THRESHOLD ADVISOR FUNDS, INC.
CLASS A AND CLASS C
DISTRIBUTION 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
Distribution Plan ("Plan") pursuant to Rule 12b-1 of the Investment Company Act
of 1940, as amended ("1940 Act"); and the Fund's Board of Directors, including
its Independent Directors, have determined that there is a reasonable likelihood
that adoption of this Plan will benefit the Fund and its shareholders; and
WHEREAS, the Fund intends to employ Unified Financial Securities, Inc.,
a registered broker-dealer and NASD/SIPC member as Distributor of its
securities; and
WHEREAS, the Fund intends to employ Kennedy Capital Management, Inc.,
investment adviser to the Fund, as Distribution Coordinator of certain accounts;
and
WHEREAS, the Fund's Board of Directors, including the directors who are
not interested persons of the Fund and who have no direct or indirect financial
interest in the Plan or in any agreements related to the Plan ("Independent
Directors"), have determined that, in the exercise of the their reasonable
business judgment and in light of their fiduciary duties, there is a reasonable
likelihood that the Plan will benefit the Portfolios and their shareholders.
NOW, THEREFORE, the Fund hereby adopts this Plan in accordance with
Rule 12b-1 under the 1940 Act on the following terms and conditions:
1. (a) Payment of Fees to the Distributor. Each Portfolio listed on
Schedule A, as such schedule may be amended from time to time, is authorized to
pay the Distributor an annual fee for its services and expenses in connection
with the coordination of the promotion and distribution of the Portfolios'
shares and related shareholder servicing (collectively, "Distribution
Expenses"), with respect to shares of the Portfolios that are sold by the
Distributor through a participating dealer. The annual fee paid to the
Distribution Coordinator under the Plan will be calculated daily and paid
monthly by the Portfolios on the first day of each month at an annual rate as
set forth on Schedule A.
(b) Payment of Fees to the Distribution Coordinator. Each
Portfolio will pay to the Distribution Coordinator an annual fee for its
services and Distribution Expenses incurred with respect to shares of the
Portfolios that are not sold by the Distributor through a participating dealer.
The annual fee paid to the Distribution Coordinator under the Plan will be
calculated daily and paid monthly by the Portfolios on the first day of each
month at an annual rate as set forth on Schedule B.
(c) Payment of Dealer Concession Fee. For purchases of Class A
shares of a Portfolio of $1 million or more, the Portfolio may pay to the
Distributor up to 1.00% of the purchase amount on the first $1 million and 0.60%
on assets thereafter. An investor who redeems those Class A shares within 12
months of purchase will pay a redemption fee of 1% of the initial investment
amount.
2. Compensation Plan. The distribution and service fees set forth in
paragraph 1 shall be payable by the Fund regardless of whether those fees exceed
or are less than the actual expenses described in Paragraph 2 below and incurred
by the Distributor or the Distribution Coordinator with respect to a Portfolio
in a particular year. All Distribution Expenses of the Distributor or
Distribution Coordinator in excess of the compensation provided hereunder shall
be borne the party incurring such excess Distribution Expenses.
3. Distribution Expenses. The fees paid to the Distributor and
Distribution Coordinator under paragraph 1 may be used by such party to pay for
any expenses primarily intended to result in the sale of the Portfolios' shares
("distribution services"), including, but not limited to: (a) costs of payments,
including incentive compensation, made to agents for, and consultants to, the
Distributor or Distribution Coordinator, as applicable, or the Fund, including
pension administration firms that provide distribution related services and
broker-dealers that engage in the distribution of a Portfolio's shares; (b)
payments made to, and expenses of, persons who provide support services in
connection with the distribution of a Portfolio's shares and servicing of the
Portfolio's shareholders, including, but not limited to, personnel of the
Distributor or Distribution Coordinator, as applicable, (c) expenses of
providing office space and equipment, telephone facilities, answering routine
inquiries regarding the Portfolios, processing shareholder transactions and
providing any other shareholder services not otherwise provided by the Fund's
transfer agent or other service providers; (d) all payments made pursuant to the
Fund's Distribution Agreement with the Distributor, including, but not limited
to, compensation paid by the Distributor to its registered representatives and
to participating dealers who have entered into sales agreements with the
Distributor; (e) all payments made pursuant to the Fund's Distribution
Coordination Agreement with the Distribution Coordinator; (f) costs relating to
the formulation and implementation of marketing and promotional activities,
including, but not limited to, direct mail promotions and television, radio,
newspaper, magazine and other mass media advertising; (f) costs of printing and
distributing prospectuses, statements of additional information and reports of
the Portfolios to prospective shareholders of the Portfolios; (g) advertising
costs, including preparation and distribution of advertising material, sales
literature and other sales promotion expenses and costs of organizing and
conducting sales seminars; and (h) costs involved in obtaining whatever
information, analyses and reports with respect to marketing and promotional
activities that a Portfolio may, from time to time, deem advisable. Such
expenses shall be deemed incurred whether paid directly by the Distributor or
Distribution Coordinator or by a third party to the extent reimbursed therefor
by the Distributor or Distribution Coordinator.
4. Service Fees. In addition to Distribution Expenses, as stated in
paragraph 2 above, the fees authorized by paragraph 1 of this Plan may be used
to compensate the Distributor or Distribution Coordinator and other service
providers with a "service fee" as such term is contemplated under Rule 2830 of
the Conduct Rules of the National Association of Securities Dealers, Inc.
5. Additional Compensation. This Plan shall not be construed to
prohibit or limit additional compensation derived by the Distributor from sales
charges or other sources payable under the Distribution Agreement or derived by
the Distribution Coordinator from advisory fees payable under the Fund's
investment advisory agreement with the Distribution Coordinator.
6. 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 and such related agreements.
7. Renewal of Plan. This Plan shall continue in full force and effect
for successive periods of one year from its approval as set forth in Paragraph 6
for so long as such continuance is specifically approved at least annually in
the manner provided for approval of this Plan in Paragraph 6 or by a vote of at
least a majority of the outstanding voting securities, as defined in the 1940
Act, of the Fund.
8. Reports. Any agreement entered into pursuant to this Plan shall
provide that the Distributor and Distribution Coordinator, as applicable, shall
provide to the Board of Directors and the Board shall review, at least
quarterly, or at such other more frequent intervals as reasonably requested by
the Board, a written report of the amounts so expended and the purposes for
which such expenditures were made.
9. Termination. This Plan may be terminated with respect to a
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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.
10. Amendments. Any change to the Plan that would materially increase
the distribution costs to a Portfolio may not be instituted unless such
amendment is approved in the manner provided for in paragraph 7 hereof or by a
vote of at least a majority of the outstanding voting securities, as defined in
the 1940 Act, of the Portfolio to which the Plan is effective, voting separately
from any other Portfolio of the Fund. Any other material change to the Plan may
not be instituted unless such change is approved in the manner provided for
initial approval in Paragraph 6 hereof.
11. Nomination of Directors. While this Plan is in effect,
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the selection and nomination of Independent Directors of the Fund shall be
committed to the discretion of the Independent Directors then in office.
12. Records. The Fund shall preserve copies of this Plan and any
related agreements and all reports made pursuant to Paragraph 8 hereof for a
period of not less than six years from the date of execution of this Plan, or of
the agreements or of such reports, as the case may be, the first two years in an
easily accessible place.
13. Severability. The provisions of this Plan shall be severable for
each class of shares of the Fund outstanding. Whenever any action is required to
be taken with respect to this Plan, that action must be taken separately with
respect to each class; provided, however, that any shareholder vote on a
distribution plan of a target class must also require a vote of any purchase
class.
Date: November 20, 2000
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Schedule A
to the
Distribution Plan
The maximum annualized fee rate paid by each Portfolio listed below to the
Distributor pursuant to paragraph 1(a) of the Distribution Plan for all shares
of a Portfolio sold by the Distributor through a participating dealer shall be
as follows:
(1) Threshold Advisors Small Cap Value Fund
Class Annual 12b-1 Fee
Class A 0.25%
Class I None
(2) Threshold Advisors Mid Cap Fund
Class Annual 12b-1 Fee
Class A 0.25%
Class I None
Date: December 7, 2000
<PAGE>
Schedule B
to the
Distribution Plan
The maximum annualized fee rate paid by each Portfolio listed below to the
Distribution Coordinator pursuant to paragraph 1(b) of the Distribution Plan for
all shares of a Portfolio that are not sold by the Distributor through a
participating dealer shall be as follows:
(1) Threshold Advisors Small Cap Value Fund
Class Annual 12b-1 Fee
Class A 0.25%
Class I None
(2) Threshold Advisors Mid Cap Fund
Class Annual 12b-1 Fee
Class A 0.25%
Class I None
Date: December 7, 2000
