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EXHIBIT (d)(26)
INVESTMENT SUBADVISORY AGREEMENT
This Investment Subadvisory Agreement is made as of the 26th day of
October, 2000, by and between THE ICMA RETIREMENT CORPORATION, a Delaware
corporation (hereafter "Client") and PACIFIC INVESTMENT MANAGEMENT COMPANY LLC,
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000 (hereafter
"Subadviser"), and is effective as of October 26th, 2000 (the "Effective Date").
WHEREAS, Client serves as investment adviser to the ICMA Retirement
Trust (the "Trust"), which provides for the commingled investment of the assets
of certain retirement plans that are administered by the Client;
WHEREAS, Client and Subadviser wish to enter into a subadvisory
agreement pursuant to which Subadviser will provide such assistance to Client.
AGREEMENTS:
In consideration of the performance by the Subadviser as Investment
Subadviser of certain Trust assets, the Client has authorized the Subadviser to
manage the securities and other assets as follows:
1. ACCOUNT
The account with respect to which the Subadviser shall perform its
services shall consist of those assets of the VantageTrust Income Preservation
Fund (the "Fund") that the Client determines to assign to an account with the
Subadviser, together with all income earned by those assets and all realized and
unrealized capital appreciation related to those assets (hereafter "Account").
From time to time, the Client may, upon notice to the Subadviser, make additions
to or withdrawals from the Account.
2. APPOINTMENT STATUS, POWERS OF SUBADVISER
(a) Purchase and Sale. Client hereby appoints Subadviser to manage the
Account on the terms and conditions set forth in this Agreement. Subject to the
restrictions set forth in this Agreement, and acting always in conformity with
the Investment Policies provided in Paragraph 4, Subadviser shall supervise and
direct investment of the Account. Client hereby grants the Subadviser complete,
unlimited and unrestricted discretion and authority to select portfolio
securities with respect to the Account including the power to acquire (by
purchase, exchange, subscription or otherwise), to hold and to dispose (by sale,
exchange or otherwise). The Subadviser
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will consult with Client, upon the request of the Client concerning any
transactions it makes with respect to the investment of the Account.
(b) Limitation on Authority. Except as expressly authorized herein or
hereafter from time to time, Subadviser shall for all purposes be deemed an
independent contractor and shall have no authority to act for or to represent
the Client or the Fund in any way or otherwise to be an agent of the Client or
the Fund. The activities of Client and Subadviser in managing the assets of the
VantageTrust Income Preservation Fund shall in all instances be conducted
subject to the supervision and direction of the Board of Trustees of the Trust.
(c) Voting. Unless otherwise instructed by Client, Subadviser shall have
discretion to take any action or render any advice with respect to the voting of
shares or the execution of proxies solicited from time to time by, or with
respect to, the issuers of securities held in the Account. Subadviser will
report annually to Client regarding such voting.
(d) Key Personnel. Subadviser agrees that the following key personnel
have a primary responsibility with respect to the investment management of the
Account. If the(se) individual(s) is unable to devote sufficient time to
maintain primary responsibility of the Account, the Subadviser must give Client
written advance notice, or prompt notice within three (3) business days, of the
name of the person designated by the Subadviser to replace or supplement the
individual(s). In addition, the Subadviser will give Client written notice of
the replacement of any employee of the Subadviser who has direct supervisory
responsibility for the key personnel or who has responsibility for the key
personnel or who has responsibility for setting investment policy as soon as
reasonably practicable.
Key Personnel: XXXX XXXXX
3. ACCEPTANCE OF APPOINTMENT
Subadviser accepts the appointment as an investment Subadviser and
agrees to use its reasonable best efforts and professional judgment to make
timely investment transactions for the Client with respect to the investments of
the Account, and to provide the other services required of the Subadviser under
the provisions of this Agreement.
4. INVESTMENT POLICIES
(a) Investment Objectives. Subject to the supervision of the Trust's
Board of Trustees and the Client, the Subadviser shall direct the investments of
the Account in accordance with the Fund's investment objectives, policies, and
restrictions as provided in The Retirement Investment Guide of the Trust, as
currently in effect and as amended or supplemented from time to time, and such
other limitations as the Fund or Client may reasonably impose by written notice
to the Subadviser or as set forth in SCHEDULE A.
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(b) Trust's Declaration of Trust. The Subadviser will adhere to all
specific provisions relating to the investment of the Account established in the
Trust's Declaration of Trust which is hereby incorporated by reference and made
a part of this Agreement. The Client shall give written notice to the Subadviser
of any amendments to the Declaration of Trust, which amendments, upon their
receipt by the Subadviser, shall be binding on the Subadviser.
(c) Investment Subadviser Guidelines. The Subadviser shall act in
accordance with The Retirement Investment Guide, and in accordance with the
limitations set forth in the specific statement of Investment Adviser
Guidelines, SCHEDULE B, as restated or modified from time to time by the Client
in written notice to the Subadviser. The Client retains the right, on written
notice to the Subadviser, to modify any such objectives, guidelines,
restrictions, and liquidity requirements in any manner at any time. Subadviser
is authorized on behalf of the Account to enter into agreements and execute any
documents required to make investments pursuant to the investment guidelines
attached as Schedule B hereto, as such schedule may be amended from time to
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
asset of the Fund (including the Account). The Subadviser shall have no
authority, responsibility or obligation with respect to the custody, receipt or
delivery of securities or other assets of the Fund (including the Account). In
the event that any cash or securities of the Fund are delivered to the
Subadviser, it will promptly deliver the same over to the custodian, in the name
of the Fund.
(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 Fund of cash or securities due to or from the Account. The
Subadviser will make all reasonable efforts to notify the custodian of all
orders to brokers for the Account by 9:00 am EST on the day following the trade
date and will affirm the trade within the close of business one (1) business day
after the trade date (T+1).
(c) Tri-Party Agreement. The Subadviser is authorized to enter into
Tri-Party Agreements and sign the standard PSA tri-party agreement (the
"Tri-Party Agreement") on behalf of the Client and the sub-custodian thereunder
is authorized to act as a sub-custodian for the Account's assets involved in any
tri-party repurchase agreement pursuant to such Tri-Party Agreement.
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6. RECORD KEEPING AND REPORTING
(a) Records. Subadviser will maintain proper and complete records
relating to the furnishing of services under this Agreement, including records
with respect to the acquisition, holding and disposition of securities for
Client that are required of an investment adviser pursuant to the Investment
Advisers Act of 1940, and the rules thereunder, and in accordance with such
reasonable instructions as shall be provided to Subadviser by Client from time
to time. All records maintained pursuant to this Agreement shall be subject to
examination by Client and by persons authorized by it during normal business
hours upon reasonable notice. Except as expressly authorized in this Agreement
or as required by applicable law, regulation or order of court or as directed by
other party in writing, Subadviser and Client shall keep confidential the
records and other information obtained by reason of this Agreement. Upon
termination of this Agreement, Subadviser shall promptly, upon demand, return to
Client all records Client reasonably believes are necessary in order to
discharge its responsibilities to the Fund. Subadviser shall be entitled to
retain originals or copies of records pursuant to the requirements of applicable
laws or regulations.
(b) Reconciliations. Subadviser shall reconcile security and cash
positions, and market values on a monthly basis to the custodian's records and
report discrepancies to the Client by ten (10) business days after the end of
the month.
(c) Loss Reimbursement. Subadviser shall reimburse the Account for any
material error to the Fund's net asset value caused by Subadviser's breach of
its standard of care set forth in Section 12 that is a direct cause of a delay
in the accurate daily pricing of the Fund(s), provided such loss was not the
result of action or inaction of other service providers to the Client or the
Fund.
(d) Reports. Subadviser shall furnish Client and the Board of Trustees
of the Trust such periodic and special reports and information as either of them
may request, including such information as shall be reasonably necessary to
evaluate the terms of any advisory agreement between Client and Subadviser with
respect to the assets of the VantageTrust Income Preservation Fund.
(e) Other Reports on Request. Subadviser shall provide to Client
promptly upon request any information available in the records maintained by
Subadviser relating to the Account.
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 direct
portfolio transactions for which Subadviser is responsible to any broker that
Client may see fit), Subadviser shall place all orders for the purchase and sale
of securities on behalf of the Client with brokers or
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dealers selected by Subadviser. Subadviser shall not be liable for any act or
omission of any securities brokerage firm or firms designated by the Client or
chosen with reasonable care.
(b) Best Execution. In placing such orders, the subadviser will
give primary consideration to obtaining the most favorable price and efficient
execution reasonably available under the circumstances. In evaluating the terms
available for executing particular transactions for Client and in selecting
brokers and dealers to execute such transactions, the Subadviser may consider,
in addition to commission cost and execution capabilities, the financial
stability and reputation of brokers and dealers and the brokerage and research
services (as those terms are defined in Section 28(e) of the Securities Exchange
Act of 1934, as amended) provided by brokers and dealers. Subadviser is
authorized to pay a broker or dealer who provides such brokerage and research
services a commission for executing a transaction which is in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction if Subadviser determines in good faith that such commission is
reasonable in relation to the value of the brokerage and research services
provided by such broker and dealer in discharging responsibilities with respect
to the Account or to other client accounts as to which it exercises investment
discretion.
(c) Bunching Orders. Client agrees that Subadviser may aggregate sales
and purchase orders of Account with similar orders being made simultaneously for
other accounts managed by Subadviser, if in Subadviser's reasonable judgment
such aggregation shall result in an overall economic benefit or more efficient
execution to the Account taking into consideration the advantageous selling or
purchase price, brokerage commission and other expenses. Client acknowledges
that the determination of such economic benefit to the Fund by Subadviser
represents Subadviser's evaluation that the Account is benefited by relatively
better purchase or sales prices, lower commission expenses and beneficial timing
of transactions or a combination of these and other factors. In such event,
allocation of the securities so purchased or sold, as well as expenses incurred
in the transaction, will be made by the Subadviser in a manner the Subadviser
considers to be most equitable and consistent with its fiduciary obligations to
the Fund and to its other clients.
(d) Futures and Options. The Subadviser's investment authority shall
include the authority to purchase, sell, cover open positions, and generally to
deal in financial futures contracts and options thereon, in accordance with the
Investment Adviser Guidelines. The Client will: (i) open and maintain brokerage
accounts for financial futures and options (such accounts hereinafter referred
to as "brokerage accounts") on behalf of and in the name of the Account and (ii)
execute for and on behalf of the Account, standard customer agreements with a
broker or brokers. The Subadviser may, using such of the securities and other
property in the Account as the Subadviser deems necessary or desirable, direct
the custodian to deposit on behalf of the Account, original maintenance
brokerage deposits and otherwise direct payments of cash, cash equivalents and
securities and other property into such brokerage accounts and to such brokers
as the Subadviser deems desirable or appropriate. The Subadviser has
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delivered to the Client a copy of its Disclosure Document, as amended, dated
June 15, 2000, on file with the Commodity Futures Trading Commission. The Client
hereby acknowledges receipt of such copy.
(e) Delivery of Part II of Form ADV. Concurrently with the execution
of this Agreement, the Subadviser is delivering to the Client a copy of
Part II of its Form ADV, as revised, on file with the Securities and Exchange
Commission. The Client acknowledges receipt of such copy.
8. INVESTMENT FEES
(a) Fee Schedule. The compensation of the Subadviser for its services
under this Agreement shall be calculated and paid by the Client from the assets
of the Account in accordance with SCHEDULE C hereto.
(b) For purposes of this Section 8 and Schedule C, all payments due to
Subadviser shall be solely made from the assets of the Fund.
(c) Pro Rata Fee. If the Subadviser should serve for less than the whole
of any calendar quarter, its compensation shall be determined as provided above
on the basis of the average market value of the Account in the quarter in which
the initial funding or termination occurs and shall be payable on a pro rata
basis for the period of the calendar quarter for which it has served as
Subadviser hereunder.
9. BEST EFFORTS; NON-EXCLUSIVITY OF SERVICES
The Subadviser shall devote its best efforts and such time as it deems
necessary to provide prompt and expert service to the Client. The services of
Subadviser to be provided to Client hereunder are not to be deemed exclusive and
Subadviser shall be free to provide similar services for its own account and the
accounts of other persons and to receive compensation for such services. Client
acknowledges that Subadviser and its members, Affiliates and employees, and
Subadviser's other clients may at any time, have, acquire, increase, decrease,
or dispose of positions in the same investments which are at the same time being
held, acquired for or disposed of under this Agreement for the Fund. Subadviser
shall have no obligation to acquire or dispose of a position in any investment
pursuant to this Agreement simply because Subadviser, its directors, members,
Affiliates or employees invest in such a position for its or their own accounts
or for the account of another client.
10. XXXXXXX XXXXXXX POLICIES ANDCODE OF ETHICS
Subadviser hereby represents that it has adopted policies that meet the
requirements of Rule 17j-1 under the Investment Company Act of 1940. Copies of
such
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policies shall be delivered to the Client upon request, and any material
violation of such policies by personnel of the Subadviser who are "access
persons" with respect to the Account shall be reported to the Client.
11. INSURANCE
At all times during the term of this Agreement, Subadviser shall
maintain, at its own cost and expense, professional liability insurance for
errors, omissions, and negligent acts, in an amount equal to at least $25
million and with such terms as are standard in the financial services industry.
12. LIABILITY
In the absence of any gross negligence, malfeasance, or willful
violation of this Agreement, Subadviser shall not be liable to Client for honest
mistakes of judgment or for action or inaction taken in good faith for a purpose
that the Subadviser reasonably believes to be in the best interests of the
Client or the Fund. However, neither this provision nor any other provision of
this Agreement shall constitute a waiver or limitation of any rights which
Client may have under federal or state securities laws. The Subadviser is
expressly authorized to rely upon any and all instructions, approvals and
notices given on behalf of the Client by any one or more of those persons
designated as representatives of the Fund whose names, titles and specimen
signatures appear in SCHEDULE D attached hereto. The Client may amend such
Schedule D from time to time by written notice to the Subadviser. The Subadviser
shall continue to rely upon these instructions until notified by the Client to
the contrary.
13. TERM
This Agreement shall be in effect for an initial term of one year
beginning on the Effective Date.
14. TERMINATION
This Agreement may be terminated by either party hereto, without the
payment of any penalty, immediately upon notice to the other in the event of a
material breach of any provision thereof by the party so notified if such breach
shall not have been cured within a twenty (20) day period after notice of such
breach, or otherwise by Subadviser upon sixty (60) days' written notice to the
Client or by the Client upon thirty (30) days' written notice to Subadviser,
except that this Agreement shall automatically terminate in the event of its
assignment, as provided in Paragraph 19, at the discretion of the Client in the
event of Subadviser's change in control as provided in Paragraph 19, upon the
termination of the Fund, or upon termination of Client's advisory agreement with
the Fund. Any termination in accordance with the terms of this Agreement shall
not cause
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the payment of any penalty. Any such termination shall not affect the status,
obligations or liabilities of any party hereto to the other.
15. REPRESENTATIONS
(a) Subadviser hereby confirms to Client that Subadviser is registered
as an investment adviser under the Investment Advisers Act of 1940, that it has
full power and authority to enter into and perform fully the terms of this
Agreement and that the execution of this Agreement on behalf of Subadviser has
been duly authorized and, upon execution and delivery, this Agreement will be
binding upon Subadviser in accordance with its terms.
(b) Client hereby confirms to Subadviser that it is registered as an
investment adviser under the Investment Advisers Act of 1940, that it has full
power and authority to enter into this Agreement and that the execution of this
Agreement on behalf of Client has been fully authorized and, upon execution and
delivery, this Agreement will be binding upon Client in accordance with its
terms.
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:
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ICMA Retirement Corporation
Attention: Xxxx Xxxxxxxxx, Legal Department
000 Xxxxx Xxxxxxx Xxxxxx, XX, Xxxxx 000
Xxxxxxxxxx, XX 00000-0000
SUBADVISER:
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Pacific Investment Management Company LLC
Attention: Xxxxx Xxxxx, Executive Vice President
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
cc: Chief Legal Officer
Each party may change its address by giving notice as herein required.
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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 the client to modify
or waive any of the provisions of the Agreement. It is understood that certain
material amendments may require approval of the Fund's shareholders.
19. ASSIGNMENT AND CHANGE IN CONTROL
This Agreement shall automatically terminate in the event of its
assignment. Subadviser agrees to provide immediate written notice in the event
of a change in control. Such a change in control will entitle, but not require,
the Client to terminate the Agreement immediately or upon notice.
20. COUNTERPARTS
This Agreement may be executed in counterparts each of which shall be
deemed to be an original and all of which, taken together, shall be deemed to
constitute one and the same instrument.
21. CHOICE OF LAW
This Agreement shall be governed by, and the rights of the parties
arising hereunder construed in accordance with, the laws of the State of
Delaware without reference to principles of conflict of laws and the 1940 Act,
the latter shall control.
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IN WITNESS WHEREOF, THE PARTIES HERETO EXECUTE THIS AGREEMENT ON
October 26th, 2000, and make it effective on the date set forth.
CLIENT SUBADVISER
ICMA Retirement Corporation Pacific Investment Management Company LLC
by: by:
/s/ XXXXXX XXXXXX /s/ XXXXX X. XXXXXX
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(Signature) (Signature)
---------------------------- Xxxxx X. Xxxxxx LEGAL
Xxxxxx Xxxxxx, President Managing Director MVP
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Date: October 26, 2000 Date: October 26, 2000
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SCHEDULE A
ICMA RETIREMENT TRUST
VANTAGETRUST INCOME PRESERVATION FUND
STATEMENT OF POLICIES AND GUIDELINES
These Polices and Guidelines apply to the VantageTrust Income Preservation
Fund until all assets have been transferred to the Vantagepoint Income
Preservation Fund.
These investment polices and guidelines have been adopted by the ICMA
Retirement Trust (the "Trust") pursuant to Section 2.2 of the Declaration of
Trust to govern the management and administration of the VantageTrust Income
Preservation Fund of the Trust by the ICMA Retirement Corporation (the
"Retirement Corporation"). They may be reviewed and revised at the discretion
of the Trustees of the Trust. The VantageTrust Income Preservation Fund's
investment administration is under the supervision of the Retirement
Corporation, which is responsible for the monitoring and appointment of
subadvisers to handle the day-to-day investment of assets assigned to them.
These Investment Policies and Guidelines cover two different matters:
1. They set forth criteria to be applied by the Retirement Corporation
in the selection of investment contracts; these criteria are referred
to as "Fund Level" policies and guidelines;
2. They also set forth criteria that should be applied to the management
of asset portfolios in Participating Contracts; these criteria are
referred to as "Portfolio Level" policies and guidelines.
INVESTMENT POLICIES
I. INVESTMENT OBJECTIVE
The VantageTrust Income Preservation Fund seeks stable returns while
preserving principal.
II. STABLE VALUE INVESTMENTS
Stable value investment contracts are financial instruments negotiated by the
Retirement Corporation (RC) for the benefit of the Trust with approved
contract issuers. A stable value contract entails a promise to pay a stated
rate of interest on a principal amount for an agreed upon period of time. The
time to maturity and the interest paid may be fixed or variable as negotiated.
Stable value contracts as negotiated by RC, provide liquidity for required
redemptions, e.g., benefit withdrawals and transfers to other fund options.
Participant initiated redemptions are honored at book value; for that reason,
such contracts are termed "benefit responsive" and are valued at all times at
original principal
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plus accrued interest regardless of fluctuations in market interest rates.
This is referred to as "book value," an accounting treatment.
Amounts paid to honor redemption requests initiated by Plans, as distinguished
from Participants, may be less than invested principal based on market
conditions at the time of withdrawal.
There are types of stable value investment contracts in which the Trust may
invest: Non-Participating and Participating. The term "participating" refers
to the whether or not a contract's interest rate reflects the actual
investment performance of the assets in which the principal is invested.
THE VANTAGETRUST INCOME PRESERVATION FUND WILL INVEST IN PARTICIPATING
SYNTHETIC CONTRACTS ONLY.
PARTICIPATING CONTRACTS: In Participating contracts, the amount of interest
paid is determined by the actual investment performance of an identified
separate portfolio of high quality, marketable securities, in which the
contract is invested. The term to maturity can be a fixed period of time or an
indefinite period with specified termination provisions.
Examples of typical Participating contracts are actively managed insurance
company separate accounts and "synthetic" contracts consisting of a portfolio
of securities managed by an investment subadviser with the benefit payments at
book value underwritten by a qualified financial institution.
The principal distinction between separate account contracts and synthetic
contracts is the ownership of the assets supporting the contracts. With a
separate account contract, the contract issuer is the legal owner of all
contract assets. In a synthetic contract, the Trust is the legal owner of the
separate portfolio of marketable securities.
III. STRUCTURE
The assets of the VantageTrust Income Preservation Fund are managed by the
ICMA Retirement Corporation which selects investment subadvisers and
investment contracts (wrappers) for the fund. Selection of participating
investment contracts will ordinarily entail review and approval of a
subadviser to manage the underlying contract portfolio. Each subadviser must
either be registered with the Securities and Exchange Commission (SEC) under
the Investment Advisers Act of 1940 or be a Bank, Insurance Company or Trust
Company exempted as such from registration.
IV. INVESTMENT STRATEGY
A. FUND LEVEL STRATEGY
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The Retirement Corporation is expected to seek requisite yield,
interest rate responsiveness, diversification and liquidity. The
Fund's assets will be allocated in a manner that achieves these
objectives. The selected subadvisers should be able to add value over
passive benchmarks selected by the Retirement Corporation on a net of
fee basis.
B. PORTFOLIO LEVEL STRATEGY
The Retirement Corporation is expected to seek a variety of applicable
fixed income management approaches and investment disciplines to
obtain a complementary commingling of styles that will effectively
achieve the investment objective of the Fund.
The Fund will be partially invested in the VantageTrust PLUS Fund in
decreasing proportions until all assets from the PLUS Fund have been
transferred. The investment guidelines of the VantageTrust PLUS Fund
will apply to the portion of the Fund that remains invested in PLUS
Fund shares.
Investment strategies employed in portfolios underlying the contracts
will involve active fixed income management.
Active management strategies may include:
- Core strategies which encompass the entire investment grade
universe,
- Tactical management in which attractive sectors of the bond
market are identified and undervalued securities within those
sectors are owned,
- Duration management which adjusts duration based on the most
undervalued sectors of the yield curve or on expected changes
in interest rates.
V. PERFORMANCE BENCHMARKS
Performance benchmarks will be established for the Fund. These benchmarks will
be recommended by the Retirement Coporation and adopted by the Trust and will
be subject to review by the Retirement Corporation and revision by the Trust
when appropriate.
VI. TRUSTEE REVIEW
The Retirement Corporation will report periodically to the Trustees on
performance of the Fund against benchmarks and on manager results and will
evaluate for the Trustees the overall performance of the Fund and its
objectives. The Trustees will consider such reports and other relevant factors
in appraising the investment objectives and performance of the Fund.
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VIP FUND LEVEL INVESTMENT GUIDELINES
A. SYNTHETIC GICs Synthetic investment contracts will be formed through
the use of selected fixed income subadvisers and wrappers.
FIXED INCOME SUBADVISERS: The subadvisers will be selected based on
the Retirement Corporation's expectation of the subadviser's ability
to add value over a passive fixed income benchmark through active
management. In addition to investment level guidelines at the Fund
level, the subadvisers will be required to conform to investment
level guidelines at the manager level with respect to asset
allocation, credit quality, issue and issuer exposure, duration and
prohibited practices.
WRAPPERS: The role of the wrappers is to enable book value accounting
and simultaneously ensure benefit responsiveness. The wrappers will
be selected from an approved list maintained by the Retirement
Corporation's credit analysis department.
B. PORTFOLIO ASSET ALLOCATION: Characteristics of the VIP Fund should
conform to the following asset allocation limitations outlined below.
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ASSET TYPE TARGET MINIMUM MAXIMUM
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Cash and Cash 10% 5% 100%
Equivalents
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Enhanced Cash 30% 0% 100%
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Xxxxxx
Intermediate
Gov't/Corporate 30% 0% 50%
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Xxxxxx Aggregate 30% 0% 50%
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C. PORTFOLIO DURATION: The target duration for the overall Fund is 2.5
YEARS. At any given time the duration of the Fund may deviate from
the target within a range of PLUS OR MINUS 1 YEAR.
D. PORTFOLIO QUALITY: The target overall quality of the Fund is AA.
Investment guidelines at the Fund and manager level are designed to
achieve this target. The minimum quality for any issue in the
portfolio is BBB-.
E. ELIGIBLE INVESTMENTS
1. FIXED INCOME SECURITIES:
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- Money market instruments including CDs, Commercial Paper, Bankers
Acceptances, Time Deposits, Repurchase and Reverse-repurchase
agreements, Floating rate instruments, US money market funds and bank
STIFs
- Securities issues by the US Treasury, government agencies and
government sponsored enterprises
- Corporate Bonds
- Asset-Backed Securities
- Mortgage-Backed fixed Income Securities including CMOs and CMBSs
- US dollar-denominated securities issued by foreign governmental and
corporate entities that meet the Fund's criteria for quality
2. DERIVATIVES
- Options, Futures and Mortgages forwards (TBA dollar rolls) may be used
to obtain exposure to fixed income sectors within the subadviser's
respective benchmark without incurring leverage.
- Swaps, Caps and Floors may be used to take advantage of manager
expectations of interest rates.
F. ELIGIBLE PRACTICES
There are no restrictions on subadvisers as to the following:
- Portfolio Turnover
- Realized Gains and Losses
G. SECTOR DIVERSIFICATION
Sector diversification will vary depending on the subadviser's style and
investment approach. These limits will be set by the Retirement Corporation
with each subadviser.
H. PROHIBITED PRACTICES AND SECURITIES
- Short Sales
- Derivative securities except as explicity approved by the Retirement
Corporation. This restriction applies to among others:
- Inverse Floaters
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- Interest Only Securities (I/Os)
- Principal Only Securities (P/Os)
- Securities for which there is no established trading market
- Commodities (other than approved financial futures)
- Margin purchases and other forms of borrowing; granting of pledges or
other security interests in assets of the Fund
- Securities issued by the subadvisers, wrappers or their affiliates
- Equity securities (except preferred stock and convertible bonds) and
their derivatives including financial futures on equities
I. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in the Fund Level Investment
Guidelines Section may be used but only if explicitly approved in advance by
the Retirement Corporation and reported to the Trust.
J. SECURITIES LENDING
The Retirement Corporation will deem the securities in the synthetic fixed
income portfolios as eligible for the Corporation's securities lending
program.
K. PERFORMANCE EVALUATION
The performance of the fund at the subadviser, Fund and RC External Product
level is outlined as follows:
1. RC INVESTMENTS FUND LEVEL BENCHMARK: The Fund's overall benchmark
will be a composite consisting of 10% 90-Day T-Xxxx plus a 90%
wrapped portion consisting of 30% 90-Day T-Xxxx plus 30% Xxxxxx
Brothers Intermediate Government/Corporate Index plus 30% Xxxxxx
Brothers Aggregate Index.
2. RC FUND PEER GROUP: The Institute of Management and Administration
(IOMA) Stable Value Pool. The Retirement Corporation may select any
benchmark considered suitable for the Fund.
6
17
SCHEDULE B
THE VANTAGEPOINT FUNDS
VANTAGETRUST INCOME PRESERVATION FUND
INVESTMENT GUIDELINES
FOR
PACIFIC INVESTMENT MANAGEMENT COMPANY LLC
I. OBJECTIVE
The Pacific Investment Management Company Portfolio (the "Portfolio")
objective is total return in excess of the benchmark through active
management of a portfolio of high quality fixed-income securities,
with risk characteristics similar to the benchmark.
II. BENCHMARK
The performance and risk benchmark is a blend of two bond indexes:
- 50% Xxxxxx Brothers Aggregate Bond Index
- 50% Xxxxxx Brothers Intermediate Government/Credit Bond
Index
III. PORTFOLIO MANAGEMENT GUIDELINES
To ensure the fund maintains a high quality status, the following
guidelines are in effect for the Portfolio:
A. PORTFOLIO DURATION: The portfolio's market value weighted duration
is to be between three and five years.
B. PORTFOLIO QUALITY RATING: The portfolio's market value weighted
quality is to be at least Aa2/AA. The lower of the Xxxxx'x or
Standard & Poor's ratings shall be used in assigning an issue's
rating.
C. LIQUIDITY: Because the Portfolio represents only a portion of the
VIP Fund, and because the VIP Fund contains a cash buffer to meet
anticipated shareholder liquidity needs, the Portfolio can be
managed using a "fully invested" approach. However, all issues held
should have a high degree of liquidity.
D. TYPES OF SECURITIES AND MAXIMUM AMOUNTS: Only the fixed-income
security types contained in the benchmark indexes (or futures on
such securities), or security types otherwise explicitly permitted
in these guidelines or amendments
18
thereto, may be held in the Portfolio. The maximum amounts that may
be held, subject to other limitations below, are shown in brackets.
1) Cash equivalents, rated Aaa/AAA or A1/P1 [maximum limit=100%]
2) Fixed Income Securities (securities with durations greater than
one year):
a) US Treasury securities, including strips [100%]
b) US Government Agency securities, fully backed by US
Treasury [50%]
(Note: Agency-backed pass-through securities included in
mortgage category below)
c) US corporate fixed-income securities, rated between Aaa/AAA
and Baa2/BBB [50%]
- BBB rated securities [10%]
- Holdings downgraded to Baa3/BBB- must be sold within 90
days of downgrade. Issues downgraded below Baa3/BBB-
must be sold in the shorter of 30 days or the remainder
of the previous 90 days.
d) Mortgage-backed securities [35%]
- Securities representing an entire mortgage pool may be
held. CMO's may also be held, however segmented issues
with volatile cashflows, such as IOs or POs, may not be
held.
- Commercial mortgage-backed securities [10%]
e) Asset-backed securities [10%]
OTHER NON-BENCHMARK SECURITY TYPES THAT ARE PERMITTED INCLUDE:
- Medium term notes [25%]
- Taxable municipal securities [25%]
- 144A securities with sufficient liquidity as indicated by issuance
size greater than $100 million, or with registration rights [10%]
- Adjustable-rate mortgages [10%]
- Non-agency mortgages [10%]
- Treasury and other inflation-linked securities [10%]
- Capital trust securities [10%]
- Derivatives on fixed-income securities contained in the indexes
[50%, based on face value]
Investment Guidelines-PIMCO: September 5, 2000
2
19
E. PORTFOLIO CONCENTRATION LIMITS
- Single issue [5%]
- Single issuer:
- US Treasury [100%]
- US Government Agency [30%]
- Corporation [5%], with special limit on BBB issuer [1%]
- Other issuers [5%]
F. PROHIBITED PRACTICES
- Transactions resulting in a leveraged position
- Short sales
- Investment in issues of VIP Fund subadvisers or affiliates
- Investment in security types not specified herein, without
prior written permission from the ICMA-RC.
3
Investment Guidelines-PIMCO: September 5, 2000
20
SCHEDULE C
VANTAGETRUST INCOME PRESERVATION FUND
FEE SCHEDULE
FOR
PACIFIC INVESTMENT MANAGEMENT COMPANY LLC
The Adviser's quarterly fee shall be calculated based on the average daily net
assets of the assets under management as provided by the Custodian, based on
the following annual rate.
All assets under management 0.25 percent
