1
Exhibit (d)(2)
INVESTMENT ADVISORY AGREEMENT
This Investment Advisory Agreement is made as of the
__________ day of _______________, 1999 by and between VANTAGEPOINT INVESTMENT
ADVISERS, LLC, a Delaware limited liability company (hereafter "Client"), and
FIRST PACIFIC ADVISORS CAPITAL at ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (hereafter "Adviser") and is effective as of
March 1, 1999 (the "Effective Date").
WHEREAS, the Vantagepoint Funds (the "Funds") is a Delaware
Business Trust registered as an open-end management investment company under
the Investment Company Act of 1940;
WHEREAS, Client is party to an Investment Adviser Agreement
with the Funds for management of the investment operations of the Funds
including the establishment and operation of investment portfolios for the
Funds and the entering into of contracts with sub-advisers to assist in
managing the investment of the Funds property;
WHEREAS, Client and Adviser wish to enter into an agreement
pursuant to which Adviser will provide such assistance to Client.
AGREEMENTS:
In consideration of the performance by the Adviser as
Investment Adviser of certain assets held by the Funds, the Client has
authorized the Adviser to manage the securities and other assets as follows:
1. ACCOUNT
The account with respect to which the Adviser shall perform
its services shall consist of those assets of the Funds which the Client
determines to assign to an account with the Adviser, together with all income
earned by those assets and all realized and unrealized capital appreciation
related to those assets (hereafter "Account"). From time to time, the Client
may, upon notice to the Adviser, make additions to the Account and may, upon
notice to the Adviser, make withdrawals from the Account.
2. APPOINTMENT STATUS, POWERS OF ADVISER
(a) Purchase and Sale. Client hereby appoints Adviser to
manage the Account on the terms and conditions set forth in this Agreement.
Subject to the restrictions set forth in this Agreement, and acting always in
conformity with the Investment Policies provided in Paragraph 4, Adviser shall
supervise and direct investment of the Account. Client hereby grants the
Adviser complete, unlimited and unrestricted discretion and authority to select
portfolio securities with respect to the Account including the power to acquire
(by purchase, exchange, subscription or otherwise), to hold and dispose (by
sale, exchange or otherwise). The Adviser will consult with Client, upon the
request of the Client, concerning any transactions it makes with respect to the
investment of the Account.
(b) Limitation on Authority. Except as expressly authorized
herein or hereafter from time to time, Adviser shall for all purposes be deemed
an independent contractor and shall have no authority to act for or to
represent the Client or the Funds in any way or otherwise to be an agent of the
Client or the Funds.
(c) Voting. Unless otherwise instructed by Client, Adviser
shall have discretion to take any action or render any advice with respect to
the voting of shares or the execution of proxies solicited from time to time
by, or with respect to, the issuers of securities held in the Account. Adviser
will report annually to Client regarding such voting.
2
(d) Key Personnel. Adviser agrees that the following key
personnel have primary responsibility with respect to the investment management
of the Account. If the(se) individual(s) is unable to devote sufficient time to
maintain primary responsibility of the Account, the Adviser must give Client
written advance notice, or prompt notice within three (3) business days, of the
name of the person designated by the Adviser to replace or supplement the
individual(s). In addition, the Adviser will give Client prompt written notice
of the replacement of any employee of the Adviser who has direct supervisory
responsibility for the key personnel or who has responsibility for setting
investment policy.
Key Personnel:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
3. ACCEPTANCE OF APPOINTMENT
Adviser accepts the appointment as an investment adviser and
agrees to use its best efforts and professional judgment to make timely
investment transactions for the Client with respect to the investments of the
Account, and to provide the other services required of the Adviser under the
provisions of this Agreement.
4. INVESTMENT POLICIES
(a) Investment Objectives. The Adviser will adhere to the
investment objectives, guidelines, restrictions, and liquidity requirements of
the Funds as specified by the Client on SCHEDULE A hereto, and as restated or
modified from time to time by the Client in written notice to the Adviser.
(b) Funds' Agreement and Declaration of Trust. The Adviser
will adhere to all specific provisions established in the Funds' Agreement and
Declaration of Trust and Registration Statement as filed with the Securities
and Exchange Commission on Form N-1A ("Registration Statement), both of which
are hereby incorporated by reference and made a part of this Agreement. The
Client shall give written notice to the Adviser of any amendments to the
Agreement and Declaration of Trust or Registration Statement, which amendments,
upon their receipt by the Adviser, shall be binding on the Adviser.
(c) Investment Adviser Guidelines. The Adviser shall act in
accordance with the specific statement of Investment Adviser Guidelines,
SCHEDULE B, as restated or modified from time to time by the Client in written
notice to the Adviser. The Client retains the right, on written notice to the
Adviser, to modify any such objectives, guidelines, restrictions, and liquidity
requirements in any manner at any time.
(d) Conflict in Policies. If a conflict in policies or
guidelines referenced herein occurs, the Registration Statement shall govern
for purposes of this Agreement.
5. CUSTODY, DELIVERY, RECEIPT OF SECURITIES
(a) Custody Responsibilities. The Client shall designate one
or more custodians to hold the Account. The Custodian, as designated by the
Client will be responsible for the custody, receipt and delivery of securities
and other assets of the Funds (including the Account), and the Adviser shall
have no authority, responsibility or obligation with respect to the custody,
receipt or delivery of securities or other assets of the Funds (including the
Account). In the event that any cash or securities of the Funds are delivered
to the Adviser, it will promptly deliver the same over to the Custodian, in the
name of the Funds.
(b) Securities Transactions. All securities transactions for
the Account will be consummated by payment to or delivery by the Funds of cash
or securities due to or from the Account. The Adviser will notify the Custodian
of all orders to brokers for the Account by 9:00 am EST on the day following
the trade date and will affirm the trade within one (1) business day after the
trade date (T+1).
2
3
(c) Tri-Party Agreement. The Adviser is authorized to enter
into Tri-Party Repurchase Agreements and sign the standard PSA tri-party
agreement (the "Tri-Party Agreement") on behalf of the Client and the
subcustodian thereunder is authorized to act as a subcustodian for the
Account's assets involved in any tri-party repurchase agreement pursuant to
such Tri-Party Agreement.
6. RECORD KEEPING AND REPORTING
(a) Records. Adviser will maintain proper and complete
records relating to the furnishing of services under this Agreement, including
records with respect to the acquisition, holding and disposition of securities
for Client. All records maintained pursuant to this Agreement shall be subject
to examination by Client and by persons authorized by it at all times upon
reasonable notice. Except as expressly authorized in this Agreement or as
required by applicable law, regulation or order of court or as directed by
other party in writing, Adviser and Client shall keep confidential the records
and other information obtained by reason of this Agreement (including, with
respect to Client, the investment information and transactions executed by
Adviser). Upon termination of this Agreement, Adviser shall promptly, upon
demand, return to Client all records Client reasonably believes are necessary
in order to discharge its responsibilities to the Funds. Adviser shall be
entitled to retain originals or copies of records pursuant to the requirements
of applicable laws or regulations.
(b) Quarterly Valuation Reports. Assuming appropriate
arrangements can be made with the Custodian, Adviser shall use best efforts to
provide to the Client within TEN (10) business days after the end of each
calendar quarter a statement of the fair market value of the Account as of the
close of such quarter together with an itemized list of the assets in the
Account.
(c) Valuation Methodology. For purposes of this Agreement,
fair market value shall mean, as of a particular date, the value of the Account
(determined in accordance with generally accepted accounting principles
consistently applied), plus income accrued thereon less the liabilities related
to the assets in the Account. Adviser shall reconcile security and cash
positions , and market values, and report discrepancies to the Client.
(d) Loss Reimbursement. Adviser shall reimburse the Account
for any loss caused by Adviser's actions that cause delay in the accurate daily
pricing of the Fund(s).
(e) Monthly Reports. Adviser shall provide the Client via
conference call a report as to the securities in the account, the fair market
value thereof and the accrued income thereon within FOUR (4) business days
after the end of each Calendar Month. Assuming appropriate arrangements can be
made with the Custodian, the Adviser shall also use best efforts to provide, in
writing, preliminary performance numbers and a brief explanation of these
results within FIVE (5) business days after the end of each Calendar Month. The
requested format will be as mutually agreed by Adviser and Client. For purposes
of this Agreement, fair market value shall mean, as of a particular date, the
value of the Account plus income accrued thereon less the liabilities related
to the assets in the Account.
(f) Reports on Request. Adviser shall provide to Client
promptly upon request any information available in the records maintained by
Adviser relating to the Account.
7. PURCHASE AND SALE OF SECURITIES
(a) Selection of Brokers. Except to the extent
otherwise instructed by Client, (it being understood that Client may, in its
absolute discretion, direct portfolio transactions for which Adviser is
responsible to any broker that Client may see fit), Adviser shall place all
orders for the purchase and sale of securities on behalf of the Client with
brokers or dealers selected by Adviser, but not with a person affiliated
3
4
with Adviser, as the term "affiliated person" is defined in the Investment
Company Act of 1940 (hereafter an "Affiliate").
(b) Best Execution. In placing such orders, the Adviser will
give primary consideration to obtaining the most favorable price and efficient
execution. In evaluating the terms available for executing particular
transactions for Client and in selecting brokers and dealers to execute such
transactions, the Adviser may consider, in addition to commission cost and
execution capabilities, the financial stability and reputation of brokers and
dealers and the brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934, as amended) provided by
brokers and dealers. Adviser is authorized to pay a broker or dealer who
provides such brokerage and research services a commission for executing a
transaction which is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if Adviser determines
that such commission is reasonable in relation to the value of the brokerage
and research services provided by such broker or dealer in discharging
responsibilities with respect to the Account.
(c) Bunching Orders. Client agrees that Adviser may aggregate
sales and purchase orders of Account with similar orders being made
simultaneously for other accounts managed by Adviser. Adviser may allocate
trades as disclosed in Adviser's Form ADV.
8. INVESTMENT FEES
(a) Fee Schedule. The compensation of the Adviser for its
services under this Agreement shall be calculated and paid by the Client from
the assets of the Account in accordance with SCHEDULE C hereto. The Adviser
shall send a written invoice to the Client within 30 days of the quarter end
and shall be duly compensated from the assets of the Account.
(b) Fee Computation. The Adviser's fee shall be calculated
as provided in SCHEDULE C.
(c) Fee Amendment. Fee rates may be changed from time to time
by agreement between the Client and the Adviser; provided, however, that no
increase in such rates shall be made during the first calendar year of this
Agreement.
(d) Pro Rata Fee. If the Adviser should serve for less than
the whole of any calendar quarter, its compensation shall be determined as
provided above on the basis of the ending market value of the Account in the
month in which the termination occurs and shall be payable on a pro rata basis
for the period of the calendar quarter for which it has served as Adviser
hereunder.
9. BEST EFFORTS; NON-EXCLUSIVITY OF SERVICES
The Adviser shall devote its best efforts and such time as it
deems necessary to provide prompt and expert service to the Client. The
services of Adviser to be provided to Client hereunder are not to be deemed
exclusive and Adviser shall be free to provide similar services for its own
account and the accounts of other persons and to receive compensation for such
services. Client acknowledges that Adviser and its members, Affiliates and
employees, and Adviser's other clients may at any time, have, acquire,
increase, decrease, or dispose of positions in the same investments which are
at the same time being held, acquired for or disposed of under this Agreement
for the Client. Adviser shall have no obligation to acquire or dispose of a
position in any investment pursuant to this Agreement simply because Adviser,
its directors, members, Affiliates or employees invest in such a position for
its or their own accounts or for the account of another client.
4
5
10. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ POLICIES AND CODE OF ETHICS
Adviser hereby represents that it has adopted policies that
meet the requirements of Rule 17j-1 under the Investment Company Act of 1940.
Copies of such policies shall be delivered to the Client, and any violation of
such policies by personnel of the Adviser shall be reported to the Client.
11. INSURANCE
At all times during the term of this Agreement, Adviser shall
maintain, at its own cost and expense, professional liability insurance for
errors, omissions, and negligent acts, in an amount and with such terms as are
standard in the financial services industry for an investment adviser managing
the amount of aggregate assets managed by Adviser for Client and for the
Adviser's other clients.
12. LIABILITY
Adviser shall not be liable for any error of judgment or
mistake of law or for any loss arising out of any investment or for any act or
omission in the management of the account, except for willful misfeasance, bad
faith or negligence in the performance of its duties, or by reason of reckless
disregard of its obligations and duties hereunder. However, neither this
provision nor any other provision of this Agreement shall constitute a waiver
or limitation of any rights which Client may have under federal or state
securities laws.
13. TERM
This Agreement shall be in effect for an initial term of two
years beginning on the Effective Date. This Agreement may be renewed thereafter
for successive one-year periods if such renewal is approved annually by the
majority of those members of the Funds' Board of Directors who are not
"interested persons" as that term is defined in the Investment Company Act of
1940.
14. TERMINATION
This Agreement may be terminated by either party hereto,
without the payment of any penalty, immediately upon notice to the other in the
event of a breach of any provision thereof by the party so notified, or
otherwise by Adviser upon sixty (60) days' written notice to the Client or by
Client upon 30 days' written notice to Adviser, except that this Agreement
shall automatically terminate in the event of its assignment, as provided in
Paragraph 19, at the discretion of the Client in the event of Adviser's
ownership change as provided in Paragraph 19, or upon the termination of the
Funds. Any termination in accordance with the terms of this Agreement shall not
cause the payment of any penalty. Any such termination shall not affect the
status, obligations or liabilities of any party hereto to the other.
15. REPRESENTATIONS
(a) Adviser hereby confirms to Client that Adviser is
registered as an investment adviser under the Investment Advisers Act of 1940,
that it has full power and authority to enter into and perform fully the terms
of this Agreement and that the execution of this Agreement on behalf of Adviser
has been duly authorized and, upon execution and delivery, this Agreement will
be binding upon Adviser in accordance with its terms.
(b) Client hereby confirms to Adviser that it has full power
and authority to enter into this Agreement and that the execution of this
Agreement on behalf of Client has been fully authorized and, upon execution and
delivery, this Agreement will be binding upon Client in accordance with its
terms.
5
6
16. NOTICES
Notices or other notifications given or sent under or
pursuant to this Agreement shall be in writing and be deemed to have been given
or sent if delivered to the party at its address listed below in person or by
telex or telecopy receipt of which is confirmed or by mail or by registered
mail, return receipt requested. The addresses of the parties are:
CLIENT:
Vantagepoint Investment Advisers, LLC
Attention: Legal Department
c/o ICMA Retirement Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇, ▇▇▇. ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇-▇▇▇▇
ADVISER:
▇▇▇▇ ▇▇▇▇
First Pacific Advisors Capitol
11400 ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Each party may change its address by giving notice as herein
required.
17. SOLE INSTRUMENT
This instrument constitutes the sole and only agreement of
the parties to it relating to its object and correctly sets forth the rights,
duties, and obligations of each party to the other as of its date. Any prior
agreements, promises, negotiations or representations not expressly set forth
in this Agreement are of no force or effect.
18. WAIVER OR MODIFICATION
No waiver or modification of this Agreement shall be
effective unless reduced to a written document signed by the party to be
charged. No failure to exercise and no delay in exercising, on the part of any
party hereto, of any right, remedy, power or privilege hereunder, shall operate
as a waiver thereof. Only the Chief Executive Officer, has authority on behalf
of Client to modify or waive any of the provisions of the Agreement.
19. ASSIGNMENT AND OWNERSHIP CHANGE
This Agreement shall automatically terminate in the event of
its assignment. Adviser agrees to provide immediate written notice in the event
of an ownership change. Such an ownership change will entitle, but not require,
the Client to terminate the Agreement immediately or upon notice.
20. COUNTERPARTS
This Agreement may be executed in counterparts each of which
shall be deemed to be an original and all of which, taken together, shall be
deemed to constitute one and the same instrument.
6
7
21. CHOICE OF LAW
This Agreement shall be governed by, and the rights of the
parties arising hereunder construed in accordance with, the laws of the State
of Delaware without reference to principles of conflict of laws.
22. YEAR 2000 TRANSITION
Adviser represents that the information systems used by it in
making investment decisions or otherwise fulfilling its obligations under this
Agreement will not be adversely affected by the Year 2000 transition.
IN WITNESS WHEREOF, THE PARTIES HERETO EXECUTE THIS AGREEMENT ON
, 199 and make it effective on the date set forth.
CLIENT ADVISER
Vantagepoint First Pacific Advisors Capital
Investment Advisers, LLC.
by: by:
------------------------ ------------------------
(signature) (signature)
------------------------ ------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇, President (name, title)
Date: Date:
7
8
ADDENDUM DATED _______________ TO THE
INVESTMENT ADVISORY AGREEMENT DATED _____________
This addendum modifies and forms a part of the Investment Advisory Agreement
(the "Agreement") dated _______________ 1999, between Vantagepoint Investment
Advisers, LLC, a Delaware corporation ("Client"), and First Pacific Advisors
Capital ("Adviser"), relating to the Vantagepoint Funds ("VF").
All terms used in this Addendum have the same meaning given to them in the
Agreement unless specifically noted otherwise.
1. The assets of the Account to be managed by the Adviser under the Agreement
and this Addendum are assets of the Aggressive Opportunities Fund (the "Fund"),
a portfolio of VF. For purposes of Section 8 (Fees) and Schedule C, all payments
due to Adviser shall be solely made from the assets of the Fund.
2. All references in the Agreement and this Addendum to the Investment Policies
to be followed by Adviser in managing the assets of the Fund are hereby deemed
to include the Investment Policies set forth in the Agreement and any Schedules
to the Agreement, as well as the Fund's current prospectus and statement of
additional information as on file with the Securities and Exchange Commission.
3. The activities of the Client and the Adviser in managing the assets of the
Fund pursuant to the Agreement and this Addendum shall in all instances be
conducted subject to the supervision and direction of the Board of Directors of
VF.
4. For purposes of Sections 8 (Fees), 12 (Liability), 13 (Term), 14
(Termination), 15 (Representation), 16 (Notices), 18 (Waiver or Modification),
19 (Assignment and Ownership Change), and 22 (Year 2000 Transition) of the
Agreement, as well as for purposes of Schedule C of the Agreement, VF is hereby
made a party to the Agreement and shall be entitled to all notices, protections
and rights set forth in those Sections and in Schedule C to which Client is
entitled.
5. For purposes of the Agreement and this Addendum, Client and Adviser hereby
agree to maintain all books and records relating to VF that are required to be
maintained in accordance with good practice, applicable federal and state
securities laws, including the Investment Company Act of 1940 and or the
Investment Advisers Act of 1940, and such reasonable instructions as shall be
provided to Adviser by Client from time to time.
6. Adviser shall furnish Client and the Board of Directors of VF such periodic
and special reports and information as either of them may request, including
such information as shall be reasonably necessary to evaluate the terms of any
advisory agreement between Client and Adviser with respect to assets of VF.
7. For purposes of the Agreement and this Addendum, the value of the assets of
the Fund managed by Adviser shall be calculated in accordance with the
procedures for determining net asset value per share ("NAV") set forth in the
Fund's prospectus and statement of additional information.
8. Section 6 is hereby amended as follows:
a. 6(a) is amended beginning on line 8 and ending on line 9 by deleting
the parentheses and all language with in the parentheses;
b. 6(b) is deleted in its entirety;
c. 6(c) is redesignated 6(b) Reconciliations, the first sentence is
deleted;
8
9
d. 6(d) is changed to 6(c); and
e. 6(e) is deleted and 6(f) is changed to 6(d).
9. Section 8, Investment Fees, is amended by deleting 8(b) and 8(c) in
their entirety and by redesignating 8(d) as 8(b).
10. Section 15, Representations, is amended by the insertion of 15(c)
below:
"(c) Adviser hereby acknowledges that VF is registered as an open end
investment company under the Investment Company Act of 1940 and is
subject to taxation as a regulated investment company under the
Internal Revenue Code; Adviser hereby represents that it is familiar
with the requirements of such laws and the rules and regulations
thereunder as they apply to VF and has systems and procedures in place
reasonably designed to permit Adviser, Client, and VF to comply with
such requirement."
IN WITNESS WHEREOF, THE PARTIES HERETO EXECUTE THIS ADDENDUM ON
February 25, 1999, and make it effective on the date set
forth.
VANTAGEPOINT INVESTMENT ADVISERS, LLC
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------
Title: President
--------------------------------------
FIRST PACIFIC ADVISORS CAPITAL
By: ▇▇▇▇▇ ▇. ▇▇ ▇▇▇▇, ▇▇.
--------------------------------------
Title: Principal & CEO
--------------------------------------
VANTAGEPOINT FUNDS
(only with respect to Sections 8,
12, 13, 14, 15, 16, 18, 19, 22 and
Schedule C of the Agreement)
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
Title: President
-------------------------------------
9
10
SCHEDULE A
THE VANTAGEPOINT FUNDS
AGGRESSIVE OPPORTUNITIES FUND
STATEMENT OF INVESTMENT POLICIES
These Investment Policies and Guidelines have been adopted by the Vantagepoint
Funds (the "Funds") to govern the management and administration of the
Aggressive Opportunities Fund by Vantagepoint Investment Advisors, LLC ("VIA").
They may be reviewed and revised at the discretion of the Directors of the
Vantagepoint Funds (the "Directors"). VIA is responsible for the monitoring and
appointment of subadvisers to handle the day-to-day investment of assets
assigned to them.
I. GENERAL DESCRIPTION AND GOALS
The Aggressive Opportunities Fund seeks high, long-term capital
appreciation by investing in a variety of flexible investment
approaches and techniques. Investments may include U.S. and foreign
equity securities, options, financial derivatives, and short selling.
II. STRUCTURE
The assets of the Aggressive Opportunities Fund shall be managed by two
or more subadvisers. The subadvisers may be retained to manage separate
accounts under discretionary investment advisory contracts. Each
subadviser will be selected for its individual investment management
expertise and each will operate independently of the others. Each
subadviser must either be registered with the Securities and Exchange
Commission (SEC) under the Investment Advisers Act of 1940 or a Bank,
Insurance Company or Trust Company exempt as such from registration.
Each subadviser shall exercise complete management discretion over
assets of the Fund allocated to its account in a manner consistent with
these Investment Policies and Guidelines and with such further
investment limitations and conditions as may be recommended by VIA and
approved by the Directors. subadvisers will be obligated to manage Fund
assets as if they were subject to the fiduciary duty of care that
applies under the Employee Retirement Income Security Act of 1974
(ERISA) governing pension and profit sharing assets.
III. INVESTMENT STRATEGY
VIA shall select subadvisers that represent a variety of portfolio
management approaches and investment disciplines. These investment
approaches will be combined in a complementary manner to effectively
achieve the investment objective of the Fund. The Fund as a whole will
be more diversified than each individual subadviser's portfolio.
Investment strategies employed by the subadvisers included in the
Aggressive Opportunities Fund may include:
- equity securities of U.S. issuers including small and micro-
capitalization growth stocks,
- securities issued by companies that are "distressed" or
"out of favor",
- securities issued by foreign companies including companies
located in or doing business in emerging markets,
- commodities,
10
11
- securities of companies that fluctuate with the value of
commodities such as precious metals,
- short selling,
- purchasing and writing options,
- futures contracts, and
- leverage.
Certain of the above strategies are not permitted or their use is
limited under the Investment Guidelines for the individual subadvisers.
IV. PERFORMANCE BENCHMARKS
Performance benchmarks will be established for the Fund. These
benchmarks will be recommended by VIA and adopted by the Directors and
will be reviewed and revised as appropriate from time to time. The
current performance benchmarks for the Fund are appended to this
document as Exhibit I.
V. DIRECTOR REVIEW
VIA will report periodically to the Directors on performance of the
Fund against benchmarks and on subadviser results and will evaluate for
the Directors the overall performance of the Fund relative to its
objectives. The Directors will consider such reports and other relevant
factors in appraising the investment objectives and performance of the
Fund.
INVESTMENT GUIDELINES
I. ELIGIBLE INVESTMENTS
A. EQUITY SECURITIES: U.S. and Non-U.S. common stock, preferred
stock, common stock equivalents (units of beneficial
interest), American Depository Receipts, convertible
preferred stocks, warrants, and other rights.
B. CASH/CASH EQUIVALENTS: Fixed income obligations with maturity
less than one year, or short-term accounts or securities
managed by a custodian institution.
C. FIXED INCOME: Fixed income and convertible fixed income
securities with maturities greater than one year.
D. FINANCIAL FUTURES: Equity index futures.
E ELIGIBLE PRACTICES: There are no restrictions on subadvisers
as to the following:
- Portfolio turnover.
- Realized gains and losses.
F. ELIGIBLE INVESTMENT LIMITS
MINIMUM NORMAL RANGE MAXIMUM
------- ------------ -------
U.S. equity securities 65% 80-100% 100%
Non-U.S. equity securities 0% 0-10% 20%
Cash and cash equivalents 0% 0-20% 35%
Fixed income securities 0% 0-5% 25%
11
12
except derivatives
Convertible securities 0% 5-15% 25%
II. PROHIBITED PRACTICES AND SECURITIES
A. Securities for which there is no established trading market.
B. Securities issued by the subadvisers of the Fund or their
affiliates.
C. General partner interests.
D. Direct investments in oil, gas, or other mineral exploration or
development programs.
E. Direct investments in real estate or interests in real estate;
this does not preclude investment in purchases of securities
of real estate investment trusts and other companies holding
real estate or interests in real estate.
F. Commingled funds; this does not preclude investment in mutual funds
up to 10% of the Fund's market value at the time of purchase.
G. Acquisition of securities that would cause exposure to non-equity
holdings to exceed 35% of the Fund's market value at the time of
purchase.
H. Acquisition of securities that would cause exposure to a single
industry to exceed 25% of the Fund's market value at the time of
purchase.
I. In the absence of prior consent of VIA, acquisition of
securities of an issuer that would cause more than 5% of the Fund
to be invested in such securities.
J. In the absence of prior consent of VIA, acquisition of more than
5% of the outstanding shares of any class of equity securities.
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in Section I or Section II
of these Investment Guidelines may be acquired or employed, as the case
may be, but only if explicitly approved in advance by VIA.
IV. SECURITIES LENDING
Nothing herein shall prevent loans of securities in the Aggressive
Opportunities Fund pursuant to an established securities lending
program conducted by the Fund's custodian.
12
13
EXHIBIT I
TO THE
STATEMENT OF INVESTMENT POLICIES AND GUIDELINES OF
THE AGGRESSIVE OPPORTUNITIES FUND
MARCH 1, 1999
The following standards will be used to measure the performance of the
Aggressive Opportunities Fund:
A. BENCHMARKS
1. The performance benchmark for the Fund is the ▇▇▇▇▇▇▇ 2000 INDEX.
This benchmark will be used to measure the Fund's performance net
of subadviser fees.
2. A peer group benchmark for the Fund will consist of mutual
funds with characteristics similar to the Fund. The peer group
will be used to measure the Fund's performance relative to
other funds with a similar investment approach. The peer group
benchmark will measure Fund performance net of all fees and
expenses except for the plan administration fee.
3. The Lipper Capital Appreciation Index, selected by Lipper
Analytical Services, will serve as the performance benchmark
for participant returns, net of all fees and expenses. In
assessing performance against this benchmark, it will be taken
into consideration that Lipper Analytical Services may change
the composition of the Index.
B. TIME HORIZON
The time horizon for performance measurement will be one, three, and
five years.
One Year:
Performance relative to any benchmark established for the Fund will
vary widely over one-year periods; such variance over short time
periods is expected and acceptable. However, if such variance is
determined to be caused by systemic issues, action may be appropriate.
Three and Five Years:
Performance of the Fund should track market and universe benchmarks
more closely as the evaluation period lengthens. The ideal performance
objective for the Aggressive Opportunities Fund is to exceed the
returns of all relevant benchmarks; however, shortfalls over various
time periods should be expected in some cases. Underperformance against
a single benchmark over an extended period may be acceptable,
particularly if other benchmarks have been exceeded.
C. INVESTMENT CHARACTERISTICS
The Fund may have investment characteristics which differ from the
general market, as measured by the Standard & Poor's 500 Index..
Because of the broad mandate given to the subadvisers in the Aggressive
Opportunities Fund, investment characteristics may be expected to vary
widely. For the total Fund, these would include, but are not limited
to:
13
14
CHARACTERISTIC RELATIVE TO S&P 500 INDEX
Beta Higher
Capitalization Lower
Dividend Yield Lower
Hist. 5 year EPS Growth Higher
Price to Earnings Ratio Higher
Standard Deviation Higher
14
15
SCHEDULE B
VANTAGEPOINT INVESTMENT ADVISERS, LLC
AGGRESSIVE OPPORTUNITIES FUND
INVESTMENT GUIDELINES FOR
FIRST PACIFIC ADVISORS, INC.
MARCH 1, 1999
First Pacific Advisors, Inc. employs an absolute value approach to stock
selection primarily within the small to medium-sized company universe and in
industries out-of-favor in the current market. Investments tend to be
concentrated in a limited number of securities and are expected to be held for a
minimum of three to five years. Cash may accumulate in the portfolio if stock
prices become too high to meet the firm's value criteria.
I. ELIGIBLE INVESTMENTS
A. EQUITY SECURITIES: Common stock, preferred stock, common stock
equivalents (units of beneficial interest), American Depository
Receipts, convertible preferred stocks, warrants, and other
rights.
B. CASH/CASH EQUIVALENTS: Fixed income obligations with maturities
less than one year, or short term accounts or securities managed
by the custodian institution.
C. FIXED INCOME: Fixed income and convertible fixed income
securities with maturities greater than one year.
D. ELIGIBLE INVESTMENT LIMITS:
MINIMUM NORMAL RANGE MAXIMUM
------- ------------ -------
Equity securities 65% 85%-100% 100%
Fixed income, Cash
and cash equivalents 0% 0%-25% 35%
II. PROHIBITED PRACTICES AND SECURITIES
A. Short sales unless against the box and not in excess of 25% of
total net assets.
B. Options unless the writing of covered calls.
C. Commodities (including financial futures).
D. Securities for which there is no established trading market.
E. Foreign securities in excess of 10% of total net assets unless
listed and traded in the U.S.
15
16
F. Margin purchases and other forms of borrowing; granting of pledges
or other security interests in assets of the portfolio; use of
futures to obtain market leverage.
G. Securities offered by the Adviser or its affiliates.
H. General partner interests.
I. Direct investments in oil, gas, or other mineral exploration or
development programs.
J. Direct investments in real estate or interests in real estate;
this does not preclude investment in purchases of securities
of real estate investment trusts and other companies holding
real estate or interests in real estate.
K. In the absence of prior consent of VIA, acquisition of
securities of an issuer that would cause more than 5% of the
portfolio at the time of purchase to be invested in such
securities.
L. In the absence of prior consent of VIA, acquisition of more than
5% of the outstanding stock of an issuer.
M. In the absence of prior consent of VIA, acquisition of securities
that would cause exposure to a single industry to exceed 25% of
the portfolio at the time of purchase.
N. Commingled and registered mutual funds.
Exceptions to the above listed eligible investments and prohibited
securities or practices may be permitted with prior consent of VIA.
III. SECURITIES AND PRACTICES NOT OTHERWISE MENTIONED
Any securities or practices not enumerated in Section I or Section II
of these Investment Guidelines may be acquired or employed, as the case
may be, but only if explicitly approved in advance by VIA.
IV. PERFORMANCE BENCHMARK AND MONITORING CRITERIA
The standards outlined in this section are subject to review and
revision by VIA as and when appropriate.
A. PERFORMANCE BENCHMARKS
The market benchmark for measuring investment performance for
the Adviser is the ▇▇▇▇▇▇▇ 2000 INDEX. The Adviser is expected
to outperform the benchmark net of Adviser fees over rolling
three and five-year periods.
B. PEER GROUPS
VIA will develop an appropriate peer group against which to
compare investment performance. The peer group will consist of
other managers with a similar investment approach. The
managers within the peer group will be reviewed periodically
for consistency of style and may be changed as and when deemed
appropriate by VIA. Such changes will be communicated to the
Adviser.
16
17
1. The peer group will consist primarily of mutual funds,
however separate account managers may be included.
2. VIA will track relative net-of-fee performance quarterly
and evaluate performance on a trailing one, three and
five-year basis.
3. VIA will compare the Adviser's net performance with the
one-year mean return of the peer group.
The current peer group consists of the following managers:
(under review)
17
18
SCHEDULE C
VANTAGEPOINT INVESTMENT ADVISERS, LLC
FEE SCHEDULE
FOR
FIRST PACIFIC ADVISORS, INC.
The Adviser's quarterly fee shall be calculated based on the average daily
market value of the assets under management as provided by the Custodian, based
on the following annual rate:
$100 million 0.80 percent
Over $100 million 0.75 percent
EXAMPLE OF FEE CALCULATION (HYPOTHETICAL AMOUNTS)
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
18