THE VANTAGEPOINT FUNDS
US GOVERNMENT SECURITIES FUND
777 NORTH CAPITOL STREET, NE
SUITE 600
WASHINGTON, D.C. 20002
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INFORMATION STATEMENT
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This Information Statement is being furnished by the Board of Directors of The
Vantagepoint Funds (the "VP Funds") to inform shareholders of the US Government
Securities Fund (the "Fund") about recent changes related to the Fund's
subadvisory arrangements. These changes were made by the Board of Directors of
the VP Funds on the recommendation of the Fund's investment adviser,
Vantagepoint Investment Advisers, LLC ("VIA"), without shareholder approval as
is permitted by a May 8, 2000 order of the Securities and Exchange Commission
("SEC"). WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US
A PROXY.
This Information Statement is being mailed to shareholders of the Fund on or
before March 29, 2004.
INTRODUCTION
VIA is the investment adviser for each of the VP Funds. VIA employs a so-called
"manager of managers" arrangement in managing the VP Funds. This permits VIA,
subject to approval by the Board of Directors, to hire, terminate or replace
unaffiliated subadvisers, and to modify material terms and conditions of a
subadvisory agreement (including the fees payable by VIA under those subadvisory
agreements). VIA recommended and the Board of Directors has approved the
appointment of Mellon Capital Management Corporation ("Mellon Capital") as a
subadviser to the Fund, replacing Seix Investment Advisors, Inc. This
Information Statement informs you of that change.
Section 15(a) of the Investment Company Act of 1940 (the "1940 Act") generally
requires that each fund's shareholders approve all agreements pursuant to which
persons serve as investment adviser or subadviser to the fund. In order to use
the "manager or managers" authority discussed above, the VP Funds and VIA
requested and received an exemptive order (the "SEC Order") on May 8, 2000 from
the SEC. The SEC Order exempts VIA and the VP Funds from the shareholder voting
requirements of Section 15(a) of the 1940 Act and allows the VP Funds' Board of
Directors, subject to certain conditions, to appoint a new unaffiliated
subadviser and approve a new subadvisory agreement on behalf of a fund without a
shareholder vote.
Consistent with the SEC Order, the Board of Directors, including the Directors
who are not "interested persons" of the VP Funds or of VIA under the 1940 Act,
appointed Mellon Capital as a subadviser for the Fund and approved the
subadvisory agreement with Mellon Capital. As discussed later in this
Information Statement, the Board of Directors carefully considered the matter
and concluded that the appointment of Mellon Capital under the terms of the
subadvisory agreement was in the best interests of the Fund and its
shareholders.
As a condition to relying on the SEC Order, VIA and the VP Funds are required to
furnish shareholders of the Fund with notification of the appointment of a new
unaffiliated subadviser within ninety days from the date that the sub-adviser is
hired. This Information Statement serves to provide such notice and give details
of the new arrangement.
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APPOINTMENT OF A NEW SUBADVISER FOR THE FUND
Effective December 29, 2003, Mellon Capital was appointed as a new subadviser
for the Fund, replacing Seix Investment Advisors, Inc. ("Seix"). The Fund's
subadvisory agreement with Seix was terminated. Mellon Capital is currently the
only subadviser for the Fund.
VIA'S RECOMMENDATION AND THE BOARD OF DIRECTORS' DECISION
VIA recommended the appointment of Mellon Capital as subadviser of the Fund
after a careful search for a government securities manager. Mellon Capital was
recommended because it demonstrated expertise as a risk-controlled manager and
VIA's conclusion that the change from an active management approach to an
enhanced index management approach would improve returns, net of fees, compared
against the Fund's benchmark index on a more consistent basis. Before approving
VIA's recommendations, the Board of Directors of the VP Funds, at a meeting held
on December 11, 2003, considered detailed recommendations, supporting analyses
and data presented by VIA.
Among other things, the Board of Directors received from VIA and considered
information relating to VIA's recommendation to terminate Seix and about Mellon
Capital's business, personnel, operations, brokerage and trading policies and
practices, code of ethics and other compliance procedures and investment
services, including data on the performance of comparable accounts and funds and
the portfolio composition of comparable accounts and funds under Mellon
Capital's management. The Board of Directors also received information from VIA
on the results of VIA's ongoing subadviser oversight and monitoring process and
its prospective subadviser search process that included on-site interviews of
Mellon Capital's key personnel by a team of VIA representatives. VIA provided
the Board of Directors with information relating to the expected effect of the
subadvisory change on the Fund, including information on cross-holdings among
the securities held in the Fund's portfolio and similar accounts managed by
Mellon Capital. In addition, the Board of Directors received and considered
information relating to advisory fees and expense ratios of a selected group of
comparable funds and the impact of the recommended changes on the Fund in terms
of the advisory fees that would be paid to Mellon Capital in relation to the
Fund's current subadvisory fees and in terms of the Fund's total expense ratio
and the potential transaction and investment opportunity costs to the Fund of
transitioning from Seix to Mellon Capital. In reaching its decision to appoint
Mellon Capital, the Board of Directors considered the nature and quality of the
services expected to be provided to the Fund, the investment process of Mellon
Capital, the history, reputation and qualifications of Mellon Capital's
personnel and certain information relating to Mellon Capital's financial
condition, and other relevant factors.
THE SUBADVISORY AGREEMENT
The subadvisory agreement between Mellon Capital, the Fund and VIA has terms
substantially similar to the agreements with other subadvisers to The
Vantagepoint Funds, except for the rates of the fees payable by the Fund to
Mellon Capital. Mellon Capital will make all investment decisions for the
portion of the Fund's assets allocated to it, and will continuously review,
supervise and administer the Fund's investment program with respect to those
assets. Mellon Capital is independent of VIA and discharges its responsibilities
subject to the supervision of VIA and the Board of Directors, and in a manner
consistent with the Fund's investment objectives, policies and limitations. The
new subadvisory agreement with Mellon Capital has an initial term of two years,
until December 29, 2005. Thereafter, continuance of the agreement will require
annual approval of the VP Funds' Board of Directors, including a majority of the
independent directors.
The fees, based on the value of the Fund's assets under the subadviser's
management, charged by Mellon Capital are:
First $100 million - 0.06%
Above $100 million - 0.05%
THE NEW SUBADVISER
Mellon Capital was founded in 1983 and is registered as an investment adviser
with the SEC. Mellon Capital is a wholly-owned, indirect subsidiary of Mellon
Financial Corporation, a publicly traded bank holding company, and has its
principal place of business at 595 Market Street, San Francisco, California
94105. Mellon Capital manages institutional assets for defined benefit and
401(k) pension plans, endowments and other types of institutional
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investors utilizing quantitative investment processes. Mellon Capital provides
global and domestic tactical asset allocation and enhanced indexing investment
processes which are intended to outperform benchmarks. Mellon Capital also
provides index asset management services. The principal executive officers and
directors of Mellon Capital are listed on Exhibit A.
Mellon Capital also serves as subadviser to the Vantagepoint Asset Allocation
Fund, Vantagepoint Core Bond Index Fund, Vantagepoint 500 Stock Index Fund,
Vantagepoint Broad Market Index Fund, Vantagepoint Mid/Small Company Index Fund
and Vantagepoint Overseas Equity Index Fund. Mellon Capital does not currently
serve as investment adviser to other registered investment companies with
investment objectives similar to those of the Fund.
THE INVESTMENT ADVISER AND THE MASTER INVESTMENT ADVISORY AGREEMENT
VIA, 777 North Capitol Street, NE, Washington, D.C. 20002, is a wholly owned
subsidiary of, and controlled by the ICMA Retirement Corporation ("RC"), a
retirement plan administrator and investment adviser whose principal investment
advisory client is VantageTrust Company ("VantageTrust"). RC was established as
a not-for-profit organization in 1972 to assist state and local governments and
their agencies and instrumentalities in the establishment and maintenance of
deferred compensation and qualified retirement plans for the employees of such
public sector entities. These plans are established and maintained in accordance
with Sections 457 and 401, respectively, of the Internal Revenue Code of 1986,
as amended. RC has been registered as an investment adviser with the SEC since
1983.
VIA is a Delaware limited liability company and is registered as an investment
adviser with the SEC.
Joan McCallen serves as President and Chief Executive Officer of RC, President
of VIA and President and Principal Executive Officer of the VP Funds. Paul
Gallagher serves as Senior Vice President, Secretary and General Counsel of RC,
Secretary of VIA and Secretary of the VP Funds. John Bennett serves as Treasurer
of the VP Funds, Senior Vice President and Chief Financial Officer of RC and
Treasurer of VIA.
VIA provides investment advisory services to each of the VP Funds, including the
Fund, under a Master Investment Advisory Agreement (the "Advisory Agreement")
dated March 1, 1999, as amended on December 1, 2000. VIA's advisory services
include fund design, establishment of fund investment objectives and strategies,
selection and management of subadvisers, and performance monitoring, and
supervising and directing each fund's investments. Additionally, VIA furnishes
periodic reports to the VP Funds' Board of Directors regarding the investment
strategy and performance of each fund.
Pursuant to the Advisory Agreement, the VP Funds compensate VIA for these
services by paying VIA an annual advisory fee assessed against average daily net
assets under management in each fund as follows: All funds, except the Index
Funds (including the Model Portfolio Funds) - 0.10% and the Index Funds - 0.05%.
FEES PAID
Seix received $208,229 in fees for services provided from January 1, 2003
through December 11, 2003.
RECORD OF BENEFICIAL OWNERSHIP
The principal shareholder in the VP Funds is VantageTrust. VantageTrust was
established for the purpose of holding and investing the assets of public sector
retirement and deferred compensation plans. VantageTrust owns a majority of the
outstanding shares of the Fund and is considered a "control" person for purposes
of the 1940 Act. As of December 31, 2003, the directors and officers of the VP
Funds owned less than 1% of the outstanding shares of the Fund.
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GENERAL INFORMATION
DISTRIBUTOR
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ICMA-RC Services, LLC, 777 North Capitol Street, NE, Suite 600, Washington, D.C.
20002, serves as the distributor of the VP Funds' shares pursuant to a
Distribution Agreement dated March 1, 1999. ICMA-RC Services, LLC is a
wholly-owned subsidiary of RC and an affiliate of VIA. Joan McCallen serves as
President of ICMA-RC Services, LLC.
TRANSFER AGENT
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Vantagepoint Transfer Agents, LLC, 777 North Capitol Street, NE, Suite 600,
Washington, D.C. 20002, serves as the transfer agent of the VP Funds' shares
pursuant to a Transfer Agency and Administrative Services Agreement dated March
1, 1999. Vantagepoint Transfer Agents, LLC is a wholly-owned subsidiary of RC
and an affiliate of VIA. Joan McCallen serves as President of Vantagepoint
Transfer Agents, LLC.
ADMINISTRATOR AND CUSTODIAN
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VIA and Vantagepoint Transfer Agents, LLC provide administrative services to the
VP Funds. In addition, Investors Bank & Trust Company ("IBT"), 200 Clarendon
Street, Boston, MA 02117, provides certain administrative and sub-transfer
agency services to the VP Funds pursuant to an Administration Agreement dated
January 21, 1999, as amended December 31, 2001 and a Sub-Transfer Agency and
Service Agreement dated February 3, 1999. IBT also serves as custodian for the
VP Funds.
HOUSEHOLDING
Only one copy of this Information Statement may be mailed to households, even if
more than one person in a household is a Fund shareholder of record. If you need
additional copies of this Information Statement, please contact the VP Funds
toll free at 1-800-669-7400. If you do not want the mailing of this Information
Statement to be combined with those for other members of your household, contact
the VP Funds in writing at 777 North Capitol Street, NE, Suite 600, Washington,
D.C. 20002.
FINANCIAL INFORMATION
Shareholders can obtain a copy of the VP Funds' most recent Annual Report and
any Semi-Annual Report following the Annual Report, without charge, by writing
the VP Funds at 777 North Capitol Street, NE, Suite 600, Washington, D.C. 20002
or by calling the VP Funds toll free at 1-800-669-7400.
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EXHIBIT A
The principal executive officers and directors of Mellon Capital are(1):
NAME TITLE
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Thomas F. Loeb Chairman & Chief Executive Officer; Chairman, Board of Directors
William L. Fouse Chairman Emeritus
Charles J. Jacklin President; Director
Stephen E. Canter Director
John J. Nagorniak Director
Ronald P. O'Hanley Director
James R. Tufts Executive Vice President & Chief Operating Officer
Thomas B. Hazuka Executive Vice President & Chief Investment Officer
Susan M. Ellison Managing Director, Equity Portfolio Management
David Kwan Managing Director, Fixed Income Management & Trading
Vikas Oswal Managing Director, Chief Investment Strategist, Asset Allocation
Helen Potter Managing Director, Asset Allocation
Ralph P. Goldsticker III Managing Director, Investment Research
Ramu Thiagarajan Managing Director, Enhanced Equity Strategies
Brenda J. Oakley Executive Vice President & Chief Administrative Officer
Gabriela Franco Parcella Managing Director & General Counsel
Linda Lillard Managing Director, Information Technology
Polly Shouse Executive Vice President, Houston
Barbara Dougherty Managing Director, Client Service & Marketing Communication
Richard J. Forster Managing Director, Marketing, San Francisco
Earl Kleckner Managing Director, Marketing, Pittsburgh
Scott Ruddick Managing Director, Marketing, Boston
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(1) The address of each person is c/o Mellon Capital Management Corporation,
595 Market Street, San Francisco, California 94105.
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