Exhibit (d)(ii)
AMENDMENT TO MANAGEMENT AGREEMENT
This AMENDMENT TO MANAGEMENT AGREEMENT (the "Amendment") is made as
of March 23, 2004, by and between Bridgeway Funds, Inc., a Maryland corporation
("Bridgeway Funds"), and Bridgeway Capital Management, Inc., a Texas corporation
(the "Adviser").
WHEREAS, Bridgeway Funds and the Adviser have entered into that
certain Management Agreement (the "Management Agreement") pursuant to which the
Adviser manages the investment and reinvestment of the assets of the investment
portfolios of Bridgeway Funds (the "Portfolios").
WHEREAS, the Management Agreement was approved by the shareholders
of Bridgeway Funds and became effective on October 31, 2003.
WHEREAS, the Securities and Exchange Commission has directed that
Exhibit A to the Management Agreement be amended and revised to bring the
methodology for the calculation of the performance based fee for Aggressive
Investors 1 Fund, Aggressive Investors 2 Fund, Micro-Cap Limited Fund, Large Cap
Growth Fund, Large Cap Value Fund, Small Cap Growth Fund and Small Cap Value
Fund (collectively, the "Affected Portfolios") into compliance with Rule 205-2
under the Investment Advisers Act of 1940.
WHEREAS, Bridgeway Funds and the Adviser desire to amend Exhibit A
to the Management Agreement as directed by the Securities and Exchange
Commission, and to reflect certain understandings between them regarding
payments of expenses.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants herein contained, the parties agree as follows:
1) Amendment of Appendix A.
a) Appendix A to the Management Agreement is hereby revised in its
entirety to read as provided in Exhibit A attached to this
Amendment.
b) For each of the Affected Portfolios, Exhibit A has been revised to
include Exhibit A-1, which describes the methodology for calculation
of the performance based fee prior to the date of this Amendment,
and Exhibit A-2, which describes the methodology for calculation of
the performance based fee as required by Rule 205-2 under the
Investment Advisers Act of 1940. The parties agree that until the
earlier of shareholder approval of this Amendment or a determination
by the Board of Directors of Bridgeway Funds that shareholder
approval of this Amendment is not required, the Affected Portfolios
shall pay an advisory fee under the Management Agreement in an
amount equal to the lesser of the fee calculated under Exhibit A-1
and Exhibit A-2.
c) Adviser Payment of Expenses. The Adviser may elect to pay certain
expenses incurred by Bridgeway Funds.
d) Effect of Amendment. Except as specifically modified in this
Amendment, the terms, conditions and provisions of the Management
Agreement shall remain unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment effective as of the date first above written.
BRIDGEWAY FUNDS, INC. BRIDGEWAY CAPITAL
MANAGEMENT, INC.
/s/ Xxxx Xxxxxxxxxx /s/ Xxxx Xxxxxxxxxx
--------------------- ----------------------
EXHIBIT A-1
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 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-2
Fund: Aggressive Investors 1 Fund (the "Fund")
Fund Inception Date: 08/05/1994
General Provisions
The Fund's expenses, including the Advisory Fee, will be accrued daily. The
Advisory Fee consists of a Base Advisory Fee that is subject to a Performance
Adjustment, as described below.
Base Advisory Fee
As compensation for services rendered, the Fund will pay the Adviser a Base
Advisory Fee computed quarterly and accrued daily at the following annual rate
(the Base Advisory Fee Rate):
(1) 0.90% of the value of the Fund's average daily net assets in the quarter
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 the Base Advisory Fee, the Fund's daily net assets
shall be computed by adding the Fund's total daily asset values less liabilities
during the quarter and dividing the resulting total by the number of days in
that quarter. 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 calendar quarter during which this
Agreement is in effect, the Base Advisory Fee shall be prorated according to the
proportion such period bears to a full calendar quarter.
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
December 15, 2002, 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 as published after the close of the market on the last day of the
Performance Period (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 approximately 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.
Performance Adjustment
The Performance Adjustment to be paid to the Adviser will be accrued during the
last quarter of the Performance Period and paid shortly after the last day of
the Performance Period. To determine the Performance Adjustment, the Performance
Adjustment Rate shall be multiplied by the value of the Fund's average daily net
assets in the most recent Performance Period.
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.
The Base Fee will be accrued daily, as explained above, and will be paid monthly
to the Adviser during the quarter. However, in a period where a negative
Performance Adjustment is applied, the Base Fee paid to the Adviser shall be the
Base Fee adjusted for the negative Performance Adjustment.
Continuing with the example above, the adjusted Advisory Fee applied to the
period of time from October 1, 2002, through December 31, 2002, would be a Base
Advisory Fee equal to 0.90% (the Base Advisory Fee Rate) times the value of the
Fund's average daily net assets in the calendar quarter plus a Performance
Adjustment equal to 0.30% (the Performance Adjustment Rate) times the value of
the Fund's average daily net assets in the Performance Period.
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 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 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 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-1
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 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) 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-2
Fund: Micro-Cap Limited Fund (the "Fund")
Fund Inception Date: 06/30/1998
General Provisions
The Fund's expenses, including the Advisory Fee, will be accrued daily. The
Advisory Fee consists of a base Advisory Fee that is subject to a Performance
Adjustment, as described below.
Base Advisory Fee
As compensation for services rendered, the Fund will pay the Adviser a Base
Advisory Fee computed quarterly and accrued daily at the following annual rate
(Base Advisory Fee Rate):
(1) 0.90% of the value of the Fund's average daily net assets in the quarter
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 quarter that the Micro-Cap Limited Fund's net assets range
from $27,500,000 to $55,000,000 the Advisory Fee will be determined 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 annualized ratio of 1.49% of the assets
in the quarter the Advisory Fee is determined.
For purposes of calculating the Base Advisory Fee, the Fund's average daily net
assets shall be computed by adding the Fund's total daily asset values less
liabilities for the most recent quarter and dividing the resulting total by the
number of days in that quarter. 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 calendar quarter during which
this Agreement is in effect, the Base Advisory Fee shall be prorated according
to the proportion such period bears to a full calendar quarter.
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
December 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%.
Whereas the Index is not available until approximately two weeks after the close
of the quarter, the Index will be estimated using the Xxxxxxx 2000 Value Index
as published on the last day of the quarter. Any adjustments required between
the estimated index and the actual results will be accrued in the subsequent
period. 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 approximately 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%.
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.
Performance Adjustment
Performance Adjustments to be paid to the Adviser will be accrued during the
last quarter of the Performance Period and paid shortly after the last day of
the Performance Period. To determine the Performance Adjustment, the Performance
Adjustment Rate shall be multiplied by the value of the Fund's average daily net
assets in the most recent Performance Period.
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.
The Base Fee will be accrued daily, as explained above, and will be paid monthly
to the Adviser during the quarter. However, in a period where a negative
Performance Adjustment is applied, the Base Fee paid the Adviser shall be the
Bass Fee adjusted for the negative Performance Adjustment.
Continuing with the example above, the Advisory Fee applied to the period of
time from October 1, 2005, through December 31, 2005, would be a Base Advisory
Fee equal to 0.90% (the Base Advisory Fee Rate) times the value of the Fund's
average daily net assets in the calendar quarter plus a Performance Adjustment
equal to 0.18% (the Performance Adjustment Rate) times the value of the Fund's
average daily net assets in the Performance Period.
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-1
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 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-2
Fund: Aggressive Investors 2 Fund (the "Fund")
Fund Inception Date: 10/31/2001
General Provisions
The Fund's expenses, including the Advisory Fee, will be accrued daily. The
Advisory Fee consists of a Base Advisory Fee that is subject to a Performance
Adjustment, as described below.
Base Advisory Fee
As compensation for services rendered, the Fund will pay the Adviser a Base
Advisory Fee computed quarterly and accrued daily at the following annual rate
(the Base Advisory Fee Rate):
(1) 0.90% of the value of the Fund's average daily net assets in the calendar
quarter 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 the Base Advisory Fee, the Fund's average daily net
assets shall be computed by adding the Fund's total daily asset values less
liabilities during the calendar quarter and dividing the resulting total by the
number of days in the quarter. 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 calendar quarter during which
this Agreement is in effect, the Base Advisory Fee shall be prorated according
to the proportion such period bears to a full calendar quarter.
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
December 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 as published after the close of the market on the last day of the
Performance Period (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.
Performance Adjustment
The Performance Adjustment to be paid to the Adviser will be accrued during the
last quarter of the Performance Period and paid shortly after the last day of
the Performance Period. To determine the Performance Adjustment, the Performance
Adjustment Rate shall be multiplied by the value of the Fund's average daily net
assets in the most recent Performance Period.
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.
The Base Fee will be accrued daily, as explained above, and will be paid monthly
to the Adviser during the quarter. However, in a period where a negative
Performance Adjustment is applied, the Base Fee paid the Adviser shall be the
Bass Fee adjusted for the negative Performance Adjustment.
Continuing with the example above, the adjusted Advisory Fee applied to the
period of time from October 1, 2003, through December 31, 2003, would be a Base
Advisory Fee equal to 0.90% (the Base Advisory Fee Rate) times the value of the
Fund's average daily net assets in the calendar quarter plus a Performance
Adjustment equal to 0.30% (the Performance Adjustment Rate) times the value of
the Fund's average daily net assets in the Performance Period.
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-1
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 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 Xxxxxxx 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-2
Fund: Large-Cap Growth Fund (the "Fund")
Fund Inception Date: 10/31/2003
General Provisions
The Fund's expenses, (including the Advisory Fee, will be accrued daily. The
Advisory Fee consists of a Base Advisory Fee that is subject to a Performance
Adjustment, as described below.
Base Advisory Fee
As compensation for 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 quarterly at the following annual rate (Base Advisory Fee Rate): 0.50%
of the value of the Fund's average daily net assets during the calendar quarter.
For purposes of calculating the Base Advisory Fee, the Fund's average daily net
assets shall be computed by adding the Fund's total daily asset values less
liabilities for the quarter and dividing the resulting total by the number of
days in the quarter. 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 calendar quarter during which this
Agreement is in effect, the Base Advisory Fee shall be prorated according to the
proportion such period bears to a full calendar quarter.
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
December 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 Xxxxxxx 1000 Growth Index as published after
the close of the market on the last day of the Performance Period (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 is the Base
Advisory Fee Rate times the daily net assets of the Fund 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.
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.
Performance Adjustment
The Performance Adjustment to be paid to the Adviser will be accrued during the
last quarter of the Performance Period and paid shortly after the last day of
the Performance Period. To determine the Performance Adjustment, the Performance
Adjustment Rate shall be multiplied by the value of the Fund's average daily net
assets in the Performance Period.
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.
The Base Fee will be accrued daily, as explained above, and will be paid monthly
to the Adviser during the quarter. However, in a period where a negative
Performance Adjustment is applied, the Base Fee paid the Adviser shall be the
Bass Fee adjusted for the negative Performance Adjustment.
Continuing with the example above, the adjusted Advisory Fee applied to the
period of time from October 1, 2005, through December 31, 2005, would be a Base
Advisory Fee equal to 0.50% (the Base Advisory Fee Rate) times the value of the
Fund's average daily net assets in the calendar quarter plus a Performance
Adjustment equal to 0.02% (the Performance Adjustment Rate) times the value of
the Fund's average daily net assets in the Performance Period.
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-1
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 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 Xxxxxxx 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-2
Fund: Large-Cap Value Fund (the "Fund")
Fund Inception Date: 10/31/2003
General Provisions
The Fund's expenses, including the Advisory Fee, will be accrued daily. The
Advisory Fee consists of a Base Advisory Fee that is subject to a Performance
Adjustment, as described below.
Base Advisory Fee
As compensation for 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 quarterly at the following annual rate (Base Advisory Rate): 0.50% of
the value of the Fund's average daily net assets during the calendar quarter.
For purposes of calculating the Base Advisory Fee, the Fund's average daily net
assets shall be computed by adding the Fund's total daily asset values less
liabilities for the quarter and dividing the resulting total by the number of
days in the quarter. 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 calendar quarter during which this
Agreement is in effect, the Base Advisory Fee shall be prorated according to the
proportion such period bears to a full calendar quarter.
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
December 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 Xxxxxxx 1000 Value Index (the "Index") as
published after the close of the market on the last day of the Performance
Period 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 is the Base
Advisory Fee Rate times the daily net assets of the Fund 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.
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.
Performance Adjustment
The Performance Adjustment to be paid to the Adviser will be accrued during the
last quarter of the Performance Period and paid shortly after the last day of
the Performance Period. . To determine the Performance Adjustment, the
Performance Adjustment Rate shall be multiplied by the value of the Fund's
average daily net assets in the Performance Period.
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.
The Base Fee will be accrued daily, as explained above, and will be paid monthly
to the Adviser during the quarter. However, in a period where a negative
Performance Adjustment is applied, the Base Fee paid the Adviser shall be the
Bass Fee adjusted for the negative Performance Adjustment.
Continuing with the example above, the Advisory Fee applied to the period of
time from October 1, 2005, through December 31, 2005, would be a Base Advisory
Fee equal to 0.50% (the Base Advisory Fee Rate) times the value of the Fund's
average daily net assets in the calendar quarter plus a Performance Adjustment
Fee equal to 0.02% (the Performance Adjustment Rate) times the value of the
Fund's average daily net assets in the Performance Period..
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-1
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 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 Xxxxxxx 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-2
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. The
Advisory Fee consists of a Base Advisory Fee that is subject to a Performance
Adjustment, as described below.
Base Advisory Fee
As compensation for 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 quarterly at the following annual rate (Base Advisory Fee Rate): 0.60%
of the value of the Fund's average daily net assets during the most recent
calendar quarter.
For purposes of calculating the Base Advisory Fee, the Fund's average daily net
assets shall be computed by adding the Fund's total daily asset values less
liabilities for the quarter and dividing the resulting total by the number of
days in the quarter. 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 calendar quarter during which this
Agreement is in effect, the Base Advisory Fee shall be prorated according to the
proportion such period bears to a full calendar quarter.
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
December 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 Xxxxxxx 2000 Growth Index (the "Index") as
published after the close of the market on the last day of the Performance
Period 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 is the Base
Advisory Fee Rate times the daily net assets of the Fund 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.
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.
Performance Adjustment
The Performance Adjustment to be paid to the Adviser will be accrued during the
last quarter of the Performance Period and paid shortly after the last day of
the Performance Period. . To determine the Performance Adjustment, the
Performance Adjustment Rate shall be multiplied by the value of the Fund's
average daily net assets in the Performance Period.
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.
The Base Fee will be accrued daily, as explained above, and will be paid monthly
to the Adviser during the quarter. However, in a period where a negative
Performance Adjustment is applied, the Base Fee paid the Adviser shall be the
Bass Fee adjusted for the negative Performance Adjustment.
Continuing with the example above, the Advisory Fee applied to the period of
time from October 1, 2005, through December 31, 2005, would be a Base Advisory
Fee equal to 0.60% (the Base Advisory Fee Rate) times the value of the Fund's
average daily net assets in the calendar quarter plus a Performance Adjustment
equal to 0.02% (the Performance Adjustment Rate) times the value of the Fund's
average daily net assets in the Performance Period..
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-2
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 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 Xxxxxxx 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.
EXHIBIT A-2
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. The
Advisory Fee consists of a Base Advisory Fee that is subject to a Performance
Adjustment, as described below.
Base Advisory Fee
As compensation for 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 quarterly at the following annual rate (Base Advisory Fee Rate): 0.60%
of the value of the Fund's average daily net assets during the calendar quarter.
For purposes of calculating the Base Advisory Fee, the Fund's average daily net
assets shall be computed by adding the Fund's total daily asset values less
liabilities for the quarter and dividing the resulting total by the number of
days in the quarter. 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 calendar quarter during which this
Agreement is in effect, the Base Advisory Fee shall be prorated according to the
proportion such period bears to a full calendar quarter.
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
December 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 Xxxxxxx 2000 Value Index (the "Index") as
published after the close of the market on the last day of the Performance
Period 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 is the Base
Advisory Fee Rate times the average daily net assets of the Fund 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.
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.
Performance Adjustment
The Performance Adjustment to be paid to the Adviser will be accrued during the
last quarter of the Performance Period and paid shortly after the last day of
the Performance Period. . To determine the Performance Adjustment, the
Performance Adjustment Rate shall be multiplied by the value of the Fund's
average daily net assets in the Performance Period.
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.
The Base Fee will be accrued daily, as explained above, and will be paid monthly
to the Adviser during the quarter. However, in a period where a negative
Performance Adjustment is applied, the Base Fee paid the Adviser shall be the
Bass Fee adjusted for the negative Performance Adjustment.
Continuing with the example above, the Advisory Fee applied to the period of
time from October 1, 2005, through December 31, 2005, would be a Base Advisory
Fee equal to 0.60% (the Base Advisory Fee Rate) times the Fund's average daily
net assets in the calendar quarter plus a Performance Adjustment equal to 0.02%
(the Performance Adjustment Rate) times the Fund's average daily net assets in
the Performance Period..
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.
