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 XXXXXX AND RYGEL at
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxxxxx, 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:
Xxxx X. Xxxxxx
Xxxxx X. Xxxxxxx
Xxxxx X. Xxxx
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
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
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
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 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
7
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 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
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
000 Xxxxx Xxxxxxx Xxxxxx, XX, Xxx. 000
Xxxxxxxxxx, X.X. 00000-0000
ADVISER:
Xxxxxx & Rygel
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx Xxxxxxx
Each party may change its address by giving notice as herein required.
17. SOLE INSTRUMENT
8
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
10
CLIENT ADVISER
Vantagepoint Xxxxxx and Rygel
Investment Advisers, Inc.
by: by:
/s/ XXXXXX XXXXXX /s/ XXXXX XXXXXXXX
--------------------------- ----------------------------
(signature) (signature)
President Principal
--------------------------- ----------------------------
(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 _______________ 1999, between Vantagepoint Investment
Advisers, LLC, a Delaware corporation ("Client"), and Xxxxxx 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
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.
17
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
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 MAXIMUM
------- ------ -------
RANGE
------
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.
19
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
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
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.
22
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
20
SCHEDULE B
VANTAGEPOINT INVESTMENT ADVISERS, LLC
ASSET ALLOCATION FUND
INVESTMENT GUIDELINES
FOR
XXXXXX & RYGEL INVESTMENT COUNSEL
MARCH 1, 1999
Xxxxxx & 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. Xxxxxx
& 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
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
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
23
FEE SCHEDULE
FOR
XXXXXX & 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
