MANAGEMENT AGREEMENT
MANAGEMENT AGREEMENT, made this __ day of ______, 2003 by and between Bridgeway
Funds, Inc., a Maryland corporation ("Bridgeway Funds"), and Bridgeway Capital
Management, Inc., a Texas corporation (the "Adviser").
WITNESSETH:
WHEREAS, Bridgeway Funds is engaged in business as an open-end management
investment company and is registered as such under the Investment Company Act
of 1940, as amended (the "1940 Act"), and has registered shares of the Fund
named in Exhibit A for public offering under the Securities Act of 1933, as
amended (the "1933 Act");
WHEREAS, the Adviser is engaged principally in the business of rendering
investment and management services and is registered as an investment adviser
under the Investment Advisers Act of 1940 (the "Advisers Act"), as amended;
WHEREAS, Bridgeway Funds and the Adviser wish to enter into an agreement to
provide for investment advisory and management services to Bridgeway Funds upon
the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
1. Appointment of the Adviser
Bridgeway Funds hereby appoints the Adviser to manage the investment and
reinvestment of the assets of the Fund named in Exhibit A hereto. Bridgeway
Funds further appoints the Adviser to manage its affairs for the period and on
the terms set forth in this agreement. The Adviser hereby accepts such
appointment and agrees to render the services and to assume the obligations set
forth for the compensation herein provided, subject to the supervision of the
Board of Directors of Bridgeway Funds and giving due consideration to the
investment policies and restrictions and other statements concerning Bridgeway
Funds in the Bridgeway Funds Articles of Incorporation, Bylaws, and
Registration Statements under the 1940 Act and the 1933 Act, and to the
provisions of the Internal Revenue Code, as amended from time to time and
applicable to Bridgeway Funds as a registered investment company. The Adviser
shall for all purposes herein be deemed to be an independent contractor and
shall, unless otherwise expressly provided or authorized, have no authority to
act for or represent Bridgeway Funds in any way or otherwise be deemed as agent
of Bridgeway Funds.
The Adviser shall manage the investment and reinvestment of the Fund's assets,
subject to and in accordance with its investment objectives and restrictions
stated in the Bridgeway Funds Registration Statement. In pursuing the
foregoing, the Adviser shall make all determinations, without prior
consultation with Bridgeway Funds, as to which securities and other assets of
the Fund will be acquired, held, disposed of or loaned, and shall take steps
necessary to implement same. Such determination and services shall also include
determining the manner in which voting rights, rights to consent to corporate
action, and any other rights pertaining to the Fund's securities shall be
exercised. The Adviser shall render regular reports to the Bridgeway Funds
Board concerning the Fund's investment activities.
In connection with the placement of orders for the execution of the Fund's
transactions the Adviser shall create and maintain all necessary brokerage
records of the Fund in accordance with all applicable laws, rules and
regulations.
2. Expenses
A. Expenses Paid by Bridgeway Funds
Expenses incurred in the operations of Bridgeway Funds and the offering of its
shares shall be borne by Bridgeway Funds, unless such expense is specifically
assumed herein by the Adviser. Expenses borne by Bridgeway Funds include but
are not limited to:
(1) Investment Advisory Fees to the Adviser as provided herein,
(2) Charges and expenses of any custodian or depository appointed by
Bridgeway Funds for the safekeeping of its cash, securities and
other property,
(3) Brokers' commissions and issue and transfer taxes chargeable to
the Fund in connection with securities transactions to which the
Fund is a party,
(4) Directors' fees and expenses of Bridgeway Funds' Directors who
are not interested persons of the Adviser,
(5) Reimbursement to the Adviser for any compensation paid by the
Adviser to its employees who serve in the role and fulfill the
function of Bridgeway Funds Treasurer and Secretary. Such
reimbursement will be in proportion to time spent on these
functions. Bridgeway Funds will not reimburse the Adviser for
any compensation paid to the President of Bridgeway Funds.
(6) The charges and expenses of bookkeeping personnel, auditors, and
accountants, computer services and equipment, and record keeping
services and equipment,
(7) The charges and expenses of the transfer agency and registrar
function performed by or on behalf of the Fund,
(8) All taxes and corporate fees payable by Bridgeway Funds to
federal, state or other government agencies,
(9) Fees and expenses involved in registering and maintaining
registration of Bridgeway Funds and of shares of the Fund with
the Securities and Exchange Commission (the "SEC") and
qualifying such shares under state or other securities laws,
including the preparation and printing of prospectuses used for
these purposes and for shareholders of the Fund,
(10) All expenses of Directors' meetings and of preparing and
printing reports to Directors and shareholders,
(11) Charges and expenses of legal counsel for Bridgeway Funds and
the Independent Directors of Bridgeway Funds incurred in
connection with legal matters relating to Bridgeway Funds,
including without limitation, legal services rendered in
connection with Bridgeway Funds' corporate existence, corporate
and financial structure and relations with its shareholders,
registrations and qualifications of securities under federal,
state and other laws, issues of securities and expenses which
Bridgeway Funds has herein assumed,
(12) Interest expense,
(13) Insurance expense, and
(14) Association membership dues
B. Expenses Paid by the Adviser
The Adviser shall bear all its costs and expenses in rendering the investment
advisory services required under this Agreement. The Adviser shall also furnish
to Bridgeway Funds, at the Adviser's expense, office space in the offices of
the Adviser or in such other place as may be agreed upon from time to time, and
all necessary office facilities and equipment for managing the affairs and
maintaining the records of Bridgeway Funds except as specifically listed in
Exhibit A. If desired by Bridgeway Funds, the Adviser shall arrange for members
of the Adviser's organization, or its affiliates, to serve as agents of
Bridgeway Funds without salaries from Bridgeway Funds.
C. Additional Expenses
The Adviser and Bridgeway Funds reserve the right to agree upon other expense
allocations due to new developments impacting Bridgeway Funds or the mutual
fund industry including but not limited to legal decisions, new SEC rules and
regulations, and industry practices, so long as the reallocation of expenses
are approved by a majority of the Independent Directors of Bridgeway Funds.
3. Investment Advisory Fees
As compensation for its services rendered hereunder, Bridgeway Funds will pay
the Adviser, out of the assets of the Fund, an Advisory Fee computed as
specified in Exhibit A hereto with respect to the Fund.
4. Fee Calculation
See Exhibit A
5. Broker-Dealer Relationships
The Adviser is authorized in its discretion to select the brokers or dealers
that will execute transactions for Bridgeway Funds and is directed to use its
best efforts to seek best execution for such transactions; provided, however,
that the Adviser shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason of
its having caused the Fund to pay a broker or dealer an amount of commission
for effecting a Fund investment transaction in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction, if the Adviser determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and
research services, if any, provided by such broker or dealer, viewed in terms
of either that particular transaction or the Adviser's overall responsibilities
with respect to the Fund, other Funds of Bridgeway Funds, and to other clients
of the Adviser to which the Adviser exercises investment discretion.
In selecting a broker-dealer to execute each particular transaction, the
Adviser may take the following into consideration: the best net price
available; the reliability, integrity and financial condition of the
broker-dealer; the size of and the difficulty in executing the order; the value
of the expected contribution of the broker-dealer to the investment performance
of Bridgeway Funds on a continuing basis; and such other factors as may be
disclosed in the Bridgeway Funds Prospectus and Statement of Additional
Information or as approved by the Bridgeway Funds Board of Directors. Bridgeway
Funds acknowledges that the price to the Fund in any transaction may be less
favorable than that available from another broker-dealer if the difference is
reasonably justified by other aspects of execution services offered.
To the extent consistent with applicable law, purchase or sell orders for
Bridgeway Funds may be aggregated with simultaneous purchase or sell orders for
other clients of the Adviser. Whenever the Adviser so aggregates or
simultaneously places orders to purchase or sell the same security on behalf of
the Fund and one or more other clients of the Adviser, such orders will be
allocated as to price and amount among all such clients in a manner reasonably
believed by the Adviser to be fair and equitable to each client and consistent
with the Bridgeway Funds Trade Allocation Policy approved annually by the
Bridgeway Funds Board. The Bridgeway Funds Board of Directors understands that
in some cases, this procedure may adversely affect the results obtained for
Bridgeway Funds.
Notwithstanding any other provisions in this Section 5, Bridgeway Funds shall
retain the right to direct the placement of all Fund transactions, and the
Directors of Bridgeway Funds may establish policies or guidelines concerning
Fund transactions, which shall be followed by the Adviser in placing
transactions for the Fund.
6. Audit
Bridgeway Funds shall cause its books and accounts to be audited at least once
each year by a reputable, independent public accountant or organization of
public accountants who shall be selected and hired by the Audit Committee of
the Bridgeway Funds Board and shall render a report to the Bridgeway Funds
Board.
7. Non-Exclusivity
The services of the Adviser to Bridgeway Funds hereunder are not to be deemed
exclusive, and the Adviser shall be free to render similar services to others
so long as its services hereunder are not impaired thereby.
Subject to and in accordance with the Articles of Incorporation of Bridgeway
Funds and of the Certificate of Incorporation of the Adviser, respectively, it
is understood that directors, officers, agents and stockholders of Bridgeway
Funds are or may be interested in the Adviser (or any successor thereof) as
directors, officers or stockholders, or otherwise, that directors, officers,
agents and stockholders of the Adviser are or may be interested in Bridgeway
Funds (or any such successor) as directors, officers, stockholders or
otherwise, and that the effect of any such adverse interests shall be governed
by said Articles of Incorporation and Certificate of Incorporation,
respectively.
8. Amendment
This agreement may be amended by mutual consent of the parties only if such
amendment is specifically approved (1) by a majority of the Directors of
Bridgeway Funds, including a majority of the Directors of Bridgeway Funds who
are not interested persons of Bridgeway Funds or the Adviser and, (2) if
required by law, by the affirmative vote of a majority of the outstanding
voting securities of the Fund.
9. License Agreement
Bridgeway Funds shall have the non-exclusive right to use the name "Bridgeway"
to designate any current or future series of shares only so long as Bridgeway
Capital Management, Inc. serves as investment manager or adviser to Bridgeway
Funds with respect to such shares. Bridgeway Funds shall not use the name of
the Adviser in any Prospectus, sales literature or other material relating to
Bridgeway Funds in any manner not approved prior thereto by the Adviser;
provided however, that the Adviser shall approve all use of its name which
merely refer in accurate terms to its appointment hereunder or which are
required by the SEC; and provided, further, that in no event shall such
approval be unreasonably withheld. The Adviser shall not use the name of
Bridgeway Funds or the Fund in any material relating to the Adviser in any
manner not approved prior thereto by Bridgeway Funds; provided, however, that
Bridgeway Funds shall approve all uses of its name which merely refer in
accurate terms to the appointment of the Adviser hereunder or which are
required by the SEC; and provided further that in no event shall such approval
be unreasonably withheld.
10. Liability of the Adviser
Absent willful misfeasance, bad faith, gross negligence, or reckless disregard
of obligations or duties hereunder on the part of the Adviser, the Adviser
shall not be subject to liability to Bridgeway Funds or to any shareholder of
Bridgeway Funds for any act or omission in the course of, or connected with,
rendering services hereunder or for any losses that may be sustained in the
purchase, holding or sale of any security, unless the Adviser agrees to assume
the loss or liability for such losses.
11. Force Majeure
The Adviser shall not be liable for delays or errors occurring by reason of
circumstances beyond its control, including but not limited to acts of civil or
military authority, national emergencies, work stoppage, fire, flood,
catastrophe, acts of God, insurrection, war, riot, or failure of communication
or power supply. In the event of equipment breakdowns beyond its control, the
Adviser shall take reasonable steps to minimize service interruptions but shall
have no liability with respect thereto.
12. Effective Date; Termination; Assignment
This Agreement shall become effective October 31, 2003 and shall continue in
effect for one year thereafter from year to year if its continuance after that
date is specifically approved on or before that date and at least annually
thereafter by the vote of a majority of the outstanding voting securities of
the Fund, or by the Board of Directors of Bridgeway Funds, including a majority
of the Directors of Bridgeway Funds who are not parties to the Agreement or
interested persons of such parties, provided, however, that: (1) this Agreement
may at any time be terminated without the payment of any penalty either by vote
of the Board of Directors of Bridgeway Funds or by vote of a majority of the
outstanding voting securities of the Fund, on sixty days' written notice to the
Adviser, (2) this Agreement shall immediately terminate in the event of its
assignment (within the meaning of the Investment Company Act of 1940), and (3)
this Agreement may
be terminated altogether by the Adviser on ninety days' written notice to
Bridgeway Funds. Any notice under this Agreement shall be given in writing,
addressed and delivered, or mailed postpaid, to the other party at any office
of such party.
13. Severability
If any provision of this Agreement shall be held or made invalid by any court
of competent jurisdiction, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
14. Notices
Any notices under this Agreement shall be in writing, addressed and delivered,
telecopied or mailed postage paid, to the party entitled to receive such notice
at the address that party may designate. Until further notice to the other
party, it is agreed that the address of Bridgeway Funds and that of the Adviser
shall be ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇.
15. Questions of Interpretation
Any question of interpretation of any term or provision of this Agreement
having a counterpart in or otherwise derived from a term or provision of the
1940 Act or the Advisers Act shall be resolved by reference to such term or
provision of the 1940 Act or the Advisers Act and interpretations thereof, if
any, by the United States Courts or in the orders of the SEC issued pursuant to
said Acts. In addition, where the effect of a requirement of the 1940 Act or
the Advisers Act reflected in any provision of this Agreement is revised by
rule, regulation or order of the SEC, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
16. Dispute Resolution
A. Direct Discussions. Bridgeway Funds and the Adviser shall
attempt, in good faith, to resolve by direct discussions any
disputes between them arising out of, relating to or in
connection with this Agreement.
B. Mediation. If direct discussions do not resolve the dispute,
either party may initiate mediation within 30 days of
termination of direct discussions. All disputes shall be
submitted to mediation then to arbitration. Unless otherwise
agreed, mediation proceedings shall be administered by the
American Arbitration Association.
C. Arbitration. If the parties fail to resolve the dispute through
mediation within 60 days after commencement of mediation, then
either party may submit the dispute for arbitration. Unless
otherwise agreed, arbitration proceedings shall be administered
by the American Arbitration Association. A demand for
arbitration shall be filed with the American Arbitration
Association within the applicable statute of limitations. All
disputes submitted to arbitration shall be resolved pursuant to
the procedures set forth in the Federal Arbitration Act.
The parties to this Agreement may agree on one arbitrator to
hear their dispute, in which case the decision of the sole
arbitrator shall decide the dispute. In the event that the
parties cannot agree on one arbitrator, either party may elect
to have the dispute heard by a three-arbitrator panel. If a
three-arbitrator panel is selected by Bridgeway Funds, then it
shall pay all fees and expenses of all three arbitrators. If the
Adviser elects a three arbitrator panel: (1) the Adviser shall
(prior to the hearing) deposit with the American Arbitration
Association an amount equal to one-third of the total
anticipated fees and expenses of the three arbitrators; and, (2)
Bridgeway Funds shall pay the remaining fees and expenses of the
arbitrators. If both parties elect a three-arbitrator panel then
each will pay one-half of the resulting fees and expenses. In
the case of a three-arbitrator panel, the dispute shall be
decided on the decision of a majority of the panel.
The decision of the arbitrator(s) shall be final and binding and
may be enforced in any court of competent jurisdiction. The
arbitrator(s) shall apply recognized privileges and exemptions
from discovery, such as the attorney-client, work-product and
anticipation of litigation privileges. The arbitrator(s) shall
have the authority to award any relief (including preliminary,
temporary or permanent injunctive relief) which could be awarded
by a state or federal court sitting in Texas. Upon request from
any party seeking preliminary or temporary injunctive relief,
the American Arbitration Association shall immediately appoint a
single interim arbitrator to hear and rule on such request as
quickly as possible. The arbitrator(s) shall be bound by the
substantive law of the United States and the State of Texas.
To the extent permitted by law, (the foregoing not withstanding)
the arbitrator(s) shall have the authority to award attorneys'
fees and costs to the prevailing party. In addition, the
arbitrator(s) shall have the discretion to allocate between the
parties the fees and expenses of the American Arbitration
Association and the fees and expenses of the arbitrator(s).
This dispute resolution clause shall in no way effect the right of either party
to terminate this Agreement as set forth in paragraph 12 above.
17. Miscellaneous
Each party agrees to perform such further actions and execute such further
documents as are necessary to effectuate the purposes hereof. This Agreement
shall be construed and enforced in accordance with and governed by the laws of
the state of Texas. The captions in this Agreement are included for convenience
only and in no way define or limit any of the provisions hereof or otherwise
affect their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers on the day and year first above written.
BRIDGEWAY FUNDS, INC.
By: _______________________
President
BRIDGEWAY CAPITAL MANAGEMENT, INC.
By: _______________________
President
EXHIBIT A
Fund: Aggressive Investors 1 Fund (the "Fund")
----------------------------------------
Fund Inception Date: 08/05/1994
----------
General Provisions
The Fund's expenses (including the Base Advisory Fee) will be accrued daily.
Base Advisory Fee
As compensation for its services rendered, the Fund will pay the Adviser a Base
Advisory Fee computed daily and payable monthly at the following annual rate
(the Base Advisory Fee Rate):
(1) 0.90% of the value of the Fund's average daily net assets during each year
up to $250,000,000;
(2) 0.875% of the next $250,000,000 of such assets; and
(3) 0.85% of such assets over $500,000,000,
For purposes of calculating each month's Base Advisory Fee, daily net asset
value shall be computed by adding the Fund's total daily asset values less
liabilities for the month and dividing the resulting total by the number of
days in the month. The Fund's expenses and fees, including the Base Advisory
Fee, will be accrued daily and taken into account in determining daily net
asset value. For any period less than a full month during which this Agreement
is in effect, the Base Advisory Fee shall be prorated according to the
proportion such period bears to a full month.
The Performance Period
The Performance Period shall consist of the most recent five-year period ending
on the last day of the quarter (March 31, June 30, September 30, and December
31) that the New York Stock Exchange was open for trading. For example, on
February 15, 2003, the relevant five-year period would be from Friday, December
30, 1997 through Friday, December 31, 2002.
The Performance Adjustment Rate
The Performance Adjustment Rate shall vary with the Fund's performance as
compared to the performance of the Standard & Poor's 500 Composite Stock Price
Index (hereinafter "Index" or "S & P 500 Index") with dividends reinvested and
will range from -0.70% to +0.70%. The Performance Adjustment Rate will be
calculated at 4.67% of the cumulative difference between the performance of the
Fund and that of the Index over the Performance Period, except that there will
be no performance adjustment if the cumulative difference between the Fund's
performance and that of the Index is less than or equal to 2.00% (over the
Performance Period). The factor of 4.67% assumes that the Adviser will achieve
the maximum or minimum of the Performance Adjustment Rate with a cumulative
total return difference between the Fund and the Index of plus or minus 15%
over the Performance Period [0.70% divided by 15.00% = 4.67%].
For example; assume that the Fund had a cumulative total return of 27.63% for
the five-year period through December 31, 2002. During the same period, assume
the Index with dividends reinvested had a cumulative total return of 21.21%.
Then the Performance Adjustment Rate would be 4.67% times the difference in
returns, or 4.67% times (27.63% - 21.21%) = 0.30%.
Calculation of Performance
The Fund's performance will be the cumulative percentage increase (or decrease)
in its net asset value per share over the Performance Period and will be
calculated as the sum of: (1) the change in the Fund's net asset value per
share during such period and (2) the value per share of the Fund distributions
from income or capital gains (long- or short-term) having an ex-dividend date
occurring within the Performance Period and assumed to have been reinvested at
the net asset value on ex-date. Thus, the Fund's performance will be calculated
in accordance with the SEC's standardized total return formula.
Application of the Adjusted Advisory Fee Rate
As indicated above, the Fund's expenses (including the Base Advisory Fee) will
be accrued daily. Performance adjustments will be computed quarterly and taken
into account in computing the daily net asset value of a Fund share in the
subsequent quarter (by adding to or subtracting from the Base Advisory Fee Rate
the percentage produced from application of the Performance Adjustment Rate
described above). However, expenses in excess of any maximum expense limitation
assumed by the Adviser or Distributor, if any, shall not be included for the
purpose of computing the daily net asset value of a Fund share.
If the Base Advisory Fee Rate is adjusted, the resulting rate will apply only
to the quarter immediately following the adjustment to determine the Advisory
Fee which will be paid monthly. Therefore, an increased Advisory Fee will
result even though the performance of the Fund over some period of time shorter
than the Performance Period, has been behind that of the Index and, conversely,
the Advisory Fee will decline in months where the performance of the Fund has
been ahead of that of the Index, also over some period of time shorter than the
Performance Period.
Continuing with the example above, the adjusted Advisory Fee Rate (expressed as
an annualized percentage of average net assets) applied to the period of time
from January 1, 2003, through March 31, 2003, would be 0.90% (the Base Advisory
Fee Rate) plus 0.30% (the Performance Adjustment Rate) equals 1.20% (the
adjusted Advisory Fee Rate).
Limitations
Fund expenses for the existing class of shares (Class N) shall in no case
exceed the maximum expense limitation of 2.00% of the value of its average net
assets.
The Adviser will reimburse expenses, if necessary, to ensure the expense ratio
of the Fund does not exceed the maximum expense limitation for the fiscal year.
New classes of shares of the Fund may carry a different expense limitation.
EXHIBIT A
Fund: Ultra-Small Company Fund (the "Fund")
-------------------------------------
Fund Inception Date: 08/05/1994
----------
General Provisions
The Fund's expenses (including the Advisory Fee) will be accrued daily.
Advisory Fee
As compensation for its services rendered, the Fund will pay the Adviser an
Advisory Fee computed daily and payable monthly at the following annual rate:
(1) 0.90% of the value of the Fund's average daily net assets during such
month up to $250,000,000;
(2) 0.875% of the next $250,000,000 of such assets; and
(3) 0.85% of such assets over $500,000,000,
However, during the period that the Ultra-Small Company Fund's net assets range
from $27,500,000 to $55,000,000 the Advisory Fee will be paid as if the Fund
had $55,000,000 under management (that is, $55 million times 0.009 equals
$495,000). This is limited to a maximum ratio of 1.49%.
For purposes of calculating the Advisory Fee each month, average daily net
asset value shall be computed by adding the Fund's total daily asset values,
less liabilities, for the month and dividing the resulting total by the number
of days in the month. The Fund's expenses and fees, including the Advisory Fee,
will be accrued daily and taken into account in determining daily net asset
value. For any period less than a full month during which this Agreement is in
effect, the Advisory Fee shall be prorated according to the proportion such
period bears to a full month.
Application of the Advisory Fee Rate
As indicated above, the Fund's expenses (including the monthly Advisory Fee)
will be accrued daily. However, expenses in excess of the maximum expense
limitation assumed by the Adviser shall not be accrued for the purpose of
computing the daily net asset value of a Fund share.
Fund Expenses & Limitations
Fund expenses for the existing class of shares (Class N) shall in no case
exceed the maximum expense limitation of 2.00% of the value of its average net
assets.
The Adviser will reimburse expenses, if necessary, to ensure the Fund's expense
ratio does not exceed the maximum expense limitation for the fiscal year.
New classes of shares of the Fund may carry a different expense limitation.
EXHIBIT A
Fund: Ultra-Small Company Market Fund (the "Fund")
--------------------------------------------
Fund Inception Date: 07/31/1997
----------
General Provisions
The Fund's expenses (including the Advisory Fee) will be accrued daily.
Advisory Fee
As compensation for its services rendered, the Fund will pay the Adviser an
Advisory Fee computed daily and payable monthly at the annual rate of 0.50% of
the value of the Fund's average daily net assets during such month.
For purposes of calculating the Advisory Fee each month, average daily net
assets shall be computed by adding the Fund's total daily asset values less
liabilities for the month and dividing the resulting total by the number of
days in the month. The Fund's expenses and fees, including the Advisory Fee,
will be accrued daily and taken into account in determining daily net asset
value. For any period less than a full month during which this Agreement is in
effect, the Advisory Fee shall be prorated according to the proportion such
period bears to a full month.
Fund Expenses and Limitations
Fund expenses for the existing class of shares (Class N) shall in no case
exceed the maximum expense limitation of 0.75% of the value of its average net
assets.
The Adviser will reimburse expenses, if necessary, to ensure the Fund's expense
ratio does not exceed the maximum expense limitation for the fiscal year.
New classes of shares of the Fund may carry a different expense limitation.
EXHIBIT A
Fund: Blue Chip 35 Index Fund (the "Fund")
------------------------------------
Fund Inception Date: 07/31/1997
----------
General Provisions
The Fund's expenses (including the Advisory Fee) will be accrued daily.
Advisory Fee
As compensation for its services rendered, the Fund will pay the Adviser an
Advisory Fee computed daily and payable monthly at the annual rate of 0.08% of
the value of the Fund's average daily net assets during such month.
For purposes of calculating the Advisory Fee each month, the Fund's net asset
value shall be computed by adding its total daily asset values, less
liabilities, for the month and dividing the resulting total by the number of
days in the month. The Fund's expenses and fees, including the Advisory Fee,
will be accrued daily and taken into account in determining daily net asset
value. For any period less than a full month during which this Agreement is in
effect, the Advisory Fee shall be prorated according to the proportion such
period bears to a full month.
Fund Expenses and Limitations
Fund expenses for the existing class of shares (Class N) shall in no case
exceed the maximum expense limitation of 0.15% of the value of its average net
assets.
The Adviser will reimburse expenses, if necessary, to ensure the Fund's expense
ratio does not exceed the maximum expense limitation for the fiscal year.
New classes of shares of the Fund may carry a different expense limitation.
EXHIBIT A
Fund: Micro-Cap Limited Fund (the "Fund")
-----------------------------------
Fund Inception Date: 06/30/1998
------------
General Provisions
The Fund's expenses (including the Base Advisory Fee) will be accrued daily.
Base Advisory Fee
As compensation for its services rendered, the Fund will pay the Adviser an
Advisory Fee computed daily and payable monthly at the following annual rate:
(1) 0.90% of the value of the Fund's average daily net assets during such
month up to $250,000,000;
(2) 0.875% of the next $250,000,000 of such assets; and
(3) 0.85% of such assets over $500,000,000,
However, during the period that the Micro-Cap Limited Fund's net assets range
from $27,500,000 to $55,000,000 the Advisory Fee will be paid as if the Fund
had $55,000,000 under management (that is, $55 million times 0.009 equals
$495,000). This is limited to a maximum ratio of 1.49%.
For purposes of calculating each month's Base Advisory Fee, daily net asset
value shall be computed by adding the Fund's total daily asset values less
liabilities for the month and dividing the resulting total by the number of
days in the month. The Fund's expenses and fees, including the Base Advisory
Fee, will be accrued daily and taken into account in determining daily net
asset value. For any period less than a full month during which this Agreement
is in effect, the Base Advisory Fee shall be prorated according to the
proportion such period bears to a full month.
The Performance Period
The Performance Period shall consist of the most recent five-year period ending
on the last day of the quarter (March 31, June 30, September 30, and December
31) that the New York Stock Exchange was open for trading. For example, on
February 15, 2006, the relevant five-year period would be from Friday, December
29, 2000 through Friday, December 30, 2005.
The Performance Adjustment Rate
The Performance Adjustment Rate shall vary with the Fund's performance as
compared to the performance of the CRSP Cap-based Portfolio 9 Index with
dividends reinvested (hereinafter "Index") and will range from -0.70% to
+0.70%. The Performance Adjustment Rate will be calculated at 2.87% of the
cumulative difference between the performance of the Fund and that of the Index
over the Performance Period, except that there will be no performance
adjustment if the cumulative difference between the Fund's performance and that
of the Index is less than or equal to 2% (over the Performance Period). The
factor of 2.87% assumes that the Adviser will achieve the maximum or minimum of
the Performance Adjustment Rate with a cumulative total return difference
between the Fund and the Index of plus or minus 24.40% over the Performance
Period [0.70% divided by 24.40% = 2.87%].
For example; assume that the Fund had a cumulative total return of 27.63% for
the five-year period through December 31, 2003. During the same period, assume
the Index with dividends reinvested had a cumulative total return of 21.21%.
Then the Performance Adjustment Rate would be 2.87% times the difference in
returns, or 2.87% times (27.63% - 21.21%) = 0.18%.
The dollar amount of the performance adjustment is limited to the difference
between the maximum Advisory Fee (average net assets time 1.60%) and the Base
Advisory Fee calculated according to the Management Agreement. For example, if
the Fund is at the maximum performance adjustment of .70% and has average net
assets of $35 million, the Base Advisory Fee would be $495,000 and the
calculated
performance adjustment of $245,000 ($35,000,000 * 0.70%) would be limited to
$65,000 ($35,000,000 * 1.60% - $495,000).
Calculation of Performance
The Fund's performance will be the cumulative percentage increase (or decrease)
in its net asset value per share over the Performance Period and will be
calculated as the sum of: (1) the change in the Fund's net asset value per
share during such period and (2) the value per share of the Fund distributions
from income or capital gains (long- or short-term) having an ex-dividend date
occurring within the Performance Period and assumed to have been reinvested at
the net asset value on ex-date. Thus, the Fund's performance will be calculated
in accordance with the SEC's standardized total return formula.
Application of the Adjusted Advisory Fee Rate
As indicated above, the Fund's expenses (including the Base Advisory Fee) will
be accrued daily. Performance adjustments will be computed quarterly and taken
into account in computing the daily net asset value of a Fund share in the
subsequent quarter (by adding to or subtracting from the Base Advisory Fee Rate
the percentage produced from application of the Performance Adjustment Rate
described above). However, expenses in excess of any maximum expense limitation
assumed by the Adviser or Distributor, if any, shall not be included for the
purpose of computing the daily net asset value of a Fund share.
If the Base Advisory Fee Rate is adjusted, the resulting rate will apply only
to the quarter immediately following the adjustment to determine the Advisory
Fee which will be paid monthly. Therefore, an increased Advisory Fee will
result even though the performance of the Fund over some period of time shorter
than the Performance Period, has been behind that of the Index and, conversely,
the Advisory Fee will decline in months where the performance of the Fund has
been ahead of that of the Index, also over some period of time shorter than the
Performance Period.
Continuing with the example above, the adjusted Advisory Fee Rate (expressed as
an annualized percentage of average net assets) applied to the period of time
from January 1, 2005, through March 31, 2005, would be 0.90% (the Base Advisory
Fee Rate) plus 0.18% (the Performance Adjustment Rate) equals 1.08% (the
adjusted Advisory Fee Rate).
Fund Expenses & Limitations
Fund expenses for the existing class of shares (Class N) shall in no case
exceed the maximum expense limitation of 1.90% of the value of its average net
assets.
The Adviser will reimburse expenses, if necessary, to ensure expense ratios do
not exceed the maximum expense limitation for the fiscal year.
New classes of shares of the Fund may carry a different expense limitation.
EXHIBIT A
Fund: Aggressive Investors 2 Fund (the "Fund")
----------------------------------------
Fund Inception Date: 10/31/2001
----------
General Provisions
The Fund's expenses (including the Base Advisory Fee) will be accrued daily.
Base Advisory Fee
As compensation for its services rendered, the Fund will pay the Adviser a
Base Advisory Fee computed daily and payable monthly at the following
annual rate (the Base Advisory Fee Rate):
(1) 0.90% of the value of the Fund's average daily net assets during each
month up to $250,000,000;
(2) 0.875% of the next $250,000,000 of such assets; and
(3) 0.85% of such assets over $500,000,000.
For purposes of calculating each month's Base Advisory Fee, daily net asset
value shall be computed by adding the Fund's total daily asset values less
liabilities for the month and dividing the resulting total by the number of
days in the month. The Fund's expenses and fees, including the Base Advisory
Fee, will be accrued daily and taken into account in determining daily net
asset value. For any period less than a full month during which this Agreement
is in effect, the Base Advisory Fee shall be prorated according to the
proportion such period bears to a full month.
The Performance Period
The Performance Period shall consist of the most recent five-year period ending
on the last day of the quarter (March 31, June 30, September 30, and December
31) that the New York Stock Exchange was open for trading. For example, on
February 15, 2008, the relevant five-year period would be from December 31,
2002 through December 31, 2007.
The Performance Adjustment Rate
The Performance Adjustment Rate shall vary with the Fund's performance as
compared to the performance of the Standard & Poor's 500 Composite Stock Price
Index (hereinafter "Index" or "S & P 500 Index") with dividends reinvested and
will range from -0.70% to +0.70%. The Performance Adjustment Rate will be
calculated at 4.67% of the cumulative difference between the performance of the
Fund and that of the Index over the Performance Period, except that there will
be no performance adjustment if the cumulative difference between the Fund's
performance and that of the Index is less than or equal to 2.00% (over the
Performance Period). The factor of 4.67% assumes that the Adviser will achieve
the maximum or minimum of the Performance Adjustment Rate with a cumulative
total return difference between the Fund and the Index of plus or minus 15.00%
over the Performance Period [0.70% divided by 15.00% = 4.76%].
For example; assume that the Fund had a cumulative total return of 27.63% for
the five-year period through December 31, 2007. During the same period, assume
the Index with dividends reinvested had a cumulative total return of 21.21%.
Then the Performance Adjustment Rate would be 4.67% times the difference in
returns, or 4.67% times (27.63% - 21.21%) = 0.30%.
Since the Fund does not have a five-year operating history, the Performance
Adjustment Rate will be calculated as follows during the initial five-year
period.
(a) From inception through September 30, 2002, the Performance
Adjustment Rate was inoperative. The Advisory Fee payable was the Base
Advisory Fee only.
(b) From September 30, 2002 through September 30, 2006, the
Performance Adjustment Rate will be calculated based upon a comparison of
the investment performance of the Fund
and the Index over the number of quarters that have elapsed since the
Fund's inception. Each time the Performance Adjustment Rate is calculated,
it will cover a longer time span, until it can cover a running five-year
period as intended. In the meantime, the early months of the transition
period will have a disproportionate effect on the performance adjustment
of the fee.
Calculation of Performance
The Fund's performance will be the cumulative percentage increase (or decrease)
in its net asset value per share over the Performance Period and will be
calculated as the sum of: (1) the change in the Fund's net asset value per
share during such period and (2) the value per share of the Fund distributions
from income or capital gains (long- or short-term) having an ex-dividend date
occurring within the Performance Period and assumed to have been reinvested at
the net asset value on ex-date. Thus, the Fund's performance will be calculated
in accordance with the SEC's standardized total return formula.
Application of the Adjusted Advisory Fee Rate
As indicated above, the Fund's expenses (including the Base Advisory Fee) will
be accrued daily. Performance adjustments will be computed quarterly and taken
into account in computing the daily net asset value of a Fund share in the
subsequent quarter (by adding to or subtracting from the Base Advisory Fee Rate
the percentage produced from application of the Performance Adjustment Rate
described above). However, expenses in excess of any maximum expense limitation
assumed by the Adviser or Distributor, if any, shall not be included for the
purpose of computing the daily net asset value of a Fund share.
If the Base Advisory Fee Rate is adjusted, the resulting rate will apply only
to the quarter immediately following the adjustment to determine the Advisory
Fee which will be paid monthly. Therefore, an increased Advisory Fee will
result even though the performance of the Fund over some period of time shorter
than the Performance Period, has been behind that of the Index and, conversely,
the Advisory Fee will decline in months where the performance of the Fund has
been ahead of that of the Index, also over some period of time shorter than the
Performance Period.
Continuing with the example above, the adjusted Advisory Fee Rate (expressed as
an annualized percentage of average net assets) applied to the period of time
from January 1, 2003, through March 31, 2003, would be 0.90% (the Base Advisory
Fee Rate) plus 0.30% (the Performance Adjustment Rate) equals 1.20% (the
adjusted Advisory Fee Rate).
Fund Expenses & Limitations
Fund expenses for the existing class of shares (Class N) shall in no case
exceed the maximum expense limitation of 1.90% of the value of its average net
assets.
The Adviser will reimburse expenses, if necessary, to ensure the expense ratio
of the Fund does not exceed the maximum expense limitation for the fiscal year.
New classes of shares of the Fund may carry a different expense limitation.
EXHIBIT A
Fund: Balanced Fund (the "Fund")
--------------------------
Fund Inception Date: 06/30/2001
----------
General Provisions
The Fund's expenses (including the Advisory Fee) will be accrued daily.
Advisory Fee
As compensation for its services rendered, the Fund will pay the Adviser an
Advisory Fee computed daily and payable monthly at the annual rate of 0.60% of
the value of the Fund's average daily net assets during such month.
For purposes of calculating the Advisory Fee each month, the Fund's net asset
value shall be computed by adding its total daily asset values, less
liabilities, for the month and dividing the resulting total by the number of
days in the month. The Fund's expenses and fees, including the Advisory Fee,
will be accrued daily and taken into account in determining daily net asset
value. For any period less than a full month during which this Agreement is in
effect, the Advisory Fee shall be prorated according to the proportion such
period bears to a full month.
Fund Expenses & Limitations
Fund expenses for the existing class of shares (Class N) shall in no case
exceed the maximum expense limitation of 0.94% of the value of its average net
assets.
The Adviser will reimburse expenses, if necessary, to ensure the Fund's expense
ratio does not exceed the maximum expense limitation for the fiscal year.
New classes of shares of the Fund may carry a different expense limitation.
EXHIBIT A
Fund: Large-Cap Growth Fund (the "Fund")
----------------------------------
Fund Inception Date: 10/31/2003
------------
General Provisions
The Fund's expenses (including the Base Advisory Fee) will be accrued daily.
Base Advisory Fee
As compensation for its services rendered and the charges and expenses assumed
and to be paid by the Adviser, the Fund pays the Adviser a Base Advisory Fee
computed daily and payable monthly at the following annual rate: 0.50% of the
value of the Fund's average daily net assets during such month.
For purposes of calculating each month's Base Advisory Fee, daily net asset
value shall be computed by adding the Fund's total daily asset values less
liabilities for the month and dividing the resulting total by the number of
days in the month. The Fund's expenses and fees, including the Base Advisory
Fee, will be accrued daily and taken into account in determining daily net
asset value. For any period less than a full month during which this Agreement
is in effect, the Base Advisory Fee shall be prorated according to the
proportion such period bears to a full month.
The Performance Period
The Performance Period shall consist of the most recent five-year period ending
on the last day of the quarter (March 31, June 30, September 30, and December
31) that the New York Stock Exchange was open for trading. For example, on
February 15, 2006, the relevant five-year period would be from Friday, December
29, 2000 through Friday, December 30, 2005.
The Performance Adjustment Rate
The Performance Adjustment Rate shall vary with the Fund's performance as
compared to the performance of the ▇▇▇▇▇▇▇ 1000 Growth Index (the "Index") and
will range from -0.05% to +0.05%. The Performance Adjustment Rate will be
calculated at 0.33% of the cumulative difference between the performance of the
Fund and that of the Index over the Performance Period, except that there will
be no performance adjustment if the cumulative difference between the Fund's
performance and that of the Index is less than or equal to 2% (over the
Performance Period). The factor of 0.33% assumes that the Adviser will achieve
the maximum or minimum of the Performance Adjustment Rate with a cumulative
total return difference between the Fund and the Index of plus or minus 15%
over the Performance Period [0.05% divided by 15.00% = 0.33%].
For example; assume that the Fund had a cumulative total return of 27.0% for
the five-year period through December 31, 2008. During the same period, assume
the Index with dividends reinvested had a cumulative total return of 21.0%.
Then the Performance Adjustment Rate would be 0.33% times the difference in
returns, or 0.33% times (27.00% - 21.00%) = 0.02%.
Since the Fund does not have a five-year operating history, the Performance
Adjustment Rate will be calculated as follows during the initial five-year
period.
(a) From inception through September 30, 2004, the Performance
Adjustment Rate was inoperative. The Advisory Fee payable was the Base
Advisory Fee only.
(b) From September 30, 2004 through September 30, 2008, the
Performance Adjustment Rate will be calculated based upon a comparison of
the investment performance of the Fund and the Index over the number of
quarters that have elapsed since the Fund's inception. Each time the
Performance Adjustment Rate is calculated, it will cover a longer time
span, until it can cover a running five-year period as intended. In the
meantime, the early months of the transition period will have a
disproportionate effect on the performance adjustment of the fee.
The dollar amount of the performance adjustment is limited to the difference
between the maximum Advisory Fee (average net assets times 0.55%) and the Base
Advisory Fee calculated according to the Management Agreement.
Calculation of Performance
The Fund's performance will be the cumulative percentage increase (or decrease)
in its net asset value per share over the Performance Period and will be
calculated as the sum of: (1) the change in the Fund's net asset value per
share during such period and (2) the value per share of the Fund distributions
from income or capital gains (long- or short-term) having an ex-dividend date
occurring within the Performance Period and assumed to have been reinvested at
the net asset value on ex-date. Thus, the Fund's performance will be calculated
in accordance with the SEC's standardized total return formula.
Application of the Adjusted Advisory Fee Rate
As indicated above, the Fund's expenses (including the Base Advisory Fee) will
be accrued daily. Performance adjustments will be computed quarterly and taken
into account in computing the daily net asset value of a Fund share in the
subsequent quarter (by adding to or subtracting from the Base Advisory Fee Rate
the percentage produced from application of the Performance Adjustment Rate
described above). However, expenses in excess of any maximum expense limitation
assumed by the Adviser or Distributor, if any, shall not be included for the
purpose of computing the daily net asset value of a Fund share.
If the Base Advisory Fee Rate is adjusted, the resulting rate will apply only
to the quarter immediately following the adjustment to determine the Advisory
Fee which will be paid monthly. Therefore, an increased Advisory Fee will
result even though the performance of the Fund over some period of time shorter
than the Performance Period, has been behind that of the Index and, conversely,
the Advisory Fee will decline in months where the performance of the Fund has
been ahead of that of the Index, also over some period of time shorter than the
Performance Period.
Continuing with the example above, the adjusted Advisory Fee Rate (expressed as
an annualized percentage of average net assets) applied to the period of time
from January 1, 2005, through March 31, 2005, would be 0.50% (the Base Advisory
Fee Rate) plus 0.02% (the Performance Adjustment Rate) equals 0.52% (the
adjusted Advisory Fee Rate).
Fund Expenses & Limitations
Fund expenses for the Class N shares shall in no case exceed the maximum
expense limitation of 0.84% of the value of its average net assets.
Fund expenses for the Class R shares shall in no case exceed the maximum
expense limitation of 1.09% of the value of its average net assets.
The Adviser will reimburse expenses, if necessary, to ensure expense ratios do
not exceed the maximum expense limitations for the fiscal year. New classes of
shares of the Fund may carry a different expense limitation.
EXHIBIT A
Fund: Large-Cap Value Fund (the "Fund")
---------------------------------
Fund Inception Date: 10/31/2003
------------
General Provisions
The Fund's expenses (including the Base Advisory Fee) will be accrued daily.
Base Advisory Fee
As compensation for its services rendered and the charges and expenses assumed
and to be paid by the Adviser, the Fund pays the Adviser a Base Advisory Fee
computed daily and payable monthly at the following annual rate: 0.50% of the
value of the Fund's average daily net assets during such month.
For purposes of calculating each month's Base Advisory Fee, daily net asset
value shall be computed by adding the Fund's total daily asset values less
liabilities for the month and dividing the resulting total by the number of
days in the month. The Fund's expenses and fees, including the Base Advisory
Fee, will be accrued daily and taken into account in determining daily net
asset value. For any period less than a full month during which this Agreement
is in effect, the Base Advisory Fee shall be prorated according to the
proportion such period bears to a full month.
The Performance Period
The Performance Period shall consist of the most recent five-year period ending
on the last day of the quarter (March 31, June 30, September 30, and December
31) that the New York Stock Exchange was open for trading. For example, on
February 15, 2006, the relevant five-year period would be from Friday, December
29, 2000 through Friday, December 30, 2005.
The Performance Adjustment Rate
The Performance Adjustment Rate shall vary with the Fund's performance as
compared to the performance of the ▇▇▇▇▇▇▇ 1000 Value Index (the "Index") and
will range from -0.05% to +0.05%. The Performance Adjustment Rate will be
calculated at 0.33% of the cumulative difference between the performance of the
Fund and that of the Index over the Performance Period, except that there will
be no performance adjustment if the cumulative difference between the Fund's
performance and that of the Index is less than or equal to 2% (over the
Performance Period). The factor of 0.33% assumes that the Adviser will achieve
the maximum or minimum of the Performance Adjustment Rate with a cumulative
total return difference between the Fund and the Index of plus or minus 15%
over the Performance Period [0.05% divided by 15.00% = 0.33%].
For example; assume that the Fund had a cumulative total return of 27.0% for
the five-year period through December 31, 2008. During the same period, assume
the Index with dividends reinvested had a cumulative total return of 21.0%.
Then the Performance Adjustment Rate would be 0.33% times the difference in
returns, or 0.33% times (27.00% - 21.00%) = 0.02%.
Since the Fund does not have a five-year operating history, the Performance
Adjustment Rate will be calculated as follows during the initial five-year
period.
(a) From inception through September 30, 2004, the Performance
Adjustment Rate was inoperative. The Advisory Fee payable was the Base
Advisory Fee only.
(b) From September 30, 2004 through September 30, 2008, the
Performance Adjustment Rate will be calculated based upon a comparison of
the investment performance of the Fund and the Index over the number of
quarters that have elapsed since the Fund's inception. Each time the
Performance Adjustment Rate is calculated, it will cover a longer time
span, until it can cover a running five-year period as intended. In the
meantime, the early months of the transition period will have a
disproportionate effect on the performance adjustment of the fee.
The dollar amount of the performance adjustment is limited to the difference
between the maximum Advisory Fee (average net assets times 0.55%) and the Base
Advisory Fee calculated according to the Management Agreement.
Calculation of Performance
The Fund's performance will be the cumulative percentage increase (or decrease)
in its net asset value per share over the Performance Period and will be
calculated as the sum of: (1) the change in the Fund's net asset value per
share during such period and (2) the value per share of the Fund distributions
from income or capital gains (long- or short-term) having an ex-dividend date
occurring within the Performance Period and assumed to have been reinvested at
the net asset value on ex-date. Thus, the Fund's performance will be calculated
in accordance with the SEC's standardized total return formula.
Application of the Adjusted Advisory Fee Rate
As indicated above, the Fund's expenses (including the Base Advisory Fee) will
be accrued daily. Performance adjustments will be computed quarterly and taken
into account in computing the daily net asset value of a Fund share in the
subsequent quarter (by adding to or subtracting from the Base Advisory Fee Rate
the percentage produced from application of the Performance Adjustment Rate
described above). However, expenses in excess of any maximum expense limitation
assumed by the Adviser or Distributor, if any, shall not be included for the
purpose of computing the daily net asset value of a Fund share.
If the Base Advisory Fee Rate is adjusted, the resulting rate will apply only
to the quarter immediately following the adjustment to determine the Advisory
Fee which will be paid monthly. Therefore, an increased Advisory Fee will
result even though the performance of the Fund over some period of time shorter
than the Performance Period, has been behind that of the Index and, conversely,
the Advisory Fee will decline in months where the performance of the Fund has
been ahead of that of the Index, also over some period of time shorter than the
Performance Period.
Continuing with the example above, the adjusted Advisory Fee Rate (expressed as
an annualized percentage of average net assets) applied to the period of time
from January 1, 2005, through March 31, 2005, would be 0.50% (the Base Advisory
Fee Rate) plus 0.02% (the Performance Adjustment Rate) equals 0.52% (the
adjusted Advisory Fee Rate).
Fund Expenses & Limitations
Fund expenses for the Class N shares shall in no case exceed the maximum
expense limitation of 0.84% of the value of its average net assets.
Fund expenses for the Class R shares shall in no case exceed the maximum
expense limitation of 1.09% of the value of its average net assets.
The Adviser will reimburse expenses, if necessary, to ensure expense ratios do
not exceed the maximum expense limitations for the fiscal year. New classes of
shares of the Fund may carry a different expense limitation.
EXHIBIT A
Fund: Small-Cap Growth Fund (the "Fund")
----------------------------------
Fund Inception Date: 10/31/2003
------------
General Provisions
The Fund's expenses (including the Base Advisory Fee) will be accrued daily.
Base Advisory Fee
As compensation for its services rendered and the charges and expenses assumed
and to be paid by the Adviser, the Fund pays the Adviser a Base Advisory Fee
computed daily and payable monthly at the following annual rate: 0.60% of the
value of the Fund's average daily net assets during such month.
For purposes of calculating each month's Base Advisory Fee, daily net asset
value shall be computed by adding the Fund's total daily asset values less
liabilities for the month and dividing the resulting total by the number of
days in the month. The Fund's expenses and fees, including the Base Advisory
Fee, will be accrued daily and taken into account in determining daily net
asset value. For any period less than a full month during which this Agreement
is in effect, the Base Advisory Fee shall be prorated according to the
proportion such period bears to a full month.
The Performance Period
The Performance Period shall consist of the most recent five-year period ending
on the last day of the quarter (March 31, June 30, September 30, and December
31) that the New York Stock Exchange was open for trading. For example, on
February 15, 2006, the relevant five-year period would be from Friday, December
29, 2000 through Friday, December 30, 2005.
The Performance Adjustment Rate
The Performance Adjustment Rate shall vary with the Fund's performance as
compared to the performance of the ▇▇▇▇▇▇▇ 2000 Growth Index (the "Index") and
will range from -0.05% to +0.05%. The Performance Adjustment Rate will be
calculated at 0.33% of the cumulative difference between the performance of the
Fund and that of the Index over the Performance Period, except that there will
be no performance adjustment if the cumulative difference between the Fund's
performance and that of the Index is less than or equal to 2% (over the
Performance Period). The factor of 0.33% assumes that the Adviser will achieve
the maximum or minimum of the Performance Adjustment Rate with a cumulative
total return difference between the Fund and the Index of plus or minus 15%
over the Performance Period [0.05% divided by 15.00% = 0.33%].
For example; assume that the Fund had a cumulative total return of 27.0% for
the five-year period through December 31, 2008. During the same period, assume
the Index with dividends reinvested had a cumulative total return of 21.0%.
Then the Performance Adjustment Rate would be 0.33% times the difference in
returns, or 0.33% times (27.00% - 21.00%) = 0.02%.
Since the Fund does not have a five-year operating history, the Performance
Adjustment Rate will be calculated as follows during the initial five-year
period.
(a) From inception through September 30, 2004, the Performance
Adjustment Rate was inoperative. The Advisory Fee payable was the Base
Advisory Fee only.
(b) From September 30, 2004 through September 30, 2008, the
Performance Adjustment Rate will be calculated based upon a comparison of
the investment performance of the Fund and the Index over the number of
quarters that have elapsed since the Fund's inception. Each time the
Performance Adjustment Rate is calculated, it will cover a longer time
span, until it can cover a running five-year period as intended. In the
meantime, the early months of the transition period will have a
disproportionate effect on the performance adjustment of the fee.
The dollar amount of the performance adjustment is limited to the difference
between the maximum Advisory Fee (average net assets times 0.65%) and the Base
Advisory Fee calculated according to the Management Agreement.
Calculation of Performance
The Fund's performance will be the cumulative percentage increase (or decrease)
in its net asset value per share over the Performance Period and will be
calculated as the sum of: (1) the change in the Fund's net asset value per
share during such period and (2) the value per share of the Fund distributions
from income or capital gains (long- or short-term) having an ex-dividend date
occurring within the Performance Period and assumed to have been reinvested at
the net asset value on ex-date. Thus, the Fund's performance will be calculated
in accordance with the SEC's standardized total return formula.
Application of the Adjusted Advisory Fee Rate
As indicated above, the Fund's expenses (including the Base Advisory Fee) will
be accrued daily. Performance adjustments will be computed quarterly and taken
into account in computing the daily net asset value of a Fund share in the
subsequent quarter (by adding to or subtracting from the Base Advisory Fee Rate
the percentage produced from application of the Performance Adjustment Rate
described above). However, expenses in excess of any maximum expense limitation
assumed by the Adviser or Distributor, if any, shall not be included for the
purpose of computing the daily net asset value of a Fund share.
If the Base Advisory Fee Rate is adjusted, the resulting rate will apply only
to the quarter immediately following the adjustment to determine the Advisory
Fee which will be paid monthly. Therefore, an increased Advisory Fee will
result even though the performance of the Fund over some period of time shorter
than the Performance Period, has been behind that of the Index and, conversely,
the Advisory Fee will decline in months where the performance of the Fund has
been ahead of that of the Index, also over some period of time shorter than the
Performance Period.
Continuing with the example above, the adjusted Advisory Fee Rate (expressed as
an annualized percentage of average net assets) applied to the period of time
from January 1, 2005, through March 31, 2005, would be 0.60% (the Base Advisory
Fee Rate) plus 0.02% (the Performance Adjustment Rate) equals 0.62% (the
adjusted Advisory Fee Rate).
Fund Expenses & Limitations
Fund expenses for the Class N shares shall in no case exceed the maximum
expense limitation of 0.94% of the value of its average net assets.
Fund expenses for the Class R shares shall in no case exceed the maximum
expense limitation of 1.19% of the value of its average net assets.
The Adviser will reimburse expenses, if necessary, to ensure expense ratios do
not exceed the maximum expense limitations for the fiscal year. New classes of
shares of the Fund may carry a different expense limitation.
EXHIBIT A
Fund: Small-Cap Value Fund (the "Fund")
---------------------------------
Fund Inception Date: 10/31/2003
------------
General Provisions
The Fund's expenses (including the Base Advisory Fee) will be accrued daily.
Base Advisory Fee
As compensation for its services rendered and the charges and expenses assumed
and to be paid by the Adviser, the Fund pays the Adviser a Base Advisory Fee
computed daily and payable monthly at the following annual rate: 0.60% of the
value of the Fund's average daily net assets during such month.
For purposes of calculating each month's Base Advisory Fee, daily net asset
value shall be computed by adding the Fund's total daily asset values less
liabilities for the month and dividing the resulting total by the number of
days in the month. The Fund's expenses and fees, including the Base Advisory
Fee, will be accrued daily and taken into account in determining daily net
asset value. For any period less than a full month during which this Agreement
is in effect, the Base Advisory Fee shall be prorated according to the
proportion such period bears to a full month.
The Performance Period
The Performance Period shall consist of the most recent five-year period ending
on the last day of the quarter (March 31, June 30, September 30, and December
31) that the New York Stock Exchange was open for trading. For example, on
February 15, 2006, the relevant five-year period would be from Friday, December
29, 2000 through Friday, December 30, 2005.
The Performance Adjustment Rate
The Performance Adjustment Rate shall vary with the Fund's performance as
compared to the performance of the ▇▇▇▇▇▇▇ 2000 Value Index (the "Index") and
will range from -0.05% to +0.05%. The Performance Adjustment Rate will be
calculated at 0.33% of the cumulative difference between the performance of the
Fund and that of the Index over the Performance Period, except that there will
be no performance adjustment if the cumulative difference between the Fund's
performance and that of the Index is less than or equal to 2% (over the
Performance Period). The factor of 0.33% assumes that the Adviser will achieve
the maximum or minimum of the Performance Adjustment Rate with a cumulative
total return difference between the Fund and the Index of plus or minus 15%
over the Performance Period [0.05% divided by 15.00% = 0.33%].
For example; assume that the Fund had a cumulative total return of 27.0% for
the five-year period through December 31, 2008. During the same period, assume
the Index with dividends reinvested had a cumulative total return of 21.0%.
Then the Performance Adjustment Rate would be 0.33% times the difference in
returns, or 0.33% times (27.00% - 21.00%) = 0.02%.
Since the Fund does not have a five-year operating history, the Performance
Adjustment Rate will be calculated as follows during the initial five-year
period.
(a) From inception through September 30, 2004, the Performance
Adjustment Rate was inoperative. The Advisory Fee payable was the Base
Advisory Fee only.
(b) From September 30, 2004 through September 30, 2008, the
Performance Adjustment Rate will be calculated based upon a comparison of
the investment performance of the Fund and the Index over the number of
quarters that have elapsed since the Fund's inception. Each time the
Performance Adjustment Rate is calculated, it will cover a longer time
span, until it can cover a running five-year period as intended. In the
meantime, the early months of the transition period will have a
disproportionate effect on the performance adjustment of the fee.
The dollar amount of the performance adjustment is limited to the difference
between the maximum Advisory Fee (average net assets times 0.65%) and the Base
Advisory Fee calculated according to the Management Agreement.
Calculation of Performance
The Fund's performance will be the cumulative percentage increase (or decrease)
in its net asset value per share over the Performance Period and will be
calculated as the sum of: (1) the change in the Fund's net asset value per
share during such period and (2) the value per share of the Fund distributions
from income or capital gains (long- or short-term) having an ex-dividend date
occurring within the Performance Period and assumed to have been reinvested at
the net asset value on ex-date. Thus, the Fund's performance will be calculated
in accordance with the SEC's standardized total return formula.
Application of the Adjusted Advisory Fee Rate
As indicated above, the Fund's expenses (including the Base Advisory Fee) will
be accrued daily. Performance adjustments will be computed quarterly and taken
into account in computing the daily net asset value of a Fund share in the
subsequent quarter (by adding to or subtracting from the Base Advisory Fee Rate
the percentage produced from application of the Performance Adjustment Rate
described above). However, expenses in excess of any maximum expense limitation
assumed by the Adviser or Distributor, if any, shall not be included for the
purpose of computing the daily net asset value of a Fund share.
If the Base Advisory Fee Rate is adjusted, the resulting rate will apply only
to the quarter immediately following the adjustment to determine the Advisory
Fee which will be paid monthly. Therefore, an increased Advisory Fee will
result even though the performance of the Fund over some period of time shorter
than the Performance Period, has been behind that of the Index and, conversely,
the Advisory Fee will decline in months where the performance of the Fund has
been ahead of that of the Index, also over some period of time shorter than the
Performance Period.
Continuing with the example above, the adjusted Advisory Fee Rate (expressed as
an annualized percentage of average net assets) applied to the period of time
from January 1, 2005, through March 31, 2005, would be 0.60% (the Base Advisory
Fee Rate) plus 0.02% (the Performance Adjustment Rate) equals 0.62% (the
adjusted Advisory Fee Rate).
Fund Expenses & Limitations
Fund expenses for the Class N shares shall in no case exceed the maximum
expense limitation of 0.94% of the value of its average net assets.
Fund expenses for the Class R shares shall in no case exceed the maximum
expense limitation of 1.19% of the value of its average net assets.
The Adviser will reimburse expenses, if necessary, to ensure expense ratios do
not exceed the maximum expense limitations for the fiscal year. New classes of
shares of the Fund may carry a different expense limitation.