VIRGINIA529 COLLEGE SAVINGS PLANSM
REQUEST FOR PROPOSALS (RFP) No. VA529 16-04
TO PROVIDE INVESTMENT CONSULTING SERVICES
MARY MORRIS
Chief Executive Officer
NOTE: This public body does not discriminate against faith-based organizations in accordance
with the Code of Virginia, §2.2-4343.1 or against a vendor because of race, religion, color, sex,
national origin, age disability, or any other basis prohibited by state law relating to
discrimination in employment.
This Request for Proposals (RFP) states the instructions for submitting proposals and the procedures
and criteria by which a firm may be selected. The RFP can be downloaded from this web site:
http://www.virginia529.com/procurement/
GENERAL INFORMATION
Reference Number:
RFP No. VA529 16-04
Issue Date:
December 9, 2016
Title:
Investment Consulting Services
Issuing Agency:
Attn: Princess Banks, Procurement Officer
Commonwealth of Virginia
Virginia529 College Savings Plan
9001 Arboretum Parkway
North Chesterfield, Virginia 23236
Proposal Questions:
Any questions concerning this RFP must be communicated in
writing (fax or e-mail) to the contact below no later than 5:00
p.m.(EDT) December 20, 2016 in order to guarantee a timely
response prior to the proposal due date.
Princess Banks, Procurement Officer
Phone: (804) 786-6201
Fax: (804)323-2708
E-mail: [email protected]
Proposal Due Date:
Sealed Proposals will be received until 1:00 pm (EDT), January 9,
2017 for Investment Consulting Services as described herein.
Proposal Delivery:
One (1) original, so marked, six (6) copies, so marked, of each
proposal must be submitted to the Virginia College Savings Plan.
Please also submit an electronic version of your proposal in addition
to, but not in place of, hard copies. If your proposal contains
proprietary information, please also submit one redacted copy.
Mail or Deliver to: Virginia College Savings Plan, Proposal for
Investment Consulting Services RFP VA529 16-04, 9001 Arboretum
Parkway, North Chesterfield, Virginia 23236, Attn: Princess Banks.
The VA529 does not take responsibility for lost or misdirected mail.
Initial Period of Contract:
February 1, 2017 through January 31, 2022, with the option to
renew for three additional one (1) year periods at the sole
discretion of Virginia529 College Savings Plan (VA529) and in
accordance with the terms noted in the Agreement.
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RFP VA529 16-04, Investment Consulting Services
Page 2
In compliance with this RFP and with all the conditions imposed therein and hereby incorporated by
reference, the undersigned offers and agrees to furnish Investment Consulting Services in
accordance with the attached signed proposals or as mutually agreed upon by subsequent
negotiations.
Firm’s Name:
By (Signature in Ink):
Complete Address:
Name (please print) and Title:
Date:
City/State/Zip:
Federal Employer Identification Number:
Telephone Number:
Facsimile Number:
E-Mail Address:
Virginia Freedom of Information Act Notice. As VA529 is a “public body” under the
Virginia Freedom of Information Act (VFOIA), Va. Code §§ 2.2-3700, et seq., all documents,
notes, emails and other forms of communication in the custody or control of VA529, including
those sent to VA529 by outside entities, are subject to production under VFOIA upon request,
subject only to any applicable exemptions under VFOIA.
I. PURPOSE
The Board (Board) of VA529 is seeking proposals from investment consulting firms
(“Consultant” or “Firm”) to provide investment consulting services. VA529 administers five
programs under Section 529 and 529A of the Internal Revenue Code (“IRC §529”): Virginia529
prePAIDsm (prePAID), Virginia529 inVESTsm (inVEST), CollegeAmerica®, CollegeWealthsm
and Achieving a Better Life Experience (ABLE). Program descriptions are available at
www.Virginia529.com (prePAID, inVEST, CollegeWealth and ABLEnow) and
www.AmericanFunds.com (CollegeAmerica).
VA529’s Investment Advisory Committee (IAC) will review the proposals submitted and select
the Consultant to be recommended for this service. After a review of the submissions, the
Committee may either select a single finalist or conduct interviews with one or more Firm(s).
Staff will then negotiate a contract with the selected Consultant to provide the services outlined
in this RFP.
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RFP VA529 16-04, Investment Consulting Services
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II. BACKGROUND
Virginia College Savings Plan℠, also known as Virginia529 College Savings Plan℠ is an
independent agency of the Commonwealth of Virginia and is administered by Chief Executive
Officer Mary G. Morris and an eleven-member Board of Directors (Board). Ms. Morris is a tax,
securities and bond attorney, as well as a former Treasurer of Virginia and former Senior Assistant
Attorney General and is responsible for the administration and operation of the VA529. VA529’s
Board is comprised of four citizen members appointed by the Governor, two members appointed by
the Virginia House of Delegates, one member appointed by the Senate of Virginia and four state
officials who serve by virtue of the state offices they hold: the State Treasurer, the State
Comptroller, the Chancellor of the Community College System, and the Executive Director of the
State Council of Higher Education for Virginia. Citizen members are required to have significant
experience in finance, accounting, and investment management.
VA529 operates the Commonwealth’s Internal Revenue Code (IRC) Section 529 qualified
tuition plan, which offers four programs, Virginia529 prePAID℠ (prePAID), Virginia529
inVEST℠ (inVEST), CollegeAmerica® and CollegeWealth®. In addition, VA529 is currently
developing two ABLE programs to meet its statutory mandate and serve the disability
community as provided under Section 529A of the IRC. Additional information about these
programs can be found on our website at www.Virginia529.com and at www.ABLE-now.com.
VA529 was created by the 1994 Acts of Assembly; Chapter 7, Section 23-1-701, et seq., of the
Code of Virginia (1950), as amended (VA529 Statutes).
VA529 is audited by the Virginia Auditor of Public Accounts. The most recent financial
statements and prePAID actuarial valuation report may be found at
www.virginia529.com/about/reports/.
VA529 statutes require that the Board appoint an Investment Advisory Committee to provide
sophisticated, objective, and prudent investment advice. Pursuant to its charter, the Committee is
responsible for interviewing and recommending the Consultant to the Board. The Committee
presently has ten members and meets quarterly or as needed, typically in conjunction with Board
meetings.
The Board is charged statutorily with the responsibility for the investment of VA529 assets. The
investment objective with respect to prePAID is to invest payments received from prePAID
college tuition contracts, in accordance with statutes and policy, in a prudent manner designed to
achieve a rate of return sufficient to meet future tuition contract obligations. The investment
objective with respect to inVEST, CollegeAmerica and CollegeWealth is to provide participants
in those programs with investment options and vehicles through which capital may be
accumulated for future higher education expenses. The investment objective with respect to
ABLEnow will be to provide participants with investment options and vehicles through which
capital may be accumulated and used for disability related expenses. The VA529 Statutes and the
Committee Charter are attached as Exhibit A hereto. The Investment Policies and Guidelines
may be found at www.virginia529.com/about/financial-policies/.
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VA529 is subject to continual oversight by the Joint Legislative Audit and Review Commission
(JLARC) pursuant to the Virginia College Savings Plan Oversight Act. JLARC issued its
second biennial status report on VA529 in July 2016 and noted that VA529’s programs had
grown and met long-term performance goals. The report noted that the prePAID program was
126 percent funded on an actuarial basis as of June 30, 2015, but that the fund’s investments had
underperformed their benchmark for several years. The report noted however, that the
Investment Advisory Committee oversaw the investment strategies and that the Committee
understood the reasons for the underperformance and attributed it to its asset allocation strategy,
which Committee members felt would outperform over time. The report noted the continued
growth and success of the savings programs and VA529’s expanded mission with the
responsibility for establishing and managing the ABLE programs. Finally, the report discussed
VA529’s budget and staffing changes and management thereof, the reductions in program fees
and recent legislative changes. The full report may be found on JLARC’s website at
http://jlarc.virginia.gov/vcsp.asp.
VA529’s Chief Financial Officer is Gary Ometer. The CFO is responsible for the VA529’s
financial operations, accounting, reporting and investment operations. The CFO and certain
members of his staff will be the primary day-to-day contacts for the investment consultant.
As indicated above, VA529 currently offers four IRC §529 qualified tuition programs which as
of September 30, 2016, had the following number of accounts and assets under management:
Virginia College Savings Plan
Accounts & Assets Under Management September 30, 2016
Program
Accounts
Assets Under Management
prePAID
64,290
$2,452,181,380
inVEST
220,044
$3,444,163,893
CollegeAmerica
2,198,805
$52,008,635,208
CollegeWealth
18,406
$111,015,398
A summary of allocations, managers and funds for both prePAID and inVEST as of September
30, 2016 are provided in Exhibit B hereto.
VA529 has engaged the Bank of New York Mellon (BNY Mellon) to provide Master Custodian
and investment accounting services for prePAID and inVEST. VA529 staff utilizes BNY
Mellon’s on-line reporting utilities to produce investment performance reports and to monitor
investment manager compliance with investment policy. These investment performance reports
are provided to the investment consultant on a quarterly basis so that the consultant can prepare
quarterly performance evaluation reports for the Committee and the Board. The performance
evaluation reports prepared by the Consultant are expected to contain: broad market commentary
and similar information for the period; performance attribution and related commentary at the
program, asset class, and individual manager level; and comparison of performance results
achieved by VA529 investment managers to a robust performance universe database of results
achieved by peer managers within the same investment strategy.
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The Board desires an asset mix for prePAID that will achieve the required rate of return within a
stated risk tolerance, and with diversification to minimize the risk associated with market
volatility within one or more asset classes. The current actuarial assumption of investment return
used for prePAID contract pricing and fund valuation is 6.25% annual return.
Currently VA529 has 50 separately managed accounts and mutual funds for prePAID and
inVEST. The CollegeAmerica investment options include 43 of the mutual funds offered by the
American Funds. From time to time, VA529 will request assistance in conducting searches for
new managers/mutual funds and will depend on the Firm to conduct a search, prepare a detailed
search report and make recommendations in this regard.
VA529 seeks to contract with an investment consultant knowledgeable and experienced in all
phases of providing investment consulting services to state-sponsored prepaid tuition and savings
trust programs. The Board, Committee and Chief Executive Officer will retain all decisionmaking authority with respect to the management and administration of Virginia’s 529 programs,
including engaging and replacing investment managers and decisions regarding investment
policy and asset allocation.
III. BASIS OF SELECTION
Proposals will be evaluated based upon the overall merits/value of the proposal including, but
not limited to, price. VA529 will evaluate proposals, and select a firm on the basis of:
A. The Firm’s plan to provide VA529 with investment consulting and related services as
described in the Scope of Services section. Emphasis here is on the methods for
providing the services requested, and on the Firm's capability to deliver the desired
services on schedule.
B. The Firm’s experience and qualifications in providing services similar to those described
in this RFP, providing services to 529 plans, and to include the Firm’s references from
clients, including financial services firms.
C. The Firm’s price proposal.
D. The Firm’s Small, Woman-owned, and Minority-owned (SWAM) business status and/or
the Firm’s plan for utilization of SWAM businesses.
IV. SCOPE OF SERVICES
The scope of the engagement shall include, but will not be limited to, the following:
1. Provide general investment consulting advice; provide on-going analysis of markets and
managers as appropriate; act as liaison, when necessary, between VA529 and its
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investment managers; provide advice on an as-needed basis concerning technical aspects
of the relationship between VA529, its custodian, and selected managers.
2. Meet with VA529 staff as needed to review and advise on investment-related matters;
review (at least annually) the investment return assumption for prePAID and investment
policies and guidelines for all VA529 programs; periodically review all asset allocation
strategies and make recommendations for changes to achieve investment goals; and
conduct investment manager and/or fund searches as requested.
3. Attend all Board and Committee meetings (usually held in Richmond, Virginia on a
quarterly basis but may be held more frequently).
4. Comprehensive asset allocation and portfolio structure analysis at least every three years
for prePAID; updates of analysis on an as-needed basis, but no more than twice per contract
year.
5. Reviewing and advising on investment policies for prePAID, inVEST and ABLE-now.
6. Annual review of fees and vehicles for all investment products used in prePAID, inVEST
and ABLE-now.
7. Comprehensive asset allocation study and glide path construction for inVEST age-based
portfolios (one per five year period, timing to be determined by VA529).
8. Transition manager searches for equity and fixed income transitions as needed; including
post-transition analysis reports.
9. Quarterly report with summary performance and portfolio statistics based on the current
number of managers, assuming returns and holdings are provided to the Firm by the VA529
custodian. Report will use returns that are reconciled by the custodian and reviewed by
VA529 staff. Reports will be available to VA529 staff within 50 calendar days after the
end of the quarter.
10. Quarterly performance charts on CollegeAmerica portfolios.
11. Meetings and conference calls on an as needed basis with staff.
12. Access to all topical papers/newsletters/commentaries developed by the Firm.
13. Educational presentations on investment classes/options, including alternatives on an as
needed basis.
14. Analysis of any securities lending proposal from custodian.
15. Provide at least four (one per quarter), eight-hour training sessions on investment topics
for VA529 staff annually.
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V. CONTENTS AND STRUCTURE OF THE PROPOSAL
Proposals shall be submitted with separate tabs for each of the sections listed below.
Exhibits, if any, must be included within the tab corresponding to the question to which
they refer. Please provide clear and succinct responses to the following questions:
A. General Information, Firm Ownership and Organization
1. Please provide the Firm’s complete name, address, telephone number, and web address.
Include the name, title, telephone number and e-mail address of the proposed primary day-today consultant(s) and their location.
2. Please provide a brief history of the Firm including its organizational structure. Within the
past three years, have there been any significant developments in the Firm such as changes in
ownership, restructuring or personnel reorganizations? Does the Firm anticipate any future
significant changes in the organization or scope of services provided?
3. If the Firm is incorporated, please indicate the state in which the Firm is incorporated and the
date of incorporation. An out-of-state Firm must agree to become duly qualified to do
business in the Commonwealth of Virginia as a foreign corporation before a contract can be
executed.
4. Is the Firm, its parent or an affiliate a registered investment advisor with the SEC under the
Investment Advisors Act of 1940? If not, what is the fiduciary classification?
5. Within the last two years has the Firm or an officer or principal of the Firm been involved in
any business litigation or other legal proceedings (including SEC or other Federal or State
regulatory agency charges, investigations or similar proceedings) relating to investment
consulting or related activities? If so, provide an explanation and indicate the current status
or disposition of any such proceeding.
6. Please describe the levels of coverage for errors and omissions insurance and any fiduciary or
professional liability insurance the Firm carries. List the insurance carriers supplying the
coverage.
7. Are there any circumstances specifically related to investment consulting activities under
which the Firm, its officers or employees receives direct or indirect compensation from
investment managers selected? If so, provide complete details, especially arrangements
concerning indirect compensation.
8. Is your Firm, its parent, or an affiliate a broker/dealer? Does the Firm trade for client
accounts through a broker/dealer? Can the Firm assure that its brokerage affiliate, if any,
will not present a conflict of interest? Please explain how.
9. What percentage of your Firm’s revenue during the last 12 months came from either direct
payments or commissions generated by (1) money managers who are presently retained by
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your plan sponsor clients; (2) money managers who are not retained by any of your plan
sponsor clients but whom you included in managers searches; (3) money managers other than
those listed in (1) and (2) who would like you to include them in manager searches for your
plan sponsor clients?
10. Does your Firm offer an outsourced CIO model or provide investment management or
investment implementation advisory services? If yes, explain the products or lines of
business. If yes, also explain how your Firm monitors and prevents conflicts between or
among these lines of business?
11. Is the Firm an affiliate member of the College Savings Plans Network or the College Savings
Foundation?
12. Provide a sample of any periodic capital market updates that your Firm provides clients.
B. Employees / Staff
1. Please provide an organizational chart of the investment consulting portion of the Firm’s
business. List the number of employees, professional and support, in each function (e.g.,
research, analytics, etc.). Indicate any areas of special consulting expertise in a program
similar to those offered by VA529 (addressing both prepaid and savings options).
Specifically mention staff, expertise and tenure assigned to private equity, hedge funds and
real estate.
2. Identify the employees and the location(s) from which employees will be assigned to the
VA529 engagement, and provide resumes for those employees. Explain how the primary
day-to-day consultant will be able to serve the VA529 in addition to other existing clients.
3. Does the Firm have a written code of conduct of ethics and/or conflict of interest policy?
How is it monitored and enforced? How many CFA charter holders or CFA candidates are
on staff?
C. Investment Policy
1. Describe the Firm’s process regarding the development and ongoing review of investment
policies and guidelines, including manager guidelines, from both a performance and
compliance perspective for governmental pension fund and/or 529 plan clients.
2. Please provide comments on the Plan’s existing Investment Policies and Guidelines, if any.
D. Asset Allocation
1. What is your Firm’s philosophy and approach to development of asset allocation guidelines?
Please describe this process including application of major variables (i.e., risk tolerance, asset
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vs. funding and cash flow liability management). Describe your Firm’s use of asset
allocation modeling, and internal and external tools and resources.
2. Describe your Firm’s philosophy as to portfolio risk assessment across multiple asset classes
including internally managed, externally managed funds and illiquid private assets. Include a
description of your policy and process for rebalancing asset allocation to reflect changes in
the market environment. How often is an asset allocation review recommended?
3. In June 2016, the Committee and Board affirmed the target asset allocation strategy for
prePAID. If selected as VA529’s Consultant, what specific recommendations, if any, would
you make with regard to the target asset allocation strategy?
4. Explain your Firm’s philosophy as to growth versus value equities and equity managers.
Also provide your Firm’s philosophy as to value (and growth if applicable) managers holding
cash awaiting investment opportunities.
5. Explain your Firm’s philosophy on the characterization of private debt as an asset class.
Would this fit into a traditional private equity program as an alternative investment or would
your firm classify this within the fixed income investments.
6. Provide your Firm’s experience in conducting searches for and monitoring performance of
alternative asset classes (e.g., hedge funds, private real estate, private equity, etc.).
7. Please comment specifically on the fixed income asset allocation of the prePAID portfolio.
Would your firm recommend any changes here?
8. One of the projects on the Committee’s 2017 work plan is a comprehensive review of the
inVEST age-based portfolios, including glide path and asset allocation. Please describe the
process your Firm would recommend for completing that review. Also provide any initial
recommendations your Firm may make with respect to the glide-path.
9. Provide your Firm’s philosophy on the benchmarking investments. Also, provide comments
on current benchmarks (manager and composites) of the inVEST and prePAID Programs.
Performance reports containing benchmarks are provided in Exhibit B. A benchmark review
will be incorporated into the engagement.
10. Please provide comments on JLARC’s Biannual Report on VA529. How would your firm
respond to some of the issues raised in this report to work collaboratively with JLARC staff
and obtain the best possible final work product?
11. VA529’s Rebalancing Policy is attached as Exhibit C. Please provide any comments on the
Policy and any recommended changes.
E. Investment Manager and Fund Searches
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1. Describe the Firm’s process for evaluation and selection of investment managers. Does the
Firm maintain an in-house database of investment managers? If not, what database is used?
How many managers are included and what asset classes are covered? Does the Firm charge
direct or indirect fees for investment managers to be included in its database? If so, what are
the fees and how does the Firm prevent a conflict of interest?
2. Does the Firm classify equity managers by style and, if so, what style categories are used?
What process does the Firm use to determine a manager’s style?
3. Please provide your Firm’s ratings for each of the prePAID and inVEST investment
managers. Also provide the names of two other managers within each asset class that
currently hold your Firm’s top rating.
4. If selected as VA529’s consultant, what specific recommendations would you make with
regard to the fund selection and managers for inVEST participants or within the inVEST agebased portfolio?
5. Please provide two sample of manager search reports; one for a fixed income manager and
one for a private equity manager.
6. Provide your Firm’s philosophy and experience as to the engagement of transition managers
and the coordination, monitoring and reporting on the transition process.
F. Client List References
1. Please provide a representative list of the Firm’s current governmental institutional
investment consulting clients. This list should highlight any clients who are 529 plan
sponsors (state or qualified higher education institution(s)), manage a 529 plan, or have an
existing relationship with a 529 plan. Also highlight pension fund clients.
2. Provide three institutional client references, including a contact name, address, telephone
number and e-mail address.
3. Please list any institutional clients that have terminated the Firm’s services during the past
two years, along with the reason for termination.
G. Compensation / Fees
1. Please provide a proposed fee schedule for the services described above for the initial
contract period and for the three additional one-year extension periods. No asset-based fee
structures will be considered. The fee schedule may include an annual fee for base
services and separate fees for manager searches, etc., although this is not required.
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2. Please provide details on proposed costs for travel and other expenses necessary to provide
the required services, including any caps or other relevant information related to travel costs.
3. It is anticipated that additional studies performed in conjunction with VA529’s activities may
be recommended or required. Please provide the fee, if any, for additional services.
VI. OTHER IMPORTANT PROPOSAL REQUIREMENTS AND INFORMATION
A. Authorized Signature. An authorized representative of the Firm shall sign the original
proposal. Failure to submit all information requested may result in the VA529 requiring
prompt submission of missing information and/or giving a lowered evaluation of the
proposal. The VA529 may reject proposals that are substantially incomplete or lack key
information. Mandatory requirements are those required by law or regulation or are such
that they cannot be waived and are not subject to negotiation.
B. Copies. In order to be considered for selection, Firms must submit to the VA529 a
complete response to this RFP including one (1) original, so marked, and six (6) copies,
so marked. Please also submit an electronic version of your proposal in addition to, but not
in place of, hard copies. If applicable, Firms should also include one copy of each
proposal in conformance with subsection C of this Section.
C. Ownership of Submitted Proposals and Virginia Freedom of Information Act. Ownership
of all data, materials and documentation originated and prepared for the VA529 pursuant
to the RFP shall belong exclusively to the VA529 and be subject to public inspection in
accordance with the VFOIA. Pursuant to Virginia Code §2.2-3705.1(12), in most cases
submissions in response to this RFP will not be subject to VFOIA requests until after the
VA529 has made a decision to award or not to award a contract. Should a Firm elect to
include trade secrets (as defined by the Uniform Trade Secrets Act (Virginia Code §59.1336 et seq.)) in its response to this RFP and wish to request that they be exempt from
VFOIA requests, Firm must seek an exemption under Virginia Code §2.2-3705.7(25)(b),
in writing, before the data or other material is submitted. The written notice shall
specifically identify the data or materials to be protected and state the reasons why
protection is necessary. Should the exemption request be approved, the trade secret
material submitted shall be identified by some distinct method such as highlighting or
underlining and must indicate only the specific words, figures, or paragraphs that
constitute trade secret or proprietary information. In addition, for each page containing
trade secrets please stamp the top of that page with the word “Trade Secret”. THE
CLASSIFICATION OF AN ENTIRE PROPOSAL DOCUMENT, LINE ITEM PRICES
AND/OR TOTAL PROPOSAL PRICES AS TRADE SECRETS IS NOT
ACCEPTABLE AND WILL RESULT IN THE REJECTION OF THE PROPOSAL.
D. Oral Presentation. Firms who submit a proposal in response to this RFP may be required
to give an oral presentation of their proposal to a designated committee of the VA529.
This provides an opportunity for the Firm to clarify or elaborate on the proposal. This is
a fact finding and explanation session only and does not include negotiation. The VA529
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will schedule the time and location of these presentations. Oral presentations are at the
option of the VA529 and may or may not be conducted.
VII. TERMS AND CONDITIONS
Execution and submission of a response to this RFP shall constitute agreement to all terms
and conditions specified in the RFP, including, without limitation, the general contractual
provisions attached as Exhibit D and all terms and conditions therein, except such terms and
conditions that the Firm expressly asks to exclude. Requests for exceptions to the general
contractual provisions in Exhibit D will be taken into consideration as part of the evaluation
process. The VA529 reserves the right to negotiate final contract terms, including pricing,
with the Selected Firm. The final complete agreement between the parties will consist of an
executed agreement, the RFP and the Selected Firm’s proposal, together with any
modifications and clarifications thereto that are submitted at the request of the VA529
during the evaluation and negotiation process. In the event of any conflict or contradiction
between or among these documents, the documents shall control in the following order of
precedence: the final executed Agreement; the RFP; any approved modifications and
clarifications to the Selected Firm’s proposal; and the Selected Firm’s proposal.
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Exhibit A
Code of Virginia
Title 23.1. Institutions of Higher Education; Other Educational and Cultural Institutions
Chapter 7. Virginia College Savings Plan and ABLE Savings Trust Accounts
§ 23.1-700. (Effective October 1, 2016) Definitions.
As used in this chapter, unless the context requires a different meaning:
"ABLE savings trust account" means an account established pursuant to this chapter to assist
individuals and families to save private funds to support individuals with disabilities to maintain
health, independence, and quality of life, with such account used to apply distributions for
qualified disability expenses for an eligible individual, as both such terms are defined in § 529A
of the Internal Revenue Code of 1986, as amended, or other applicable federal law.
"Board" means the governing board of the Plan.
"College savings trust account" means an account established pursuant to this chapter to assist
individuals and families to enhance the accessibility and affordability of higher education, with
such account used to apply distributions from the account toward qualified higher education
expenses at eligible educational institutions, as both such terms are defined in § 529 of the
Internal Revenue Code of 1986, as amended, or other applicable federal law.
"Contributor" means a person who contributes money to a savings trust account established
pursuant to this chapter on behalf of a qualified beneficiary and who is listed as the owner of the
savings trust account.
"Non-Virginia public and accredited nonprofit independent or private institutions of higher
education" means public and accredited nonprofit independent or private institutions of higher
education that are located outside the Commonwealth.
"Plan" means the Virginia College Savings Plan.
"Prepaid tuition contract" means the contract entered into by the board and a purchaser pursuant
to this chapter for the advance payment of tuition at a fixed, guaranteed level for a qualified
beneficiary to attend any public institution of higher education to which the qualified beneficiary
is admitted.
"Public institution of higher education" has the same meaning as provided in § 23.1-100.
"Purchaser" means a person who makes or is obligated to make advance payments in accordance
with a prepaid tuition contract and who is listed as the owner of the prepaid tuition contract.
"Qualified beneficiary" or "beneficiary" means (i) a resident of the Commonwealth, as determined
by the board, who is the beneficiary of a prepaid tuition contract and who may apply advance
tuition payments to tuition as set forth in this chapter; (ii) a beneficiary of a prepaid tuition
contract purchased by a resident of the Commonwealth, as determined by the board, who may
apply advance tuition payments to tuition as set forth in this chapter; or (iii) a beneficiary of a
savings trust account established pursuant to this chapter.
"Savings trust account" means an ABLE savings trust account or a college savings trust account.
"Savings trust agreement" means the agreement entered into by the board and a contributor that
establishes a savings trust account.
1
10/7/2016
Exhibit A
"Tuition" means the quarter, semester, or term charges imposed for undergraduate tuition by any
public institution of higher education and all mandatory fees required as a condition of
enrollment of all students. At the discretion of the board, a beneficiary may apply benefits under
a prepaid tuition contract and distributions from a savings trust account toward graduate-level
tuition and toward tuition costs at such eligible educational institutions, as that term is defined
in 26 U.S.C. § 529 or any other applicable section of the Internal Revenue Code of 1986, as
amended.
1994, c. 661, § 23-38.75; 1997, cc. 785, 861;1998, cc. 61, 85;1999, cc. 485, 518;2000, cc. 382, 400;
2015, cc. 227, 311;2016, c. 588.
§ 23.1-701. (Effective October 1, 2016) Plan established; moneys; governing board.
A. To enhance the accessibility and affordability of higher education for all citizens of the
Commonwealth, and assist families and individuals to save for qualified disability expenses, the
Virginia College Savings Plan is established as a body politic and corporate and an independent
agency of the Commonwealth.
B. Moneys of the Plan that are contributions to savings trust accounts made pursuant to this
chapter, except as otherwise authorized or provided in this chapter, shall be deposited as soon as
practicable in a separate account or separate accounts in banks or trust companies organized
under the laws of the Commonwealth, national banking associations, federal home loan banks,
or, to the extent permitted by law, savings institutions organized under the laws of the
Commonwealth or the United States. The savings program moneys in such accounts shall be paid
out on checks, drafts payable on demand, electronic wire transfers, or other means authorized by
officers or employees of the Plan.
C. All other moneys of the Plan, including payments received pursuant to prepaid tuition
contracts, bequests, endowments, grants from the United States government or its agencies or
instrumentalities, and any other available public or private sources of funds shall be first
deposited in the state treasury in a special nonreverting fund (the Fund). Such moneys shall then
be deposited as soon as practicable in a separate account or separate accounts in banks or trust
companies organized under the laws of the Commonwealth, national banking associations,
federal home loan banks, or, to the extent permitted by law, savings institutions organized under
the laws of the Commonwealth or the United States. Benefits relating to prepaid tuition contracts
and Plan operating expenses shall be paid from the Fund. Any moneys remaining in the Fund at
the end of a biennium shall not revert to the general fund but shall remain in the Fund. Interest
and income earned from the investment of such funds shall remain in the Fund and be credited
to it.
D. The Plan shall be administered by an 11-member board that consists of (i) the director of the
Council or his designee, the Chancellor of the Virginia Community College System or his
designee, the State Treasurer or his designee, and the State Comptroller or his designee, all of
whom shall serve ex officio with voting privileges, and (ii) seven nonlegislative citizen members,
four of whom shall be appointed by the Governor, one of whom shall be appointed by the Senate
Committee on Rules, two of whom shall be appointed by the Speaker of the House of Delegates,
and all of whom shall have significant experience in finance, accounting, law, or investment
management.
E. Members appointed to the board shall serve terms of four years. Vacancies occurring other
than by expiration of a term shall be filled for the unexpired term. No member appointed to the
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Exhibit A
board shall serve more than two consecutive four-year terms; however, a member appointed to
serve an unexpired term is eligible to serve two consecutive four-year terms immediately
succeeding such unexpired term.
F. Ex officio members of the board shall serve terms coincident with their terms of office.
G. Members of the board shall receive no compensation but shall be reimbursed for actual
expenses incurred in the performance of their duties.
H. The board shall elect from its membership a chairman and a vice-chairman annually.
I. A majority of the members of the board shall constitute a quorum.
1994, c. 661, § 23-38.76; 1997, cc. 785, 861;1999, cc. 485, 518;2000, cc. 382, 400;2009, cc. 827,
845;2013, cc. 586, 649;2014, cc. 23, 687;2015, cc. 227, 311;2016, c. 588.
§ 23.1-702. (Effective October 1, 2016) Advisory committees to the board; membership; terms;
qualifications; duties.
A. To assist the board in fulfilling its fiduciary duty as trustee of the funds of the Plan and to
assist the chief executive officer in directing, managing, and administering the Plan's assets, the
board shall appoint an Investment Advisory Committee to provide sophisticated, objective, and
prudent investment advice and direction.
1. Members of the Investment Advisory Committee shall demonstrate extensive experience in
any one or more of the following areas: domestic or international equity or fixed-income
securities, cash management, alternative investments, institutional real estate investments, or
managed futures.
2. The Investment Advisory Committee shall (i) review, evaluate, and monitor investments and
investment opportunities; (ii) make appropriate recommendations to the board about such
investments and investment opportunities; (iii) make appropriate recommendations to the board
about overall asset allocation; and (iv) perform such other duties as the board may delegate to
the Investment Advisory Committee.
B. To assist the board in fulfilling its responsibilities relating to the integrity of the Plan's
financial statements, financial reporting process, and systems of internal accounting and
financial controls, the board shall appoint an Audit and Actuarial Committee.
1. Members of the Audit and Actuarial Committee shall demonstrate an understanding of
generally accepted accounting principles, generally accepted auditing standards, enterprise risk
management principles, and financial statements, and evidence an ability to assess the general
application of such principles to the Plan's activities. The members should have experience in
preparing, auditing, analyzing, or evaluating financial statements of the same complexity as
those of the Plan, and an understanding of internal controls and procedures for financial
reporting.
2. In order to establish and maintain its effectiveness and independence, the following
individuals shall not be members of the Audit and Actuarial Committee: (i) current Plan
employees; (ii) individuals who have been employees of the Plan in any of the prior three fiscal
years; and (iii) immediate family members of an individual currently employed as an officer of
the Plan or who has been employed in such a capacity within the past three fiscal years.
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Exhibit A
3. The Audit and Actuarial Committee shall (i) review, examine, and monitor the Plan's
accounting and financial reporting processes and systems of internal controls; (ii) review and
examine financial statements and financial disclosures and discuss any findings with the Plan's
senior management; (iii) make appropriate recommendations and reports to the board; (iv)
monitor the Plan's external audit function by (a) participating in the retention, review, and
discharge of independent auditors; (b) discussing the Plan's financial statements and accounting
policies with independent auditors; and (c) reviewing the independence of independent auditors;
and (v) perform such other duties as the board may delegate to the Audit and Actuarial
Committee.
C. The board may appoint such other advisory committees as it deems necessary and shall set the
qualifications for members of any such advisory committee by resolution.
D. Advisory committee members shall serve at the pleasure of the board and may be removed by
a majority vote of the board.
E. Members of advisory committees shall receive no compensation but shall be reimbursed for
actual expenses incurred in the performance of their duties.
F. The disclosure requirements of subsection B of § 2.2-3114 shall apply to each member of any
advisory committee established pursuant to this section who is not also a board member.
G. The recommendations of an advisory committee are not binding upon the board or the
designee appointed by the board to make investment decisions pursuant to subsections A and B
of § 23.1-706.
2009, cc. 827, § 23-38.79:1, 845;2011, cc. 18, 26;2016, c. 588.
§ 23.1-703. (Effective October 1, 2016) Chief executive officer of the Plan.
A. The board shall employ a chief executive officer to direct, manage, and administer the Plan.
The chief executive officer may employ such staff as are necessary to accomplish the Plan's
stated objectives.
B. The chief executive officer shall demonstrate (i) extensive experience in some or all of the
following areas: management, finance, law, regulatory affairs, and investments and (ii) such
other qualifications as the board may set.
C. The chief executive officer shall, in addition to such other duties as the board may establish, (i)
oversee the development, structure, evaluation, and implementation of the Plan's strategic goals
and objectives; (ii) facilitate communication among and between the board, advisory
committees, employees, account owners, beneficiaries, and outside entities interested in the
Plan; (iii) enhance the board's ability to make effective and prompt decisions in all matters
relating to the administration of the Plan; (iv) with the assistance of the Investment Advisory
Committee appointed by the board and investment consultants, direct, manage, and administer
the Plan's assets and programs; and (v) report to the board periodically and as requested by the
board.
1994, c. 661, § 23-38.79; 2009, cc. 827, 845;2016, c. 588.
§ 23.1-704. (Effective October 1, 2016) Powers and duties of the board.
The board shall:
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Exhibit A
1. Administer the Plan established by this chapter;
2. Develop and implement programs for (i) the prepayment of undergraduate tuition, as defined
in § 23.1-700, at a fixed, guaranteed level for application at a public institution of higher
education; (ii) contributions to college savings trust accounts established pursuant to this
chapter on behalf of a qualified beneficiary in order to apply distributions from the account
toward qualified higher education expenses at eligible educational institutions, as both such
terms are defined in § 529 of the Internal Revenue Code of 1986, as amended, or other applicable
federal law; and (iii) contributions to ABLE savings trust accounts established pursuant to this
chapter on behalf of a qualified beneficiary in order to apply distributions from the account
toward qualified disability expenses for an eligible individual, as both such terms are defined in §
529A of the Internal Revenue Code of 1986, as amended, or other applicable federal law;
3. Invest moneys in the Plan in any instruments, obligations, securities, or property deemed
appropriate by the board;
4. Develop requirements, procedures, and guidelines regarding prepaid tuition contracts and
savings trust accounts, including residency and other eligibility requirements; the number of
participants in the Plan; the termination, withdrawal, or transfer of payments under a prepaid
tuition contract or savings trust account; time limitations for the use of tuition benefits or
savings trust account distributions; and payment schedules;
5. Enter into contractual agreements, including contracts for legal, actuarial, financial, and
consulting services and contracts with other states to provide savings trust accounts for residents
of contracting states;
6. Procure insurance as determined appropriate by the board (i) against any loss in connection
with the Plan's property, assets, or activities and (ii) indemnifying board members from personal
loss or accountability from liability arising from any action or inaction as a board member;
7. Make arrangements with public institutions of higher education to fulfill obligations under
prepaid tuition contracts and apply college savings trust account distributions, including (i)
payment from the Plan of the then actual in-state undergraduate tuition cost on behalf of a
qualified beneficiary of a prepaid tuition contract to the institution to which the beneficiary is
admitted and at which the beneficiary is enrolled and (ii) application of such benefits towards
graduate-level tuition and toward tuition costs at such eligible educational institutions, as that
term is defined in 26 U.S.C. § 529 or any other applicable section of the Internal Revenue Code of
1986, as amended, as determined by the Board in its sole discretion;
8. Develop and implement scholarship or matching grant programs, or both, as the board may
deem appropriate, to further its goal of making higher education more affordable and accessible
to all citizens of the Commonwealth;
9. Apply for, accept, and expend gifts, grants, or donations from public or private sources to
enable it to carry out its objectives;
10. Adopt regulations and procedures and perform any act or function consistent with the
purposes of this chapter; and
11. Reimburse, at its option, all or part of the cost of employing legal counsel and such other
costs as are demonstrated to have been reasonably necessary for the defense of any board
member, officer, or employee of the Plan upon the acquittal, dismissal of charges, nolle prosequi,
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Exhibit A
or any other final disposition concluding the innocence of such member, officer, or employee
who is brought before any regulatory body, summoned before any grand jury, investigated by any
law-enforcement agency, arrested, indicted, or otherwise prosecuted on any criminal charge
arising out of any act committed in the discharge of his official duties that alleges a violation of
state or federal securities laws. The board shall provide for the payment of such legal fees and
expenses out of funds appropriated or otherwise available to the board.
1994, c. 661, § 23-38.77; 1997, cc. 785, 861;1998, cc. 61, 85;1999, cc. 485, 518;2000, cc. 382, 400;
2009, cc. 827, 845;2015, cc. 227, 311;2016, c. 588.
§ 23.1-705. (Effective October 1, 2016) Board actions not a debt of Commonwealth.
A. As used in this section, "current obligations of the Plan" means amounts required for the
payment of contract benefits or other obligations of the Plan, the maintenance of the Plan, and
operating expenses for the current biennium.
B. No act or undertaking of the board is a debt or a pledge of the full faith and credit of the
Commonwealth or any political subdivision of the Commonwealth, and all such acts and
undertakings are payable solely from the Plan.
C. Notwithstanding the provisions of subsection B, in order to ensure that the Plan is able to
meet its current obligations, the Governor shall include in the budget bills submitted pursuant to
§ 2.2-1509 a sum sufficient appropriation for the purpose of ensuring that the Plan can meet the
current obligations of the Plan. Any sums appropriated by the General Assembly for such purpose
shall be deposited into the Fund. All amounts paid into the Fund pursuant to this subsection
shall constitute and be accounted for as advances by the Commonwealth to the Plan and, subject
to the rights of the Plan's contract holders, shall be repaid to the Commonwealth without interest
from available operating revenue of the Plan in excess of amounts required for the payment of
current obligations of the Plan.
1994, c. 661, § 23-38.78; 1998, c. 373;2000, cc. 382, 400;2016, c. 588.
§ 23.1-706. (Effective October 1, 2016) Standard of care; investment and administration of the
Plan.
A. In acquiring, investing, reinvesting, exchanging, retaining, selling, and managing property for
the benefit of the Plan, the board, and any person, investment manager, or committee to whom
the board delegates any of its investment authority, shall act as trustee and shall exercise the
judgment of care under the circumstances then prevailing that persons of prudence, discretion,
and intelligence exercise in the management of their own affairs, not in regard to speculation but
to the permanent disposition of funds, considering the probable income and the probable safety
of their capital.
If the annual accounting and audit required by § 23.1-710 reveal that there are insufficient funds
to ensure the actuarial soundness of the Plan, the board may adjust the terms of subsequent
prepaid tuition contracts, arrange refunds for current purchasers to ensure actuarial soundness,
or take such other action the board deems appropriate.
B. The assets of the Plan shall be preserved, invested, and expended solely pursuant to and for
the purposes of this chapter and shall not be loaned or otherwise transferred or used by the
Commonwealth for any other purpose. Within the standard of care set forth in subsection A, the
board and any person, investment manager, or committee to whom the board delegates any of its
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Exhibit A
investment authority, may acquire and retain any kind of property and any kind of investment,
including (i) debentures and other corporate obligations of foreign or domestic corporations; (ii)
common or preferred stocks traded on foreign or domestic stock exchanges; (iii) not less than all
of the stock or 100 percent ownership of a corporation or other entity organized by the board
under the laws of the Commonwealth for the purposes of acquiring and retaining real property
that the board may acquire and retain under this chapter; and (iv) securities of any open-end or
closed-end management type investment company or investment trust registered under the
federal Investment Company Act of 1940, as amended, including investment companies or
investment trusts that, in turn, invest in the securities of such investment companies or
investment trusts that persons of prudence, discretion, and intelligence acquire or retain for
their own account. The board may retain property properly acquired without time limitation and
without regard to its suitability for original purchase.
All provisions of this subsection shall apply to the portion of the Plan assets attributable to
savings trust account contributions and the earnings on such contributions.
C. The selection of services relating to the operation and administration of the Plan, including
contracts or agreements for the management, purchase, or sale of authorized investments or
actuarial, recordkeeping, or consulting services, are governed by the standard of care set forth in
subsection A and are not subject to the provisions of the Virginia Public Procurement Act (§ 2.24300 et seq.).
D. No board member or person, investment manager, or committee to whom the board delegates
any of its investment authority who acts in accordance with the standard of care set forth in
subsection A shall be held personally liable for losses suffered by the Plan on investments made
pursuant to this chapter.
E. To the extent necessary to lawfully administer the Plan and in order to comply with federal,
state, and local tax reporting requirements, the Plan may obtain all necessary social security
account or tax identification numbers and such other data as the Plan deems necessary for such
purposes, whether from a contributor, a purchaser, or another state agency.
F. This section shall not be construed to prohibit the Plan's investment, by purchase or
otherwise, in bonds, notes, or other obligations of the Commonwealth or its agencies and
instrumentalities.
1994, c. 661, § 23-38.80; 1996, c. 508;1997, cc. 785, 861;1999, cc. 485, 518;2000, cc. 382, 400;
2009, cc. 827, 845;2015, cc. 227, 311;2016, c. 588.
§ 23.1-707. (Effective October 1, 2016) Prepaid tuition contracts and savings trust agreements.
A. Each prepaid tuition contract made pursuant to this chapter shall include the following terms
and provisions:
1. The amount of payment or payments and the number of payments required from a purchaser
on behalf of a qualified beneficiary;
2. The terms and conditions under which purchasers shall remit payments, including the dates of
such payments;
3. Provisions for late payment charges, defaults, withdrawals, refunds, and any penalties;
4. The name and date of birth of the qualified beneficiary on whose behalf the contract is made;
7
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Exhibit A
5. Terms and conditions for a substitution for the qualified beneficiary originally named;
6. Terms and conditions for termination of the contract, including any refunds, withdrawals, or
transfers of tuition prepayments, and the name of the person entitled to terminate the contract;
7. The time period during which the qualified beneficiary is required to claim benefits from the
Plan;
8. The number of credit hours or quarters, semesters, or terms contracted for by the purchaser;
9. All other rights and obligations of the purchaser and the trust; and
10. Any other terms and conditions that the board deems necessary or appropriate, including
those necessary to conform the contract with the requirements of § 529 of the Internal Revenue
Code of 1986, as amended, which specifies the requirements for qualified state tuition programs.
B. Each college savings trust agreement made pursuant to this chapter shall include the following
terms and provisions:
1. The maximum and minimum contribution allowed on behalf of each qualified beneficiary for
the payment of qualified higher education expenses at eligible institutions, as both such terms
are defined in § 529 of the Internal Revenue Code of 1986, as amended, or other applicable
federal law;
2. Provisions for withdrawals, refunds, transfers, and any penalties;
3. The name, address, and date of birth of the qualified beneficiary on whose behalf the savings
trust account is opened;
4. Terms and conditions for a substitution for the qualified beneficiary originally named;
5. Terms and conditions for termination of the account, including any refunds, withdrawals, or
transfers, and applicable penalties, and the name of the person entitled to terminate the account;
6. The time period during which the qualified beneficiary is required to use benefits from the
savings trust account;
7. All other rights and obligations of the contributor and the Plan; and
8. Any other terms and conditions that the board deems necessary or appropriate, including
those necessary to conform the savings trust account with the requirements of § 529 of the
Internal Revenue Code of 1986, as amended, or other applicable federal law.
C. Each ABLE savings trust agreement made pursuant to this chapter shall include the following
terms and provisions:
1. The maximum and minimum annual contribution and maximum account balance allowed on
behalf of each qualified beneficiary for the payment of qualified disability expenses, as defined in
§ 529A of the Internal Revenue Code of 1986, as amended, or other applicable federal law;
2. Provisions for withdrawals, refunds, transfers, return of excess contributions, and any
penalties;
3. The name, address, and date of birth of the qualified beneficiary on whose behalf the savings
8
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Exhibit A
trust account is opened;
4. Terms and conditions for a substitution for the qualified beneficiary originally named;
5. Terms and conditions for termination of the account, including any transfers to the state upon
the death of the qualified beneficiary, refunds, withdrawals, transfers, applicable penalties, and
the name of the person entitled to terminate the account;
6. The time period during which the qualified beneficiary is required to use benefits from the
savings trust account;
7. All other rights and obligations of the contributor and the Plan; and
8. Any other terms and conditions that the board deems necessary or appropriate, including
those necessary to conform the savings trust account with the requirements of § 529A of the
Internal Revenue Code of 1986, as amended, or other applicable federal law.
D. In addition to the provisions required by subsection A, each prepaid tuition contract shall
include provisions for the application of tuition prepayments (i) at accredited nonprofit
independent or private institutions of higher education, including actual interest and income
earned on such prepayments, and (ii) at non-Virginia public and accredited nonprofit
independent or private institutions of higher education, including principal and reasonable
return on such principal as determined by the board. Payments authorized for accredited
nonprofit independent or private institutions of higher education shall not exceed the projected
highest payment made for tuition at a public institution of higher education in the same
academic year, less a fee to be determined by the board. Payments authorized for non-Virginia
public and accredited nonprofit independent or private institutions of higher education shall not
exceed the projected average payment made for tuition at a public institution of higher education
in the same academic year, less a fee to be determined by the board.
E. All prepaid tuition contracts and savings trust agreements shall specifically provide that if
after a specified period of time the contract or savings trust agreement has not been terminated
and the qualified beneficiary's rights have not been exercised, the board, after making a
reasonable effort to contact the purchaser or contributor and the qualified beneficiary or their
agents, shall report such unclaimed moneys to the State Treasurer pursuant to § 55-210.12.
F. Notwithstanding any provision of law to the contrary, money in the Plan is exempt from
creditor process, is not liable to attachment, garnishment, or other process, and shall not be
seized, taken, appropriated, or applied by any legal or equitable process or operation of law to
pay any debt or liability of any purchaser, contributor, or beneficiary, except that the state of
residence of the beneficiary of an ABLE savings trust account shall be a creditor of such account
in the event of the death of the beneficiary.
G. Notwithstanding any other provision of state law that requires consideration of one or more
financial circumstances of an individual for the purpose of determining (i) the individual's
eligibility to receive any assistance or benefit pursuant to such provision of state law or (ii) the
amount of any such assistance or benefit that such individual is eligible to receive pursuant to
such provision of state law, any (a) moneys in an ABLE savings trust account for which such
individual is the beneficiary, including any interest on such moneys, (b) contributions to an ABLE
savings trust account for which such individual is the beneficiary, and (c) distribution for
qualified disability expenses for such individual from an ABLE savings trust account for which
9
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Exhibit A
such individual is the beneficiary shall be disregarded for such purpose with respect to any period
during which such individual remains the beneficiary of, makes contributions to, or receives
distributions for qualified disability expenses from such ABLE savings trust account.
H. No prepaid tuition contract or savings trust account shall be assigned for the benefit of
creditors, used as security or collateral for any loan, or otherwise subject to alienation, sale,
transfer, assignment, pledge, encumbrance, or charge.
I. The board's decision on any dispute, claim, or action arising out of or relating to a prepaid
tuition contract or savings trust agreement made or entered into pursuant to this chapter or
benefits under such prepaid tuition contract or savings trust agreement shall be considered a
case decision as defined in § 2.2-4001 and all proceedings related to such dispute, claim, or
action shall be conducted pursuant to Article 3 (§ 2.2-4018 et seq.) of the Administrative Process
Act. Judicial review shall be provided exclusively pursuant to Article 5 (§ 2.2-4025 et seq.) of the
Administrative Process Act.
1994, c. 661, § 23-38.81; 1995, c. 315;1997, cc. 785, 861;1999, cc. 485, 518;2000, cc. 382, 400;
2015, cc. 227, 311;2016, cc. 588, 639.
§ 23.1-708. (Effective October 1, 2016) Assets of the Plan exempt from taxation.
The assets of the Plan and their income are exempt from state and local taxation.
1994, c. 661, § 23-38.83; 2000, cc. 382, 400;2016, c. 588.
§ 23.1-709. (Effective October 1, 2016) Annual report.
On or before December 15, the board shall post on its website and submit to the Governor, the
Senate Committee on Finance, and the House Committees on Appropriations and Finance an
annual statement of the receipts, disbursements, and current investments of the Plan for the
preceding year. The report shall set forth a complete operating and financial statement covering
the operation of the Plan during the year and shall include a statement of projected receipts,
disbursements, investments, and costs for the further operation of the Plan.
1994, c. 661, § 23-38.84; 1995, c. 315;2000, cc. 382, 400;2005, c. 633;2011, cc. 18, 26;2016, c. 588.
§ 23.1-710. (Effective October 1, 2016) Forms and audit of accounts and records.
The accounts and records of the board showing the receipt and disbursement of funds from
whatever source derived shall be in such form as the Auditor of Public Accounts prescribes,
provided that such accounts correspond as nearly as possible to the accounts and records for
such matters maintained by corporate enterprises. The Auditor of Public Accounts or his legally
authorized representatives shall annually audit the accounts of the board, and the board shall
bear the cost of such audit services.
1994, c. 661, § 23-38.85; 2016, c. 588.
§ 23.1-711. (Effective October 1, 2016) Admission to institutions not guaranteed; coverage
limitations.
Nothing in this chapter or in any prepaid tuition contract or savings trust agreement entered into
pursuant to this chapter shall be construed as a promise or guarantee:
1. By the board or the Commonwealth of any admission to, continued enrollment at, or
graduation from any public institution of higher education;
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Exhibit A
2. That the beneficiary's cost of tuition at an institution of higher education other than a public
institution of higher education will be covered in full by the proceeds of the beneficiary's tuition
credits; or
3. That any qualified higher education expense will be covered in full by contributions to or
earnings on any savings trust account.
1994, c. 661, § 23-38.86; 1999, cc. 485, 518;2016, c. 588.
§ 23.1-712. (Effective October 1, 2016) Payroll deductions.
The Commonwealth, the agencies and localities of the Commonwealth and their subdivisions,
and any employer in the Commonwealth are authorized to agree, by contract or otherwise, to
remit payments or contributions on behalf of an employee toward prepaid tuition contracts or
savings trust accounts through payroll deductions.
1994, c. 661, § 23-38.87; 1999, cc. 485, 518;2009, cc. 827, 845;2016, c. 588.
§ 23.1-713. (Effective October 1, 2016) Liberal construction of chapter.
Insofar as the provisions of this chapter are inconsistent with the provisions of any other general,
special, or local law, the provisions of this chapter shall control. This chapter constitutes full and
complete authority, without regard to the provisions of any other law, for performing the acts
authorized in this chapter and shall be liberally construed to effect the purposes of this chapter.
2009, cc. 827, 845, § 23-38.87:1; 2016, c. 588.
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Exhibit A
INVESTMENT ADVISORY COMMITTEE CHARTER
PURPOSE
According to Virginia Code § 23.1-702(A), the Board (the “Board”) of the Virginia
College Savings Plan℠ (“Virginia529℠” or the “Plan”) shall appoint an Investment Advisory
Committee (the “Committee”), the purpose of which is to assist the Board in fulfilling its
fiduciary duty as trustee of the funds of the Plan and to assist the Chief Executive Officer in
directing, managing, and administering the Plan's assets, and to provide the Board with
sophisticated, objective and prudent investment advice and direction on all matters related to the
management of investments, within the parameters set by the Board’s Investment Policies and
Guidelines, as they may be amended from time to time.
AUTHORITY
The Committee is authorized to request, gather, and consider such information as it
deems relevant to the matters brought before it, and to report its findings and/or
recommendations on those matters to the Board. The Committee is authorized to interview,
select and terminate investment managers. The Committee shall report any action it takes to the
Board at its next regular meeting. The Committee shall review the Plan’s investments and make
recommendations to the Board with regard to target asset allocation, investment strategies, and
other investment matters. The recommendations are not binding upon the Board. The Committee
is further authorized to take any additional action specifically authorized by the Board herein and
in other Board actions.
DUTIES AND RESPONSIBILITIES
To fulfill the purpose for which it was established, the Committee shall perform the
following duties and responsibilities:
1. Upon the Board’s direction or at the direction of the Chief Executive Officer, interview,
select and/or terminate investment managers, including collective trust and mutual funds.
2. Periodically review the Investment Policies and Guidelines of the Plan, including the use
of active and passive strategies and internal and external portfolio management, and
make recommendations for revisions to the Investment Policies and Guidelines to the
Board as deemed appropriate.
3. Review investment objectives related to actuarial assumptions for the Virginia529
prePAID℠ (prePAID℠) program.
4. Request and review asset/liability models and studies relating to prePAID℠.
Charter of the Virginia529 Investment Advisory Committee
Amended Effective December 8, 2016
Page 1 of 5
Exhibit A
5. Review asset mix and recommend to the Board prudent long-term target asset allocation
and ranges for prePAID℠ and the Virginia529 inVEST℠ (“inVEST℠”) programs.
6. Evaluate various investment vehicles, strategies and portfolios for prePAID℠, inVEST℠,
and ABLEnowsm, and make recommendations to the Board as to their utilization.
7. Examine additional sources of investment income and ways to prudently increase return
on investments for prePAID℠, inVEST℠, and ABLEnowsm.
8. Monitor and review performance of internal and external asset managers.
9. Review issues and make recommendations to the Board regarding appointment and
termination of custodian bank and investment consultant(s).
10. Review and oversee investment options in inVEST℠, ABLEnowsm and CollegeAmerica®
and recommend to the Board such changes as are deemed appropriate.
11. Review and oversee investment options in CollegeWealth®.
12. Review and make recommendations to the Board regarding:
a. Asset and liability management issues;
b. The reasonableness of any investment-related recommendations received by the
Board; and
c. Ad hoc requests from the Board.
13. Monitor investments with an emphasis on:
a. Performance as per monitoring policies;
b. Performance measurement and evaluation reports;
c. Asset/liability management issues and liquidity needs;
d. Investment philosophy and policy;
e. Asset class strategies used; and
f. Asset allocation for prePAID℠, inVEST℠, and ABLEnowsm.
14. Request reports from Virginia529’s management, investment consultants and actuary, as
needed, to enable the Committee to perform its responsibilities.
15. Perform such other duties if, as, or when directed to do so by the Board or the Chief
Executive Officer.
COMPOSITION
The Committee shall be composed of a minimum of seven members, who shall be
appointed annually by the Chairman of the Board and who may include non-Board members.
The Chairman of the Board, the Chief Executive Officer and the Chief Financial Officer shall
Charter of the Virginia529 Investment Advisory Committee
Amended Effective December 8, 2016
Page 2 of 5
Exhibit A
serve as ex officio voting members of the Committee. Any member of the Committee who is not
a Board member shall demonstrate extensive experience in one or more of the following areas:
1) Domestic or international equity or fixed-income securities;
2) Cash management;
3) Alternative investments;
4) Institutional real estate investments; or
5) Managed futures.
Each Committee member shall subscribe and conform to the Code of Ethics and Conduct
for the Board and Committees of the Virginia College Savings Plan as adopted by the Board.
Committee appointments shall be for one year terms, each term to commence January 1st
of the calendar year immediately following the appointment. There shall be no limit to the
number of times a sitting Board member can be reappointed to the Committee. Once a Board
member’s term ends for any reason, Committee membership likewise terminates. Non-Board
members may serve up to ten consecutive one year terms and thereafter shall be eligible for reappointment to the Committee after a two year break in service. Should any Committee member
resign or otherwise vacate his or her position prior to the expiration of their current term, the
Chairman of the Board may appoint a successor for the remainder of the member’s term.
All members of the Committee shall serve at the pleasure of the Board and may be
relieved of their position at any time by a majority vote of the Board. Serving members shall
serve until such time as a successor is appointed.
DISCLOSURE AND CONFLICT OF INTEREST
No Committee member shall vote or participate in a determination of any matter in which
the Committee member shall receive a special private gain. The members of the
Committee shall operate in full compliance with both the letter and the spirit of the Virginia
Freedom of Information Act (“VFOIA”), Virginia Code § 2.2-3700 et seq. and the State and
Local Government Conflict of Interests Act, Virginia Code § 2.2-3100 et seq.
OFFICERS
Chairman
The chairman of the Committee shall be elected annually by a majority vote of the
Committee members for a one year term or until a successor is elected, such term to commence
on January 1st of the calendar year immediately following the election. Ex officio Board
members, the Chairman of the Board, the Chief Executive Officer and the Chief Financial
Officer may not be elected as the chairman.
Charter of the Virginia529 Investment Advisory Committee
Amended Effective December 8, 2016
Page 3 of 5
Exhibit A
The chairman is charged with ensuring the integrity of the Committee’s process,
facilitating the operation of the Committee meetings, and motivating the Committee to be as
effective as possible in fulfilling the purpose for which it was created. Towards these ends, the
chairman:
1. Develops the agenda for Committee meetings in conjunction with the Chief
Executive Officer and Chief Financial Officer;
2. Convenes and conducts meetings of the Committee;
3. Reports to the Board on the matters considered by the Committee and the
recommendations of the Committee; and
4. Performs such additional duties as are required to facilitate the Committee’s
fulfillment of its duties and responsibilities.
Vice-Chairman
The Committee vice-chairman shall be elected annually by a majority vote of the
Committee members for a one year term or until a successor is elected, such term to commence
on January 1st of the calendar year immediately following the election. The Chief Executive
Officer and the Chief Financial Officer may not be elected as the vice-chairman.
In the event of the absence or incapacity of the Committee chairman, the vice-chairman
shall preside at meetings of the Committee and shall fulfill such other duties and responsibilities
of the chairman as may be necessary.
Secretary
The Chief Executive Officer, or his or her designee, shall act as Secretary to the
Committee. The Secretary has the following duties and responsibilities:
1.
2.
3.
4.
Notify Committee members of meetings;
Coordinate and distribute information to Committee members;
Coordinate matters on the agenda and presentations for the Committee; and
Maintain the official minutes and records of all Committee meetings.
Notwithstanding anything herein to the contrary, all officers shall serve until such time as a
successor is elected.
CONDUCT OF BUSINESS
The rules contained in the current edition of Robert’s Rules of Order Newly Revised shall
govern all Committee meetings insofar as they are applicable and not inconsistent with any of
the policies adopted by the Board, including this Investment Advisory Committee Charter
(“Charter”), with particular attention to the rules provided for conduct of business in
Committees, which rules are herewith deemed to be appropriate for use in all meetings of the
Committee.
Charter of the Virginia529 Investment Advisory Committee
Amended Effective December 8, 2016
Page 4 of 5
Exhibit A
Unless otherwise specified by the Board or applicable law, voting by proxy is not
allowed. Virginia Code § 23.1-701(D) allows Board members who serve by virtue of the state
office they hold to name a designee, and nothing herein is intended to limit that ability.
A majority of members of the Committee physically present at the meeting location shall
constitute a quorum at meetings of the Committee. The Chairman of the Board shall not be
included in the calculation for determining the number of Committee members required for a
majority; however, his or her presence at a meeting shall be counted towards constituting a
quorum.
Except as otherwise specified herein, by applicable law, or by the current version of
Robert’s Rules of Order Newly Revised, approval of an action or decision shall be by a majority
of those Committee members present and voting at a Committee meeting.
The Committee shall meet at least quarterly, and more often if necessary. The Chief
Executive Officer shall coordinate all meetings of the Committee and shall call such additional
meetings as the Chief Executive Officer may deem necessary or as may be called at the written
request of a majority of the members of the Committee.
CHANGES IN THE CHARTER
The Committee may, from time to time, deem it necessary to alter, amend, modify,
and/or rescind all or a part of this Charter. Such revisions, once approved by a majority vote of
the Committee, shall be submitted to the Board for final approval. If approved by a majority vote
of the Board, such revisions shall be incorporated into and made a part of this Charter.
VALIDITY OF CHARTER
In the event any of the policies or provisions set forth in this Charter are found to be in
conflict with any provision(s) of the Code of Virginia, the provision(s) contained in the Code of
Virginia shall supersede and take precedence over the policy or provision of the Charter.
In the event any of the policies or provisions set forth in this Charter shall be deemed to
be invalid as a result of its conflict with a provision of the Code of Virginia, this shall not
invalidate the entirety of the Charter, but the remaining provisions of the Charter shall continue
in full force and effect.
Charter of the Virginia529 Investment Advisory Committee
Amended Effective December 8, 2016
Page 5 of 5
Exhibit B
Virginia529 inVEST
Individual Manager Investment Performance
as of September 30, 2016
Net of Fees
Month
Ending
Quarter Cal Year 1 Year
Ending Ending Ending
3 Year
Ending
5 Year
Ending
10 Year Inception Inception
Ending Ending
Date
AGE-BASED PORTFOLIOS - Underlying Managers
Large Cap Domestic Equity
Vanguard Institutional Index
S&P 500 Index
0.02
0.02
3.85
3.85
7.64
7.84
15.22
15.43
11.24
11.16
16.41
16.37
7.28
7.24
4.36
4.34
Jan-00
Small/Mid Cap Domestic Equity
Rothschild Asset Management
Russell 2500
Vanguard Small Cap Index
Custom Small Cap Index 1
0.13
0.48
0.39
0.41
6.59
6.56
6.16
6.15
9.57
10.80
11.34
11.47
12.09
14.44
14.81
14.93
9.86
7.77
8.12
7.91
17.38
16.30
16.84
16.66
7.92
7.95
8.48
8.34
10.75
8.13
8.03
7.90
Jan-00
International Equity
TIF International Equity Series
MSCI EAFE
Am. Funds Euro-Pacific Growth
MSCI EAFE
Aberdeen Emerging Markets Fund
MSCI Emerging Markets Index
DFA Emerging Markets Core Fund
MSCI Emerging Markets Index
0.76
1.27
1.21
1.27
0.52
1.32
1.34
1.32
7.27
6.49
8.23
6.49
5.29
9.15
7.96
9.15
0.34
2.19
5.37
2.19
18.96
16.36
3.25
7.04
8.51
7.04
18.95
17.21
-0.94
0.92
3.48
0.92
-0.21
-0.21
6.60
7.87
9.20
7.87
4.50
3.39
2.35
2.30
4.31
2.30
4.26
2.76
9.01
7.67
0.90
-1.34
10.36
10.02
Jan-00
Global REITs
Morgan Stanley Global REIT Fund
FTSE EPRA/NAREIT Developed RE Index
-1.01
-0.90
1.48
1.46
8.17
10.97
11.59
15.85
6.80
8.59
12.27
13.16
Fixed Income
INVESCO / PRIMCO
Stable Value Custom Benchmark
Stone Harbor Emerging Market Debt
JP Morgan EMBI Global Diversified
Prudential High Yield Bond Fund
Bloomberg Barclay's Corporate High Yield
0.14
0.11
0.56
0.40
0.40
0.67
0.45
0.32
4.70
4.04
4.86
5.55
1.34
0.94
18.51
14.77
12.25
15.11
1.77
1.20
19.92
16.20
11.43
12.73
1.62
1.09
6.35
8.19
5.65
5.28
1.84
1.08
6.26
7.75
7.18
8.34
1
3.12
1.87
Jan-00
Jan-03
Jan-11
Apr-16
7.01
8.84
Jan-11
4.04
3.05
5.42
7.18
6.12
6.95
Jan-00
Jan-11
Jan-11
Exhibit B
Virginia529 inVEST
Individual Manager Investment Performance
as of September 30, 2016
Net of Fees
Month
Ending
STATIC PORTFOLIOS - Underlying Funds
Vanguard LifeStrategy Growth
Aggressive Benchmark
Vanguard LifeStrategy Mod. Growth
Moderate Benchmark
Vanguard LifeStrategy Income
Conservative Benchmark
Parnassus Core Equity
S&P 500 Index
Van. Total Stock Market Fund
Custom Total Stock Index 2
Van. Total Bond Market Fund
Custom Total Bond Index 3
Van. Total Int'l Equity Fund
Custom Int'l Stock Index 4
Van. Infl. Protected Sec. Fund
Bloomberg Barclays Cap. Treas Infl. Note
Vanguard REIT Index
MSCI U.S. REIT
Notes:
Quarter Cal Year 1 Year
Ending Ending Ending
3 Year
Ending
5 Year
Ending
10 Year Inception Inception
Ending Ending
Date
0.52
0.55
0.37
0.47
0.07
0.29
-0.12
0.02
0.17
0.17
-0.08
4.35
4.49
3.42
3.54
1.53
1.65
4.60
3.85
4.42
4.41
0.41
7.50
7.67
7.28
7.78
6.63
7.85
8.17
7.84
8.20
8.23
5.98
11.55
11.99
10.26
10.81
7.32
8.28
13.40
15.43
14.97
14.99
5.34
6.70
6.64
6.24
5.92
5.02
4.36
10.77
11.16
10.42
10.43
4.03
11.24
11.27
9.31
9.16
5.28
4.95
16.35
16.37
16.34
16.35
3.05
5.28
5.75
5.28
5.62
4.61
4.65
7.54
7.53
4.82
5.97
6.28
5.78
6.01
4.73
4.74
13.10
13.65
7.67
7.66
4.57
-0.09
1.42
1.34
0.82
0.55
-1.83
-1.83
0.45
6.66
7.00
1.00
0.96
-1.46
-1.45
5.99
6.72
6.36
7.51
7.27
11.82
11.91
5.34
9.64
10.24
6.70
6.58
19.75
19.83
4.04
0.88
1.20
2.46
2.40
14.02
14.11
3.08
6.80
7.42
1.93
1.93
15.72
15.79
4.79
2.21
1.84
4.40
4.48
6.50
6.22
4.55
4.02
3.68
4.12
4.19
8.14
7.92
Performance Returns are calculated by BNY Mellon Asset Servicing. They are presented net of fees for separate
account asset management services.
1. Russell 2000 Index through May 2003; MSCI US Small Cap 1750 Index through June 2013; CRSP US Small Cap Index thereafter.
2. MSCI US Broad Market Index through June 2013; and CRSP US Total Market Index thereafter.
3. Barclays U.S. Aggregate Bond Index through June 2013; Bloomberg Barclays U.S. Aggregate Float Adjusted Index thereafter.
4. MSCI EAFE Index through June 2013 and FTSE Global All Cap ex US Index thereafter.
2
Jan-02
Jan-02
Jan-02
Nov-09
Aug-05
Sep-05
Sep-05
Sep-05
Sep-05
Exhibit B
Virginia529 inVEST
Program Assets & Asset Allocation
as of September 30, 2016
inVEST Age-Based Portfolios
Total
Rappahannock
James River
Eastern Shore
Alleghany
Chesapeake
Potomac
Southside
Blue Ridge
Piedmont
Subtotal
63,780,612.23
202,141,426.94
298,276,879.73
414,581,955.43
522,418,778.12
407,397,343.71
121,185,973.38
32,481,700.06
134,164,050.09
2,196,428,719.69
Rothschild
SMID Cap U.S.
Sep Acct
6,733,636.54
16,320,528.30
17,808,017.65
14,465,414.96
11,726,325.14
3,573,762.37
0.00
0.00
70,627,684.96
Prudential
High-Yield F/I
Sep Acct
3,107,959.62
9,906,266.06
14,757,375.02
20,686,368.81
26,370,164.21
20,956,129.70
3,203,262.38
0.00
Stone Harbor
EM Debt
Mutual Fund
3,614,006.86
14,905,947.02
24,559,974.64
41,505,017.74
52,907,970.98
42,045,505.26
6,455,802.46
0.00
Templeton
Intl Equity
Mutual Fund
Am Funds
Intl Equity
Mutual Fund
5,778,393.80
17,662,151.41
22,858,454.83
29,395,096.95
30,503,730.52
11,313,397.56
0.00
0.00
5,817,367.25
17,795,872.03
23,032,064.15
29,621,915.09
30,754,830.06
11,427,282.34
0.00
0.00
117,511,225.07
118,449,330.92
DFA
EM Equity
Mutual Fund
4,721,257.53
12,458,694.36
14,610,960.88
14,928,060.22
11,947,626.77
3,873,240.28
0.00
0.00
0.00
62,539,840.04
Aberdeen
EM Equity
Mutual Fund
INVESCO
Stable Value
Sep Acct
4,623,323.92
2,481,234.25
12,181,434.72
18,779,077.69
14,281,845.28 46,686,923.31
14,591,694.36 88,155,687.67
11,678,872.91 158,290,356.33
3,786,475.03 191,362,461.44
0.00 99,495,846.14
0.00 32,481,700.06
134,164,050.09
98,987,525.80
185,994,224.96
61,143,646.22
771,897,336.98
Van LS Grow
Van LS Mod
Van LS Income
Van Ttl Stock
Van Ttl Bond
Van Ttl Intl
Van Infl Pro
Van REIT
Balanced‐Agg
Mutual Fund
426,787,271.63
Balanced‐Mod
Mutual Fund
Balanced‐Cons
Mutual Fund
Total Stock U.S.
Mutual Fund
Total Bond U.S.
Mutual Fund
Intl Equity
Mutual Fund
TIPS
Mutual Fund
REIT U.S.
Mutual Fund
Van 500
Large Cap U.S.
Mutual Fund
11,131,074.33
33,770,310.01
44,247,430.47
56,929,055.63
58,627,728.17
21,725,549.35
0.00
0.00
226,431,147.96
Van Sm Cap
Small Cap U.S.
Mutual Fund
2,548,427.07
8,168,476.39
10,904,494.10
14,463,408.78
11,746,140.45
4,024,680.40
0.00
0.00
Van Ttl Bond
Market F/I
Mutual Fund
4,905,756.27
20,276,589.68
37,170,819.86
61,885,979.34
91,347,932.58
79,214,759.39
12,031,062.40
0.00
Morgan Stanley
Global REIT
Mutual Fund
8,318,174.79
19,916,079.27
27,358,519.54
27,954,255.88
26,517,100.00
14,094,100.59
0.00
0.00
51,855,627.19
306,832,899.52
124,158,230.07
Van 500
Large Cap U.S.
Mutual Fund
Van Sm Cap
Small Cap U.S.
Mutual Fund
Van Ttl Bond
Market F/I
Mutual Fund
inVEST Passively-Managed Static Portfolios
Total
Aggressive Growth
Moderate Growth
Conservative Income
Total Stock
Total Bond
Total Intl
Infl Protected
REIT
Subtotal
426,787,271.63
196,119,333.06
64,191,228.07
330,041,197.41
34,815,764.12
71,001,949.64
22,688,129.75
54,294,844.05
1,199,939,717.73
196,119,333.06
64,191,228.07
330,041,197.41
34,815,764.12
71,001,949.64
22,688,129.75
54,294,844.05
426,787,271.63
196,119,333.06
64,191,228.07
330,041,197.41
34,815,764.12
71,001,949.64
22,688,129.75
54,294,844.05
inVEST Actively-Managed Static Portfolios
Total
Social Target
Active Aggressive
Active Moderate
Active Conservative
Subtotal
Parnassus
Rothschild
Core Equity U.S. SMID Cap U.S.
Mutual Fund
Sep Acct
34,321,366.62
6,639,323.89
3,187,271.95
2,151,799.17
Prudential
High-Yield F/I
Sep Acct
34,321,366.62
DFA
EM Equity
Mutual Fund
Aberdeen
EM Equity
Mutual Fund
INVESCO
Stable Value
Sep Acct
Morgan Stanley
Global REIT
Mutual Fund
334,766.19
162,564.36
110,672.46
344,527.87
334,113.66
227,062.45
559,478.38
214,226.08
80,445.84
577,183.04
220,598.30
82,690.35
502,470.91
121,126.40
26,956.09
537,310.99
132,153.93
30,165.19
157,869.69
609,913.88
839,940.01
1,153,436.73
441,162.55
163,606.16
253,525.28
123,803.59
27,950.50
483,228.58
466,707.12
426,826.14
983,009.36
238,742.57
107,737.56
902,422.80
608,003.01
905,703.98
854,150.30
880,471.69
650,553.40
699,630.11
1,607,723.58
1,758,205.44
405,279.37
1,376,761.84
1,329,489.49
BNYM Holding
Account
VA529 Savings
Account
1,283,985.98
2,398,140.56
1,495,694.33
Total inVEST Program Assets
3,444,163,893.38
Am Funds
Intl Equity
Mutual Fund
752,516.87
122,159.51
27,746.42
inVEST Cash
Cash
Templeton
Intl Equity
Mutual Fund
34,321,366.62
46,299,761.63
Total
Stone Harbor
EM Debt
Mutual Fund
Distributions
Liability
(2,186,432.21)
Exhibit B
Virginia529 prePAID Program Assets & Asset Allocation
as of September 30, 2016
Strategy
Type
Total Net Assets
Percent
by
Manager
LC Core
MC Growth
SC Value
SC Value
Mutual Fund
Separate Acct
Separate Acct
Separate Acct
119,721,931.03
107,170,107.77
62,065,752.40
84,275,513.85
4.9%
4.4%
2.5%
3.4%
Totals by
Category
Percent Target
by
for
Category Category
Percent
by
Class
Target
for
Class
806,728,258.02
32.9%
32.5%
348,909,397.35
14.2%
15.0%
690,689,743.17
28.2%
27.5%
605,853,981.83
24.7%
25.0%
100.0%
100.0%
Totals by
Class
EQUITIES
US All Cap Equities
Vanguard Institutional Index (S&P 500)
Westfield Capital Management
Donald Smith & Co.
Thompson, Siegel & Walmsley
Subtotal - US All Cap Equities
373,233,305.05
15.2%
15.0%
247,370,755.88
10.1%
10.0%
186,124,197.09
7.6%
7.5%
International Developed Markets
American Funds Euro-Pacific Growth Fund
Templeton International Equity Series
Subtotal - Int'l Dev Mkts Equity
Intl Core
Intl Value
Mutual Fund
Mutual Fund
124,994,559.35
122,376,196.53
5.1%
5.0%
Emerging Market Equity
Aberdeen Asset Management
DFA Emerging Market Core
Subtotal - Emerging Mkts Equity
Emg Mkt EQ
Emg Mkt EQ
Mutual Fund
Mutual Fund
122,775,501.91
63,348,695.18
5.0%
2.6%
Subtotal - EQUITIES
ALTERNATIVES
Aurora Offshore Ltd. II
Harmonic Capital Partners
Blackstone Partners Offshore
Aventura Holdings, LLC
Aether Investment Partners
Private Advisors
Adams Street Partners
Commonfund
UBS Trumbull
Hedge FOF
Hedge Fund
Hedge FOF
Private RE
Private EQ
Private EQ
Private EQ
Private EQ
Private RE
Hedge Fund
Hedge Fund
Hedge Fund
N/A
Limited Partnership
Limited Partnership
Limited Partnership
Limited Partnership
Limited Partnership
12,664,722.76
19,163,864.41
101,000,000.00
7,401,076.17
11,379,644.00
32,312,210.16
69,092,553.00
10,544,573.00
85,350,753.85
0.5%
0.8%
4.1%
0.3%
0.5%
1.3%
2.8%
0.4%
3.5%
Subtotal - ALTERNATIVES
NON-CORE FIXED INCOME
Advent Capital
Ferox Capital
Prudential High Yield
Wellington Emerging Market Debt
Stone Harbor EMD Blend
Convertibles
Convertibles
High Yield
Emg Mkt FI
Emg Mkt FI
Separate Acct
UCIT
Separate Acct
Collective Tr
Mutual Fund
105,382,454.80
72,380,218.57
246,648,197.88
196,374,791.57
69,904,080.35
4.3%
3.0%
10.1%
8.0%
2.9%
348,909,397.35
14.2%
15.0%
105,382,454.80
72,380,218.57
246,648,197.88
196,374,791.57
69,904,080.35
4.3%
3.0%
10.1%
8.0%
2.9%
4.5%
3.0%
10.0%
7.0%
3.0%
Subtotal - NON-CORE FIXED INCOME
CORE FIXED INCOME
US Aggregate & Cash
CS Transition
Shenkman Capital Mgmt
Blackrock Intermediate Corporate Bond
Schroders Mortgage-Backed Strategy
Core Fixed
Bank Loans
Core Fixed
Core Fixed
N/A
Separate Acct
Collective Tr
Separate Acct
Cash
Cash
Mutual Fund
N/A
734,696.18
219,428,387.38
72,126,970.03
71,001,170.45
0.0%
8.9%
2.9%
2.9%
0.0%
8.9%
2.9%
2.9%
0.0%
9.0%
3.0%
3.0%
1,081,114.03
1,647,810.44
0.0%
0.1%
0.0%
0.1%
0.0%
0.0%
120,972,784.94
4.9%
5.0%
118,861,048.38
4.8%
5.0%
Cash
BlackRock T-Fund
Treasurer of Virginia
Subtotal - US Aggregate & Cash
366,020,148.51
Inflation Indexed Bonds
State Street Global
Subtotal - Inflation Indexed Bonds
TIPS
Collective Tr
120,972,784.94
4.9%
US Stable Value
INVESCO Institutional
Subtotal - US Stable Value
Stable Value
Stable Value
118,861,048.38
4.8%
Subtotal - CORE FIXED INCOME
Total prePAID Program
2,452,181,380.37
100.0%
2,452,181,380.37
100.0%
100.0%
2,452,181,380.37
Exhibit B
Virginia529 inVEST
Monthly Portfolio Performance Summary
as of September 30, 2016
Current
Month
3 Months
Ending
Cal Year
Ending
1 Year
Ending
3 Year
Ending
AGE-BASED PORTFOLIOS
Rappahannock Portfolio
Rappahannock Benchmark
James River Portfolio
James River Benchmark
Eastern Shore Portfolio
Eastern Shore Benchmark
Alleghany Portfolio
Alleghany Benchmark
Chesapeake Portfolio
Chesapeake Benchmark
Potomac Portfolio
Potomac Benchmark
Southside Portfolio
Southside Benchmark
Blue Ridge Portfolio
Blue Ridge Benchmark
Piedmont Portfolio
Piedmont Benchmark
0.26
0.40
0.27
0.39
0.24
0.33
0.24
0.30
0.22
0.25
0.17
0.16
0.14
0.11
0.13
0.10
0.13
0.10
4.67
4.75
4.32
4.32
3.81
3.76
3.42
3.30
2.83
2.67
1.87
1.72
0.74
0.62
0.42
0.30
0.42
0.30
9.30
9.34
8.71
8.59
8.04
7.94
7.64
7.39
6.63
6.39
5.42
5.32
3.93
3.52
1.24
0.84
1.24
0.84
12.06
12.87
11.27
11.79
10.25
10.70
9.60
9.78
8.29
8.39
6.51
6.59
4.13
3.56
1.63
1.06
1.63
1.06
5.54
5.49
5.26
5.23
5.04
4.97
4.68
4.61
4.17
4.14
3.54
3.26
1.44
1.01
1.47
0.94
PASSIVELY-MANAGED STATIC PORTFOLIOS
Aggressive Growth Portfolio
Aggressive Growth Benchmark
Moderate Growth Portfolio
Moderate Growth Benchmark
Conservative Income Portfolio
Conservative Income Benchmark
Total Stock Market Portfolio
Ttl Stock Mkt Benchmark
Total Bond Market Portfolio
Ttl Bond Mkt Benchmark
Ttl International Stock Portfolio
Ttl Int'l Stock Benchmark
Inflation-Protected Securities Portfolio
Inflation-Protected Benchmark
REIT Portfolio
REIT Benchmark
0.51
0.54
0.36
0.46
0.07
0.29
0.17
0.16
-0.09
-0.10
1.41
1.33
0.81
0.54
-1.84
-1.83
4.33
4.46
3.39
3.51
1.50
1.62
4.40
4.39
0.38
0.42
6.64
6.98
0.98
0.94
-1.48
-1.47
7.39
7.56
7.18
7.67
6.52
7.75
8.09
8.12
5.87
5.89
6.61
6.25
7.41
7.16
11.71
11.81
11.40
11.85
10.11
10.67
7.18
8.14
14.82
14.85
5.19
5.20
9.49
10.09
6.56
6.44
19.59
19.69
6.54
6.48
6.08
5.77
4.86
4.21
10.26
10.28
3.85
3.89
0.73
1.04
2.31
2.25
13.85
13.96
ACTIVELY-MANAGED STATIC PORTFOLIOS
Active Aggressive Portfolio
Active Aggressive Benchmark
Active Moderate Portfolio
Active Moderate Benchmark
Active Conservative Portfolio
Active Conservative Benchmark
Socially Targeted Portfolio
Socially Targeted Benchmark
0.23
0.40
0.24
0.32
0.17
0.19
-0.13
0.01
4.68
4.86
3.52
3.47
2.21
2.11
4.57
3.83
9.42
9.46
7.88
7.57
6.04
5.72
8.06
7.73
12.25
12.99
9.89
9.97
7.21
6.99
13.25
15.29
10.60
11.01
5 Year
Ending
10 Year
Ending
Inception
Ending
Inception
Date
Jan-14
10.28
10.19
9.61
9.54
8.78
8.69
7.83
7.76
6.77
6.71
5.33
5.09
2.34
1.98
1.67
0.91
4.57
4.18
4.36
4.14
4.17
3.93
3.88
3.47
2.58
2.01
2.92
1.67
4.33
4.36
6.65
6.57
4.65
4.54
5.23
4.77
5.66
5.18
4.47
3.33
4.22
3.16
3.51
2.46
3.65
2.71
11.05
11.10
9.13
8.98
5.10
4.78
16.15
16.18
2.86
2.91
6.62
7.25
1.76
1.75
15.53
15.61
5.07
5.54
5.08
5.41
4.40
4.45
7.33
7.32
4.61
4.58
2.00
1.62
4.19
4.28
6.28
5.99
5.64
5.96
5.46
5.70
4.41
4.43
7.44
7.45
4.36
4.34
3.80
3.47
3.91
3.99
7.92
7.68
16.16
16.20
12.25
12.99
9.89
9.97
7.21
6.99
12.92
13.46
Note: Performance Returns are calculated by BNY Mellon Asset Servicing. They are presented net of management fees and inVEST administrative fees.
Jan-11
Feb-08
Aug-05
Jan-02
Jan-00
Jan-00
Jan-00
Jan-00
Jan-02
Jan-02
Jan-02
Aug-05
Sep-05
Sep-05
Sep-05
Sep-05
Oct-15
Oct-15
Oct-15
Nov-09
Virginia529 prePAID
Exhibit B
Investment Performance Summary Results
as of September 30, 2016
Net of Fees
15
Name
Total Fund
Total Fund less Private Equity
prePAID Total Fund Index
Current
Market Value
Current
Allocation
1 Month
3 Month
YTD
1 Year
3 Years
5 Years
10 Years
Since
Inception
Inception
Date
$2,450,711,275
$2,327,382,295
100.0%
95.0%
0.4%
0.4%
0.6%
3.6%
3.7%
3.6%
7.4%
7.5%
8.2%
8.3%
8.4%
10.6%
4.3%
4.2%
5.7%
6.9%
6.8%
8.0%
4.9%
4.9%
5.0%
6.2%
6.2%
5.6%
Oct-97
Oct-97
Oct-97
prePAID Total Equity
Total Equity Index
$806,728,258
32.9%
0.5%
0.7%
6.4%
5.4%
9.0%
7.1%
12.0%
12.6%
4.1%
5.7%
10.7%
11.2%
5.0%
4.5%
6.6%
5.1%
Oct-97
Oct-97
prePAID Total Domestic Equity
Domestic Equity Policy Index
Vanguard Institutional Index
S&P 500 Index (Total Return)
Westfield Capital Management
Russell 2500 Growth
Thompson, Siegel and Walmsley
TSW Custom BM
Donald Smith and Company
Russell 2000 Value
$373,233,305
15.2%
$119,721,931
4.9%
$107,170,108
4.4%
$84,275,514
3.4%
$62,065,752
2.5%
0.1%
0.2%
0.0%
0.0%
-0.5%
0.3%
0.2%
0.7%
1.1%
0.8%
5.7%
4.4%
3.8%
3.9%
7.1%
7.0%
6.1%
6.2%
6.6%
8.9%
8.4%
8.2%
7.8%
7.8%
2.6%
7.0%
13.9%
14.5%
12.9%
15.5%
12.7%
15.0%
15.4%
15.4%
7.3%
11.0%
16.0%
17.7%
12.5%
18.8%
7.7%
10.4%
11.1%
11.2%
5.3%
7.4%
9.8%
8.1%
3.0%
6.8%
15.1%
16.4%
16.3%
16.4%
14.5%
16.2%
17.9%
16.3%
10.1%
15.5%
7.3%
7.4%
7.2%
7.2%
9.7%
8.8%
7.7%
6.4%
7.0%
5.8%
7.6%
6.6%
4.1%
4.3%
10.7%
9.8%
11.0%
9.2%
11.1%
8.7%
Oct-97
Oct-97
Jan-00
Jan-00
Oct-03
Oct-03
Oct-03
Oct-03
Oct-03
Oct-03
prePAID Total International Equity
International Equity BM
Capital Research American Funds
MSCI EAFE
Franklin Templeton
MSCI EAFE
Aberdeen Emerging Markets Equity
MSCI EM (Emerging Markets)
DFA Emerging Markets Core
MSCI EM (Emerging Markets)
$433,494,953
17.7%
$124,994,559
5.1%
$122,376,197
5.0%
5.0%
0.8%
0.6%
3.3%
0.9%
-1.1%
0.9%
-0.2%
-0.2%
6.6%
6.0%
9.1%
7.9%
6.5%
7.9%
4.3%
3.4%
2.6%
9.5%
8.2%
5.4%
2.2%
0.3%
2.2%
18.9%
16.4%
18.4%
16.4%
11.4%
11.5%
8.5%
7.1%
3.3%
7.1%
18.9%
17.2%
$63,348,695
7.0%
7.6%
8.2%
6.5%
7.3%
6.5%
5.3%
9.2%
8.0%
9.2%
3.3%
2.4%
4.2%
2.3%
2.3%
2.3%
$122,775,502
0.9%
1.3%
1.2%
1.3%
0.8%
1.3%
0.5%
1.3%
1.3%
1.3%
5.8%
4.6%
7.6%
6.1%
5.3%
4.2%
5.2%
2.6%
18.4%
16.4%
Oct-97
Oct-97
Nov-01
Nov-01
Aug-97
Aug-97
Nov-09
Nov-09
Jan-16
Jan-16
$349,087,103
14.2%
2.2%
6.8%
-3.9%
3.2%
2.6%
10.2%
-4.2%
4.2%
5.6%
7.7%
1.1%
4.1%
1.5%
2.7%
0.8%
0.6%
2.6%
-3.4%
1.1%
5.5%
7.7%
$19,163,864
0.6%
0.8%
-3.1%
0.4%
4.4%
5.6%
2.7%
3.9%
$101,000,000
4.1%
$7,712,021
0.3%
$12,664,723
0.5%
$32,312,210
1.3%
$69,092,553
2.8%
$10,544,573
0.4%
$85,217,514
3.5%
6.9%
7.3%
-2.2%
2.8%
3.4%
10.1%
5.4%
10.1%
11.2%
10.1%
2.8%
10.1%
6.2%
7.9%
8.3%
10.6%
-3.2%
3.7%
4.2%
18.0%
5.9%
18.0%
10.1%
18.0%
-3.3%
18.0%
9.6%
11.8%
9.2%
11.5%
2.8%
3.6%
4.4%
19.4%
3.2%
19.4%
0.5%
1.4%
2.0%
1.1%
0.9%
-0.1%
5.0%
2.4%
5.0%
2.2%
5.0%
4.1%
5.0%
1.5%
2.1%
10.0%
11.6%
2.2%
3.6%
10.5%
13.5%
8.4%
13.5%
$11,379,644
0.5%
0.7%
1.5%
0.3%
0.0%
0.4%
2.4%
0.4%
2.2%
0.4%
0.0%
0.4%
1.7%
2.1%
-5.3%
13.5%
10.1%
13.0%
9.8%
12.7%
May-05
May-05
Dec-11
Dec-11
Sep-16
Sep-16
Sep-16
Apr-08
Apr-08
Mar-10
Mar-10
Oct-10
Oct-10
Jan-11
Jan-11
Dec-13
Dec-13
Nov-12
Nov-12
Jan-11
Jan-11
prePAID Alternatives
Alternatives BM
Harmonic Capital Partners
T-BILLS + 4%
Blackstone Offshore
T-BILLS + 4%
HFRI FOF Conservative Index
Aventura
NCREIF Property Index (1Q in Arrears)
Aurora Offshore
T-BILLS + 3.5%
Private Advisors
Russell 3000 + 3%
Adams Street Partners
Russell 3000 + 3%
Aether
Russell 3000 + 3%
Commonfund
Russell 3000 + 3%
UBS Trumbull Fund (1Q in Arrears)
NCREIF NFI ODCE (1Q in Arrears)
4.2%
5.9%
2.3%
3.5%
1.7%
16.6%
2.3%
15.0%
1.1%
11.4%
-11.7%
16.9%
9.7%
12.6%
Virginia529 prePAID
Exhibit B
Investment Performance Summary Results
as of September 30, 2016
Net of Fees
15
Name
prePAID Total Fixed Income
Fixed Income BM
prePAID Non Core Fixed Income
Non Core Fixed BM
Prudential High Yield
Bloomberg Barclays Capital High Yield
Bloomberg Barclays US High Yield
Advent Cap Mgt
BofA Merrill Lynch Global 300 Convertibles
Ferox Cap
BofA Merrill Lynch Global 300 Convertibles
Wellington Management
JPMorgan EMBI
Stone Harbor
Stone Harbor Custom BM
prePAID Core Fixed Income
Core Fixed Income Benchmark
Bloomberg Barclays Capital Aggregate
Blackrock Intermediate Corporate Bond
Bloomberg Barclays Intermediate Credit
Shroders MBS
Bloomberg Barclays U.S. MBS Index
Bloomberg Barclays CMBS Index
SSgA TIPS
Bloomberg Barclays Capital US TIPS
Shenkman Capital Management
Credit Suisse Leveraged Loans
INVESCO Institutional
Stable Value Custom BM
BlackRock Cash
Citigroup 3-Month T-Bill
1
Current
Market Value
Current
Allocation
1 Month
3 Month
YTD
1 Year
3 Years
5 Years
10 Years
Since
Inception
Inception
Date
$1,294,895,915
52.8%
0.3%
0.4%
2.7%
2.7%
7.7%
9.2%
7.6%
9.3%
3.9%
4.7%
4.7%
5.7%
5.0%
5.7%
5.7%
5.7%
Oct-97
Oct-97
$690,689,743
28.2%
10.1%
4.3%
$72,380,219
3.0%
$196,374,792
8.0%
$69,904,080
2.9%
10.8%
13.0%
12.3%
15.1%
12.9%
1.1%
7.8%
1.5%
7.8%
16.4%
15.0%
17.4%
16.0%
11.7%
13.6%
11.3%
12.7%
11.6%
2.9%
10.4%
3.7%
10.4%
18.8%
16.8%
18.0%
16.8%
5.2%
6.2%
5.6%
5.3%
5.4%
3.3%
5.7%
3.2%
5.7%
8.1%
7.4%
1.0%
2.8%
7.2%
8.7%
7.2%
8.3%
8.0%
$105,382,455
4.2%
4.8%
4.7%
5.6%
4.9%
3.6%
5.1%
3.2%
5.1%
4.5%
3.7%
3.6%
3.4%
5.4%
5.8%
$246,648,198
0.5%
0.7%
0.4%
0.7%
0.4%
0.2%
1.2%
0.1%
1.2%
0.7%
0.3%
1.3%
1.2%
5.7%
6.6%
7.6%
8.6%
8.1%
3.9%
6.9%
3.6%
6.3%
8.0%
7.7%
1.5%
3.3%
May-05
May-05
Nov-09
Nov-09
Nov-09
Sep-13
Sep-13
Aug-13
Aug-13
Dec-09
Dec-09
Apr-11
Apr-11
$604,206,171
24.7%
2.9%
$120,972,785
4.9%
9.0%
$118,861,048
4.9%
$1,081,114
0.0%
2.3%
2.4%
2.1%
3.6%
2.0%
1.1%
0.1%
0.1%
1.8%
1.9%
$219,428,387
3.4%
4.7%
5.2%
5.1%
5.2%
3.6%
3.6%
5.2%
6.5%
6.6%
2.2%
5.4%
2.1%
1.2%
0.2%
0.2%
3.8%
4.3%
4.8%
$71,001,170
4.6%
5.1%
5.8%
5.7%
5.7%
4.4%
3.7%
6.6%
7.2%
7.3%
5.3%
7.5%
1.6%
0.9%
0.2%
0.2%
2.0%
2.4%
3.1%
2.9%
1.0%
0.5%
0.5%
0.7%
0.8%
0.7%
0.6%
0.7%
1.0%
1.0%
1.8%
3.1%
0.5%
0.3%
0.1%
0.1%
2.6%
3.1%
4.0%
$72,126,970
0.1%
0.1%
-0.1%
0.1%
0.1%
0.4%
0.3%
-0.2%
0.6%
0.6%
-0.3%
0.9%
0.2%
0.1%
0.0%
0.0%
5.1%
5.0%
5.4%
3.4%
3.6%
4.3%
3.5%
4.5%
3.3%
3.1%
2.1%
3.6%
4.1%
3.1%
0.1%
0.1%
Oct-97
Oct-97
Oct-97
Jun-15
Jun-15
Oct-14
Oct-14
Oct-14
Dec-10
Dec-10
Sep-13
Sep-13
Jan-00
Jan-00
Apr-10
Apr-10
Performance Returns are calculated by BNY Mellon Asset Servicing. They are presented net of fees for separate account asset management services.
The Inception Date for the prePAID Program is 10/1/97. However, individual managers within the Program will have varying inception dates based upon when they were hired.
3
Performance returns for the Harmonic Capital Partners account are presented with a one-month lag due to the availability of valuations of the investment vehicle
4
Performance returns for the Aurora Offshore II Ltd. Fund are presented with a one-month lag due to availability of valuations of the investment vehicle.
5
Stone Harbor Custom Benchmark is comprised of 50% JPMorgan EMBI Global Diversified Index/50% JPMorgan GBI-EM Global Diversified
6
Performance returns for the Blackstone Offshore Fund are presented with a one-month lag due to the availability of valuation of the investment vehicle.
7
Fixed Income totals and subtotals include market values associated with new managers that were not completely funded by month end .
2
7.9%
7.4%
2.3%
3.9%
2.3%
1.1%
0.0%
0.1%
3.1%
1.9%
Exhibit C
VIRGINIA COLLEGE SAVINGS PLAN
VA529 Rebalancing Policy
VA529 Rebalancing Policy adopted 12-01-14
Exhibit C
Table of Contents
VA529 Rebalancing Policy............................................................................................................. 1
PURPOSE ....................................................................................................................................... 3
SCOPE ............................................................................................................................................ 3
POLICY STATEMENT ................................................................................................................. 3
VA529 prePAIDSM PROGRAM ..................................................................................................... 4
STRUCTURE OF THE prePAID PORTFOLIO ........................................................................ 4
CHANGES TO THE ASSET ALLOCATION........................................................................... 4
MANDATORY REBALANCING ............................................................................................. 4
OPTIMIZATION REBALANCING .......................................................................................... 5
CASH INFLOWS AND OUTFLOWS ....................................................................................... 5
FUNDING MANAGERS AND REDEMPTION & PURCHASE OF PORTFOLIO
INVESTMENTS ......................................................................................................................... 5
TIMING AND EXECUTION OF PORTFOLIO REBALANCING .......................................... 6
VA529 inVESTSM PROGRAM ...................................................................................................... 7
STRUCTURE OF THE inVEST AGE-BASED PORTFOLIOS ............................................... 7
INTERIM YEAR CHANGES .................................................................................................... 7
TIMING AND EXECUTION OF SCHEDULED ASSET ALLOCATION CHANGES .......... 7
CASH INFLOWS AND OUTFLOWS ....................................................................................... 8
REBALANCING ........................................................................................................................ 8
TIMING AND EXECUTION OF PORTFOLIO REBALANCING .......................................... 8
OPENING AND CLOSING PORTFOLIOS .............................................................................. 9
RESPONSIBILITIES ..................................................................................................................... 9
Senior Investment Analysts ........................................................................................................ 9
Investment Operations Manager ................................................................................................. 9
Controller/Chief Financial Officer ............................................................................................ 10
Chief Executive Officer ............................................................................................................ 10
VA529 Rebalancing Policy adopted 12-01-14
Exhibit C
3
PURPOSE
The purpose of this policy is to document and communicate the Virginia College Savings Plan’s (VA529)
commitment to the establishment and maintenance of appropriate asset allocations for the VA529
prePAID Program and the VA529 inVEST Program Age-Based Portfolios. The overall target asset
allocations for the applicable portfolios established within these Programs are set forth in the Virginia
College Savings Plan Statement of Investment Policy and Guidelines for Virginia529 prePAID and the
Virginia College Savings Plan Statement of Investment Policy and Guidelines for Virginia529 inVEST,
respectively. The portfolios designed for these Programs are balanced portfolios created by VA529
using external “best in class” investment management on an open-architecture, multi-manager
platform. The target asset allocations have been designed to reflect proper balance between the
Program’s needs for liquidity and return on assets, combined with an appropriate level of risk over time.
The asset allocations have been established from the vantage point of a long-term investment
perspective, and it is not expected that asset allocations will change frequently. However, the
Board/Investment Advisory Committee will review the allocations periodically and make adjustments as
may be appropriate in light of changing market conditions. The intent of this policy is to ensure that all
asset allocations are appropriately monitored and maintained over the life of the respective portfolios.
SCOPE
This policy will apply to VA529’s prePAID portfolio and VA529 inVEST Age-Based portfolios, as well as to
the Finance Division staff who are responsible for the monitoring and oversight of these portfolios. The
policy does not apply to the VA529 inVEST Static portfolios, as these portfolios utilize a single-manager
platform and by design do not require rebalancing.
POLICY STATEMENT
VA529 has established and maintains separate investment portfolios to provide for current and future
benefits due to participants in the VA529 prePAID Program and the VA529 inVEST Program. Portfolios
are constructed on an open architecture, multi-manager platform using external managers from various
investment strategies representing equity, fixed income, and (in the case of the prePAID Program)
alternative investments. Essential to the structure of each portfolio is an established asset allocation,
recommended by the Investment Advisory Committee and approved by the Board, which provides an
appropriate mix of investments in a structured format designed to meet the strategic objectives for that
portfolio.
As the portfolios are comprised largely of marketable securities, the values of which will fluctuate in
response to ongoing changes in related capital markets, and are subject to cash inflows for new capital
and cash outflows to pay Program benefits, the asset allocations are not designed as a rigid framework
of absolute percentage targets. Rather the asset allocations have been designed with a more flexible
structure, providing acceptable minimum and maximum ranges by asset class to ensure that a
strategically effective asset mix is maintained in an operationally efficient manner. However, when
market movements, cash flows or any other condition causes portfolio assets to move outside of their
VA529 Rebalancing Policy adopted 12-01-14
Exhibit C
4
target ranges, provision will be made to rebalance the portfolio holdings back within the acceptable
ranges.
VA529 prePAIDSM PROGRAM
STRUCTURE OF THE prePAID PORTFOLIO
The VA529 has established and maintains a single investment portfolio to accumulate funds to provide
for all current and future benefits due to participants in the VA529 prePAID Program, regardless of the
age of the beneficiaries or the point in time their contracts were purchased. For this reason, the
Program’s asset allocation is inherently linked to its’ long-term investment assumptions and the
ongoing actuarial valuation process. Essential to the portfolio’s structure is an established asset
allocation, recommended by the Investment Advisory Committee and approved by the Board, which
provides an appropriate mix of investments in a structured format designed to meet the Program’s
needs for liquidity and the required return.
As new funds are contributed to the Program, whether in the form of lump sum payments or monthly
installments, they are initially processed through an account established with the Treasurer of Virginia
and then subsequently deployed to other investment managers used in the prePAID Program’s asset
allocation. Conversely, when funds are needed to pay benefits to Program participants, portfolio
investments with external investment managers are liquidated and the proceeds are transferred back to
Treasury account for disbursement to participants. The asset allocation is actively maintained and
monitored throughout this process and over the life of the prePAID Portfolio.
CHANGES TO THE ASSET ALLOCATION
The prePAID Program’s investment portfolio has been designed with a long-term outlook, and it is not
expected that significant changes will be made frequently. The current asset allocation was developed
in 2009 after an in-depth asset liability study was conducted utilizing the services of both VA529’s
actuary and investment consultant. Refining and developing the final product was a collaborative effort
between VA529 management, the investment consultant and the Investment Advisory Committee. The
asset allocation was recommended by the Investment Advisory Committee and approved by the Board.
The asset allocation for the prePAID Program is periodically reviewed by the Investment Advisory
Committee and modified or affirmed (if found to continue to be appropriate and prudent). If long-term
market expectations change significantly, a full asset allocation study (as described above) will be
completed. A full asset allocation study may also be mandated for other reasons at the discretion of the
Chief Executive Officer, Investment Advisory Committee or Board.
MANDATORY REBALANCING
The portfolio is valued on a daily basis (with the exception of certain monthly and quarterly valued
investments), and the various (asset allocation) sub-allocations within major asset classes will fluctuate
depending of the performance of various sectors of the capital markets. Over time accumulated overperformance or under-performance of certain sectors of the market can cause the portfolio asset
VA529 Rebalancing Policy adopted 12-01-14
Exhibit C
5
allocations to move significantly off target, or “out of balance.” It is not reasonable to expect that a
daily valued Portfolio with a diverse asset allocation would remain precisely at target percentages all the
time. Some degree of movement is normal, and is in fact efficient in the overall management of the
portfolio. Therefore a range of acceptable variances has been established for each major asset class.
The optimal target percentages and allowable ranges for each broad asset category are provided in the
Virginia College Savings Plan Statement of Investment Policy and Guidelines for Virginia529 PrepaidSM.
When a portfolio component exceeds the acceptable variance, rebalancing is required. If the upper or
lower range limit for any asset category component is reached or exceeded, then the component should
be manually rebalanced halfway back to target. If one component of the asset allocation is out of
balance, it is logical to assume that one or more other components will also be out of balance. In the
event that multiple components of the portfolio have exceeded the range limits requiring rebalance, the
largest component will be rebalanced back to the halfway point, while seeking to balance the other
components within the established ranges where most logical. The need for mandatory rebalancing
should be relatively rare.
OPTIMIZATION REBALANCING
Mandatory rebalancing is required in the event the portfolio moves outside range limits at the broadest
asset category levels, however VA529 seeks to maintain the portfolio at a more optimum asset
allocation than that which is dictated by the outer limits of policy bands. Also, the Investment Advisory
Committee may specify additional lower level targets at the sub-asset class or individual manager level
that should be monitored and maintained. Therefore periodic rebalancing to optimize the portfolio may
be completed at any time at the direction of the Chief Financial Officer. Investment Operations staff
monitoring the Portfolio should maintain current asset balance information to facilitate this process.
CASH INFLOWS AND OUTFLOWS
Current cash flows are the most efficient source of funds to be used for portfolio rebalancing or to
provide for the Program’s ongoing liquidity needs. Accordingly, current cash flows should be the first
source of funds sought to facilitate rebalancing. As cash becomes available that is not needed for
current Program outflows, it should be invested in the portfolio considering the asset allocation with the
objective of optimizing the current portfolio composition. When additional cash is needed beyond that
which is available from current cash flows, portfolio assets will be liquidated also considering the asset
allocation with the objective of optimizing the current portfolio position. All such rebalancing
transactions should be completed according the standard prePAID Asset Allocation and Rebalancing
Procedures, a separate operational document designed to provide specific instructions for the proper
execution of this process.
FUNDING MANAGERS AND REDEMPTION & PURCHASE OF PORTFOLIO
INVESTMENTS
Private equity investments require a large commitment of funds initially, that are not immediately
invested but rather “drawn down” over a period of several years. When new investment strategies are
approved, there is often a significant period of time required to complete a manager search, negotiate
contracts and plan for implementation. For this reason, the ranges for the broad asset classes have
VA529 Rebalancing Policy adopted 12-01-14
Exhibit C
6
been developed with an appropriate degree of flexibility to provide for prudent portfolio development
over time.
If additional funds are needed for portfolio rebalancing beyond current cash flows, the current asset
balances will be considered to identify investments that are over their optimum targets and as a result
are a potential source of funds. In selecting investments/managers to be used as liquidity sources, staff
will consider factors including, but not limited to:
 Over-weights at the manager level, sub-asset class and broad asset class category
 relative liquidity and transaction costs
 overall market conditions, volatility and direction
 consistency with VA529 investment philosophy
The proceeds derived from liquidating selected investments will in turn be used to rebalance the
portfolio by making additional purchases in investments that are under their optimum targets. Similar
criteria as those specified above for liquidations will be used to select the investment/managers that will
receive additional funds. All such rebalancing transactions should be completed according the standard
prePAID Asset Allocation and Rebalancing Procedures, a separate operational document designed to
provide specific instructions for the proper execution of this process.
TIMING AND EXECUTION OF PORTFOLIO REBALANCING
Investment Operations staff monitor the VA529 prePAID asset balances on a daily basis, and ascertain
whether it is balanced within the mandatory ranges. In the event that a portfolio component value
moves outside the target range, notice of such should be communicated on the same business day to
the Investment Operations Manager, Controller and Chief Financial Officer, who will assess the situation
and determine what action is necessary. As previously stated, the need for mandatory rebalancing
should be relatively rare, but optimization rebalancing can be done at any time at the direction of the
Chief Financial Officer. Investment Operations staff should seek to maintain optimum balancing through
the weekly cash flow assessment process, but remain vigilant of the asset allocation and portfolio
position at all times should additional action be warranted. Formal reports of prePAID asset balances as
of each month end should be provided to the Chief Financial Officer and the Controller on a monthly
basis. Daily prePAID asset balance reports should always be available to provide to VA529 management
upon request. A formal rebalancing review should be completed during the week prior to calendar
quarter ends. All rebalancing transactions should be completed according the standard prePAID
Allocation Asset Allocation and Rebalancing Procedures, a separate operational document designed to
provide specific instructions for the proper execution of this process.
It is expected that in the course of normal operations the VA529 prePAID Portfolio will be in balance
most of the time. Therefore, once a month the Investment Operations Manager will provide a
certification to the Controller and Chief Financial Officer. This will be done in conjunction with, and on
the related time schedule for, the Investment Operations group’s monthly asset balance reporting
process.
VA529 Rebalancing Policy adopted 12-01-14
Exhibit C
7
VA529 inVESTSM PROGRAM
STRUCTURE OF THE inVEST AGE-BASED PORTFOLIOS
The VA529 inVEST Age-Based Portfolios are designed to provide investors with a range of investment
options suitable for beneficiaries of different ages and investors with varying risk appetites. Essential to
the structure of the portfolios is an established glide path, which provides for the logical and orderly
progression from a higher projected return/risk profile (higher equity concentration) to a lower
projected return/risk profile and preservation of principal (higher fixed income concentration) on a
predetermined schedule.
The overall structure of the VA529 inVEST Program will consist of a minimum of seven separately named
and managed investment Portfolios. See the Portfolio Stage Progression Schedule which is provided as
the first table on Appendix A. Each newly established portfolio will begin at the Stage 1 asset allocation
(80% Equity/20% Fixed Income) and progress through the established evolution schedule which has
been based upon a three year cycle to the Stage 2 asset allocation (70% Equity/30% Fixed Income), and
so on until the portfolio reaches the Transition Stage (100% Various Fixed Income Strategies). The
seven primary stages of portfolio evolution are the columns which are highlighted in blue.
INTERIM YEAR CHANGES
In order to avoid the necessity for sizeable asset moves at a single point in time and to smooth the
trajectory of the established asset allocation glide path, VA529 has implemented measures to complete
the progression from one stage of portfolio evolution to the next using a series of interim year changes.
For the Stage 1 through Stage 6 portfolios, in each of the two interim years between evolution stages,
the asset allocation for each strategy component will shift by one third of the amount required to bring
the portfolio to the next evolution stage target for that component. For the Transition Stage Portfolio,
there is only two years provided to reach the final target (100% Stable Value), so the single interim year
change for each strategy component will be one half of the amount required to bring the component to
the final target. The interim year changes are also presented in the Portfolio Stage Progression Schedule
provided as the first table on Appendix A. The interim year changes are represented in the columns
labeled +1 and +2, which fall between the blue highlighted primary stage progression columns.
TIMING AND EXECUTION OF SCHEDULED ASSET ALLOCATION CHANGES
Asset allocation changes, whether associated with formal stage transitions or interim year changes
should be completed after the end of the calendar year, but as early as possible in the new calendar
year in order to provide minimum disruption to performance reporting and attribution. However, the
timing of any planned asset allocation change may be changed at the discretion of VA529’s Chief
Executive Officer out of operating necessity or in the event that a change in the timing is deemed to be
in the best interests of VA529’s participants. Prior to executing an asset allocation change, the new
allocation percentages should be communicated to the Custodian so that new transactions to the
portfolios following the change will be allocated to the underlying investment managers in the correct
percentages. Also prior to executing an asset allocation change, there should be a redemption for
accrued administrative fees to date, in order to provide for the completion of the redemption with the
VA529 Rebalancing Policy adopted 12-01-14
Exhibit C
8
same applicable asset allocation percentages, as those which were in place during the period in which
the fees were accrued. All asset allocation changes should be completed according the standard inVEST
Allocation Asset Allocation and Rebalancing Procedures, a separate operational document designed to
provide specific instructions for the proper execution of this process.
CASH INFLOWS AND OUTFLOWS
All funds coming into or out of the portfolios will be apportioned to the underlying component
investment managers according to the asset allocation percentages currently in place, regardless of the
current market value positioning of the portfolio. This is operationally efficient and effective, and in the
long term provides a reasonable mechanism to maintain the balance of the asset allocation within the
portfolio. However, this does not allow for the portfolios to be rebalanced using current cash flows.
REBALANCING
Portfolios are valued on a daily basis, and the various (asset allocation) portfolio components will
fluctuate depending of the performance of various sectors of the capital markets. Over time
accumulated over-performance or under-performance of certain sectors of the market can cause
portfolio asset allocations to move significantly off target, or “out of balance.” It is not reasonable to
expect that a daily valued portfolio with a diverse asset allocation would remain precisely at target
percentages all the time. Some degree of movement is normal, and is in fact efficient in the overall
management of the portfolio. Therefore a range of acceptable variances has been established for each
component strategy at each Evolution stage (and interim year step). When a portfolio component
exceeds the acceptable variance, rebalancing will be required. The Rebalancing Ranges (+/- Target)
table which appears at the bottom of Appendix A is structured in the same manner as the Portfolio
Progression Schedule (which appears at the top of the page).
The Rebalancing Ranges Table provides the maximum amount (as a percentage of the Total Portfolio)
that each component can be over or under target. If the maximum for any portfolio component is
reached or exceeded, then the component should be manually rebalanced halfway back to target. If
one component of a portfolio is out of balance, it is logical to assume that one or more other
components will also be out of balance. In the event that multiple components of the portfolio have
exceeded the maximum targets requiring rebalance, the largest component will be rebalanced back to
the halfway point, while seeking to balance the other components within the established ranges where
most logical.
TIMING AND EXECUTION OF PORTFOLIO REBALANCING
Investment Operations staff monitor the VA529 inVEST asset balances on a daily basis, and ascertain
whether it is balanced within the mandatory ranges. In the event that a portfolio component value
moves outside the target range, notice of such should be communicated on the same business day to
the Investment Operations Manager, Controller and Chief Financial Officer, who will assess the situation
and determine if immediate action is necessary, or if rebalancing can wait until the end of the quarter.
The need for interim rebalancing should be relatively rare, but can be done at any time at the direction
of the Chief Financial Officer. Otherwise, normal rebalancing should be completed during the week
prior to calendar quarter ends. All rebalancing transactions should be completed according the
VA529 Rebalancing Policy adopted 12-01-14
Exhibit C
9
standard inVEST Allocation Asset Allocation and Rebalancing Procedures, a separate operational
document designed to provide specific instructions for the proper execution of this process.
It is expected that in the course of normal operations the VA529 inVEST Portfolios will be in balance
most of the time. Therefore, once a month the Investment Operations Manager will provide a
certification to the Controller and Chief Financial Officer. This will be done in conjunction with, and on
the related time schedule for, the Investment Operations group’s monthly asset balance reporting
process.
OPENING AND CLOSING PORTFOLIOS
Over time as the current portfolios progress through their evolution cycle, it will be necessary to open
new portfolios and operationally efficient to close portfolios that have reached their final stage of
evolution. A new Stage 1 Portfolio will be opened every three years. It will be opened as close as
possible to January 1st of the year prior to the current Stage 1 Portfolio evolving to the Stage 2
allocation. Portfolios that have completed their final evolution to 100% Stable Value will be closed
three years after the evolution is complete. When possible, portfolio closures should be done on the
last business day of the calendar year. Remaining participants in fully evolved Age-Based portfolios that
are closing should be automatically transitioned to the permanent Stable Value portfolio.
RESPONSIBILITIES
Senior Investment Analysts
1. Monitor daily prePAID and inVEST Portfolio asset balancing. Provide required notices any time a
Portfolio component moves out of target asset allocation ranges.
2. For inVEST Portfolios, execute administrative fee redemptions prior to asset allocation changes.
3. Assist with the execution of asset transfers associated with asset allocation changes and
rebalancing transactions.
4. Assist with the quarterly review process.
Investment Operations Manager
1. Coordinate necessary advance communications with the Custodian and external investment
managers.
2. Provide required monthly certifications of Portfolio balancing and supervise the quarterly review
process.
3. Consult with the Controller and Chief Financial Officer on “out of balance” conditions.
4. Supervise the execution of asset transfers associated with asset allocation changes and
rebalancing transactions.
VA529 Rebalancing Policy adopted 12-01-14
Exhibit C
10
Controller/Chief Financial Officer
1.
2.
3.
4.
Receive and review monthly certifications of Portfolio balancing and quarterly reviews.
Consult with Investment Operations Manager on “out of balance” conditions.
Approve any rebalancing outside of the weekly cash flow analysis. (Chief Financial Officer only.)
Receive, review and approve instructions for the execution of rebalancing transactions.
Chief Executive Officer
1.
Approve changes to the timing of any planned asset allocation changes for inVEST.
VA529 Rebalancing Policy adopted 12-01-14
Exhibit C
Appendix A – VA529 inVEST Rebalancing Policy
Table 1 – Portfolio Stage Progression Schedule
Fund
Stage
1
+1
+2
Stage
2
+1
+2
Stage
3
+1
+2
Stage
4
+1
+2
Stage
5
+1
+2
Stage
6
+1
+2
Trans
+1
Final
Large Cap
SMID Active
SMID Passive
Intl Eq
Emg Mkts
Global REITS
High Yield
EMD
Mkt FI
Stable Value
17.5
17.5
17.5
17.5
16.7
15.8
15.0
14.6
14.2
13.8
13.4
12.9
12.5
10.8
9.2
7.5
5.0
2.5
0.0
0.0
0.0
11.2
10.2
9.2
8.3
7.7
7.2
6.6
5.7
4.8
3.9
3.4
3.0
2.5
2.1
1.7
1.2
0.8
0.4
0.0
0.0
0.0
3.8
4.0
4.1
4.2
3.9
3.7
3.4
3.5
3.5
3.6
3.2
2.9
2.5
2.1
1.7
1.3
0.8
0.4
0.0
0.0
0.0
17.5
17.5
17.5
17.5
16.7
15.8
15.0
14.6
14.2
13.8
13.4
12.9
12.5
10.8
9.2
7.5
5.0
2.5
0.0
0.0
0.0
15.0
14.2
13.3
12.5
11.7
10.8
10.0
9.2
8.3
7.5
6.7
5.8
5.0
4.2
3.3
2.5
1.7
0.8
0.0
0.0
0.0
15.0
13.3
11.7
10.0
10.0
10.0
10.0
9.2
8.3
7.5
6.7
5.8
5.0
5.0
5.0
5.0
3.3
1.7
0.0
0.0
0.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
5.0
2.5
0.0
5.0
5.8
6.7
7.5
7.5
7.5
7.5
8.3
9.2
10.0
10.0
10.0
10.0
10.0
10.0
10.0
10.0
10.0
10.0
5.0
0.0
7.5
8.3
9.2
10.0
10.8
11.7
12.5
13.3
14.2
15.0
15.8
16.7
17.5
18.3
19.2
20.0
20.0
20.0
20.0
10.0
0.0
2.5
4.2
5.8
7.5
10.0
12.5
15.0
16.7
18.3
20.0
22.5
25.0
27.5
31.7
35.8
40.0
48.3
56.7
65.0
82.5
100.0
+2
Stage
5
+1
+2
Stage
6
+1
+2
Trans
+1
Table 2 - Rebalancing ranges (+/- Target)
Fund
Large Cap
SMID Active
SMID Passive
Intl Eq
Emg Mkts
Global REITS
High Yield
EMD
Mkt FI
Stable Value
Stage
1
+1
+2
Stage
2
+1
+2
Stage
3
+1
+2
Stage
4
+1
3.5
3
3
3
3
3
3
3
3
3
3
3
3
2.5
2.5
2.5
2.5
2.5
0
0
2.6
2.6
2.2
2.0
2.0
2.0
2.0
2.0
2.0
1.5
1.5
1.5
1.5
1.3
1.3
1.2
1.2
1.2
0
0
0.9
0.9
0.8
1.0
1.0
1.0
1.0
1.0
1.0
1.5
1.5
1.5
1.5
1.2
1.2
1.3
1.3
1.3
0
0
4
4
4
4
4
4
4
3.5
3.5
3.5
3.5
3.5
3.5
3.5
3.5
3.5
3.5
3
0
0
3
3
3
3
3
3
3
3
2.5
2.5
2.5
2.5
2.5
2.5
2.5
2.5
2.5
2.5
0
0
5.5
5.5
5.5
5.5
5.5
5.5
5.5
5.5
5.5
5.5
5.5
5.5
5.5
5.5
5.5
5.5
5.5
5
0
0
5
5
5.5
5.5
6
6.5
6.5
7
7
7.5
8
8
8
8
9
9
9
9
10
10
6
6
6.5
6.5
6.5
7
7
7
7.5
7.5
8
8
8
8
8.5
8.5
8.5
8.5
9
9
4
4
4.5
4.5
5
5.5
6
6.5
7
7.5
8
9
9.5
11
13
15
19
21
23
25
1.5
2
2
2
2
2
2.5
2.5
2.5
3
3
3.5
4
4.5
5
6
8.5
14
16
18
Numbers in bold represent a change from the prior year.