1
By board action on 8/14/2001
MANAGEMENT CONTRACT
AGREEMENT, made this 14th of August, 2001 by and between Bridgeway
Fund, Inc., a Maryland corporation (hereinafter called the "Fund"), and
Bridgeway Capital Management, Inc., a Texas corporation (hereinafter sometimes
called the "Adviser").
WITNESSETH:
WHEREAS the Fund and the Adviser wish to enter into an agreement
setting forth the terms on which the Adviser will perform certain services for
the Fund;
NOW THEREFORE, in consideration of the premises and the covenants
contained hereinafter, the Fund and the Adviser agree as follows:
1. The Fund hereby employs the Adviser to manage the investment and
reinvestment of the assets of the AGGRESSIVE INVESTORS PORTFOLIO II, (referred
to hereafter by name or "the Portfolio") and to administer its affairs, subject
to the supervision of the Board of Directors of the Fund, for the period and
on the terms in this agreement set forth. The Adviser hereby accepts such
employment and agrees during such period, at its own expense, to render the
services and to assume the obligations herein set forth, for the compensation
herein provided. 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 in any way or
otherwise be deemed as agent of the Fund.
2. The Adviser, at its own expense, shall furnish to the Fund office
space in the offices of the Adviser or in such other place as may be agreed upon
from time to time, and all necessary office facilities, equipment and personnel
(with the exception of bookkeeping, auditing, state registration, and accounting
personnel) for managing the affairs and investments and keeping the Fund's
records and shall arrange, if desired by the Fund, for members of the Adviser's
organization or its affiliates to serve without salaries from the Fund as
officers or agents of the Fund. The Adviser assumes and shall pay or reimburse
the Fund for: (1) the compensation (if any) of the directors of the Fund who are
interested persons of the Adviser, and the compensation of the officers of the
Fund as such (with the exception of the Chief Financial Officer, Accounting
Officer or Treasurer), and (2) all expenses incurred by the Adviser or by the
Fund in connection with the management of the investment and reinvestment of the
assets of the Fund and the administration of the affairs of the Fund, other than
those specifically assumed by the Fund herein.
Except as otherwise expressly provided above, the Fund assumes and
shall pay all expenses of the Fund, including, without limitation: (1) the
charges and expenses of any custodian or depository appointed by the Fund for
the safekeeping of its cash, securities and other property, (2) the charges and
expenses of bookkeeping personnel, auditors, and accountants, computer services
and record keeping, (3) the charges and expenses of any transfer agents and
registrars appointed by the Fund, (4) brokers' commissions and issue and
transfer taxes chargeable to the Fund in connection with securities transactions
to which the Fund is a party, (5) all taxes and corporate fees payable by the
Fund to federal, state or other government agencies, (6) the cost of stock
certificates (if any) representing shares of the Fund, (7) fees and expenses
involved in registering and maintaining registrations of the Fund and of its
shares with the Securities and Exchange Commission and qualifying its shares
under state or other securities laws, including the preparation and printing of
prospectuses used for these purposes and for shareholders of the Fund, (8) all
expenses of shareholders' and directors' meetings and of preparing and printing
reports to shareholders, (9) charges and expenses of legal counsel for the Fund
in connection with legal matters relating to the Fund, including without
limitation, legal services rendered in connection with the Fund's corporate
existence, corporate and financial structure and relations with its
shareholders, registrations and qualifications of securities under federal,
state and other laws, issues of securities and expenses which the Fund has
herein assumed, (10) compensation of directors who are not interested persons of
the Adviser, (11) interest expense, (12) insurance expense, and (13) association
membership dues.
2
The services of the Adviser to the Fund hereunder are not to be deemed
exclusive, and the Adviser shall be free to render similar services to others so
long as its services hereunder be not impaired thereby. The Fund and the Adviser
both acknowledge the "right of first refusal" given to Aggressive Investors
Portfolio I as outlined in the October 31, 2001 prospectus.
3. As compensation for its services rendered and the charges and
expenses assumed and to be paid by the Adviser as described above, pays the
Adviser a base fee computed and payable on or promptly after the last market day
of each month at the following annual rate:
.9% of the value of the Portfolio's average daily net assets
during such month up to $250,000,000;
.875% of the next $250,000,000 of such assets; and
.85% of such assets over $500,000,000,
For purposes of calculating such fee, average daily net assets shall be
computed by adding the total asset values less liabilities of the Portfolio as
computed by the Adviser each day (during the month and dividing the resulting
total by the number of days in the month). Expenses and fees of the Portfolio,
including the advisory fee, will be accrued daily and taken into account in
determining net asset value. For any period less than a full month during which
this agreement is in effect, the fee shall be prorated according to the
proportion which such period bears to a full month.
The Aggressive Investors Portfolio II base fee described above will be
adjusted each Quarterly Period (as defined below) by adding to or subtracting
from such rate, when appropriate, the applicable performance adjustment rate
percentage as described below. The resulting advisory fee rate will then be
applied to the average daily net asset value of the Fund for the succeeding
quarterly period. The advisory fee will be paid monthly and will be one-twelfth
(1/12th) of the resulting dollar figure.
The performance adjustment rate shall vary with the Portfolio's
performance as compared to the performance of the Standard & Poor's 500
Composite Stock Price Index with dividends reinvested (hereinafter "Index" or
"S & P 500 Index") and will range from -.7% to +.7%; the performance rate
adjustment will be calculated at 4.67% of the difference between the
cumulative performance of the Portfolio and that of the Index, except that
there will be no performance adjustment if the difference between the
Portfolio performance and the Index performance is less than or equal to 2%.
The performance period shall consist of the most recent five year
period ending on the last day of the quarter (March, June, September, and
December) that the New York Stock Exchange was open for trading.
The performance of the Index will be the five year percentage increase
(or decrease) in the capitalization weighted S & P 500 Index with dividends
reinvested. The Portfolio performance will be the percentage increase (or
decrease) of the portfolio net asset value per share over the performance
period and will be calculated as the sum of: 1) the change in the portfolio
unit value during such period, 2) the unit value of portfolio 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, and 3) the unit value of capital gains taxes
paid or accrued during the performance period of undistributed realized
capital gains, if any. Thus, the Portfolio performance will be in accordance
with SEC standardized total return formula.
The adjustment to the Base Advisory Fee will not be cumulative. An
increased fee will result even though the performance of the Portfolio over some
period of time shorter than the Performance Period has been behind that of the
Index and, conversely, a reduction in the Base Advisory Fee will be made for a
month even though the performance of the Portfolio over some period of time
shorter than the performance Period has been ahead of that of the Index.
As indicated above, the Portfolio's expenses (including the monthly
Base Advisory fee) will be accrued daily. The performance adjustment for each
performance fee period will be computed monthly and accrued daily in the
subsequent monthly period and taken into account in computing the daily net
asset value of a Fund Portfolio's share. However, the expenses in excess of any
maximum expense limitation that is assumed
2
3
by the Portfolio's Adviser or Distributor, if any, shall not be accrued for the
purpose of computing the daily net asset value of a Portfolio share.
Since the Portfolio does not have a five year operating history, the
performance rate adjustment will be calculated as follows during the initial
five year period.
(a) From Portfolio inception through September 30, 2002, the
performance rate adjustment will not be operative. The advisory fee
payable will be the base fee only.
(b) From September 30, 2002 through September 30, 2006, the
performance rate adjustment fee will be calculated based upon a
comparison of the investment performance of the Portfolio and the
Index over the number of quarters that have elapsed since the Fund
began operations (October 30, 2001). Each time the performance
adjustment fee 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.
4. The Fund shall cause its books and accounts to be audited at least
once each year by a reputable, independent public accountant or organization of
public accountants who shall render a report to the Fund.
5. Subject to and in accordance with the Articles of Incorporation of
the Fund and of the Certificate of Incorporation of the Adviser, respectively,
it is understood that directors, officers, agents and shareholders of the Fund
are or may be interested in the Adviser (or any successor thereof) as directors,
officers or stockholders, or otherwise, that directors, officers, agents and
stockholders of the Adviser are or may be interested in the Fund as directors,
officers, stockholders or otherwise, that the Adviser (or any such successor) is
or may be interested in the Fund as stockholder or otherwise and that the effect
of any such adverse interests shall be governed by said Articles of
Incorporation and Certificate of Incorporation, respectively.
6. This agreement shall continue in effect until June 30, 2002 and
thereafter from year to year if its continuance after said date is specifically
approved on or before said date and at least annually thereafter by vote of a
majority of the outstanding voting securities of the Fund or by the Board or
Directors of the Fund, and in addition thereto by a majority of the Directors of
the Fund who are not parties to the agreement or interested persons of the
Adviser or affiliated with any such party except as directors of the Fund,
provided, however, that: (1) this agreement may at any time be terminated
without the payment of any penalty either by vote of the Board of Directors of
the Fund or by vote of a majority of the outstanding voting securities of the
Fund, on sixty days' written notice to the Adviser, (2) this agreement shall
immediately terminate in the event of its assignment (within the meaning of the
federal Investment Company Act of 1940), and (3) this agreement may be
terminated by the Adviser on ninety days' written notice to the Fund. Any notice
under this agreement shall be given in writing, addressed and delivered, or
mailed postpaid, to the other party at any office of such party.
7. This agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Fund shall have been
approved by vote of a majority of the outstanding voting securities of the Fund.
The Adviser will reimburse expenses, if necessary, to ensure expense ratios of
the Portfolio do not exceed 1.9% for the fiscal year.
IN WITNESS WHEREOF the parties have hereto executed this agreement on
the day and year first above written.
BRIDGEWAY FUND, INC. BRIDGEWAY CAPITAL MANAGEMENT, INC.
By: By:
------------------------ -----------------------
President President
3
