Incentive Fees

Incentive Fee Illustration

Description

Private account clients who are eligible (please see the important disclosures below) may choose Navellier's incentive-fee program as a billing arrangement, under which they will be billed by Navellier only if we make them money. In other words, if your account loses money, we won't bill you! If Navellier makes you money, we will bill you for 10% of the profits. Our incentive-fee accounts are on an annual billing cycle. This means that every year, on the anniversary of your account-opening date, Navellier will look at the value of your account. If it's profitable, we'll bill you for 10% of those profits. If it's down, we will not send you a management bill!

The incentive-fee program has a provision that we call a "high-water mark": to continue billing the account, Navellier must grow the account higher than the highest level reached on any previous billing date.

For example, Richard opens a $500,000 account with Navellier on April 1, 2006. The account's first billing date would be April 1, 2007. If the account's value was less than $500,000 on that date, Navellier would not send Richard a bill. What's more, Navellier would be required to bring the account above $500,000 (the "high-water mark") on a future billing date before it could send Richard a bill.

(Note that existing clients who switch from a standard flat-fee arrangement to an incentive-fee arrangement will create a new billing inception date for their accounts.)

Requirements

Investors who select the incentive-fee arrangement must have a net worth of $1.5 million or more or at least $750,000 under management.

Navellier & Associates, Inc. is a registered investment advisor under the Investment Advisors' Act of 1940.

Further Information About Incentive Fees

Fees are accrued daily and payable annually, beginning twelve (12) months after an Agreement becomes effective with respect to an Account and annually thereafter. Fees are calculated based on the amount of increase, if any, in the net market value of the Account in the preceding twelve (12) month period, after deduction of all fees and commissions paid (including fees and commissions charged by the broker-dealer or other custodian of the account, and accounting for all net investment income and gains, whether realized or unrealized). There is no minimum fee. In the event that there is a net loss at the end of a year, no fee will be charged that year. Any such losses will be carried forward and applied against any profits accrued in the following year for purposes of calculating fees in such following year. Each invoice for profits accrued will be based on the profit calculated from the Client's statements from the bank or brokerage firm with custody of Client's Account. In the event that the Client terminates this Agreement during the first year (before the close of the first annual billing cycle), then Client hereby agrees to pay Navellier fees based on 0.90% per annum of the assets under management in the account as of the termination date. If the Client terminates this Agreement after the first full annual billing cycle, then the Client agrees to pay a fee of 10% of net profits from the beginning of the previous paid billing period (or from the inception date, if there was no last paid billing period), through the termination date (a period of more than 12 months). In such a case, any fees previously paid as a result of profits during the period in question will be subtracted from the fees owed on the closing invoice. Fees do not cover any execution-related expenses, commissions and margin interest, if any, securities exchange fees, or other fees required by law or charged by the broker-dealer with custody of the Account. Investors should be aware that different fee structures may be available upon request.

Incentive Fee Disclosures

In the interest of a full and fair disclosure and fully informed consent, the following possibilities arise from the incentive fee based on performance:

1. Incentive fee arrangements may create an incentive for Navellier to make investments that are more risky or more speculative than might be the case in the absence of a fee based on performance; and

2. Investors are advised that Navellier may receive increased compensation (compared to a fixed fee) based on unrealized appreciation as well as realized gains on assets in the client's account.

3. Not all brokerage firms or custodians are able to provide services equally. In this respect Navellier may reserve the right to withhold the offer of providing investment management services under those circumstances whereby Navellier believes that effective trading of client accounts may be impeded by inefficient trading systems, unique billing requirements or other operational difficulties associated with certain brokerage firms.

Investment Company Shares; Free Cash Balances

The fees and costs of any investment company, including Exchange Traded Funds (ETFs), in which the account invests will not be deducted from the compensation that Client pays to Navellier for its services under this Agreement. Client understands and agrees that funds held may be invested in an ETF or a money market fund, which may be managed by an affiliated company of Navellier. Client, along with other shareholders, will bear a proportionate share of the expenses of any ETF or money market fund in which Client's Assets are invested, including, to the extent permitted by law, management and distribution fee expenses, certain of which may be payable to Navellier and/or its affiliates. These fees and expenses are outlined in the relevant ETF or money market fund prospectus, a copy of which will be furnished to the Client upon request, and will not be deducted from the fees that Client pays to Navellier for its services under this Agreement.