Distributions and Tax Information

2007 Dividends

Dividend Timing : 2007 Dividend Amounts : Why should I care about the timing and amount of future distributions? : Tax Efficiency

Dividend Timing

The Bridgeway Funds have set the following distribution dates:

Record Date - 12/17/07

Ex-dividend Date - 12/18/07

Payable Date - 12/19/07

2007 Dividends (as of 12/18/07)

These are per share capital gain and income distributions that were paid out in 2007.

Fund	Income	Short-Term Capital Gains	Long-Term Capital Gains	Total
Aggressive Investors 1	$0.00	$0.00	$10.48676	$10.48676
Aggressive Investors 2	$0.00	$0.00	$0.56984	$0.56984
Ultra-Small Company	$0.11252	$0.00	$4.30707	$4.41959
Ultra-Small Company Market	$0.04206	$0.00	$0.64655	$0.68861
Micro-Cap Limited	$0.01480	$0.00	$0.00	$0.01480
Blue Chip 35 Index	$0.10862	$0.00	$0.00	$0.10862
Balanced	$0.17345	$0.00	$0.00	$0.17345
Small-Cap Growth	$0.00	$0.00	$0.00	$0.00
Small-Cap Value	$0.00	$0.00	$0.00	$0.00
Large-Cap Growth	$0.03927	$0.00	$0.00	$0.03927
Large-Cap Value	$0.21273	$0.00	$0.51397	$0.72670

Why should I care about the timing of future distributions?

Bridgeway typically distributes any dividends in the November to December time frame. In general, as the period approaches, it may be better to invest after the dividend "record date" if you have a high tax rate and the fund in which you are interested anticipates paying a larger dividend. If you invest through a tax-deferred account, this consideration does not matter. Since the only Funds with large distributions in 2007 (Ultra-Small Company and Aggressive Investors 1) are closed to new investments, dividends are probably a minor consideration for 2007. Consult your tax advisor for more information. If you put off investing until after the dividend date, or forget to invest altogether, it could be to your disadvantage if before your investment date, the Fund appreciates more than the amount of tax on your dividend. However, keep in mind that when to invest is a decision that can only be made by you.

Tax Efficiency

The following discussion is not applicable to shareholders in tax-deferred accounts, such as IRAs.
An important aspect of fund ownership in a taxable account is the tax efficiency of the Fund. A fund may have great performance, but if a large percentage of that performance is paid in taxes, the purpose of active management may be defeated. Tax efficiency is the ratio of after-tax total returns to before-tax total returns. The first column of the following table illustrates the tax efficiency of each Fund through December 31, 2006. It assumes that a shareholder was invested in the Fund for the full period since inception, had paid taxes at the maximum federal marginal rates and continues to hold the shares. Currently, these rates are 35% for income, 35% for short-term capital gains, and 15% for long-term capital gains (securities held for more than one year). These calculations exclude any state and local taxes. 100% tax efficiency means that the shareholder had no taxable distributions and paid no taxes. This measure of tax efficiency ignores potential future taxes represented by unrealized gains, stocks which have appreciated in value but have not been sold. It also ignores the taxes an individual would pay if they sold their shares. The second column is the same tax efficiency number, but considers taxes paid if a shareholder sold his or her shares at the end of fiscal year ended December 31, 2006.

Bridgeway Funds Tax Efficiency

Fund	% Tax Efficiency for Shares Held	% Tax Efficiency for Shares Sold
Aggressive Investors 1	92.84%	88.24%
Aggressive Investors 2	98.79%	87.51%
Ultra-Small Company	88.62%	86.51%
Ultra-Small Company Market	98.91%	90.54%
Micro-Cap Limited	86.69%	84.90%
Small-Cap Growth	100.00%	86.45%
Small-Cap Value	100.00%	86.92%
Large-Cap Growth	99.48%	85.70%
Large-Cap Value	97.86%	85.61%
Blue Chip 35 Index	93.25%	83.36%
Balanced	91.03%	81.38%

Past performance is not an indication of future results.
Bridgeway Funds pays attention to taxes in all its Funds. However, the active management style of Ultra-Small Company, Aggressive Investors 1, Aggressive Investors 2, Micro-Cap Limited and Balanced make these Funds potentially less tax-efficient than any of our other funds. The aggressive tax managment combined with the active managment style of Small-Cap Growth, Small-Cap Value, Large-Cap Growth and Large-Cap Value make these funds very tax efficient, but not usually as tax efficient as Blue Chip 35 Index and Ultra-Small Company Market. Blue Chip 35 Index and Ultra-Small Company Market have been extremely tax efficient, even among index funds.
The Blue Chip 35 Index Fund has not distributed a capital gain in the seven years since inception; while Blue-Chip 35 Index Fund is not expected to pay a capital gain this year, Ultra-Small Company Market Fund is expected to distribute a long-term capital gain for the third consecutive year. Blue Chip 35 Index fund will distribute dividend income.