January 16, 2007
SAN DIEGO, CA - Dunham & Associates Investment Counsel, Inc. today announced its new Dunham
Funds Class A shares offering. The Class A shares uniquely compensate sub-advisers with a fulcrum
fee compared to established benchmarks versus a flat asset-based fee. Dunham & Associates is
one of the first firms in the industry to offer fulcrum-fee compensation for sub-advisers
in this share classification.
"Offering fulcrum-fee compensation to our Class A share sub-advisers is a natural expansion of
the Dunham & Associates commitment to delivering fairness in pricing to investors," Jeffrey A.
Dunham, founder and president of the firm, said. "We believe investors have long disliked the
traditional percentage-of-assets-under-management formula for determining the fees they are charged
for fund management and advice. Tired of paying the same fees 'win or lose,' more and more investors
are demanding performance-based pricing that helps facilitate tying fee levels to fund returns."
"Investors like performance-based sub-adviser fees because of the inherent fairness in pricing, the fact
that they are not expected to pay the same amount in fees for funds that under-perform, and the way that
the compensation structure provides fund managers with a strong incentive to work for the best possible
return on investment," Dunham said. "I am convinced that investor demand will drive more and more firms
to join Dunham & Associates in offering these types of fee structures. I believe that we are on the
leading edge of a trend that will see a significant increase in the number of funds with
performance-based fees. I predict that within the next 10 years up to a quarter of the overall market
will be invested in funds that assess sub-adviser compensation on the basis of performance."
In July 2006, Dunham & Associates shifted all of its public mutual fund sub-advisers to fulcrum-fee
compensation. The Dunham Funds received a regulatory exemption in September, which permits them to
change sub-advisers without seeking shareholder approval. Subject to board approval, this exemption
will help facilitate Dunham & Associates" goal of tying sub-adviser fees to investment performance
wherever possible by allowing the firm to replace an underperforming sub-adviser with one more aligned
to achieving a fund's objective.
"We are very excited about the addition of Class A shares to our product offerings," Keith E. Gregg,
Dunham & Associates executive vice president and chief sales and marketing officer, said.
"This is a service industry, and the best way to succeed is to give your clients what they want.
The expansion of fulcrum-fee compensation to our Class A shares will help us do just that. By offering
an alternative fee structure to our advisers, we are also helping them meet the growing investor demand
for sub-advised performance-based fees."
Dunham Funds Class A Shares
Dunham Funds Class A shares are offered at their public offering price, which is the net asset value per
share plus applicable sales charge. The sales charge varies depending on how much is invested. There are
no sales charges on reinvested dividends. Class A shares are subject to a service fee of 0.25 percent
In general, the fund features front-end loads that help keep ongoing fund costs low, meeting the needs
of investors with a long-term outlook. Complete details of each fund's front-end sales charge (FESC)
and purchase-amount breakpoints, as well as ways to reduce sales charges are described in the Dunham
Funds A shares prospectus.
How Fulcrum Fees Work
Fulcrum fees consist of two parts; a base fee and a performance fee. The base fee is a predetermined rate
at which a sub-adviser is compensated when net performance is in line with a benchmark set for the fund.
The base fee can be adjusted up or down by the performance fee, which is calculated by comparing net
fund performance against the benchmark over a rolling 12-month period. With the fulcrum-fee structure, it
is still possible that fund shareholders could compensate a sub-adviser even if performance is negative,
for example, if a benchmark declines at a greater rate than a decline in fund performance.
The overall objective of a fulcrum-fee structure is to better align the interests of clients with the
sub-advisers making investment decisions by tying compensation directly to managerial performance. When
performance is good, the sub-advisers' compensation increases on net profits over and above
applicable benchmarks. If performance declines, sub-advisers forfeit a portion of performance compensation.
Significant underperformance could result in no compensation at all for the sub-adviser.
Founded in 1985, Dunham & Associates Investment Counsel, Inc. is a private wealth management firm
dedicated to providing financial advisors with asset management solutions for affluent clients. The San Diego,
California-based firm is a Registered Investment Adviser and FINRA broker/dealer. Dunham & Associates serves
as adviser to and distributor of The Dunham Funds. As such, it receives a separate fee. Some sub-advisers may
receive a minimum fee even if they don’t meet the benchmark. Dunham & Associates has specialized in
providing investment programs for institutions, foundations, and high net-worth individuals for more than
two decades. For more information, please visit the Dunham & Associates Website at: www.dunham.com.
Carefully consider the funds' investment objectives, risk factors, charges and expenses before
investing. This and other information can be found in the Fund prospectus, which may be obtained
by calling us at 800-442-4358. Read the prospectus carefully before investing. Investing involves
risk, including possible loss of principal.