ADVISORY AGREEMENT
AGREEMENT, made as of July 31, 2002 between COMMONWEALTH CASH RESERVE FUND, INC.
(herein called the "Company"), and PFM ASSET MANAGEMENT LLC, a Delaware limited
liability company (the "Adviser").
WHEREAS, the Company is registered as an open-end diversified, management
investment company under the Investment Company Act of 1940, as amended ("1940
Act"); and
WHEREAS, the Company desires to appoint the Adviser as investment adviser to
its investment portfolio (the "Fund");
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. Delivery of Documents. The Company has furnished the Adviser with
copies properly certified or authenticated of each of the following:
(a) The Company's Articles of Incorporation, as filed with the
Clerk of the State Corporation Commission of the Commonwealth
of Virginia on December 8, 1986 and all amendments thereto
(such Articles of Incorporation, as presently in effect as it
shall from time to time be amended, is herein called the
"Articles of Incorporation");
(b) The Company's By-laws, and amendments thereto (such By-laws,
as presently in effect and as it shall from time to time be
amended, is herein called the "By-laws")
(c) Resolution of the Company's Board of Directors authorizing
the appointment of the Adviser and approving this Agreement;
(d) The Company's Notification of Registration on Form N-8A under
the 1940 Act as filed with the Securities and Exchange
Commission ("SEC") on December 11, 1986 and all amendments
thereto;
(e) The Company's Registration Statement on Form N-1A under the
Securities Act of 1933 as amended ("1933 Act") (File No.
33-10754) and under the 1940 Act as filed with the SEC on
December 11, 1987, and all amendments thereto; and
(f) The Company's most recent Prospectus and Statement of
Additional Information (such Prospectus, and Statement of
Additional Information as presently in effect and all
amendments and supplements thereto are herein called the
"Prospectus').
The Company will furnish the Adviser from time to time with copies
of all amendments of or supplements to the foregoing.
2. Services. The Company hereby appoints the Adviser to act as
investment adviser to the Fund for the period and on the terms set
forth in this Agreement. Intending to be legally bound, the Adviser
accepts such appointment and agrees to furnish the services required
herein to the Fund with compensation as hereinafter provided.
Subject to the supervision of the Company's Board of Directors the
Adviser will provide with respect to the Fund a continuous
investment program, including investment research and management
with respect to all securities and investments and cash equivalents
in such Fund. The Adviser will compute the Net Asset Value and daily
net income of the Fund at the times and in the manner set forth in
the Prospectus and resolutions of the Company's Board of Directors
applicable to the Fund. The Adviser will determine from time to time
what securities and other investments will be purchased, retained or
sold by the Fund. The Adviser will provide the services under this
Agreement in accordance with the Fund's investment objective,
policies and restrictions as stated in the Prospectus and
resolutions of the Company's Board of Directors applicable to the
Fund.
3. Covenants by Adviser. The Adviser agrees with respect to the
services provided to the Fund that it:
(a) will conform with all applicable Rules and Regulations of
the Securities and Exchange Commission;
(b) will use the same skill and care in providing such services
as it uses in providing services to fiduciary accounts for
which it has investment responsibilities;
(c) will not make loans to any person to purchase or carry Fund
shares, or make loans to the Fund;
(d) will place orders pursuant to its investment determinations
for the Fund either directly with the issuer or with any
broker or dealer. In placing orders with brokers and dealers,
the Adviser will attempt to obtain the best net price and the
most favorable execution of its orders. Consistent with the
obligation, when the execution and price offered by two or
more brokers or dealers are comparable, the Adviser may, in
its discretion, purchase and sell portfolio securities from
and to brokers and dealers who provide the Company with
research advice and other services. In no instance will
portfolio securities be purchased from or sold to the
Adviser, any sub-adviser, the Administrator, the Distributor,
or an affiliated person of the Fund, the Adviser, any sub-
adviser, or the Distributor; except as permitted under the
1940 Act;
(e) will maintain all books and records with respect to the
securities transactions for the Fund to the extent agreed
upon between the Company and the Advisor, keep the Company's
books of account with respect to the Fund and furnish the
Company's Board of Directors with such periodic and special
reports as the Board may reasonably request with respect to
the Fund;
(f) will treat confidentially and as proprietary information of
the Company all records and other information relative to the
Company and prior, present or potential shareholders, and
will not use such records and information for any purpose
other than performance of its responsibilities and duties
hereunder (except after prior notification to and approval
in writing by the Company, which approval shall not be
unreasonably withheld and may not be withheld and will be
deemed granted where the Adviser may be exposed to civil
or criminal contempt proceedings for failure to comply,
when requested to divulge such information by duly
constituted authorities, or when so requested by the
Company).
4. Services Not Exclusive. The services furnished by the Adviser
hereunder are deemed not to be exclusive, and the Adviser shall be
free to furnish similar services to others so long as its services
under this Agreement are not impaired thereby.
5. Books and Records. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Adviser hereby agrees that all records
which it maintains for the Company, are the property of the Company
and further agrees to surrender promptly to the Company any of such
records upon the Company's request. The Adviser further agrees to
maintain the records required by the following sections of Rule 31
under the Investment Company Act of 1940; all in the manner
required under Rules 31a-2 and 31a-3: 31a-1(a); 31a-1 (b)
(1), (2), (3), (5), through (11).
6. Expenses. During the term of this Agreement, the Adviser will pay
all expenses incurred by it in connection with its activities under
this Agreement other than the cost of securities (including brokerage
commissions, if any) purchased for the Fund.
For the services provided and the expenses assumed with respect to
the Fund pursuant to this Agreement, the Company will pay the Adviser
from the assets belonging to the Fund and the Adviser will accept as
full compensation therefor a fee, computed daily and paid monthly,
at an annual rate of .12 of 1% of the first $200 million of average
daily net assets of the Fund, .10 of 1% of the average daily net
assets over $200 million but under $400 million, .09 of 1% of the
average daily net assets of $400 million and over but under $600
million, and .08 of 1% of the average daily net assets over $600
million.
If in any fiscal year the aggregate expenses of the Fund (as defined
under the securities regulations of any state having jurisdiction
over the Company) exceed the expense limitations of any such state,
the Adviser will waive fees to the extent required to attain
compliance. The obligation of the Adviser to waive fees to the
Company hereunder is limited in any fiscal year to the amount of
its fee hereunder for such fiscal year provided, however, that
notwithstanding the foregoing, the Adviser shall waive or reimburse
the Company for such excess expenses regardless of the amount of
fees paid to it during such fiscal year to the extent that the
securities regulations of any state having jurisdiction over the
Company so require. Such expenses waiver or reimbursement, if any,
will be estimated, reconciled and paid on a monthly basis.
7. Limitation of Liability. The Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by
the Company in connection with the performance of this Agreement,
except a loss resulting from a breach of fiduciary duty with respect
to the receipt of compensation for services or loss resulting from
willful misfeasance, bad faith or gross negligence on the part of
the Adviser in the performance of its duties or from reckless
disregard by it or its obligations and duties under the Agreement.
Any person, even though also an officer, partner, employee, or agent
of the Adviser, who may be or become an officer, Director, employee
or agent of the Company, shall be deemed, when rendering service to
the Company or acting on any business of the Company (other than
services or business in connection with Adviser's duties as
investment adviser hereunder), to be rendering such services to or
acting solely, for the Company and not as an officer, partner,
employee or agent or one under the control or direction of the
Adviser even though paid by it.
8. Duration and Termination. This Agreement will become effective
as of the date first written above, and shall continue in effect
for a period of two years. Thereafter if not terminated, this
Agreement shall continue in effect with respect to the Fund for
successive annual periods, provided such continuance is
specifically approved at least annually (a) by the vote of a
majority of those members of the Company's Board of Directors
who are not interested persons of any party to this Agreement,
cast in person at a meeting called for the purpose of voting on
such approval; (b) and by a majority of the Company's Board or by
vote of a majority of the outstanding voting securities of the
Fund. Notwithstanding the foregoing, this Agreement may be
terminated at any time without the payment of any penalty, by the
Company (by vote of the Company's Board of Directors or by vote
of a majority of the outstanding voting securities of the Fund),
or by the Adviser on sixty days' written notice. This Agreement
will immediately terminate in the event of its assignment. As
used in the Agreement, the terms "majority of the outstanding
voting securities," "interested person" and "assignment" shall
have the same meaning of such terms in the 1940 Act.)
9. Amendment of this Agreement. No provision of this Agreement
may be changed, waived, discharged or terminated orally, except
by an instrument in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is
sought. No material amendment of this Agreement shall be
effective with respect to the Fund until approved by vote of a
majority of the outstanding voting securities of the Fund.
10. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit
any of the provisions hereof or otherwise affect their
construction or effect. If any provision of this Agreement
shall be held or made invalid by a court decision, statute,
rule or otherwise, the remainder of this Agreement shall be
not be affected thereby. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their
respective successors and shall be governed by Virginia law.
11. Names. The names "Commonwealth Cash Reserve Fund, Inc." and
"Directors of Commonwealth Cash Reserve Fund, Inc." refer
respectively to the Company and the Directors as Directors but
not individually or personally, acting from time to time under
the Articles of Incorporation dated December 2, 1986, which is
hereby referred to and a copy of which is on file at the office
of the Clerk of the State Corporation Commission of the
Commonwealth of Virginia and the principal office of the
Company. The obligations of "Commonwealth Cash Reserve Fund,
Inc." entered into in the name or on behalf thereof by any of
the Directors, representatives or agents are made not
individually, but in such capacities, and are not binding upon
any of the Directors, Shareholders, or representatives of the
Directors personally, but bind only the Company's Property,
and all persons dealing with any class of shares of the
Company must look solely to the Company's Property belonging
to such class for the enforcement of any claims against the
Company.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their Officers designated below
as of the day and year first above written.
COMMONWEALTH CASH RESERVE FUND, INC.
BY; /s/ Xxxxxxx X. Xxxxx
Xxxxxxx X. Xxxxx
President
PFM ASSET MANAGEMENT LLC
BY; /s/ Xxxxxx Xxxxxxxx
Xxxxxx Xxxxxxxx
Managing Director
