Mutual Fund Directors Forum Evaluation of Fund Expense Information Keil Fiduciary Strategies LLC

1. __________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ Mutual Fund Directors Forum Evaluation of Fund Expense Information Keil Fiduciary Strategies LLC Coral Gables, FL | Jeffrey C. Keil | January 27, 2010 _________________________________________________________________________________________________________________________________________

2. Goals – what does the board expect to accomplish? Expectations – determine advisor materials Knowledge – know what to ask and look for Peer fund basis – valid? Consider ‘action guidelines’ – outlying funds Board Counsel – right questions? Advisor discussion(s), negotiations (as necessary) Documentation Follow-up (as necessary) ‘Successful’ Expense Evaluation________________________________________ ______________________________________________________________________________________________________________________________________________

3. What fund expense items should be reviewed during 15(c) exercise? “Advisory” fees “Administrative” fees (if applicable) Advisory + Administrative = “Management” Non-management expenses 12b-1/distribution, “service fees” Total Expenses – optimally with, w/o 12b-1/distribution Transfer agency costs – typically drives non-mgmt; based on chosen distribution models, account sizes Brokerage/Turnover – problematic, customized, outlying? Expense Review/Analysis________________________________________ ______________________________________________________________________________________________________________________________________________

4. What constitutes a reasonable and valid peer group? Seek out funds ‘most comparable’ Logical peer selection process, consistently applied Whole fund universe examined, considered Independently provided? Criteria: fund type (OE/CE/VA), investment obj. classification, load/distribution fees, size, attributes “Market reality” peer group? Not a science – more an art; scenarios demand flexibility Macro and micro benchmarks – classification, peer group Average vs. median vs. $-weighted average Expense Benchmarks & Peer Groups________________________________________ ______________________________________________________________________________________________________________________________________________

5. Ranking volatility typically low year-to-year Management fee rankings Total Expense rankings Non-management, distribution impact on TER; drivers? Peer group size an issue? Fund size an issue? Classification an issue? Generally, reason(s) to ‘discount’ peer group results? Valid reasons for high management fee or TER? Unfavorable benchmark deviation(s) – board action guidelines Assessment of Expenses________________________________________ ______________________________________________________________________________________________________________________________________________

6. Peer group methodology (if applicable) Fee, expense rankings Management fee breakpoints Economies of scale Management fee waivers TER or management fee caps Fund/complex profitability – pre-, post-, after-tax Fall-out benefits: other financial benefits ‘enjoyed’ by the funds’ advisor? Cost conundrum: Performance results a valid above-average fee driver? Topics for Discussion________________________________________ ______________________________________________________________________________________________________________________________________________

7. [Review Lipper expense material content, format: pgs. 2-7, each Fund] Trustees should note: Neptune European Contractual management fee 5th quintile (6/7); TER 4th (5/7) yet, spreads from peer group median are small; fee has breakpoints; custodial fee highest in peer group Solaris American Contractual management fee/TER both 5th quintile (10/11, 11/11); portfolio turnover 2nd highest in group while brokerage lowest; current TER higher than 4 years ago; fee has breakpoints Universal Opportunities Management fees, TER both 5th quintile (7/7); transfer agency fees 2nd highest in group; fee has breakpoints Subject Funds’ Expenses________________________________________ ______________________________________________________________________________________________________________________________________________

8. What should generally be of concern? Significantly above-average management fees w/o reasoning Inconsistent intra-complex management fees Lack of fee breakpoints for a multi-Bil fund Non-competitive TER and sparse logic to support Questions, Discussions, Solutions What are the absolute deviations from benchmarks? What drove non-mgmt expense levels? Economies-of-scale: how generated? how long? exist? shared? Waivers, fee or TER caps, breakpoints, fee reduction(s) The “pay for performance” conundrum ‘Issues’ with Subject Funds________________________________________ ______________________________________________________________________________________________________________________________________________

9. The funds’ advisor will provide rationale behind above-average fee levels or total expenses – what to ‘buy?’ TOP 10 REASONS FOR HIGH FEES, EXPENSES 10. “Our investment research is very extensive.” 9. “We seek out companies neglected by the marketplace.” 8. “Portfolio management talent is expensive.” 7. “Our investment objective is unique.” 6. “Our long-term returns justify our fee.” Management’s Perspective________________________________________ ______________________________________________________________________________________________________________________________________________

10. 5. “Our distribution ‘partners’ are extortionists.” 4. “They also unmercifully charge us for data networking on the TA side.” 3. “The price to obtain quality sub-advisors pushed us to an above-average TER.” 2. “We can only waive our advisory fees and cap total expenses for so long.” 1. “Economies of scale in fund management is a myth.” [Many of these statements could be true, but may require validation!?] Management’s Perspective________________________________________ ______________________________________________________________________________________________________________________________________________

11. Assets down/ratios up – waivers, caps, reimbursements? Fee breakpoints likely a non-issue Economies of scale picture altered dramatically Validity of shifting peer groups, benchmarks? Profitability most likely lower than 2008 Fund mergers, liquidations - ? Expense levels now of more concern to investors - ? Cost cuts by advisor to improve margins – impact(s) on funds? Supreme Court review of Jones v. Harris – profitability weight diluted? expense benchmarking more vital? Inst’l accts/SMAs now valid comparables? Gartenberg factors at risk? Operational approach changes due to revenue decreases? The Current Expense Landscape________________________________________ ______________________________________________________________________________________________________________________________________________

12. Questions, comments and discussion Conclusion________________________________________ ______________________________________________________________________________________________________________________________________________