THRESHOLD ADVISOR FUNDS, INC.
RULE 18f-3 PLAN
WHEREAS, Threshold Advisor Funds, Inc., a Maryland corporation (the
"Fund") is an open-end management investment company registered as such under
the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Fund, on behalf of its designated series presently
existing or hereinafter established (the "Portfolios") desires to adopt this
18f-3 Plan ("Plan") pursuant to Rule 18f-3 of the Investment Company Act of
1940, as amended ("1940 Act"); and
WHEREAS, the Fund's Board of Directors, including the directors who are
not interested persons of the Fund ("Independent Directors"), have determined
that, in the exercise of their reasonable business judgment and in light of
their fiduciary duties, the Plan, including the expense allocation, is in the
best interests of each class of each Portfolio individually and the Fund as a
whole;
NOW, THEREFORE, the Fund hereby adopts this Plan in accordance with
Rule 18f-3 under the 1940 Act on the following terms and conditions:
A. Differences Among Classes. Each class of shares of a Portfolio:
(1) (i) Shall have a different arrangement for shareholder services or the
distribution its shares or both, and shall pay all of the expenses of
that arrangement;
(ii) May pay a different share of other expenses, not including
advisory or custodial fees or other expenses related to the
management of the company's assets, if these expenses are
actually incurred in a different amount by that class, or if
the class receives services of a different kind or to a
different degree than other classes; and
(iii) May pay a different advisory fee to the extent that any
difference in amount paid is the result of the application of
the same performance fee provisions in the advisory contract
of the company to the different investment performance of each
class;
(2) Shall have exclusive voting rights on any matter submitted to
shareholders that relates solely to its arrangement;
(3) Shall have separate voting rights on any matter submitted to
shareholders in which the interests of one class differ from the
interests of any other class; and
(4) Shall have in all other respects the same rights and obligations as
each other class.
B. Description of Classes. Threshold Small Cap Value Fund and Threshold
Mid Cap Fund each may offer the following classes of shares on the terms set
forth below:
(1) Class A. Class A shares are sold at the public offering price, which is
the net asset value per share plus an initial sales charge as described
in the Portfolio's Class A prospectus. Selected persons may be able to
purchase Class A shares at a reduced commission or at net asset value.
Class A shareholders who initially purchase shares worth $1 million or
more and do not pay a sales charge, then redeem those shares within one
year of purchase will be required to pay a 1.00% redemption fee. Class
A shareholders pay a 12b-1 distribution fee of 0.25% per year. The
minimum purchase for Class A shares is $5,000, subject to certain
exceptions.
(2) Class C. Purchasers of Class C shares pay no initial sales charge or
other commission at the time the shares are acquired. Class C
shareholders are required to pay a redemption fee of 1.00% if they sell
their Class C shares within one year of purchase. Class C shareholders
pay a 12b-1 distribution fee of 1.00% per year. The minimum purchase
for Class C shares is $5,000, subject to certain exceptions. The
portfolios currently do not intend to offer Class C shares to the
public.
(3) Class I. Purchasers of Class I shares pay no commission at the time of
purchase, no front-end or contingent deferred sales charges and no
12b-1 distribution fees. The minimum purchase for Class I shares is
$250,000.
C. Waiver of Expenses. Expenses of a class may be waived or reimbursed
by Kennedy Capital Management, Inc., the Fund's adviser.
D. Allocation of Class Expenses. Income, realized gains and losses,
unrealized appreciation and depreciation, and Fund-wide expenses not allocated
to a particular class shall be allocated to each class based on the net assets
of that class in relation to the net assets of the company ("relative net
assets").
E. Board Approval. This Plan shall take effect with respect to each
Portfolio on the date that it is approved, together with any related agreements,
by vote of a majority of both (a) the Board of Directors and (b) the Independent
Directors, cast in person at a meeting or meetings called for the purpose of
voting on this Plan. Prior to approving the Plan or any material amendment
thereto, a majority of the Directors and Independent Directors shall find that
the Plan as proposed to be adopted or amended, including the expense allocation,
is in the best interests of each class of the Portfolios individually and the
Fund as a whole. Before any vote on the Plan, the directors shall request and
evaluate, and any agreement relating to a class arrangement shall require the
parties thereto to furnish, such information as may be reasonably necessary to
evaluate the Plan.
F. Renewal of Plan. This Plan shall continue in full force and effect
for successive periods of one year from its approval for so long as such
continuance is specifically approved at least annually in the manner provided
for approval of this Plan in Paragraph D.
G. Termination. This Plan may be terminated with respect to a
particular Portfolio at any time by vote of a majority of the Independent
Directors or by a vote of a majority of the outstanding voting securities of
such Portfolio, voting separately from any other Portfolio of the Fund.
Date: December 7, 2000
