The assets of the Asset Allocation Fund shall be managed by two or more
subadvisers. The subadvisers may be retained to manage separate accounts
under discretionary investment advisory contracts. Each subadviser will
be selected for its individual investment management expertise and each
will operate independently of the others. Each subadviser must either be
registered with the Securities and Exchange Commission (SEC) under the
Investment Advisers Act of 1940 or a Bank, Insurance Company or Trust
Company exempt as such from registration.
Each subadviser shall exercise complete management discretion over assets
of the Fund allocated to its account in a manner consistent with these
Investment Policies and Guidelines and with such further investment
limitations and conditions as may be recommended by VIA and approved by
the Directors. Subadvisers will be obligated to manage Fund assets as if
they were subject to the fiduciary duty of care that applies under the
Employee Retirement Income Security Act of 1974 (ERISA) governing pension
and profit sharing assets.
17
<PAGE> 14
III. INVESTMENT STRATEGY
VIA will integrate the activities of the Fund's subadvisers to create a
framework in which overall Fund exposure to stocks, bonds, and cash will
be varied in response to changes in criteria including:
- Long-term expected returns
- Historical valuation levels
- Monetary, economic, and other indicators that can be quantified
and measured over long periods of time.
Subadvisers seek to add value by taking advantage of the changes in
relative value and risk among asset classes. Allocation among asset
classes may change dramatically over time. Allocation among asset classes
are often implemented by using futures contracts. Portfolio management of
assets representing each asset class may be active or passive.
IV. PERFORMANCE BENCHMARKS
Performance benchmarks will be established for the Fund. These benchmarks
will be recommended by VIA and adopted by the Directors and will be
reviewed and revised as appropriate from time to time. The current
performance benchmarks for the Fund are appended to this document as
Exhibit I.
V. DIRECTOR REVIEW
VIA will report periodically to the Directors on performance of the Fund
against benchmarks and on subadviser results and will evaluate for the
Directors the overall performance of the Fund relative to its objectives.
The Directors will consider such reports and other relevant factors in
appraising the investment objectives and performance of the Fund.
18
<PAGE> 15
INVESTMENT GUIDELINES
I. ELIGIBLE INVESTMENTS
A. EQUITY SECURITIES: U.S. common stock, preferred stock, common
stock equivalents (units of beneficial interest), American
Depository Receipts, convertible preferred stocks, warrants, and
other rights.
B. CASH/CASH EQUIVALENTS: Money market instruments.
C. FIXED INCOME: U.S. Treasury notes and bonds.
D. FINANCIAL FUTURES: S&P 500 Index futures contracts and U.S.
Treasury note and bond futures contracts.
E ELIGIBLE PRACTICES: There are no restrictions on subadvisers as to
the following:
- Portfolio turnover.
- Realized gains and losses.
F. ELIGIBLE INVESTMENT LIMITS
<TABLE>
<CAPTION>
MINIMUM NORMAL MAXIMUM
------- ------ -------
RANGE
------
<S> <C> <C> <C>
Equity securities 0% 45-80% 100%
Cash and cash equivalents 0% 5-40% 100%
Fixed income 0% 15-30% 50%
</TABLE>
II. PROHIBITED PRACTICES AND SECURITIES
A. Short sales; however, the use of S&P 500 Index futures contracts
and U.S. Treasury note and bond futures contracts to offset
existing exposures is permitted.
B. Options.
C. Commodities except for financial futures. Financial futures may be
used to vary asset class exposure but may not be used to obtain
market leverage or for any other purpose.
19
<PAGE> 16
D. Securities for which there is no established trading market.
E. Foreign securities unless listed and traded in the U.S.
F. Margin purchases and other forms of borrowing; granting of pledges
or other security interests in assets of the Fund,
G. Securities issued by the subadvisers of the Fund or their
affiliates (except as provided in Section 2(a) of the Investment
Advisory Agreement).
H. General partner interests.
I. Direct investments in oil, gas, or other mineral exploration or
development programs.
J. Direct investments in real estate or interests in real estate;
this does not preclude investment in purchases of securities of
real estate investment trusts and other companies holding real
estate or interests in real estate.
K. Commingled funds; this does not preclude investment in mutual
funds up to 10% of the Fund's market value at the time of
purchase.
L. Acquisition of securities that would cause exposure to non-equity
holdings to exceed 35% of the Fund's market value at the time of
purchase.
M. Acquisition of securities that would cause exposure to a single
industry to exceed 25% of the Fund's market value at the time of
purchase.
N. In the absence of prior consent of VIA, acquisition of securities
of an issuer that would cause more than 5% of the Fund to be
invested in such securities.
O. In the absence of prior consent of VIA, acquisition of more than
5% of the outstanding shares of any class of equity securities.
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in Section I or Section II of
these Investment Guidelines may be acquired or employed, as the case may
be, but only if explicitly approved in advance by VIA.
IV. SECURITIES LENDING
20
<PAGE> 17
Nothing herein shall prevent loans of securities in the Asset Allocation
Fund pursuant to an established securities lending program conducted by
the Fund's custodian.
21
<PAGE> 18
EXHIBIT I
TO THE
STATEMENT OF INVESTMENT POLICIES AND GUIDELINES OF
THE ASSET ALLOCATION FUND
MARCH 1, 1999
The following standards will be used to measure the performance of the Asset
Allocation Fund:
A. BENCHMARKS
1. The performance benchmark for the Fund is a composite index
consisting of a 65% allocation to the STANDARD & POOR'S 500 INDEX,
a 25% allocation to the LEHMAN LONG-TERM TREASURY INDEX and a 10%
allocation to the 91-DAY TREASURY BILL. This benchmark will be
used to measure the Fund's performance net of subadviser fees.
2. A peer group benchmark for the Asset Allocation Fund will consist
of mutual funds with characteristics similar to those of the Asset
Allocation Fund. The peer group will be used to measure the Fund's
performance relative to other funds with a similar investment
approach. The peer group benchmark will measure Fund performance
net of all fees and expenses except for the plan administration
fee.
3. The Lipper Flexible Portfolio Index, selected by Lipper Analytical
Services, will serve as the performance benchmark for participant
returns, net of all fees and expenses. In assessing performance
against this benchmark, it will be taken into consideration that
Lipper Analytical Services may change the composition of the
Index.
B. TIME HORIZON
The time horizon for performance measurement will be one, three, and five
years.
One Year:
Performance relative to any benchmark established for the Fund will vary
over one-year periods; such variance over short time periods is expected
and acceptable. However, if such variance is determined to be caused by
systemic issues, action may be appropriate.
22
<PAGE> 19
Three and Five Years:
Performance of the Fund should track market and universe benchmarks more
closely as the evaluation period lengthens. The ideal performance
objective for the Asset Allocation Fund is to exceed the returns of all
relevant benchmarks; however, shortfalls over various time periods should
be expected in some cases. Under-performance against a single benchmark
over an extended period may be acceptable, particularly if other
benchmarks have been exceeded.
C. INVESTMENT CHARACTERISTICS
The investment characteristics of the Asset Allocation Fund will depend
upon subadviser asset allocation, which is intended to maximize
risk-adjusted returns.
23
<PAGE> 20
SCHEDULE B
VANTAGEPOINT INVESTMENT ADVISERS, LLC
ASSET ALLOCATION FUND
INVESTMENT GUIDELINES
FOR
PAYDEN & RYGEL INVESTMENT COUNSEL
MARCH 1, 1999
Payden & Rygel Investment Counsel manages the cash portfolio of the Asset
Allocation Fund, which is used by the tactically allocating subadvisers for
outright cash allocations and for cash that underlies futures positions. Payden
& Rygel seeks to generate a high level of current income while providing
preservation of capital and liquidity.
I. ELIGIBLE INVESTMENTS
A. CASH/CASH EQUIVALENTS: Securities with maturities less than 397
days at time of purchase that are "First Tier" as defined in Rule
2a-7 under the Investment Company Act of 1940.
II. PROHIBITED PRACTICES AND SECURITIES
A. Acquisition of securities that would cause the average maturity
of the portfolio to exceed 90 days. The calculation of average
portfolio maturity will be determined by Rule 2a-7.
B. Acquisition of securities of an issuer (other than obligations of
the U.S. government, its agencies, and instrumentalities) that
would cause more than 5% of the portfolio to be invested in such
securities.
C. Acquisition of securities that would cause exposure to a single
industry to exceed 25% of the portfolio at the time of purchase
(with the exception of the financial services industry). This
restriction does not apply to investment in obligations issued or
guaranteed by the U.S. government, its agencies or
instrumentalities and bank instruments such as certificates of
deposit, bankers acceptances, time deposits, and bank repurchase
agreements.
D. Short sales.
24
<PAGE> 21
E. Options.
F. Commodities.
G. Securities for which there is no established trading market.
H. Foreign securities unless issued and traded in the U.S. All
securities will be denominated in US dollars.
I. Margin purchases and other forms of borrowing; granting of
pledges or other security interests in assets of the portfolio;
use of futures to obtain market leverage.
J. Securities offered by the Adviser or its affiliates.
K. General partner interests.
L. Direct investments in oil, gas, or other mineral exploration or
development programs.
M. Direct investments in real estate or interests in real estate;
this does not preclude investment in purchases of securities of
real estate investment trusts and other companies holding real
estate or interests in real estate.
N. Acquisition of more than 5% of the outstanding shares of any
class of equity securities.
O. Commingled and registered mutual funds.
Exceptions to the above listed eligible investments and prohibited
securities or practices may be permitted with prior consent from VIA.
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in Section I or Section II of
these Investment Guidelines may be acquired or employed, as the case may
be, but only if explicitly approved in advance by VIA.
25
<PAGE> 22
IV. PERFORMANCE BENCHMARK AND MONITORING CRITERIA
The standards outlined in this section are subject to review by VIA as
and when appropriate.
A. PERFORMANCE BENCHMARK
The market benchmark for measuring investment performance for the
Adviser is the IBC ALL TAXABLE INSTITUTIONAL MONEY FUND Average.
The Adviser is expected to outperform the benchmark net of Adviser
fees over rolling one-, three-, and five-year periods.
26
<PAGE> 23
FEE SCHEDULE
FOR
PAYDEN & RYGEL INVESTMENT COUNSEL
The Adviser's quarterly fee shall be calculated based on the average daily
market value of the assets under management as provided by the Custodian, based
on the following annual rate.
$200 million 0.10 percent
Next $100 million 0.09 percent
Over $300 million 0.08 percent
EXAMPLE OF FEE CALCULATION (HYPOTHETICAL AMOUNTS)
January 1, 1999 $190,000,000 End-of-Day Market Value
January 2, 1999 $190,678,462 End-of-Day Market Value
January 3, 1999 $190,796,123 End-of-Day Market Value
. . .
March 29, 1999 $194,512,214 End-of-Day Market Value
March 30, 1999 $194,720,978 End-of-Day Market Value
March 31, 1999 $194,901,556 End-of-Day Market Value
Quarterly Daily Average $192,601,555
$100 million 0.50 percent $500,000
Next $100 million 0.45 percent $416,707
Over $200 million 0.40 percent --------
Annual Fee $916,707
One-Fourth Annual Fee $229,177
27
<PAGE> 1
(d)(24)
INVESTMENT ADVISORY AGREEMENT
This Investment Advisory Agreement is made as of the __________ day of
_______________, 1999 by and between VANTAGEPOINT INVESTMENT ADVISERS, LLC, a
Delaware limited liability company (hereafter "Client"), and SEIX INVESTMENT
ADVISERS at 300 Tice Boulevard, Woodcliff Lake, New Jersey 07675 (hereafter
"Adviser") and is effective as of March 1,1999 (the "Effective Date").
WHEREAS, the Vantagepoint Funds (the "Funds") is a Delaware Business
Trust registered as an open-end management investment company under the
Investment Company Act of 1940;
WHEREAS, Client is party to an Investment Adviser Agreement with the
Funds for management of the investment operations of the Funds including the
establishment and operation of investment portfolios for the Funds and the
entering into of contracts with sub-advisers to assist in managing the
investment of the Funds property;
WHEREAS, Client and Adviser wish to enter into an agreement pursuant to
which Adviser will provide such assistance to Client.
AGREEMENTS:
In consideration of the performance by the Adviser as Investment Adviser
of certain assets held by the Funds, the Client has authorized the Adviser to
manage the securities and other assets as follows:
1. ACCOUNT
The account with respect to which the Adviser shall perform its services
shall consist of those assets of the Funds which the Client determines to assign
to an account with the Adviser, together with all income earned by those assets
and all realized and unrealized capital appreciation related to those assets
(hereafter "Account"). From time to time, the Client may, upon notice to the
Adviser, make additions to the Account and may, upon notice to the Adviser, make
withdrawals from the Account.
2. APPOINTMENT STATUS, POWERS OF ADVISER
(a) Purchase and Sale. Client hereby appoints Adviser to manage the
Account on the terms and conditions set forth in this Agreement. Subject to the
restrictions set forth in this Agreement, and acting always in conformity with
the Investment Policies provided in Paragraph 4, Adviser shall supervise and
direct investment of the Account. Client hereby grants the Adviser complete,
unlimited and unrestricted discretion and authority to select portfolio
securities with respect to the
<PAGE> 2
Account including the power to acquire (by purchase, exchange, subscription or
otherwise), to hold and dispose (by sale, exchange or otherwise). The Adviser
will consult with Client, upon the request of the Client, concerning any
transactions it makes with respect to the investment of the Account.
(b) Limitation on Authority. Except as expressly authorized herein or
hereafter from time to time, Adviser shall for all purposes be deemed an
independent contractor and shall have no authority to act for or to represent
the Client or the Funds in any way or otherwise to be an agent of the Client or
the Funds.
(c) Voting. Unless otherwise instructed by Client, Adviser shall have
discretion to take any action or render any advice with respect to the voting of
shares or the execution of proxies solicited from time to time by, or with
respect to, the issuers of securities held in the Account. Adviser will report
annually to Client regarding such voting.
(d) Key Personnel. Adviser agrees that the following key personnel
have primary responsibility with respect to the investment management of the
Account. If the(se) individual(s) is unable to devote sufficient time to
maintain primary responsibility of the Account, the Adviser must give Client
written advance notice, or prompt notice within three (3) business days, of the
name of the person designated by the Adviser to replace or supplement the
individual(s). In addition, the Adviser will give Client prompt written notice
of the replacement of any employee of the Adviser who has direct supervisory
responsibility for the key personnel or who has responsibility for setting
investment policy.
Key Personnel:
Christina Seix
John Talty
3. ACCEPTANCE OF APPOINTMENT
Adviser accepts the appointment as an investment adviser and agrees to
use its best efforts and professional judgment to make timely investment
transactions for the Client with respect to the investments of the Account, and
to provide the other services required of the Adviser under the provisions of
this Agreement.
4. INVESTMENT POLICIES
(a) Investment Objectives. The Adviser will adhere to the investment
objectives, guidelines, restrictions, and liquidity requirements of the Funds as
specified by the Client on SCHEDULE A hereto, and as restated or modified from
time to time by the Client in written notice to the Adviser.
<PAGE> 3
(b) Funds' Agreement and Declaration of Trust. The Adviser will
adhere to all specific provisions established in the Funds' Agreement and
Declaration of Trust and Registration Statement as filed with the Securities and
Exchange Commission on Form N-1A ("Registration Statement), both of which are
hereby incorporated by reference and made a part of this Agreement. The Client
shall give written notice to the Adviser of any amendments to the Agreement and
Declaration of Trust or Registration Statement, which amendments, upon their
receipt by the Adviser, shall be binding on the Adviser.
(c) Investment Adviser Guidelines. The Adviser shall act in
accordance with the specific statement of Investment Adviser Guidelines,
SCHEDULE B, as restated or modified from time to time by the Client in written
notice to the Adviser. The Client retains the right, on written notice to the
Adviser, to modify any such objectives, guidelines, restrictions, and liquidity
requirements in any manner at any time.
(d) Conflict in Policies. If a conflict in policies or guidelines
referenced herein occurs, the Registration Statement shall govern for purposes
of this Agreement.
5. CUSTODY, DELIVERY, RECEIPT OF SECURITIES
(a) Custody Responsibilities. The Client shall designate one or more
custodians to hold the Account. The Custodian, as designated by the Client will
be responsible for the custody, receipt and delivery of securities and other
assets of the Funds (including the Account), and the Adviser shall have no
authority, responsibility or obligation with respect to the custody, receipt or
delivery of securities or other assets of the Funds (including the Account). In
the event that any cash or securities of the Funds are delivered to the Adviser,
it will promptly deliver the same over to the Custodian, in the name of the
Funds.
(b) Securities Transactions. All securities transactions for the
Account will be consummated by payment to or delivery by the Funds of cash or
securities due to or from the Account. The Adviser will notify the Custodian of
all orders to brokers for the Account by 9:00 am EST on the day following the
trade date and will affirm the trade within one (1) business day after the trade
date (T+1).
(c) Tri-Party Agreement. The Adviser is authorized to enter into
Tri-Party Repurchase Agreements and sign the standard PSA tri-party agreement
(the "Tri-Party Agreement") on behalf of the Client and the subcustodian
thereunder is authorized to act as a subcustodian for the Account's assets
involved in any tri-party repurchase agreement pursuant to such Tri-Party
Agreement.
6. RECORD KEEPING AND REPORTING
<PAGE> 4
(a) Records. Adviser will maintain proper and complete records
relating to the furnishing of services under this Agreement, including records
with respect to the acquisition, holding and disposition of securities for
Client. All records maintained pursuant to this Agreement shall be subject to
examination by Client and by persons authorized by it at all times upon
reasonable notice. Except as expressly authorized in this Agreement or as
required by applicable law, regulation or order of court or as directed by other
party in writing, Adviser and Client shall keep confidential the records and
other information obtained by reason of this Agreement (including, with respect
to Client, the investment information and transactions executed by Adviser).
Upon termination of this Agreement, Adviser shall promptly, upon demand, return
to Client all records Client reasonably believes are necessary in order to
discharge its responsibilities to the Funds. Adviser shall be entitled to retain
originals or copies of records pursuant to the requirements of applicable laws
or regulations.
(b) Quarterly Valuation Reports. Adviser shall use best efforts to
provide to the Client within TEN (10) business days after the end of each
calendar quarter a statement of the fair market value of the Account as of the
close of such quarter together with an itemized list of the assets in the
Account.
(c) Valuation Methodology. For purposes of this Agreement, fair market
value shall mean, as of a particular date, the value of the Account (determined
in accordance with generally accepted accounting principles consistently
applied), plus income accrued thereon less the liabilities related to the assets
in the Account. Adviser shall reconcile security and cash positions , and market
values, and report discrepancies to the Client.
(d) Loss Reimbursement. Adviser shall reimburse the Account for any
loss caused by Adviser's actions that cause delay in the accurate daily pricing
of the Fund(s).
(e) Monthly Reports. Adviser shall provide the Client an itemized
report as to the securities in the account, the fair market value thereof and
the accrued income thereon within FOUR (4) business days after the end of each
Calendar Month. The Adviser shall also use best efforts to provide, in writing,
preliminary performance numbers and a brief explanation of these results within
FIVE (5) business days after the end of each Calendar Month. The requested
format will be as mutually agreed by Adviser and Client. For purposes of this
Agreement, fair market value shall mean, as of a particular date, the value of
the Account plus income accrued thereon less the liabilities related to the
assets in the Account.
(f) Reports on Request. Adviser shall provide to Client promptly upon
request any information available in the records maintained by Adviser relating
to the Account.
7. PURCHASE AND SALE OF SECURITIES
<PAGE> 5
(a) Selection of Brokers. Except to the extent otherwise instructed
by Client, (it being understood that Client may, in its absolute discretion,
direct portfolio transactions for which Adviser is responsible to any broker
that Client may see fit), Adviser shall place all orders for the purchase and
sale of securities on behalf of the Client with brokers or dealers selected by
Adviser, but not with a person affiliated with Adviser, as the term "affiliated
person" is defined in the Investment Company Act of 1940 (hereafter an
"Affiliate").
(b) Best Execution. In placing such orders, the Adviser will give
primary consideration to obtaining the most favorable price and efficient
execution. In evaluating the terms available for executing particular
transactions for Client and in selecting brokers and dealers to execute such
transactions, the Adviser may consider, in addition to commission cost and
execution capabilities, the financial stability and reputation of brokers and
dealers and the brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934, as amended) provided by
brokers and dealers. Adviser is authorized to pay a broker or dealer who
provides such brokerage and research services a commission for executing a
transaction which is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if Adviser determines
that such commission is reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer in discharging
responsibilities with respect to the Account.
(c) Bunching Orders. Client agrees that Adviser may aggregate sales
and purchase orders of Account with similar orders being made simultaneously for
other accounts managed by Adviser, if in Adviser's reasonable judgment such
aggregation shall result in an overall economic benefit to the Account taking
into consideration the advantageous selling or purchase price, brokerage
commission and other expenses. Client acknowledges that the determination of
such economic benefit to Client by Adviser represents Adviser's evaluation that
client is benefited by relatively better purchase or sales prices, lower
commission expenses and beneficial timing of transactions or a combination of
these and other factors.
8. INVESTMENT FEES
(a) Fee Schedule. The compensation of the Adviser for its services
under this Agreement shall be calculated and paid by the Client from the assets
of the Account in accordance with SCHEDULE C hereto. The Adviser shall send a
written invoice to the Client within 30 days of the quarter end and shall be
duly compensated from the assets of the Account.
(b) Fee Computation. The Adviser's fee for each calendar quarter
shall be calculated based on the market value of the average net assets under
management each month for the past four months as provided by the Custodian. The
market value of the net assets will be determined by the Custodian on the last
business day of each
<PAGE> 6
calendar month-end. (See example on Schedule C.) The fee will be calculated at a
rate equal to one-fourth of the annual rates specified in Schedule C.
(c) Fee Amendment. Fee rates may be changed from time to time by
agreement between the Client and the Adviser; provided, however, that no
increase in such rates shall be made during the first calendar year of this
Agreement.
(d) Pro Rata Fee. If the Adviser should serve for less than the whole
of any calendar quarter, its compensation shall be determined as provided above
on the basis of the ending market value of the Account in the month in which the
termination occurs and shall be payable on a pro rata basis for the period of
the calendar quarter for which it has served as Adviser hereunder.
9. BEST EFFORTS; NON-EXCLUSIVITY OF SERVICES
The Adviser shall devote its best efforts and such time as it deems
necessary to provide prompt and expert service to the Client. The services of
Adviser to be provided to Client hereunder are not to be deemed exclusive and
Adviser shall be free to provide similar services for its own account and the
accounts of other persons and to receive compensation for such services. Client
acknowledges that Adviser and its members, Affiliates and employees, and
Adviser's other clients may at any time, have, acquire, increase, decrease, or
dispose of positions in the same investments which are at the same time being
held, acquired for or disposed of under this Agreement for the Client. Adviser
shall have no obligation to acquire or dispose of a position in any investment
pursuant to this Agreement simply because Adviser, its directors, members,
Affiliates or employees invest in such a position for its or their own accounts
or for the account of another client.
10. INSIDER TRADING POLICIES AND CODE OF ETHICS
Adviser hereby represents that it has adopted policies that meet the
requirements of Rule 17j-1 under the Investment Company Act of 1940. Copies of
such policies shall be delivered to the Client, and any violation of such
policies by personnel of the Adviser shall be reported to the Client.
11. INSURANCE
At all times during the term of this Agreement, Adviser shall maintain,
at its own cost and expense, professional liability insurance for errors,
omissions, and negligent acts, in an amount and with such terms as are standard
in the financial services industry for an investment adviser managing the amount
of aggregate assets managed by Adviser for Client and for the Adviser's other
clients.
<PAGE> 7
12. LIABILITY
Adviser shall not be liable to Client for honest mistakes of judgment or
for action or inaction taken in good faith for a purpose that the Adviser
reasonably believes to be in the best interests of the Client. Adviser shall be
liable to Client for any liability, damages or expenses of Client arising out of
the negligence, malfeasance or violation of applicable law by Adviser or any of
its officers, employees or Affiliates in providing management under this
Agreement. However, neither this provision nor any other provision of this
Agreement shall constitute a waiver or limitation of any rights which Client may
have under federal or state securities laws.
13. TERM
This Agreement shall be in effect for an initial term of two years
beginning on the Effective Date. This Agreement may be renewed thereafter for
successive one-year periods if such renewal is approved annually by the majority
of those members of the Funds' Board of Directors who are not "interested
persons" as that term is defined in the Investment Company Act of 1940.
14. TERMINATION
This Agreement may be terminated by either party hereto, without the
payment of any penalty, immediately upon notice to the other in the event of a
breach of any provision thereof by the party so notified, or otherwise by
Adviser upon sixty (60) days' written notice to the Client or by Client upon 30
days' written notice to Adviser, except that this Agreement shall automatically
terminate in the event of its assignment, as provided in Paragraph 19, at the
discretion of the Client in the event of Adviser's ownership change as provided
in Paragraph 19, or upon the termination of the Funds. Any termination in
accordance with the terms of this Agreement shall not cause the payment of any
penalty. Any such termination shall not affect the status, obligations or
liabilities of any party hereto to the other.
15. REPRESENTATIONS
(a) Adviser hereby confirms to Client that Adviser is registered as
an investment adviser under the Investment Advisers Act of 1940, that it has
full power and authority to enter into and perform fully the terms of this
Agreement and that the execution of this Agreement on behalf of Adviser has been
duly authorized and, upon execution and delivery, this Agreement will be binding
upon Adviser in accordance with its terms.
<PAGE> 8
(b) Client hereby confirms to Adviser that it has full power and
authority to enter into this Agreement and that the execution of this Agreement
on behalf of Client has been fully authorized and, upon execution and delivery,
this Agreement will be binding upon Client in accordance with its terms.
16. NOTICES
Notices or other notifications given or sent under or pursuant to this
Agreement shall be in writing and be deemed to have been given or sent if
delivered to the party at its address listed below in person or by telex or
telecopy receipt of which is confirmed or by mail or by registered mail, return
receipt requested. The addresses of the parties are:
CLIENT:
Vantagepoint Investment Advisers, LLC
Attention: Legal Department
c/o ICMA Retirement Corporation
777 North Capitol Street, NE, Ste. 600
Washington, D.C. 20002-4240
ADVISER:
Seix Investment Advisors
300 Tice Boulevard
Woodcliff Lake, New Jersey 07675
Attn: John Talty
Each party may change its address by giving notice as herein required.
17. SOLE INSTRUMENT
This instrument constitutes the sole and only agreement of the parties
to it relating to its object and correctly sets forth the rights, duties, and
obligations of each party to the other as of its date. Any prior agreements,
promises, negotiations or representations not expressly set forth in this
Agreement are of no force or effect.
18. WAIVER OR MODIFICATION
No waiver or modification of this Agreement shall be effective unless
reduced to a written document signed by the party to be charged. No failure to
exercise
<PAGE> 9
and no delay in exercising, on the part of any party hereto, of any right,
remedy, power or privilege hereunder, shall operate as a waiver thereof. Only
the Chief Executive Officer, has authority on behalf of Client to modify or
waive any of the provisions of the Agreement.
19. ASSIGNMENT AND OWNERSHIP CHANGE
This Agreement shall automatically terminate in the event of its
assignment. Adviser agrees to provide immediate written notice in the event of
an ownership change. Such an ownership change will entitle, but not require, the
Client to terminate the Agreement immediately or upon notice.
20. COUNTERPARTS
This Agreement may be executed in counterparts each of which shall be
deemed to be an original and all of which, taken together, shall be deemed to
constitute one and the same instrument.
21. CHOICE OF LAW
This Agreement shall be governed by, and the rights of the parties
arising hereunder construed in accordance with, the laws of the State of
Delaware without reference to principles of conflict of laws.
22. YEAR 2000 WARRANTY
(a) Adviser warrants that all software or other information
technology product used by Adviser or by Adviser's vendors, subcontractors, or
agents, that is to be used in the performance of Adviser's obligations under
this Agreement, is designed to be used prior to, during, and after the calendar
year 2000 A.D. Adviser further warrants that said software or other information
technology product will operate during such time period without error relating
to date data, specifically including any error relating to, or the product of,
date data which represents or references different centuries or more than one
century.
(b) Adviser shall indemnify and hold Client harmless from and against
any cost, loss, damage or expense (including reasonable attorney fees) incurred
by Client as a result of a breach of subsection (a) of this section 22.
IN WITNESS WHEREOF, THE PARTIES HERETO EXECUTE THIS AGREEMENT ON
<PAGE> 10
March 1, 1999 and make it effective on the date set forth.
CLIENT ADVISER
Vantagepoint Seix Investment Advisers
Investment Advisers, LLC
by: by:
/s/ GIRARD MILLER /s/ CHRISTINA SEIX
- ------------------------- ------------------------
(signature) (signature)
President Chairman
- ------------------------- ------------------------
(name, title) (name, title)
Date: Date:
<PAGE> 11
ADDENDUM DATED March 1, 1999 TO THE
INVESTMENT ADVISORY AGREEMENT DATED _____________
This addendum modifies and forms a part of the Investment Advisory Agreement
(the "Agreement") dated _______________ 1999, between Vantagepoint Investment
Advisers, LLC, a Delaware corporation ("Client"), and Seix Investment Advisers
("Adviser"), relating to the Vantagepoint Funds ("VF").
All terms used in this Addendum have the same meaning given to them in the
Agreement unless specifically noted otherwise.
1. The assets of the Account to be managed by the Adviser under the Agreement
and this Addendum are assets of the U.S. Treasury Securities Fund (the "Fund"),
a portfolio of VF. For purposes of Section 8 (Fees) and Schedule C, all payments
due to Adviser shall be solely made from the assets of the Fund.
2. All references in the Agreement and this Addendum to the Investment Policies
to be followed by Adviser in managing the assets of the Fund are hereby deemed
to include the Investment Policies set forth in the Agreement and any Schedules
to the Agreement, as well as the Fund's current prospectus and statement of
additional information as on file with the Securities and Exchange Commission.
3. The activities of the Client and the Adviser in managing the assets of the
Fund pursuant to the Agreement and this Addendum shall in all instances be
conducted subject to the supervision and direction of the Board of Directors of
VF.
4. For purposes of Sections 8 (Fees), 12 (Liability), 13 (Term), 14
(Termination), 15 (Representation), 16 (Notices), 18 (Waiver or Modification),
19 (Assignment and Ownership Change), and 22 (Year 2000 Warranty) of the
Agreement, as well as for purposes of Schedule C of the Agreement, VF is hereby
made a party to the Agreement and shall be entitled to all notices, protections
and rights set forth in those Sections and in Schedule C to which Client is
entitled.
5. For purposes of the Agreement and this Addendum, Client and Adviser hereby
agree to maintain all books and records relating to VF that are required to be
maintained in accordance with good practice, applicable federal and state
securities laws, including the Investment Company Act of 1940 and or the
Investment Advisers Act of 1940, and such reasonable instructions as shall be
provided to Adviser by Client from time to time.
<PAGE> 12
6. Adviser shall furnish Client and the Board of Directors of VF such periodic
and special reports and information as either of them may request, including
such information as shall be reasonably necessary to evaluate the terms of any
advisory agreement between Client and Adviser with respect to assets of VF.
7. For purposes of the Agreement and this Addendum, the value of the assets of
the Fund managed by Adviser shall be calculated in accordance with the
procedures for determining net asset value per share ("NAV") set forth in the
Fund's prospectus and statement of additional information.
8. Section 6 is hereby amended as follows:
a. 6(a) is amended beginning on line 8 and ending on line 9 by deleting the
parentheses and all language with in the parentheses;
b. 6(b) is deleted in its entirety;
c. 6(c) is redesignated 6(b) Reconciliations, the first sentence is deleted;
d. 6(d) is changed to 6(c); and
e. 6(e) is deleted and 6(f) is changed to 6(d).
9. Section 8, Investment Fees, is amended by deleting 8(b) and 8(c) in their
entirety and by redesignating 8(d) as 8(b).
10. Section 15, Representations, is amended by the insertion of 15(c) below:
"(c) Adviser hereby acknowledges that VF is registered as an open end
investment company under the Investment Company Act of 1940 and is subject
to taxation as a regulated investment company under the Internal Revenue
Code; Adviser hereby represents that it is familiar with the requirements
of such laws and the rules and regulations thereunder as they apply to VF
and has systems and procedures in place reasonably designed to permit
Adviser, Client, and VF to comply with such requirement."
<PAGE> 13
SCHEDULE A
THE VANTAGEPOINT FUNDS
INTERNATIONAL FUND
STATEMENT OF INVESTMENT POLICIES
These Investment Policies and Guidelines have been adopted by the Vantagepoint
Funds (the "Funds") to govern the management and administration of the
International Fund by Vantagepoint Investment Advisers, LLC ("VIA"). They may be
reviewed and revised at the discretion of the Directors of the Vantagepoint
Funds (the "Directors"). VIA is responsible for the monitoring and appointment
of subadvisers to handle the day-to-day investment of assets assigned to them.
I. GENERAL DESCRIPTION AND GOALS
The International Fund seeks long-term growth of capital by
investing at least 65% of its total assets in securities of
companies whose principal place of business is located in countries
other than in the United States. The Fund will invest primarily in
equity securities, however, debt securities of foreign governments
and private issuers are permitted. The Fund may invest in securities
payable in any currency and may hold foreign currency.
II. STRUCTURE
The assets of the International Fund shall be managed by two or more
subadvisers. The subadvisers may be retained to manage separate
accounts under discretionary investment advisory contracts. Each
subadviser will be selected for its individual investment management
expertise and each will operate independently of the others. Each
subadviser must either be registered with the Securities and
Exchange Commission (SEC) under the Investment Advisers Act of 1940
or a Bank, Insurance Company or Trust Company exempt as such from
registration.
Each subadviser shall exercise complete management discretion over
assets of the Fund allocated to its account in a manner consistent
with these Investment Policies and Guidelines and with such further
investment limitations and conditions as may be recommended by VIA
and approved by the Directors. Subadvisers will be obligated to
manage Fund assets as if they were subject to the fiduciary duty of
care that applies under the Employee Retirement Income Security Act
of 1974 (ERISA) governing pension and profit sharing assets.
<PAGE> 14
III. INVESTMENT STRATEGY
VIA shall select subadvisers that represent a variety of portfolio
management approaches and investment disciplines. These investment
approaches will be combined in a complementary manner to effectively
achieve the investment objective of the Fund. The Fund as a whole
will be more diversified than each individual subadviser's
portfolio.
Investment philosophies incorporated in the International Fund may
include "top-down" approaches which focus on macro-economic and
political events. Judgment, quantitative models and purchasing power
parity models are among the factors used to identify currencies and
markets that are overvalued or undervalued relative to the U.S.
dollar. The Fund subadvisers may also use "bottom-up" strategies
which emphasize company and industry dynamics. The future prospects
of growth in earnings per share, security valuation and dividend
considerations of companies will be among the investment criteria of
those subadvisers. Investments may include:
- non-U.S. and U.S. equity securities of large-, mid- and
small-cap companies,
- equity securities in emerging markets,
- securities issued by companies that are "distressed" or
"out of favor",
- futures contracts.
The Fund's performance may be significantly affected by changes in
foreign currency exchange rates.
Certain of the above strategies are not permitted or their use is
limited under the Investment Guidelines for the individual
subadvisers.
IV. PERFORMANCE BENCHMARKS
Performance benchmarks will be established for the Fund. These
benchmarks will be recommended by VIA and adopted by the Directors
and will be reviewed and revised as appropriate from time to time.
The current performance benchmarks for the Fund are appended to this
document as Exhibit I.
V. DIRECTOR REVIEW
VIA will report periodically to the Directors on performance of the
Fund against benchmarks and on subadviser results and will evaluate
for the Directors the overall performance of the Fund relative to
its objectives. The Directors will consider such reports and other
relevant factors in appraising the investment objectives and
performance of the Fund.
<PAGE> 15
INVESTMENT GUIDELINES
I. ELIGIBLE INVESTMENTS
A. EQUITY SECURITIES: Foreign and domestic common stock
(including shares of closed-end funds) or ordinary
shares, preferred stock, common stock equivalents (units
of beneficial interest), American Depository Receipts,
convertible preferred stocks, warrants, and other
rights.
B. CASH/CASH EQUIVALENTS: Foreign and domestic fixed
income obligations with maturity less than one year, or
short term accounts managed by a custodian institution.
C. FIXED INCOME: Foreign and domestic fixed income and
convertible fixed income securities with maturities
greater than one year.
D. FINANCIAL FUTURES: Equity index and currency futures.
E. ELIGIBLE PRACTICES: There are no restrictions on
subadvisers as to the following:
- Portfolio turnover.
- Realized gains and losses.
F. ELIGIBLE INVESTMENT LIMITS
<TABLE>
<CAPTION>
MINIMUM NORMAL RANGE MAXIMUM
------- ------------ -------
<S> <C> <C> <C>
Non-U.S. equity securities 65% 85-100% 100%
U.S. equity securities 0% 0-15% 35%
Cash and cash equivalents 0% 0-15% 35%
Fixed income securities 0% 0-10% 25%
Convertible securities 0% 0-15% 25%
</TABLE>
II. PROHIBITED PRACTICES AND SECURITIES
A. Short sales
B. Options
C. Commodities (excluding financial and currency futures)
D. Securities for which there is no established trading market.
16
<PAGE> 16
E. Securities issued by the subadviser of the Fund or its
affiliates.
F. General partner interests.
G. Direct investments in oil, gas, or other mineral exploration or
development programs.
H. Direct investments in real estate or interests in real estate;
this does not preclude investment in purchases of securities of
real estate investment trusts and other companies holding real
estate or interests in real estate.
I. Commingled funds; this does not preclude investment in mutual
funds up to 10% of the Fund's market value at the time of
purchase.
J. Acquisition of securities that would cause exposure to a single
industry to exceed 25% of the Fund's market value at the time of
purchase.
K. In the absence of prior consent of VIA, acquisition securities of
an issuer that would cause more than 5% of the Fund to be
invested in such securities.
L. In the absence of prior consent of VIA, acquisition of more than
5% of the outstanding shares of any class of equity securities.
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in Section I or Section
II of these Investment Guidelines may be acquired or employed, as
the case may be, but only if explicitly approved in advance by VIA.
IV. SECURITIES LENDING
Nothing herein shall prevent loans of securities in the
International Fund pursuant to an established securities lending
program conducted by the Fund's custodian.
17
<PAGE> 17
EXHIBIT I
TO THE
STATEMENT OF INVESTMENT POLICIES AND GUIDELINES OF
THE INTERNATIONAL FUND
MARCH 1, 1999
The following standards will be used to measure the performance of the
International Fund:
A. BENCHMARKS
1. The performance benchmark for the Fund is the MSCI EUROPE,
AUSTRALIA, AND FAR EAST (EAFE) INDEX. This benchmark will be
used to measure the Fund's performance net of subadviser fees.
2. A peer group benchmark for the Fund will consist of mutual funds
with characteristics similar to the Fund. The peer group will be
used to measure the Fund's performance relative to other funds
with a similar investment approach. The peer group benchmark will
measure Fund performance net of all fees and expenses except for
plan administration fee.
3. The Lipper International Index, selected by Lipper Analytical
Services, will serve as the performance benchmark for participant
returns, net of all fees and expenses. In assessing performance
against this benchmark, it will be taken into consideration that
Lipper Analytical Services may change the composition of the
Index.
B. TIME HORIZON
The time horizon for performance measurement will be one, three, and
five years.
One Year:
Performance relative to any benchmark established for the International
Fund will vary widely over one-year periods; such variance over short
time periods is expected and acceptable. However, if such variance is
determined to be caused by systemic issues, action may be appropriate.
18
<PAGE> 18
Three and Five Years:
Performance of the International Fund should track market and universe
benchmarks more closely as the evaluation period lengthens. The ideal
performance objective for the International Fund is to exceed the
returns of all relevant benchmarks; however, shortfalls over various
time periods should be expected in some cases. Underperformance against
a single benchmark over an extended period may be acceptable,
particularly if other benchmarks have been exceeded.
C. INVESTMENT CHARACTERISTICS
The Fund may have investment characteristics which differ from the
general international equity market as measured by the MSCI EAFE index.
Because of the broad mandate given subadvisers in the International
Fund, investment characteristics may be expected to vary widely.
However, the beta of the Fund may be higher than the MSCI EAFE Index.
19
<PAGE> 19
FEE SCHEDULE
FOR
SEIX INVESTMENT ADVISORS
The Adviser's quarterly fee shall be calculated based on the average daily
market value of the assets under management as provided by the Custodian, based
on the following annual rate.
$25 million 0.17 percent
Next $50 million 0.12 percent
Next $25 million 0.07 percent
Over $100 million Negotiable
EXAMPLE OF FEE CALCULATION (HYPOTHETICAL AMOUNTS)
January 1, 1999 $190,000,000 End-of-Day Market Value
January 2, 1999 $190,678,462 End-of-Day Market Value
January 3, 1999 $190,796,123 End-of-Day Market Value
. . .
March 29, 1999 $194,512,214 End-of-Day Market Value
March 30, 1999 $194,720,978 End-of-Day Market Value
March 31, 1999 $194,901,556 End-of-Day Market Value
Quarterly Daily Average $192,601,555
$100 million 0.50 percent $500,000
Next $100 million 0.45 percent $416,707
Over $200 million 0.40 percent ---------
Annual Fee $916,707
One-Fourth Annual Fee $229,177
20
<PAGE> 1
EXHIBIT h
TRANSFER AGENCY AND ADMINISTRATIVE SERVICES AGREEMENT
This Agreement made as of this 1st day of March, 1999, by and between The
Vantagepoint Funds, a Delaware Business Trust (the "Fund") and Vantagepoint
Transfer Agents, LLC, a Delaware limited liability company (the "Transfer
Agent").
WHEREAS, the Fund desires to appoint the Transfer Agent as its transfer agent,
dividend disbursing agent, and agent in connection with shareholder services and
certain other activities, and the Transfer Agent desires to accept such
appointment.
WHEREAS, the Transfer Agent is duly registered as a transfer agent as provided
in Section 17A(c) of the Securities Exchange Act of 1934, as amended (the "1934
Act");
WHEREAS, the Fund is authorized to issue shares in separate series, with each
such series representing interests in a separate portfolio of securities and
other assets;
WHEREAS, the Fund initially intends to offer shares in the series listed in
Appendix A hereto;
NOW THEREFORE, in consideration of the mutual covenants herein set forth, the
Fund and the Transfer Agent hereby agree as follows:
1. TERMS OF APPOINTMENT; DUTIES OF TRANSFER AGENT
Subject to the terms and conditions set forth in this agreement, the
Fund hereby employs and appoints the Transfer Agent to act, and the
Transfer Agent agrees to act, as transfer agent for each of the Fund's
series of authorized and issued shares of beneficial interest
("shares"), dividend disbursing agent, and agent with respect to
certain other administrative services as described herein.
Transfer Agent agrees that it will provide the following services:
(a) Administer and perform the customary services of a transfer
agent, acting as agent in connection with dividend
disbursement and distribution functions; and performing
administrative functions in connection with the issuance,
transfer and redemption of shares of the Fund in accordance
with the terms of the Fund's prospectus, applicable law, any
procedures that may be established from time-to-time by the
Fund, and any applicable law.
(b) Recording the issuance of shares and maintaining according to
the requirements of the 1934 Act a record of the total number
of shares of each series of the Fund that are issued and
outstanding.
<PAGE> 2
(c) Maintain a record of the number of shares held by each
shareholder of record which shall include name, address,
taxpayer identification number and account transaction
history.
(d) Maintaining records and performing services for the
shareholder participants of 457, 401 and other retirement
plans that are shareholders of the Fund ("participants"), as
set forth in Appendix B hereto.
(e) Notwithstanding any of the foregoing provisions of this
agreement, Transfer Agent shall be under no duty to or
obligation to inquire into, and shall not be liable for (i)
the legality of the issuance or sale of the Fund's shares;
(ii) the legality of the redemption of any Fund shares; or
(iii) the legality of the declaration of any dividend by the
Board of Directors of the Fund.
(f) Transfer Agent shall create and maintain all records required
of it pursuant to its duties hereunder, and as set forth in
Appendix B in accordance with all applicable laws, rules and
regulations, including records required by Section 31(a) of
the Investment Company Act of 1940 (the "1940 Act") and the
rules thereunder.
(g) The records preserved hereunder shall be the sole property of
the Fund, and will be surrendered promptly to the Fund at its
request.
(h) Promptly respond to any inquiries from shareholders or
participants relating to accounts.
(i) Address and mail to shareholders and participants all reports,
account statements, dividend notices and proxy materials,
process and tabulate returned proxy cards, act as inspector of
election at shareholder meetings and certify shares voted at
such meetings.
(j) Process new accounts, additional purchases, allocate investor
payments among series of the Fund, process redemption requests
and effect the delivery of redemption proceeds,
transfer/exchange shares between series upon the receipt of
proper instructions.
(k) Upon the declaration of any dividend or capital gain by the
Board of Directors of the Fund, the fund shall provide the
Transfer Agent with a certified resolution detailing the date
of the declaration of the dividend, the ex-dividend date, the
date of payment thereof, the record date as of which
shareholders shall be entitled to payment shall be determined
and the total amount payable per share on the payment date.
2
<PAGE> 3
Upon receipt of such resolution from the Fund, Transfer Agent
shall take any necessary steps to effect the payment of the
dividend or capital gain as specified therein.
(l) Transfer Agent shall prepare and file the appropriate
information returns concerning the payment of dividend and
capital gain distributions on behalf of the Fund with the
proper Federal, state and local authorities as are required by
law.
(m) Perform any and all functions reasonably necessary to support
the duties specified herein or in any exhibit hereto.
2. COMPENSATION.
The Fund will compensate the Transfer Agent for the performance of its
obligations hereunder the amount of .35% of average net assets. Any
compensation agreed to hereunder may be adjusted from time to time,
upon the approval of the Fund's Board of Directors.
3. INDEMNIFICATION.
The Fund shall indemnify and hold Transfer Agent harmless from and
against any and all claims, costs, expenses, losses, damages and
liabilities of any sort which may be asserted against Transfer Agent or
for which Transfer Agent may be held liable arising from the actions of
the Transfer Agent required to be taken hereunder unless such claim has
resulted from the willful malfeasance, bad faith or gross negligence of
the Transfer Agent of the reckless disregard of its duties hereunder.
4. LIMITATION OF LIABILITY.
Transfer Agent shall at all times act in good faith and agrees to use
its best efforts within commercially reasonable limits to ensure the
accuracy of all services performed hereunder. Transfer Agent shall not
be responsible for losses or damages to the Fund unless said losses or
damages are caused by Transfer Agent's willful malfeasance, bad faith,
gross negligence or reckless disregard of its duties hereunder.
5. TERM OF AGREEMENT.
This Agreement shall be effective on the date first written above and
shall continue for a period of two years (the "Initial Term"). Upon the
expiration of the Initial Term, this agreement shall renew for
successive two year terms, subject to the approval of the Fund's Board
of Directors.
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The agreement may be terminated by either party upon 50 days prior
written notice. The agreement may be terminated immediately by the Fund
upon its assignment, as that term is defined in the 1940 Act, by the
Transfer Agent.
6. ADDITIONAL SERIES.
In the event that the Fund establishes one or more additional series of
shares, the Fund shall notify the Transfer Agent and Appendix A hereto
shall be amended to reflect such additional series.
7. CONFIDENTIALITY/OWNERSHIP.
In the course of its performance under this Agreement, Transfer Agent
may have access to confidential information about the Fund, including
but not limited to information concerning its shareholders or
participants. Such information shall be considered confidential and
proprietary to the Fund, and shall not be published or disclosed to any
third party by the Transfer Agent without the prior consent of the
Fund.
In the course of the performance of this Agreement by the Transfer
Agent, it may create reports, marketing materials, or other materials
relating to the Fund. Transfer Agent agrees that sole ownership rights
to such materials shall reside with the Fund.
8. SUBCONTRACTING.
Duties of the Transfer Agent under this Agreement may be subcontracted
to a third party only upon the approval of the Fund's Board of
Directors.
9. GOVERNING LAW.
The laws of the State of Delaware shall govern the interpretation,
validity and enforcement of this Agreement.
The Vantagepoint Funds
By: /s/
------------------------------------
Vantagepoint Transfer Agent
By: /s/
------------------------------------
4
<PAGE> 1
EXHIBIT i
April 25, 2000
The Vantagepoint Funds
777 North Capitol Street, N.E.
Suite 600
Washington, DC 20002
Re: Opinion of Counsel regarding Post-Effective Amendment No. 4 to the
Registration Statement filed on Form N-1A under the Securities Act
of 1933 (File No. 333-60789).
Ladies and Gentlemen:
We have acted as counsel to The Vantagepoint Funds, a Delaware business trust
(the "Trust"), in connection with the above-referenced Registration Statement
(as amended, the "Registration Statement") which relates to the Trust's units of
beneficial interest, without par value (collectively, the "Shares"). This
opinion is being delivered to you in connection with the Trust's filing of
Post-Effective Amendment No. 4 to the Registration Statement (the "Amendment")
to be filed with the Securities and Exchange Commission pursuant to Rule 485(b)
of the Securities Act of 1933 (the "1933 Act"). With your permission, all
assumptions and statements of reliance herein have been made without any
independent investigation or verification on our part except to the extent
otherwise expressly stated, and we express no opinion with respect to the
subject matter or accuracy of such assumptions or items relied upon.
In connection with this opinion, we have reviewed, among other things, executed
copies of the following documents:
(a) a certificate of the State of Delaware as to the
existence and good standing of the Trust;
(b) the Agreement and Declaration of Trust for the Trust and
all amendments and supplements thereto (the "Declaration
of Trust");
(c) a certificate executed by Paul F. Gallagher, Secretary
of the Trust, certifying as to, and attaching copies of,
the Trust's Declaration of Trust and By-Laws
<PAGE> 2
The Vantagepoint Funds
April 25, 2000
Page 2
(the "By-Laws"), and all amendments and supplements
thereto, and certain resolutions adopted by the Board of
Trustees of the Trust authorizing the issuance of the
Shares; and
(d) a printer's proof of the Amendment.
In our capacity as counsel to the Trust, we have examined the originals, or
certified, conformed or reproduced copies, of all records, agreements,
instruments and documents as we have deemed relevant or necessary as the basis
for the opinion hereinafter expressed. In all such examinations, we have assumed
the legal capacity of all natural persons executing documents, the genuineness
of all signatures, the authenticity of all original or certified copies, and the
conformity to original or certified copies of all copies submitted to us as
conformed or reproduced copies. As to various questions of fact relevant to such
opinion, we have relied upon, and assume the accuracy of, certificates and oral
or written statements of public officials and officers or representatives of the
Trust. We have assumed that the Amendment, as filed with the Securities and
Exchange Commission, will be in substantially the form of the printer's proof
referred to in paragraph (d) above.
Based upon, and subject to, the limitations set forth herein, we are of the
opinion that the Shares, when issued and sold in accordance with the Declaration
of Trust and By-Laws, and for the consideration described in the Registration
Statement, will be legally issued, fully paid and nonassessable under the laws
of the State of Delaware.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not concede that we are in
the category of persons whose consent is required under Section 7 of the 1933
Act.
Very truly yours,
/s/ MORGAN, LEWIS & BOCKIUS LLP
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Post-Effective
Amendment No. 4 (File No. 333-60789) to the registration statement on Form N-1A
("Registration Statement") of our report dated February 25, 2000 relating to the
financial statements and financial highlights which appears in the December 31,
1999 Annual Reports to Shareholders of The Vantagepoint Funds, which is also
incorporated by reference in this Registration Statement.
We also consent to the reference to us under the headings "Financial Highlights"
in the Prospectus and "Legal Counsel, Independent Auditors and Custodian" and
"Financial Statements" in the Statement of Additional Information.
PricewaterhouseCoopers LLP
Baltimore, Maryland
April 27, 2000
<PAGE> 1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Vantagepoint Funds:
We consent to the use of our report dated February 11, 2000 for Bond Index
Master Portfolio, Extended Index Master Portfolio, International Index Master
Portfolio, S&P 500 Index Master Portfolio and U.S. Equity Master Portfolio (five
portfolios of Master Investment Portfolio) incorporated by reference herein.
KPMG LLP
San Francisco, California
April 26, 2000
<PAGE> 1
EXHIBIT P
THE VANTAGEPOINT FUNDS
INSIDER TRADING POLICY UNDER RULE 17j-1
OF THE
INVESTMENT COMPANY ACT OF 1940
I. GENERAL POLICY
The Vantagepoint Funds (the "Funds") is an open-end investment
company that is registered under the Investment Company Act of 1940 (the "1940
Act").
This policy is intended to meet the requirements of Rule 17j-1 of
the 1940 Act, and it is based on the principle that all persons associated with
the Funds owe a fiduciary duty to the shareholders of the Funds to conduct their
affairs, including their personal securities transactions, in such a manner as
to avoid: (i) serving their own personal interests ahead of the interests of the
Funds' shareholders; (ii) taking advantage of their position; and (iii) any
actual or potential conflicts of interest.
Federal law prohibits the knowing or reckless purchase or sale of a
security by an individual based on material, non-public information. It is also
illegal to communicate such information to anyone in connection with a purchase
or sale of a security. It is the policy of the Funds that all associates (as
defined below), as well as members of the Board of Directors of the Funds and
the Board of Directors of the ICMA Retirement Corporation ("RC"), must comply
with laws and regulations relating to the use of material non-public
information. If an associate or a director acquires information as a result of a
special or a confidential relationship with an issuer, that person shall not
communicate the information or take investment action based on such information.
EACH PERSON SUBJECT TO THIS POLICY HEREBY AGREES TO ABIDE BY ITS
TERMS.
This policy extends to all affiliates of The Vantagepoint Funds and
to the ICMA Retirement Trust. The effective date of this policy is ___________,
1999. Please direct any questions to Paul Gallagher, Secretary of the Funds.
II. DEFINITIONS.
1. FUND. Any series of The Vantagepoint Funds, collectively
referred to as the "Funds."
2. BOARD OF DIRECTORS. The Board of Directors of The Vantagepoint
Funds, individually, "Directors." The Board of Directors of
the ICMA Retirement
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Corporation is referred to herein as the "RC Board." The Board
of Trustees of the ICMA Retirement Trust is referred to herein
as the "Trust Board".
3. ASSOCIATE. Any employee of the ICMA Retirement Corporation
("RC").
4. INVESTMENT PERSONNEL. All Associates in RC's Investments
Division or Financial Operations group or any person who makes
decisions or otherwise participates in the purchase or sale of
securities for the Funds, or obtains prior or contemporaneous
information regarding the purchase or sale of securities for
the Funds or otherwise interacts with subadvisers.
5. SPECIAL PURPOSE INVESTMENT PERSONNEL. Any Associate or member
of the Board of Directors of either the Funds or RC who, by
virtue of his or her position, may to be in a position from
time to time to obtain prior or contemporaneous information
regarding the purchase or sale of securities for the Funds.
6. SUBADVISER. Any individual or firm that contracts with the
Funds or with Vantagepoint Investment Advisers ("VIA") to
manage any portion of the Funds' assets for compensation.
7. COMPLIANCE OFFICER. Such person or persons who may be
designated from time to time by the President of the Funds to
administer the provisions of this policy.
8. SECURITY. Shall have the same meaning as set forth in Section
2(a) (36) of the 1940 Act, including any stock or bond, but
does not include securities issued by the government of the
United States or any government agency, bankers' acceptances,
bank certificates of deposit, commercial paper, such other
money market instruments as may be designated by the Board of
Directors, and shares of open-end investment companies. A
security is "being purchased or sold" from the time when a
purchase or sale on behalf of the Funds has been recommended,
or communicated to the person who places buy and sell orders
on behalf of the Fund, by a subadviser to the time that such
transaction has been completed or terminated.
9. BENEFICIAL OWNERSHIP. Shall be interpreted in the same manner
as it would be in determining whether a person is subject to
the provisions of Section 16 of the Securities Exchange Act of
1934 and the rules and regulations thereunder, except that the
determination of direct or indirect beneficial ownership shall
apply to all securities (as defined herein) which a person
owns or acquires.
"Beneficial ownership" is generally understood to include
those securities from which a person enjoys some economic
benefits which are substantially equivalent to ownership
regardless of who is the registered owner. This would include:
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Insider Trading Policy
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(i) securities which a person holds for his or her own benefit in
bearer form, registered in his or her own name or otherwise,
regardless of whether the securities are owned individually or
jointly;
(ii) securities held in the name of his or her spouse or minor
children;
(iii) ultimate ownership rights to securities held by a trustee,
executor or administrator or by custodians, brokers or
relatives;
(iv) securities owned by a partnership or limited liability company
of which the person is a general partner or managing member;
(v) a person's proportionate share of securities owned through an
investment club or similar organization;
(vi) securities held by a corporation which can be regarded as a
personal holding company;
(vii) securities recently purchased by a person and awaiting
transfer to his or her name.
10. AFFILIATES. Affiliates include the ICMA Retirement Corporation;
Vantagepoint Investment Advisers, LLC; Vantagepoint Transfer Agents,
LLC; ICMA-RC Services, LLC; and, any subsidiaries of such companies
that may be organized in the future.
III. RESTRICTIONS ON PERSONAL SECURITIES TRANSACTION
When buying or selling securities Directors, Officers or Associates may
not employ any device, scheme, or artifice to defraud, mislead or manipulate the
Funds or their shareholders.
A. THE FOLLOWING RESTRICTIONS SHALL APPLY SPECIFICALLY TO INVESTMENT
PERSONNEL
1. BLACKOUT PERIODS. Investment Personnel may not purchase or
sell, directly or indirectly, any security within 5 days
before or after the time that the same security is purchased
or sold by the Funds (subject to the exception set forth in
Section IV for index funds).
2. SHORT-TERM TRADING. Investment Personnel may not generally
realize a profit from the purchase and sale of the same
security within a period of sixty days. It is recognized that
short-term trading is not dispositive of whether an individual
is trading on inside information. Accordingly, Investment
Personnel may apply to the Compliance Officer for an exception
from this provision, which will be granted if the Compliance
Officer reasonably
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believes that the trade is not based on inside information and
has no potential to harm the Funds or their shareholders.
3. INITIAL PUBLIC OFFERINGS. Investment Personnel shall not
acquire a security in an initial public offering.
4. BOARDS OF DIRECTORS. Investment Personnel may not serve on the
Board of Directors of any publicly traded company unless such
service has been previously approved by the President of RC
and the President of the Funds.
5. SHORT SALES. Investment Personnel shall not engage in short
sales of securities.
B. THE FOLLOWING RESTRICTION SHALL APPLY TO SPECIAL PURPOSE INVESTMENT
PERSONNEL
If any such person gains actual prior or contemporaneous knowledge of a
current fund trade, such person shall not trade in the security or
securities that are the subject of such trade for a period of 5 days.
SPECIAL PURPOSE INVESTMENT PERSONNEL ARE NOT SUBJECT TO THE RESTRICTIONS
THAT APPLY TO INVESTMENT PERSONNEL, AS DESCRIBED ABOVE.
C. THE FOLLOWING RESTRICTIONS SHALL APPLY TO ALL ASSOCIATES WITH
RESPECT TO ANY SECURITY IN WHICH THEY HOLD RIGHTS OF BENEFICIAL
OWNERSHIP AS DEFINED HEREIN
Associates may not purchase or sell the securities of any company that has
a substantial business relationship with the Funds, RC, or any of their
affiliates.
IV. EXEMPTED TRANSACTIONS.
The prohibitions and reporting requirements contained in this policy shall
not apply to:
1. Purchases or sales effected in any account over which the person has
no direct or indirect influence or control.
2. Purchases or sales of any open-end investment company shares.
3. Purchases or sales which are non-volitional.
4. Purchases which are part of an automatic dividend reinvestment plan.
5. Purchases effected upon the exercise of rights issued by an issuer
pro rata to all holders of a class of securities, to the extent that
such rights were acquired from such issuer, and sales of such rights
so acquired.
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6. Purchases and sales of securities corresponding with purchases and
sales of the same securities by a Vantagepoint index fund.
7. Any purchase or sale of securities which has been determined, upon
investigation by the Compliance Officer, to present no reasonable
likelihood or potential for harm to the Funds or their shareholders.
8. Any purchase or sale involving $1,000 or less.
V. PRIOR APPROVAL AND REPORTING
This policy recognizes the fact that The Vantagepoint Funds employ a
subadvisory structure in which all investment decisions are made by
non-affiliated subadvisers, and that Associates are not responsible for placing
buy and sell orders on behalf of the Funds.
In addition to the specific requirements set forth above, the following
requirements shall apply to securities transactions by Associates, Investment
Personnel and Special Purpose Investment Personnel, as noted:
1. PRIOR APPROVAL. Investment Personnel shall receive prior approval
from the Compliance Officer before purchasing or selling securities.
2. CERTIFICATION. Special Purpose Investment Personnel shall certify to
the Compliance Officer that they did not possess actual prior or
contemporaneous knowledge regarding the purchase or sale of such
security by the Funds at the time that they engaged in a personal
securities transaction. Such certification shall be made on or about
the last day of any quarter in which such person engaged in a
transaction. SPECIAL PURPOSE INVESTMENT PERSONNEL ARE NOT SUBJECT TO
THE PRIOR APPROVAL REQUIREMENT SET FORTH ABOVE.
3. REPORTING.
(i) Investment Personnel shall report all personal securities
holdings to the Compliance Officer as of the effective date of
this policy and, thereafter, on an annual basis as of December
31.
(ii) Every person covered by this policy shall certify annually
that they have read and understand this policy; that they have
complied with its requirements; and that they have reported
all securities transactions required to be reported pursuant
to this policy.
(iii) Investment Personnel who have purchased or sold securities
during any calendar quarter, shall file a report with the
Compliance Officer within 10 days of the end of such quarter.
Such report shall include the date of the
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transaction; the nature of the transaction (i.e.-purchase or
sale); the price at which the transaction was effected; and
the name of the broker or dealer with or through whom the
transaction was effected.
VI. BOARD REVIEW
1. The President of the Funds shall report all violations of this
policy to the Board of Directors, the RC Board and to the
Trust Board at the board meeting following such violation.
2. An annual report relating to this policy shall be presented to
the Board of Directors, the RC Board, and the Trust Board, and
such report shall:
(i) summarize existing procedures concerning personal
investing and any changes in the procedures made during
the year. Identify any violations requiring significant
remedial action during the past year; and
(ii) identify any recommended changes in existing
restrictions or procedures based on the Funds'
experience under this policy, evolving industry
practices, or developments in applicable laws or
regulations.
VIII. SANCTIONS
Upon discovering a violation of this policy, the Board of Directors
may impose such sanctions as they deem appropriate, including but not limited
to, forfeiture of profits, a letter of censure, or suspension or termination
from employment.
IX. RETENTION OF RECORDS
This policy, a copy of each report filed by Associates, any written
report relating to the interpretation of this policy, or violations hereunder,
shall be preserved with the records of the Funds for the period required by Rule
17j-1, as amended.
Dated: ___________________________, 1999
6
