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EXHIBIT d.3
Contract extended to 6/30/2002
By board action on 4/11/2000
Amended by the board on 8/18/99
MANAGEMENT CONTRACT
AGREEMENT, made this 3rd day of June, 1998 by and between the
MICRO-CAP LIMITED PORTFOLIO (hereinafter called the "Portfolio") of 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 Fund 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, 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 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 any portion of the Treasurer or Secretary's
time spent on bookkeeping, auditing, state registration and accounting), 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
related to Portfolio accounting 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) fees and expenses involved in registering and
maintaining registrations of the Fund and of its shares with the Securities and
Exchange
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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, (7) all expenses of shareholders' and
directors' meetings and of preparing and printing reports to shareholders, (8)
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, (9) compensation of
directors who are not interested persons of the Adviser, (10) interest expense,
(11) insurance expense, and (12) association membership dues.
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.
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 during the first year through June 30, 1999 a base fee computed and
payable within two business days of 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 $27,500,000;
During the period that the Portfolio's net assets range from
$27,500,000 to $55,000,000, the fee will be paid as if the
Portfolio had $55,000,000 under management ($55 million times
.009 equals $495,000), subject to a maximum of 1.49% annual
rate .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.
After June 30, 1999, the 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 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 -.7% to +.7%;
the performance rate adjustment will be calculated at 2.87% of the difference
between the performance of the Fund and that of the Index, except that there
will be no performance adjustment if the difference between the Fund
performance and the Index performance is less than or equal to 2%. The graph
and table in the Prospectus (see "Management of the Fund") illustrate the
relationship between the advisory fee and the fund performance relative to the
Index.
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. For example,
on February 15, 2006, the relevant five year period would be from Friday,
December 29, 2000 through Friday, December 30, 2005.
The Fund 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
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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 Fund performance will
be in accordance with SEC standardized total return formula.
The adjustment to the Basic Advisory Fee will not be cumulative. An
increased fee will result even though the performance of the Fund over some
period of time shorter or longer than the Performance Period has been behind
that of the Index and, conversely, a reduction in the basic advisory fee will
be made for a month even though the performance of the Fund over some period of
time shorter or longer than the performance Period has been ahead of that of
the Index.
As indicated above, the Fund's expenses (including the monthly Basic
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 by the Fund's Adviser or
Distributor, if any, shall not be accrued for the purpose of computing the
daily net asset value of a Fund share.
Since the Fund 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 Fund inception through April 30, 1999, the performance rate
adjustment will not be operative. The advisory fee payable will be the
base fee only.
(b) From July 1, 1999 through June 30, 2003, 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 June 30, 1998. 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 Portfolio.
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 stockholders 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, 1999 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
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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 contract was amended by the Board of Directors on August 18, 1999 without a
shareholder vote, relying on no-action positions cited by the SEC staff in
reply to the Adviser's no-action request to read :
The Adviser will reimburse expenses, if necessary, to ensure expense ratios 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.
By: _______________________
President
BRIDGEWAY CAPITAL MANAGEMENT, INC.
By: _______________________
President
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