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
XXXX-XXXXX XXXXXXX INTERNATIONAL, INC., at 000 Xxxx Xxxxx Xxxxxx, Xxxxxxxxx,
Xxxxxxxx 00000 (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
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
XXX Xxxx Xxxxxxxxxx - Xxxxx 0, 0000
0
(x) 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.
XXX Xxxx Xxxxxxxxxx - Xxxxx 0, 0000
0
(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
XXX Xxxx Xxxxxxxxxx - Xxxxx 0, 0000
0
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. XXXXXXX XXXXXXX 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
XXX Xxxx Xxxxxxxxxx - Xxxxx 0, 0000
0
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
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:
XXX Xxxx Xxxxxxxxxx - Xxxxx 0, 0000
8
CLIENT:
Vantagepoint Investment Advisers, LLC
Attention: Legal Department
c/o ICMA Retirement Corporation
000 Xxxxx Xxxxxxx Xxxxxx, XX, Xxx. 000
Xxxxxxxxxx, X.X. 00000-0000
ADVISER:
Xxxx-Xxxxx Xxxxxxx International, Inc.
Attention: Xxxxx X. Xxxxxxx, Esq.
c/o X. Xxxx Price Associates, Inc.
000 X. Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
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
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 Xxxx-Xxxxx Xxxxxxx International, Inc.
Investment Advisers, LLC
by: by:
/s/ XXXXXX XXXXXX /s/ XXXXX X. XXXXXXX
----------------------------- ----------------------------
(signature) (signature)
President Managing Director
----------------------------- ----------------------------
(name, title) (name, title)
Date: Date:
XXX Xxxx Xxxxxxxxxx - Xxxxx 0, 0000
00
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 Xxxx-Xxxxx Xxxxxxx
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;
XXX Xxxx Xxxxxxxxxx - Xxxxx 0, 0000
00
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."
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.
XXX Xxxx Xxxxxxxxxx - Xxxxx 0, 0000
00
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.
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
MINIMUM NORMAL RANGE MAXIMUM
------- ------------ -------
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%
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
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
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
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
18
SCHEDULE B
VANTAGEPOINT INVESTMENT ADVISERS, LLC
INTERNATIONAL FUND
INVESTMENT GUIDELINES
FOR
XXXX XXXXX-XXXXXXX INTERNATIONAL, INC.
XXXXX 0, 0000
Xxxx Xxxxx-Xxxxxxx 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:
MINIMUM NORMAL RANGE MAXIMUM
------- ------------ -------
Equity securities 80% 90%-100% 100%
Cash and cash equivalents 0% 0%-10% 15%
Fixed income securities 0% 0%-10% 15%
II. PROHIBITED PRACTICES AND SECURITIES
A. Short sales.
B. Options unless used for currency management.
C. Commodities (including financial futures).
18
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
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)
20
21
SCHEDULE C
VANTAGEPOINT INVESTMENT ADVISERS, LLC
FEE SCHEDULE
FOR
XXXX-XXXXX XXXXXXX 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
