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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14C
INFORMATION STATEMENT PURSUANT TO SECTION 14(c)
OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Check the appropriate box:
/ / Preliminary Information Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
/X/ Definitive Information Statement
The Vantagepoint Funds
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(Name of Registrant As Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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THE VANTAGEPOINT FUNDS
VANTAGEPOINT INCOME PRESERVATION FUND
777 NORTH CAPITOL STREET, NE
SUITE 600
WASHINGTON, D.C. 20002
--------------------------
NOTICE OF ACTION BY WRITTEN CONSENT
--------------------------
To the Shareholders of the Vantagepoint Income Preservation Fund:
Pursuant to Article 5, Section 2, of the Amended Agreement and Declaration of
Trust of The Vantagepoint Funds, notice is hereby given that, by written consent
delivered to the Vantagepoint Income Preservation Fund (the "Fund") on September
2, 2004, the holders of a majority of the outstanding shares of the Fund voted
to approve changes to the name, investment objective and principal investment
strategies of the Fund. The Fund's Information Statement, which has been filed
with the Securities and Exchange Commission, accompanies this Notice.
By Order of the Board of Directors
/s/ Joan McCallen
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Joan McCallen, President
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THE VANTAGEPOINT FUNDS
VANTAGEPOINT INCOME PRESERVATION FUND
777 NORTH CAPITOL STREET, NE
SUITE 600
WASHINGTON, D.C. 20002
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INFORMATION STATEMENT
--------------------------
This Information Statement is being furnished by the Board of Directors (the
"Board") of The Vantagepoint Funds (the "VP Funds") to inform shareholders of
the Vantagepoint Income Preservation Fund (the "Fund") about changes that are
being made to the Fund's name, investment objective and principal investment
strategies. These changes were recommended by the Board of the VP Funds, and
were approved by written consent of the holders of a majority of the outstanding
shares of the Fund on September 2, 2004. WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY.
This Information Statement is being mailed on or about October 4, 2004 to Fund
shareholders at the close of business on September 3, 2004.
INTRODUCTION
On August 30, 2004, the Board of the VP Funds approved, and decided to recommend
that the shareholders of the Fund approve changing the name, investment
objective and strategies of the Fund to that of a fund that seeks total return
that is consistent with preservation of capital, by investing primarily in a
diversified portfolio of debt securities payable primarily in U.S. dollars and
by normally maintaining an average portfolio maturity between one and three
years. The Fund will not maintain a stable net asset value per share. On that
same date, the Board also authorized the officers of the Fund to seek the
written consent of the holders of a majority of the outstanding shares of the
Fund to these changes. On September 2, 2004, the Board's recommendations were
presented to and approved by the Board of Directors of The VantageTrust Company,
which indirectly holds a majority of the Fund's shares through the Vantagepoint
Model Portfolio Funds. The VantageTrust Company is an affiliate of the Fund's
investment adviser, Vantagepoint Investment Advisers, LLC ("VIA"). These
changes, which will result in the conversion of the Fund to a short-term bond
Fund ("Conversion") are expected to take place on or about November 5, 2004.
When the changes become effective, the Fund will be renamed the "Vantagepoint
Short-Term Bond Fund".
REASONS FOR THESE CHANGES
The Board has taken these actions because it has concluded that the Fund is not
likely to be able to continue, over the long term, to follow its current
strategy of using wrapper agreements to seek to preserve capital and to maintain
a stable net asset value per share. The Board reached this conclusion based on,
among other things, the current regulatory uncertainty about the method for
valuing wrapper agreements that mutual funds will be able to use in the future.
The Board also considered the potential inability of the Fund to continue to
purchase wrapper agreements on economically viable terms and took into account
the potential impact of rising interest rates on the Fund's ability to maintain
a stable net asset value without such wrapper agreements and that shareholders
could be subject to unexpected loss of principal value as a result. In addition,
the Board considered the facts that the Fund's current wrapper agreements will
expire on November 7 and December 1, 2004, respectively, and that it is
uncertain whether these agreements could be renewed in light of the regulatory
inquiries described below. The Board believes its actions are in the best
interests of the Fund and its shareholders under the circumstances.
As disclosed in the Fund's registration statement, applicable supplements and
most recent semi-annual report, the staff of the U.S. Securities and Exchange
Commission ("SEC") has inquired of registered "stable value" mutual funds,
including the Fund, as to the methodology used by these funds to value their
wrapper agreements. The SEC and its staff have not issued any public statement
regarding the results of this inquiry and have not indicated whether or when
such a statement may be made. However, it is possible that the SEC's conclusions
may require stable value mutual funds to stop using the types of wrapper
agreements commonly used today or to seek to buy wrapper
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agreements having very different terms. VIA has informed the Board that such
wrapper agreements are not likely to be available on terms or at a cost that
would make it economically viable for the Fund to continue to pursue its
investment strategy of maintaining a stable net asset value per share.
Interest rates have risen over the past few months. In this environment, the
Fund's potential inability to continue valuing its wrapper agreements using its
current methodology or to obtain wrapper agreements with significantly different
terms, could have potentially adverse consequences to the Fund and its
shareholders. To seek to protect against such possible adverse consequences, the
Board has decided to take the actions described in this information statement.
As noted above, the recommended changes to the Fund were approved by the Fund's
indirect majority shareholders on September 2, 2004. A supplement notifying
shareholders of these changes was filed with the SEC on September 2, 2004 and
mailed shortly thereafter.
INTERIM INVESTMENT ACTIVITIES
In early August 2004, at the direction of the Fund's investment adviser, VIA,
the average duration of the Fund's portfolio was shortened to approximately 1.5
years, as permitted by the Fund's investment guidelines.
In addition, on September 8, 2004, VIA reallocated the portions of the Fund's
portfolio previously subadvised by Wellington Management Company, LLP and
Pacific Investment Management Company, LLC and placed the entire portfolio under
the management of the Fund's remaining subadviser, Payden & Rygel Investment
Counsel ("Payden & Rygel"). Payden & Rygel invested the Fund's assets in a
portfolio of short-term fixed income instruments with 60 days or less to
maturity ("Interim Portfolio"). Payden and Rygel constructed the Interim
Portfolio on September 13, 2004 and will continue to subadvise the portfolio,
subject to the continuing oversight of VIA, until one or more subadvisers are
appointed by the Board to manage the Fund's assets in accordance with its new
investment objectives and strategies. However, shortly before the Conversion
takes place, the Interim Portfolio is expected to mature and will hold most of
its assets in cash or cash equivalents for a brief period of time. As noted
earlier, the Conversion is expected to take place on or about November 6, 2004.
By investing its assets in this manner, the Fund will seek to continue to
maintain a stable net asset value of $100 per share until its Conversion to a
short-term bond fund. While the Fund will attempt to maintain a stable net asset
value of $100 per share during the period prior to its Conversion, there is no
assurance that the Fund will be able to do so and the Fund's net asset value per
share may fluctuate.
After its Conversion to a short-term bond fund, the Fund will no longer seek to
maintain a stable net asset value and its net asset value per share will
fluctuate with changes in the market value of the Fund's portfolio holdings.
The Fund's Board of Directors approved the use of the Interim Portfolio as a
temporary measure. The Interim Portfolio may produce a lower level of income
than previously has been achieved by the Fund.
The Fund will pay Payden & Rygel for providing subadvisory services with respect
to the Interim Portfolio at its current annual rate of 0.09% of the Fund's
average daily net assets until the Fund's portfolio holdings are invested in
accordance with its new investment objectives and strategies. In addition, the
Fund will continue to pay VIA its annual advisory fee of 0.10% of the average
daily net assets of the Fund through the Interim Period and after the
Conversion. The annualized estimated expenses for the Fund during the Interim
Period are expected to be as follows:
Advisory Fee Subadvisory Fee Other Expenses Total Expenses
0.10% 0.09% 0.54% 0.73%
The subadvisers that will manage the Fund's assets after its Conversion have not
yet been selected. However, it is expected that the subadviser(s) will be
appointed and announced before the Conversion takes place. When the new
subadvisers are appointed, shareholders will be notified. VIA will continue to
manage the Fund and oversee the activities of its subadvisers both before and
after the Conversion.
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LIMITS ON PURCHASING FUND SHARES PRIOR TO CONVERSION
Until the Fund's Conversion to a short-term bond fund takes place, individuals
currently investing in the Fund through the VantageCare Retirement Health
Savings Plan ("RHS") or an Individual Retirement Account ("IRA") will be
permitted to continue to invest in the Fund in accordance with their existing
investment elections. However, from September 3, 2004 until its conversion to a
short-term bond fund is completed, the Fund will not accept (i) any new
elections by RHS or IRA investors to allocate all or part of their contributions
to the Fund; (ii) changes to existing investment elections or allocation
instructions that would increase or decrease an RHS or IRA investor's allocation
to the Fund, although an investor will be permitted to discontinue entirely any
future contributions to the Fund; or (iii) any transfers into the Fund from
other investment options. This will effectively "close" the Fund to new
investors for this temporary period, while permitting those investors who
already have elected to make contributions to the Fund to continue to invest in
the Fund. Of course, RHS and IRA investors will be able to transfer their assets
out of the Fund to other investment options, or to change their elections so as
to discontinue all contributions to the Fund during the Interim Period, in
either case without penalty.
VANTAGEPOINT MODEL PORTFOLIO FUNDS
The Vantagepoint Model Portfolio Savings Oriented Fund, the Vantagepoint Model
Portfolio Conservative Growth Fund and the Vantagepoint Model Portfolio
Traditional Growth Fund (each a "Model Portfolio" and together, the "Model
Portfolios") each invest a portion of their assets in the Fund, pursuant to the
following target allocations:
- The Model Portfolio Savings Oriented Fund's target is to allocate 65%
of its assets to an investment in the Fund.
- The Model Portfolio Conservative Growth Fund's target is to allocate 50%
of its assets to the Fund.
- The Model Portfolio Traditional Growth Fund's target is to allocate 30%
of its assets to the Fund.
The Fund's investment adviser, VIA, also serves as the investment adviser to
these three Model Portfolios. The Model Portfolios are expected to continue
investing in the Fund in accordance with their current targets and rebalancing
policies during the period while the Fund's assets are invested in the Interim
Portfolio. However, in light of the changes to the investment objective and
strategies of the Fund, VIA is re-evaluating the fixed income allocations of the
assets of the three Model Portfolios listed above and may determine to redeem a
portion of their respective shares of the Fund and reinvest the proceeds in
shares of other funds of the VP Funds. Such redemptions likely would
significantly reduce the asset size of the Fund, possibly by as much as
one-third. Before deciding to implement such reallocations, VIA will conduct its
customary periodic analysis to seek to identify the allocation of assets among
the different funds of the VP Funds that is optimum for each Model Portfolio in
light of its individual investment objectives and strategies. No Model Portfolio
is expected to withdraw its entire investment in the Fund, although it could at
any time. Further, a decision by VIA to reallocate some of the assets of the
Model Portfolios away from the Fund and into other funds of the VP Funds should
not be taken as an indicator of whether this would be an appropriate investment
decision for any other investors in the Fund. Any redemptions by the Model
Portfolios is not expected to have a negative impact on the overall fees and
expenses of the Fund. In fact, it is expected that the total estimated expenses
for the Fund will be less during both the Interim Period and following the
Conversion.
VIA expects to effect any redemptions by the Model Portfolios after most of the
short-term fixed income securities held in the Fund's Interim Portfolio have
matured and have been converted to cash or cash equivalents, but before the
Fund's assets are reinvested in a portfolio of securities consistent with the
Fund's new investment objectives and strategies. By effecting the redemptions on
behalf of the Model Portfolios in this manner, VIA will seek to avoid causing
the Fund to incur unnecessary transaction costs and also to avoid or limit any
other potential adverse impacts that such large redemptions may have on the Fund
and its remaining shareholders.
DESCRIPTION OF THE VANTAGEPOINT SHORT-TERM BOND FUND
The following describes the investment objective, main investment strategies,
risks and expenses of the Fund that are expected to become effective upon
Conversion, when it will be renamed the Vantagepoint Short-Term Bond Fund, on or
about November 6, 2004.
INVESTMENT OBJECTIVE:
The Fund will seek total return that is consistent with preservation of capital.
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PRINCIPAL INVESTMENT STRATEGIES:
- The Fund will invest in a wide variety of debt securities payable
primarily in U.S. dollars. These include (1) debt obligations issued or
guaranteed by the U.S. Government and foreign governments and their
agencies and instrumentalities, political subdivisions of foreign
governments (such as provinces and municipalities), and supranational
organizations (such as the World Bank); (2) debt securities, loans and
commercial paper issued by U.S. and foreign companies; (3) U.S. and
foreign mortgage-backed and asset-backed debt securities; and (4)
taxable municipal securities, which are debt obligations issued by state
and local governments, territories and possessions of the U.S., regional
governmental authorities, and their agencies and instrumentalities, the
interest on which is not exempt from federal income tax.
- The Fund generally will invest in investment grade debt securities,
which are securities rated within the four highest grades by at least
one of the major rating agencies such as Standard & Poor's (at least
BBB), Moody's (at least Baa) or Fitch (at least BBB), or are securities
the applicable subadviser determines are of comparable quality. However,
the Fund may invest up to 10% of its total assets in corporate debt
securities rated below investment grade and up to 5% of its total assets
in emerging markets debt. In any event, the average credit quality of
the Fund overall will remain investment grade.
- The Fund may invest up to 10% of its assets in securities denominated
in foreign currencies.
- Under normal market conditions, the Fund will invest at least 80% of
its total assets in bonds of varying maturities. The Fund also normally
will invest at least 65% of its total assets in securities with more
than one year to maturity, and its maximum average portfolio maturity
(on a dollar-weighted basis) will be three years.
- The Fund will invest in debt securities that its subadvisers believe
offer attractive yields and are undervalued relative to securities of
similar credit quality and interest rate sensitivity.
- The Fund may invest its assets in derivative instruments such as
futures, options and options on futures if used for relative value,
hedging or risk control, but not for speculation and may use swap
agreements to manage interest rate, currency and credit exposure.
Investments in derivative instruments will be limited to 10% of the
market value of the Fund's assets.
PRINCIPAL INVESTMENT RISKS:
- As with most bond funds, the income on and value of shares in the Fund
will fluctuate along with interest rates. When interest rates rise, the
market prices of the debt securities owned by the Fund usually will
decline. When interest rates fall, the prices of these securities
usually will increase. Generally, the longer the Fund's average
portfolio maturity, the greater will be the price fluctuation. The price
of any security owned by the Fund may also fall in response to events
affecting the issuer of the security, such as its ability to continue to
make principal and interest payments, or its credit ratings. Investors
in the Fund, therefore, could lose money.
- Below investment grade debt securities (commonly known as "high yield
bonds" or "junk bonds") are speculative and involve a greater risk of
default and price change due to changes in the issuer's
creditworthiness. The market prices of these debt securities may
fluctuate more than the market prices of investment grade debt
securities and may decline significantly in periods of general economic
difficulty.
- Although capital appreciation is not a primary objective of the Fund,
there may be periods of time when the Fund's total return will be
partly attributable to capital appreciation.
- Investing in foreign securities poses additional risks. The performance
of foreign securities can be adversely affected by currency fluctuations
and the different political, regulatory and economic environments in
countries where the Fund invests. Although the Fund expects to be hedged
against currency risk, there may be periods when the Fund has some
currency risk exposure. In addition, emerging markets tend to be more
volatile than the U.S. market or developed foreign markets.
EXPENSES:
The Fund is expected to have the following annual operating expenses after
the Conversion:
Advisory Fee Subadvisory Fee Other Expenses Total Expenses
0.10% 0.15% 0.42% 0.67%
THE INVESTMENT ADVISER AND THE MASTER INVESTMENT ADVISORY AGREEMENT
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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 The VantageTrust Company. 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, Vice President and Acting 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, performance monitoring, and supervising
and directing each fund's investments. Additionally, VIA furnishes periodic
reports to the VP Funds' Board 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.
INVESTMENT SUBADVISER
VIA currently is conducting a search for one or more subadvisers to oversee the
day-to-day investment management of the Fund. VIA expects to present its
recommendations to the Board at a meeting to be held in person in mid-October.
Once one or more subadvisers are appointed, shareholders will receive another
information statement outlining additional information about such subadviser(s).
RECORD OF BENEFICIAL OWNERSHIP
As of August 31, 2004 the Fund had 7,141,915.090 share outstanding. The Model
Portfolios own a majority of the outstanding shares of the Fund and as of
August 31, 2004 together owned approximately 85% of the Fund. The principal
shareholder in the Model Portfolios and the VP Funds is the VantageTrust.
VantageTrust is a group trust sponsored and maintained by The VantageTrust
Company for the purpose of holding and investing the assets of public sector
retirement and deferred compensation plans. As of August 31, 2004, the
directors and officers of the VP Funds owned less than 1% of the outstanding
shares of the Fund.
GENERAL INFORMATION
DISTRIBUTOR
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
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.
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ADMINISTRATOR AND CUSTODIAN
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 as amended December 31, 2001. IBT also
serves as custodian for the VP Funds pursuant to a Custodian Agreement dated
February 3, 1999 and amended on December 31, 2001.
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 Semi-Annual Report
and any Annual Report following the Semi-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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