SCHEDULE 14C
(RULE 14C-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
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)
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THE VANTAGEPOINT FUNDS
VANTAGEPOINT INTERNATIONAL 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 on behalf of the Board of
Directors ("Directors" or "Board") of The Vantagepoint Funds (the "VP Funds") to
inform shareholders of the Vantagepoint International Fund (the "Fund") about a
recent change related to the Fund's subadvisory arrangements. The change was
approved by the Board of the VP Funds on the recommendation of the Fund's
investment adviser, Vantagepoint Investment Advisers, LLC ("VIA" or the
"Adviser"), without shareholder approval as is permitted by an order of the U.S.
Securities and Exchange Commission ("SEC") dated May 8, 2000. 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 December 15, 2006 to
shareholders of record of the Fund as of October 31, 2006.
INTRODUCTION
VIA is the investment adviser for each of the VP Funds. VIA employs a
"manager of managers" arrangement in managing the assets of the VP Funds. This
permits VIA, subject to approval by the Board, to hire, terminate or replace
subadvisers unaffiliated with the VP Funds or VIA ("unaffiliated subadvisers"),
and to modify material terms and conditions of subadvisory agreements with
unaffiliated subadvisers, without shareholder approval. VIA recommended and the
Board has approved a new subadvisory agreement ("New Subadvisory Agreement")
with one of the Fund's current subadvisers, Walter Scott & Partners, Limited
("WSPL"), due to the acquisition of WSPL by Mellon International Limited (the
"Transaction") (See "The Transaction" below).
Section 15(a) of the Investment Company Act of 1940 (the "1940 Act")
generally requires that the shareholders of a mutual fund approve an agreement
pursuant to which a person serves as investment adviser or subadviser of the
fund. In order to use the "manager or managers" authority discussed above, the
VP Funds and VIA requested and received an exemptive order from the SEC on May
8, 2000 (the "SEC Order"). The SEC Order exempts VIA and the VP Funds from
certain of the shareholder approval requirements of Section 15(a) of the 1940
Act and allows the VP Funds' Board, subject to certain conditions, to appoint
new, unaffiliated subadvisers and approve new subadvisory agreements on behalf
of the VP Funds without shareholder approval.
Consistent with the SEC Order, the Board, including a majority of the
Directors who are not "interested persons" of the VP Funds or of VIA under the
1940 Act ("Independent Directors") has approved, the New Subadvisory Agreement
among the VP Funds, VIA and WSPL relating to the Fund. As discussed later in
this Information Statement, the Board carefully considered the matter and
concluded that the approval of the New Subadvisory Agreement was in the best
interests of the Fund and its shareholders.
[Vantagepoint Funds Logo]
As a condition to relying on the SEC Order, VIA and the VP Funds are
required to furnish Fund shareholders with notification of the New Subadvisory
Agreement within ninety days from the date that the subadviser is hired. This
Information Statement provides that notice and gives details of the new
arrangement.
THE TRANSACTION
Upon completion of the Transaction on October 2, 2006, Mellon International
Limited acquired 100% of the outstanding voting securities of WSPL, which
constitutes a "change of control" of WSPL under applicable provisions of the
1940 Act. The 1940 Act provides that a "change of control" of a fund's adviser
or subadviser results in an "assignment," and a consequent automatic
termination, of the investment advisory agreement between the fund and the
adviser or subadviser, as the case may be. Accordingly, as a result of the
Transaction, the prior subadvisory agreement dated January 3, 2006 (as
originally approved by the Board on December 16, 2005 in accordance with the
terms of the SEC order) among VIA, as the Funds' investment adviser, the VP
Funds and WSPL, as the Fund's subadviser, terminated on October 2, 2006. In
anticipation of the pending transaction and consequent immediate termination of
the prior subadvisory agreement with WSPL, the Board, at its September 22, 2006
regular meeting (the "September Meeting"), approved the New Subadvisory
Agreement with WSPL, having terms substantively identical to the terms of the
prior subadvisory agreement except for the effective date.
Under the terms of the New Subadvisory Agreement, WSPL makes investment
decisions for the assets of the relevant Fund allocated to it by the Adviser,
and continuously reviews, supervises and administers such Fund's investment
programs with respect to these assets.
VIA'S RECOMMENDATION AND THE BOARD OF DIRECTORS' DECISION
VIA recommended the approval of the New Subadvisory Agreement between
VIA,WSPL and the VP Funds. VIA's recommendation was based on VIA's continued
belief that, among other things, (i) WSPL demonstrated consistently favorable
historical performance; (ii) WSPL takes an opportunistic and disciplined
approach in managing international assets; (iii) WSPL has an investment staff
experienced in managing international equity portfolios; (iv) WSPL is led by a
stable management team; (v) WSPL possesses a workable organizational structure;
(vi) WSPL has adequate infrastructure and support staff; (vii) WSPL is expected
to continue to use an investment approach complementary to that employed by the
Fund's other subadvisers in managing the Fund's assets; and (viii) each of these
will continue to be true following the Transaction. Before approving the
appointment of WSPL as subadviser to the Fund, the Board of the VP Funds, at the
September Meeting, considered the recommendations of, and supporting analyses
and data presented by VIA.
With respect to the Board's consideration of the New Subadvisory Agreement
with WSPL, the Directors received written information in advance of the
September Meeting from VIA, which included: 1) the conclusions reached by VIA as
a result of the due diligence it conducted relating to the Transaction; (2) the
nature and quality of the services that WSPL would provide to the Fund; (3)
WSPL's experience, reputation, investment management business, personnel and
operations; (4) WSPL's brokerage and trading policies and practices; (5) the
level of subadvisory fees to be charged to the Fund by WSPL and a comparison of
those fees to the: (a) standard fee schedule charged by WSPL for managing
international equity accounts and the fee WSPL charges to other U.S. registered
mutual funds with a similar investment mandate to that of the Fund; and (b)
fees charged by a group of active separate account investment managers utilizing
an international equity mandate; (6) WSPL's compliance program; (7) WSPL's
historical performance returns utilizing an international equity mandate and
such performance compared to a relevant benchmark; and (8) WSPL's investment
performance as a subadviser to the Fund.
In considering the information and materials described above, the
Independent Directors received assistance from and met separately with their
independent legal counsel and were provided with a written description of their
statutory responsibilities and the legal standards that are applicable to
approvals of advisory agreements.
In determining whether to approve the New Subadvisory Agreement, the
Directors considered the information received in advance of the September
Meeting, the presentations made by and discussions held with the personnel
2
of VIA, and discussions with representatives of WSPL and Mellon International
Limited, at the September Meeting, as well as a variety of factors, and reached
the following conclusions:
Nature, Extent and Quality of Services. With respect to the nature, extent
and quality of the investment advisory services to be provided by WSPL to the
Fund following the Transaction, the Directors considered WSPL's investment
management process in managing the Fund's assets allocated to it, including the
experience and capability of WSPL's management and other personnel responsible
for the portfolio management of the Fund. The Directors also considered that
WSPL and Mellon International Limited each represented to the Board at the
Meeting that there would be no material change in the nature, quality or scope
of the investment advisory services provided by WSPL to the Fund as a result of
the Transaction. The Directors considered Mellon International Limited's
representations that it has no present intention of changing the investment
management practices or principles or any personnel of WSPL or altering the fees
that are charged to the Fund for the services rendered by WSPL. The Directors
also took into account the information provided regarding the retention and
incentive tools put into place by Mellon International Limited that are designed
to retain the key employees of WSPL after the Transaction.
The Directors further considered that WSPL represented to VIA that they do
not plan to make any changes in operations or key personnel as a result of the
Transaction and intend to continue managing the Fund in the same manner as they
are currently. The Directors also considered that VIA does not anticipate any
material changes to the nature and quality of the services provided by WSPL
following the Transaction. Based on the information considered, the Directors
concluded that the Fund was likely to continue to benefit from the nature,
extent and quality of WSPL's services, and that WSPL has the ability to continue
to provide these services after the Transaction.
Investment Performance. The Directors considered the data provided
regarding WSPL's historical investment performance record in managing their
clients' assets utilizing an international equity mandate versus a relevant
benchmark. The Directors also considered WSPL's investment performance with
respect to managing the assets of the Fund and VIA's favorable assessment of
such performance. The Directors concluded that the investment performance record
of WSPL supported approval of the New Subadvisory Agreement with WSPL.
Subadvisory Fees and Economies of Scale. In evaluating the subadvisory
fee, the Directors considered that the subadvisory fee payable under the New
Subadvisory Agreement is the same as the subadvisory fee payable under the
current subadvisory agreement with WSPL.
The Directors considered comparisons of the subadvisory fees charged by
WSPL to the Fund with WSPL's standard fee schedule, and its fee schedule for
other U.S. registered mutual funds, for managing an investment mandate similar
to the mandate the subadviser employs on behalf of the Fund. The Directors also
considered VIA's assessment that the Fund's fee schedule at the current level of
assets allocated to WSPL is competitive with WSPL's standard fee schedule and
WSPL's fee schedule for other U.S. registered mutual funds advised by WSPL that
have a similar investment mandate. The services WSPL provides to the Fund appear
to be comparable to those it provides to such other advisory clients. The
Directors reviewed information provided by VIA (which was based on an
independent third-party source) on the fees charged by a group of separate
account investment managers that employ an active international equity mandate.
According to the information provided, the effective fee rate to be paid by the
Fund to WSPL at current asset levels is below the median fee charged by such
managers.
The foregoing comparisons assisted the Directors in considering the New
Subadvisory Agreement by providing them with a basis for evaluating WSPL's fees
on a relative basis. Based on this information, the Directors concluded that
WSPL's subadvisory fees appeared to be within a reasonable range for the
services provided.
The Directors also reviewed the information provided by WSPL regarding the
estimated profits to be realized with respect to WSPL's relationship with the
Fund. In reviewing the extent to which economies of scale may be realized by
WSPL as the assets of the Fund to be managed by WSPL grow, and whether the
proposed fee levels reflect these economies, the Directors considered that
WSPL's fee schedule includes breakpoints, which indicated that the subadvisory
fee rate is intended to capture certain anticipated economies of scale for the
benefit of the Fund's shareholders in connection with the services to be
provided.
3
Other Considerations. The Directors considered the due diligence process
engaged in by VIA in connection with the Transaction and in deciding to
recommend that the Board approve the New Subadvisory Agreement with WSPL. The
Directors also considered VIA's conclusion that the fees to be paid by WSPL for
its services to the Fund continue to be reasonable and appropriate in light of
the nature and quality of services to be provided by WSPL.
The Directors concluded that VIA's recommendations and conclusions
supported approval of the New Subadvisory Agreement.
The Directors also considered the potential "fall-out" or ancillary
benefits that may accrue to WSPL due to its relationship with the Fund and noted
that WSPL does not consider there to be any material fall-out benefits accruing
to WSPL by virtue of its relationship with the Fund.
Conclusion. After full consideration of the foregoing factors, with no
single factor identified as being of paramount importance, the Directors,
including a majority of the Independent Directors, concluded that the approval
of the New Subadvisory Agreement with WSPL is in the best interests of the Fund
and its shareholders, and approved the New Subadvisory Agreement with, and the
fee to be paid to, WSPL.
THE NEW SUBADVISORY AGREEMENT
The New Subadvisory Agreement has terms substantially identical to the
prior subadvisory agreement between VIA, the VP Funds and WSPL except for the
effective date. WSPL 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. WSPL is
not affiliated with VIA. WSPL discharges its responsibilities subject to the
supervision of VIA and the Board, and has agreed to do so in a manner consistent
with the Fund's investment objective, policies and limitations. The prior
subadvisory agreement was dated January 3, 2006 with an initial term ending
February 28, 2007. The New Subadvisory Agreement is dated October 2, 2006 and
has an initial term ending February 28, 2008. Thereafter, continuance of this
subadvisory arrangement requires the annual approval of the VP Funds' Board,
including a majority of the Independent Directors
Pursuant to the terms of the New Subadvisory Agreement, WSPL's subadvisory
fee,based on the value of the Fund's assets under its management is an annual
rate of 0.60% for the first $100 million and 0.50% over $100 million. This
subadvisory fee is the same as the prior subadvisory arrangements.
ADDITIONAL INFORMATION ABOUT WSPL
WSPL is a registered investment adviser that was founded in 1983 with a
principal business address of One Charlotte Square, Edinburgh, EH2 4DZ, UK. WSPL
is a wholly owned subsidiary of Mellon International Limited, with an address at
Mellon Financial Centre, 160 Queen Victoria Street, London, EC4V4LA, England,
which is a wholly owned subsidiary of Mellon International Holdings S.a r.l.,
with an address at 73 Cote d'Eich, L1450, Luxembourg, which is a wholly owned
subsidiary of Neptune LLC, with an address c/o Corporation Service Company, 2711
Centerville Road, Suite 400, Wilmington, Delaware, 19808, which is a wholly
owned subsidiary of MBC Investments Corporation, with an address at 4001 Kennett
Pike, Suite 218, Greenville, DE 19807, which is a wholly-owned subsidiary of
Mellon Financial Corporation, a publicly held company with an address at One
Mellon Financial Center, 500 Grant Street, Pittsburgh, PA 15258. As of June 30,
2006, WSPL managed approximately $27.5 billion in assets.
Attached as Appendix A is a list of the directors and principal executive
officers of WSPL and their principal occupations. Unless otherwise noted, the
address of each person listed is One Charlotte Square, Edinburgh, EH2 4DZ, UK.
WSPL currently serves as subadviser (but not investment adviser) to three
other mutual funds with similar objectives to the Fund. The chart at Appendix B
contains a description of these funds and the compensation paid to WSPL for its
subadvisory services.
4
THE INVESTMENT ADVISER AND THE MASTER INVESTMENT ADVISORY AGREEMENTS
VIA, 777 North Capitol Street, NE, Washington, D.C. 20002, is a wholly
owned subsidiary of, and controlled by the ICMA Retirement Corporation ("ICMA-
RC"), a retirement plan administrator and investment adviser whose principal
investment advisory client is the VantageTrust Company. ICMA-RC was established
in 1972 as a not-for-profit organization 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. ICMA-RC has been registered as an investment adviser with the SEC
since 1983. VIA is a Delaware limited liability company and has been registered
as an investment adviser with the SEC since 1999.
Joan McCallen serves as President and Chief Executive Officer of ICMA-RC,
Manager and President of VIA and President and Principal Executive Officer of
the VP Funds. Angela Montez serves as Vice President, Acting Secretary and
Acting General Counsel of ICMA-RC and Secretary of the VP Funds. Gerard P. Maus
serves as Treasurer of the VP Funds, Senior Vice President and Chief Financial
Officer of ICMA-RC and Treasurer of VIA.
VIA provides investment advisory services to each of the VP Funds,
including the Fund, pursuant to Master Investment Advisory Agreements (the
"Advisory Agreements") dated January 3, 2005 and 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 VP Fund.
Pursuant to the Advisory Agreements, the VP Funds compensate VIA for these
services to the Fund by paying VIA an annual advisory fee assessed against
average daily net assets under management of 0.10%. VIA received for services to
the Fund $621,765 in advisory fees for the fiscal year ended December 31, 2005.
SUBADVISORY FEES PAID
The Fund has four subadvisers: Artisan Partners Limited Partnership;
Capital Guardian Trust Company; GlobeFlex Capital, LP and WSPL. Artisan Partners
Limited Partnership and Capital Guardian Trust Company earned $2,213,825 and
$1,294,030, respectively, in fees for services provided to the Fund for the
fiscal year ended December 31, 2005. GlobeFlex Capital, LP and WSPL began
service as subadvisers to the Fund on January 4, 2006. Had WSPL also served as
investment subadviser of the Fund for the fiscal year ended December 31, 2005
for its respective portion of the Fund as determined in January 2006, WSPL would
have earned $1,051,251 in fees for services provided to the Fund. As of June 30,
2006, GlobeFlex Capital, LP and WSPL earned $254,855 and $552,903 respectively,
in fees for services provided to the Fund.
PAYMENTS TO AFFILIATED BROKERS
The Fund did not make any payments to an affiliated broker for the fiscal
year ended December 31, 2005.
RECORD OF BENEFICIAL OWNERSHIP
As of October 31, 2006, the Fund had 74,412,222 shares outstanding. A
majority of the voting shares of the Fund are held, either directly or
indirectly through the Vantagepoint Model Portfolio Funds and the Vantagepoint
Milestone Funds, by the VantageTrust, a group trust sponsored and maintained by
The VantageTrust Company ("Trust Company"). The VantageTrust, 777 North Capitol
Street, NE, Washington, D.C. 20002, was established for the purpose of holding
and investing the assets of public sector retirement and deferred compensation
plans. The Trust Company, a New Hampshire non-depository banking corporation,
has the power to vote the shares of the VP Funds directly held by the
VantageTrust and has the power to direct the vote of the shares of the
Vantagepoint Model Portfolio Funds and the Vantagepoint Milestone Funds under
the proxy voting policy adopted by VIA. The Trust Company therefore holds with
the power to vote more than 25% of the VP Funds' voting securities and thus
5
under the 1940 Act is considered to "control" the VP Funds. In addition, the
Trust Company holds with the power to vote more than 25% of the voting
securities of the Fund (see percentages below) and thus under the 1940 Act is
considered to "control" the Fund. As a control person of the VP Funds and the
Fund, the Trust Company may possess the ability to control the outcome of
matters submitted to the vote of shareholders. Both the Trust Company and VIA
are wholly owned subsidiaries of ICMA-RC.
As of October 31, 2006, the VantageTrust held, directly or
indirectly,71,261,938 shares of the Fund or 95.77%. Also, as of October 31,
2006, the Directors and executive officers of the VP Funds, both individually
and as a group, owned less than 1% of the Fund's outstanding shares.
GENERAL INFORMATION
DISTRIBUTOR
ICMA-RC Services, LLC ("RC Services"), 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. RC Services is a wholly owned subsidiary
of ICMA-RC and an affiliate of VIA. Joan McCallen serves as President of RC
Services. The VP Funds did not pay any commissions to RC Services during the
fiscal year ended December 31, 2005.
TRANSFER AGENT AND ADMINISTRATOR
Vantagepoint Transfer Agents, LLC ("VTA"), 777 North Capitol Street, NE,
Suite 600, Washington, D.C. 20002, is the designated transfer agent of the VP
Funds' shares and, pursuant to a Transfer Agency and Administrative Services
Agreement, also provides certain transfer agency and administrative shareholder
support services for the VP Funds related to the retirement plans investing in
the VP Funds. VTA is a wholly owned subsidiary of ICMA-RC and an affiliate of
VIA. Joan McCallen serves as President of VTA. VTA receives fees from the Fund
for the services it provides.
The VP Funds have also entered into an Administration Agreement with
Investors Bank & Trust Company ("IBT"), 200 Clarendon Street, Boston, MA 02116,
wherein IBT performs certain financial reporting, tax filing and portfolio
compliance functions.
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;
unless the VP Funds has received instructions to the contrary. If you need
additional copies of this Information Statement, please contact the VP Funds
toll free at 1-800-669-7400 or in writing at 777 North Capitol Street, NE, Suite
600, Washington, D.C. 20002. If you do not want the mailing of an Information
Statement to be combined with those for other members of your household in the
future, or if you are receiving multiple copies and would rather receive just
one copy for the household, contact the VP Funds in writing at 777 North Capitol
Street, NE, Suite 600, Washington, D.C. 20002 or toll free at 1-800-669-7400.
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.
6
APPENDIX A
<Table>
<Caption>
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NAME PRINCIPAL OCCUPATION
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Dr. Walter G. Scott Chairman
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Alan McFarlane Managing Director
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John Clark Director and Senior Adviser
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Dr. Kenneth Lyall Director
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Sharon Bentley-Hamlyn Director
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Rodger Nisbet Director
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James Smith Director
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Pamela Maxton Director
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Marilyn Harrison Director
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Alistair Lyon-Dean Company Secretary and Chief Compliance Officer
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Ron O'Hanley Director
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Jonathan Little Director and Chief Executive, Mellon Global
Investments Limited
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</Table>
7
APPENDIX B
<Table>
<Caption>
APPROXIMATE TOTAL
FUND ASSETS AS OF SUBADVISORY FEE WAIVER OF
SEPTEMBER 30, 2006 (ANNUALLY, AS % OF SUBADVISORY FEE
NAME OF FUND (MILLIONS) AVERAGE DAILY NET ASSETS)
GuideStone International $261 0.75% on the first $50 million
Equity Fund 0.50% on assets above $50 million N/A
Brown Advisory $154 0.60% on the first $100 million
International Fund 0.50% on assets above $100 million N/A
BBH International $265 0.55% per annum on "Combined
Equity Fund Assets" up to $250,000,000 and
0.35% per annum on "Combined N/A
Assets" over $250,000,000
</Table>
8