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 0000 Xxxxx Xxxxxx, Xxxxx Xxxxxx, Xxxxxxxxxx 00000 (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
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:
Xxxxxx X. Xxxxxxx
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
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
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
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
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. 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, 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
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
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
000 Xxxxx Xxxxxxx Xxxxxx, XX, Xxx. 000
Xxxxxxxxxx, X.X. 00000-0000
ADVISER:
Wilshire Asset Management
0000 Xxxxx Xxxxxx
Xxxxx Xxxxxx, 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
8
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
10
/s/ XXXXXX XXXXXX /s/ XXXXXX X. XXXXXXX
----------------------- --------------------------
(signature) (signature)
President Senior Vice President
----------------------- --------------------------
(name, title) (name, title)
Date: Date:
10
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
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
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
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
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
MINIMUM NORMAL RANGE MAXIMUM
------- ------------ -------
Equity securities 0% 45-80% 100%
Cash and cash equivalents 0% 5-40% 100%
Fixed income 0% 15-30% 50%
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
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
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
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 XXXXXX LONG-TERM TREASURY INDEX
and a 10% allocation to the 91-DAY TREASURY XXXX. 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
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
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
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
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
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.
$100 million 0.04 percent
Next $400 million 0.02 percent
Over $500 million 0.01 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
24
