EXHIBIT (d)(2)
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT (the "Agreement"), by and between
GARTMORE MUTUAL FUND CAPITAL TRUST, a Delaware business trust (the "Adviser"),
and MARKET STREET FUND, a Delaware business trust (the "Fund"), made as of
_______________, 2003, and effective with respect to the series portfolios of
Market Street Fund (said portfolios hereinafter referred to collectively as the
"Portfolios," and each a "Portfolio") (said Market Street Fund hereinafter
referred to as the "Fund"), as specified in this Agreement.
WHEREAS, the Fund is a series-type, open-end management investment
company registered with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "1940 Act"), that currently
consists of eleven investment portfolios (each, a "Portfolio"), each such
Portfolio having its own investment objective(s); and
WHEREAS, the Fund issues a separate series of shares for each
Portfolio, which shares represent fractional undivided interests in the
Portfolio; and
WHEREAS, the Adviser is engaged principally in rendering investment
advisory services and is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended (the "Advisers Act"); and
WHEREAS, the Fund desires to retain the Adviser to provide or to
arrange to provide overall investment management of the Fund's Portfolios, in
the manner and on the terms and conditions set forth in this Agreement; and
WHEREAS, the Adviser is willing to provide or to arrange to provide,
investment advisory services to the Fund and the Fund's Portfolios on the terms
and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the covenants
contained in this Agreement, the Fund and Adviser hereby agree as follows:
1. APPOINTMENT OF ADVISER. The Fund hereby appoints the Adviser to provide
investment advisory services for the Portfolios specified in an appendix to this
Agreement (each, a "Portfolio"), as this appendix may be amended from time to
time under this Agreement ("Appendix A"). Pursuant to this Agreement and subject
to the oversight and supervision by Fund's Board of Trustees (the "Board"), the
Adviser shall manage the investment and reinvestment, or arrange for the
investment and reinvestment of each Portfolio's assets.
2. ACCEPTANCE OF APPOINTMENT BY ADVISER. The Adviser hereby accepts the
appointment by the Fund in the foregoing capacity and agrees, at the Adviser's
own expense, to render the services set forth herein and to provide the office
space, furnishings, equipment, and personnel required by the Adviser to perform
these services on the terms and for the compensation provided in this Agreement.
3. SERVICES TO BE PROVIDED BY ADVISER. In particular, the Adviser shall
furnish continuously an investment program for the Portfolio and shall determine
from time to time in the Adviser's discretion the securities and other
investments to be purchased or sold or exchanged and what portions of the
Portfolio shall be held in various securities, cash, or other investments. In
this connection, the Adviser shall provide the Fund's Board and officers, with
any reports and documentation as the Adviser, and the Fund's Board and officers
shall reasonably request regarding the Adviser's management of the Portfolio
assets. The Adviser shall not delegate any of the Adviser's duties under this
Agreement to any other Adviser without the consent and approval of the Fund's
Board and a majority of those trustees who are not parties to this Agreement or
"interested persons" of any party; provided, that, in the event the Adviser is
authorized to so delegate, the Adviser shall retain overall responsibility for
these delegated powers and functions and any and all obligations and liabilities
in connection therewith.
4. COMPLIANCE BY ADVISER WITH PORTFOLIO POLICIES AND APPLICABLE LAW. The
Adviser shall carry out the Adviser's responsibilities under this Agreement in
compliance with: (a) a Portfolio's investment objective, policies, and
restrictions, as set forth in the Fund's current registration statement, as
amended from time to time; (b) any policies or directives as the Fund's Board
may from time to time establish or issue and communicate to the Adviser in
writing; and (c) applicable law and related regulations. The Fund shall promptly
notify the Adviser in writing of changes to (a) or (b) above and shall notify
the Adviser in writing of changes to (c) above promptly after the Fund becomes
aware of these changes.
5. ADVISER'S DUTIES REGARDING PORTFOLIO TRANSACTIONS.
(a) PLACEMENT OF ORDERS. The Adviser shall take all actions the
Adviser considers necessary to implement the investment policies of the
Portfolio, and, in particular, to place all orders for the purchase or
sale of securities or other investments for the Portfolio with brokers
or dealers the Adviser selects, and, to that end, the Adviser is
authorized as the Fund's agent to give instructions to the Fund's
custodian as to deliveries of securities or other investments and
payments of cash for a Portfolio's account. In connection with the
selection of brokers or dealers and the placement of purchase and sale
orders, the Adviser is directed at all times to seek to obtain best
execution and price within the policy guidelines determined by the
Fund's Board and set forth in the Fund's current registration
statement.
(b) SELECTION OF BROKERS AND DEALERS. To the extent permitted by
the policy guidelines set forth in the Fund's current registration
statement, in the selection of brokers and dealers to execute portfolio
transactions, the Adviser is authorized to consider not only the
available prices and rates of brokerage commissions but also other
relevant factors, which may include, without limitation: the execution
capabilities of the brokers and dealers; the research, custody, and
other services provided by the brokers and dealers that the Adviser
believes will enhance the Adviser's general portfolio management
capabilities; the size of the transaction; the difficulty of execution;
the operational facilities of these brokers and dealers;
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the risk to this broker or dealer of positioning a block of securities;
and the overall quality of brokerage and research services provided by
these brokers and dealers. In connection with the foregoing, the
Adviser is specifically authorized to pay those brokers and dealers who
provide brokerage and research services to the Adviser, a higher
commission than that charged by other brokers and dealers if the
Adviser determines in good faith that the amount of the commission is
reasonable in relation to the value of these services in terms of
either the particular transaction or in terms of the Adviser's overall
responsibilities with respect to the Portfolio and to any other client
accounts or portfolios that the Adviser advises. The execution of these
transactions shall not be considered to represent an unlawful breach of
any duty created by this Agreement or otherwise.
(c) SOFT DOLLAR ARRANGEMENTS. On an ongoing basis, but not less
often than annually, the Adviser shall identify and provide a written
description to the Fund of all "soft dollar" arrangements that the
Adviser maintains with respect to the Portfolio or with brokers or
dealers that execute transactions for the Portfolio. Prior to the
commencement of the active management of the Portfolio, and
periodically thereafter, but not less often than annually, the Adviser
shall provide the Fund with a written description of all arrangements
with third parties and other individuals, entities, brokers, or money
management firms that have or may receive or share in the payment of
fees for services in connection with securing or continuing this
Agreement.
(d) AGGREGATED TRANSACTIONS. The Adviser also is authorized to
aggregate purchase and sale orders for securities held (or to be held)
in the Portfolio with similar orders being made on the same day for
other client accounts or portfolios that the Adviser manages. When an
order is so aggregated: (a) the actual prices applicable to the
aggregated transaction will be averaged, and the Portfolio and each
other account or portfolio participating in the aggregated transaction
shall be treated as having purchased or sold the Portfolio's portion of
the securities at this average price; and (b) all transaction costs
incurred in effecting the aggregated transaction shall be shared on a
pro-rata basis among the accounts or portfolios (including the
Portfolio) participating in the transaction. When recommending or
effecting a transaction in a particular security or investment for more
than one client account or portfolio (including the Portfolio), the
Adviser may allocate the recommendations or transactions among all
accounts and portfolios for whom the recommendation is made or
transaction is effected on a basis that the Adviser considers
equitable. The Fund recognizes that in some cases this procedure may
adversely affect the size of the position obtainable for the Portfolio.
6. NON-EXCLUSIVITY OF ADVISER'S SERVICES. The Adviser's services under
this Agreement are not exclusive. The Adviser may provide the same or similar
services to other clients. The Fund acknowledges that, except when transactions
for multiple clients are aggregated, transactions in a specific security or
other investment may not be recommended or executed at the same time or price
for all client accounts or portfolios (including the Portfolio) for which that
security or investment is recommended or executed. This Agreement does not
require the
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Adviser to give priority to the Portfolio over other client accounts or
portfolios. The Adviser shall for all purposes herein be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Fund or the Portfolio
or otherwise be deemed an agent of the Fund or the Portfolio.
7. DELEGATION OF PROXY VOTING RIGHTS. The Fund delegates the Fund's
discretionary authority to exercise voting rights with respect to the securities
and other investments in the Portfolio to the Adviser. The Adviser shall
exercise these voting rights unless and until the Fund revokes this delegation
in writing. The Fund may revoke this delegation at any time without cause. The
Adviser shall maintain and preserve a record, in an easily accessible place for
a period of not less than three (3) years, of the Adviser's voting procedures,
and of the Adviser's actual votes, and the Adviser shall supply this record to
the Fund, or any authorized representative of the Fund, upon the written request
of the Fund or the Fund's authorized representative, as appropriate.
8. AFFILIATED BROKERS. The Adviser or any of the Adviser's affiliates may
act as broker in connection with the purchase or sale of securities or other
investments for the Portfolio, subject to: (a) the requirement that the Adviser
seek to obtain best execution and price within the policy guidelines determined
by the Fund's Board and set forth in the Fund's current registration statement;
(b) the provisions of the Advisers Act; (c) the provisions of the Securities
Exchange Act of 1934, as amended, including, but not limited to, Section 11(a)
thereof; and (d) other applicable provisions of law. These brokerage services
are not within the scope of the duties of the Adviser under this Agreement.
Subject to the requirements of applicable law and any procedures adopted by
Fund's Board, the Adviser or the Adviser's affiliate may receive brokerage
commissions, fees, or other remuneration from the Portfolio or the Fund for
these services in addition to the Adviser's fees for services under this
Agreement.
9. CUSTODY. Nothing in this Agreement shall require the Adviser to take or
receive physical possession of cash, securities, or other investments of the
Portfolio.
10. REGISTRATION OF ADVISER. The Adviser is registered as an investment
adviser with the U.S. Securities and Exchange Commission under the Advisers Act.
The Adviser shall remain so registered throughout the term of this Agreement and
shall notify the Fund immediately if the Adviser ceases to be so registered as
an investment adviser.
11. REPRESENTATIONS AND COVENANTS OF ADVISER.
(a) The Adviser: (a) is duly organized and validly existing under
Pennsylvania law with the power to own and possess the
Adviser's assets and carry on the Adviser's business as this
business is now being conducted; (b) has the authority to
enter into and perform the services contemplated by this
Agreement; (c) is not prohibited by the 1940 Act or the
Advisers Act from performing the services contemplated by this
Agreement; (d) has met, and shall continue to seek to meet for
the duration of this Agreement, any other applicable federal
or state requirements, or the applicable requirements of any
regulatory or industry self-regulatory agency, necessary to be
met in order to perform the services contemplated by this
Agreement; and (e) shall promptly notify the Fund of the
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occurrence of any event that would disqualify the Adviser from
serving as an investment adviser to an investment company
pursuant to Section 9(a) of the 0000 Xxx.
(b) The Adviser shall be responsible for the management of each
Portfolio in accordance with the prospectus and statement of
additional information applicable to the Portfolio, and in
compliance with the requirements applicable to a regulated
investment company under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code") and, further, to the
extent applicable for only the Portfolios that are
insurance-dedicated investment portfolios, in compliance with
the diversification requirements for variable annuity, life
insurance, or endowment contracts pursuant to Code Section
817(h) and United States Treasury Regulation Section 1.817-5,
each as may be amended from time to time; and, furthermore,
the Adviser shall promptly inform the Fund if any information
in the prospectus or statement of additional information to a
Portfolio, or if any action relating to the Adviser or the
Adviser's services to the Portfolio is (or will become)
inaccurate, incomplete, or no longer compliant with Code
Section 817(h) or Section 1.817-5, supra, if applicable.
12. REPRESENTATIONS AND COVENANTS OF THE FUND. The Fund: (a) is duly
organized and validly existing under Delaware law with the power to own and
possess the Fund's assets and carry on the Fund's business as this business is
now being conducted; (b) has the authority to enter into and perform the
services contemplated by this Agreement; and (c) represents that the Fund is
(and during the term of this Agreement, will remain) registered as an open-end
management investment company under the 1940 Act and that the Fund's shares
representing an interest in the Portfolio are (and during the term of this
Agreement will remain) registered under the Securities Act of 1933 and under any
applicable state securities laws.
13. ADVISER CODE OF ETHICS. The Adviser certifies that the Adviser has
adopted a written code of ethics complying with the requirements of Rule 17j-1
under the 1940 Act, and that the Adviser has instituted procedures reasonably
necessary to prevent Access Persons from violating the Adviser's code of ethics.
The Adviser will provide the Fund with a copy of that code, together with
evidence of the code's adoption. Within twenty (20) days of the end of each
calendar quarter during which this Agreement remains in effect, the president or
a vice president of the Adviser shall certify to the Fund that the Adviser has
complied with the requirements of Rule 17j-1 during the previous quarter and
that there have been no violations of the Adviser's code of ethics or, if a
violation has occurred, that appropriate action has been taken in response to
the violation; provided, that, no less frequently than annually, the appropriate
officer of the Adviser shall furnish a written report to the Adviser that
complies with the requirements of Rule 17j-1 with respect to these reports
regarding issues, material violations, and any related sanctions in connection
with the administration of the code of ethics, or as otherwise required pursuant
to Rule 17j-1. Upon written request of the Fund, the Adviser shall permit
representatives of the Fund to examine the reports (or summaries of the reports)
required to be made to the Adviser by Rule 17j-1(d)(1) and other records
evidencing enforcement of the code of ethics.
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14. FEE PROVISIONS.
(a) FEE. For the services rendered, the facilities furnished, and
the expenses assumed by the Adviser, the Fund shall pay the Adviser
quarterly fees, in arrears, based on the net assets of all Portfolios
managed by the Adviser, calculated daily at the annual rates specified
with respect to a Portfolio in an appendix to this Agreement, as this
appendix may be amended from time to time under this Agreement
("Appendix B"). The Adviser's fee shall be accrued daily at 1/365th of
the applicable annual rate set forth in Appendix B. For the purpose of
accruing compensation, the net assets of a Portfolio shall be
determined in the manner and on the dates set forth in the Fund's
current prospectus, and, on days on which the net assets are not so
determined, the net asset value computation to be used shall be as
determined on the immediately preceding day on which the net assets
were determined.
(b) SPECIAL FEE PROVISIONS. In the event of termination of this
Agreement with respect to a Portfolio, all compensation due through the
date of termination will be calculated on a pro-rated basis through the
date of termination and paid within thirty (30) business days of the
date of termination. During any period when the determination of net
asset value is suspended, the net asset value of the Portfolio as of
the last business day prior to the suspension shall for this purpose be
deemed to be the net asset value at the close of each succeeding
business day until the Portfolio's net asset value is again determined.
15. RECORDS.
(a) MAINTENANCE OF RECORDS. The Adviser hereby undertakes and
agrees to maintain, in the form and for the period required by Rule
31a-2 under the 1940 Act, all records relating to the Portfolio's
investments that are required to be maintained by the Fund pursuant to
the requirements of paragraphs (b)(5), (b)(6), (b)(7), (b)(9), (b)(10),
and (f) of Rule 31a-1 under the 1940 Act.
(b) OWNERSHIP OF RECORDS. The Adviser agrees that all books and
records which the Adviser maintains for the Portfolio or the Fund are
the Fund's property and further agrees to surrender promptly to the
Fund any books, records, or information upon the Fund's request;
provided, however, that the Adviser may retain copies of the records.
All the requested books and records shall be made available, within
five (5) business days of a written request, to the Fund's accountants
or auditors during regular business hours at the Adviser's offices. The
Fund or the Fund's authorized representatives shall have the right to
copy any records in the possession of the Adviser that pertain to the
Portfolio or the Fund. These books, records, information, or reports
shall be made available to properly authorized government
representatives consistent with state and federal law and/or
regulations. In the event of the termination of this Agreement, all
these books, records, or other information shall be returned to the
Fund. The Adviser agrees that the policies and procedures the Adviser
has established for managing
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the Portfolio, including, but not limited to, all policies and
procedures designed to ensure compliance with federal and state
regulations governing the Adviser/client relationship and management
and operation of the Portfolio, shall be made available for inspection
by the Fund or its authorized representatives not less frequently than
annually.
16. CONFIDENTIALITY.
(a) NON-DISCLOSURE BY ADVISER. The Adviser agrees that the Adviser
will not disclose or use any records or confidential information
obtained pursuant to this Agreement in any manner whatsoever, except as
authorized in this Agreement or specifically by the Fund, or if this
disclosure is required by federal or state regulatory authorities.
(b) NON-DISCLOSURE EXCEPTIONS. The Adviser may disclose the
investment performance of the Portfolio(s); provided, that the
disclosure does not reveal the identity of the Portfolio(s), or the
Fund. The Adviser may, however, disclose that the Fund and the
Portfolio(s) are the Fund's clients; provided, that the disclosure does
not reveal the investment performance or the composition of the
Portfolio(s).
17. LIMITATION OF LIABILITY OF ADVISER. In the absence of willful
misfeasance, bad faith, or gross negligence on the part of the Adviser or the
Adviser's officers, directors, or employees, or reckless disregard by the
Adviser of the Adviser's duties under this Agreement (together, "disabling
conduct"), the Adviser shall not be liable to a Portfolio or the Fund, or to any
shareholder of the Portfolio for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding, or sale of any security, except to the
extent otherwise provided in Section 36(b) of the 1940 Act concerning loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services; provided, that with respect to the Adviser's
responsibilities pursuant to Subchapter M of the Code and Code Section 817(h) as
described in Section 11(b) hereof, the Adviser agrees to indemnify and hold
harmless the Fund, and each of its directors or trustees and officers acting
within the scope of his or her responsibilities (the "Indemnified Parties"), for
losses, damages, liabilities, or expenses (including reasonable attorney fees)
that arise as a result of any failure by the Fund or its Portfolios to comply
with the diversification requirements specified in that Section 11(b), except to
the extent that these losses, damages, liabilities, or expenses (including
reasonable attorney fees) arise as a result from the gross negligence, bad faith
or willful misconduct of the Indemnified Parties, including the Fund's Board, or
any member thereof, in connection with the Fund's operations.
18. DOCUMENT DELIVERY AND REVIEW. The Adviser shall furnish each subadviser
(a "Subadviser") to a Portfolio of the Fund with copies of the Fund's prospectus
and statement of additional information, proxy statements, sales literature, or
any other material prepared for distribution to its shareholders, or the public
that refer in any way to the Subadviser, and shall not use such material if the
Subadviser reasonably objects in writing within three (3) business days or such
other time as may be agreed to by the parties in writing after receipt thereof,
as soon
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as practicable after such documents become available. The Adviser shall ensure
that materials prepared by employees or agents of the Adviser that refer to the
Subadviser in any way are consistent with those materials previously approved by
the Subadviser, as referenced in the preceding sentence. The Adviser shall
furnish the Subadviser with any further documents, materials, or information
that the Subadviser may reasonably request in writing to perform the
Subadviser's duties pursuant to this Agreement.
19. EFFECTIVENESS. This Agreement shall not become effective with respect
to a Portfolio until this Agreement is approved by the Fund's Board, including a
majority of trustees who are not parties to this Agreement or "interested
persons" of any party to this Agreement, and, to the extent required by law, a
majority of the outstanding shares of the Portfolio. Subject to receipt of all
necessary approvals, this Agreement shall be effective as of the date, and for
the term, provided in Appendix A with respect to a Portfolio.
20. TERMINATION. This Agreement may be terminated at any time with respect
to a Portfolio without the payment of any penalty, by the Fund's Board, or by
vote of a majority of the outstanding shares of the Portfolio, on sixty (60)
days written notice to the Adviser or by the Adviser, on sixty (60) days written
notice to the Fund. This Agreement shall automatically terminate in the event of
this Agreement's assignment.
21. AMENDMENT. This Agreement may be amended with respect to a Portfolio in
writing by the parties only if the amendment is specifically approved by: (a) a
majority of those trustees who are not parties to this Agreement or "interested
persons" of any party cast in person at a meeting called for the purpose of
voting on the Agreement's approval; and (b) if required by applicable law, the
vote of a majority of outstanding shares of the affected Portfolio(s).
22. DEFINITIONS. The terms "assignment," "affiliated person," and
"interested person," when used in this Agreement, shall have the respective
meanings specified in Section 2(a) the 1940 Act. The term "majority of the
outstanding shares" means the lesser of (a) sixty-seven percent (67%) or more of
the shares present at a meeting if more than fifty percent (50%) of these shares
are present or represented by proxy or (b) more than fifty percent (50%) of the
outstanding shares.
23. GOVERNING LAW. This Agreement shall be construed in accordance with
Delaware law and applicable provisions of the Advisers Act and 1940 Act.
24. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule, or otherwise, the remainder of this
Agreement shall not be affected thereby.
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25. COUNTERPARTS. This Agreement may be executed in counterparts, all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
GARTMORE MUTUAL FUND CAPITAL TRUST
By:
------------------------------
Name:
---------------------
Title:
---------------------
ATTEST:
-----------------------------
MARKET STREET FUND
By:
------------------------------
Name: Xxxxxxx Xxxxx
Title: President
ATTEST:
-----------------------------
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APPENDIX A
TO THE INVESTMENT ADVISORY AGREEMENT BETWEEN
GARTMORE MUTUAL FUND CAPITAL TRUST
AND MARKET STREET FUND
PORTFOLIO(S) EFFECTIVE DATE AND TERM
------------ -----------------------
All Pro Broad Equity Portfolio The effective date of this Agreement with respect to this
All Pro Large Cap Growth Portfolio Portfolio shall be as of the close of business on the ____
All Pro Large Cap Value Portfolio day of ____________, 2003. Subject to Section 20 of this
All Pro Small Cap Growth Portfolio Agreement, the term of this Agreement shall continue for two
All Pro Small Cap Value Portfolio (2) years and shall thereafter continue in effect from year
Equity 500 Index Portfolio to year so long as the Agreement's continuance is
International Portfolio specifically approved at least annually by: (a) the Fund's
Balanced Portfolio Board, or by the vote of a majority of the outstanding
Money Market Portfolio shares of the Portfolio, and (b) a majority of those
Mid Cap Growth Portfolio trustees who are not parties to this Agreement or interested
Bond Portfolio persons of any party cast in person at a meeting called for
the purpose of voting on the Agreement's approval.
GARTMORE MUTUAL FUND CAPITAL TRUST
By: Date:
----------------------------- --------------------
Name:
------------------
Title:
------------------
MARKET STREET FUND
By: Date:
----------------------------- --------------------
Name: Xxxxxxx Xxxxx
Title: President
X-0
XXXXXXXX X
TO THE INVESTMENT ADVISORY AGREEMENT BETWEEN
GARTMORE MUTUAL FUND CAPITAL TRUST
AND MARKET STREET FUND
PORTFOLIOS FEE
---------- ---
(as a %age of the average daily net assets, calculated as described
in Section 14 of this Agreement)
All Pro Broad Equity 0.75% on the first $200 million, and 0.70% on assets in excess of
$200 million
All Pro Large Cap Growth 0.70% on the first $200 million, and 0.65% on assets in excess of
$200 million
All Pro Large Cap Value 0.70% on the first $200 million, and 0.65% on assets in excess of
$200 million
All Pro Small Cap Growth 0.90% on the first $200 million, and 0.85% on assets in excess of
$200 million
All Pro Small Cap Value 0.90% on the first $200 million, and 0.85% on assets in excess of
$200 million
Equity 500 Index 0.24%
International 0.75% on the first $500 million, and 0.70% on assets in excess of
$500 million
Mid Cap Growth 0.75% on the first $200 million, and 0.70% on assets excess of $200
million
Balanced 0.55%
Bond 0.40%
Money Market 0.25%
GARTMORE MUTUAL FUND CAPITAL TRUST
By: Date:
----------------------------- --------------------
Name:
------------------
Title:
------------------
MARKET STREET FUND
By: Date:
----------------------------- --------------------
Name: Xxxxxxx Xxxxx
Title: President
B-1
