EXHIBIT (D)(3)
ADVISORY AGREEMENT
AGREEMENT made this 31st day of December 2004 by and between CGM TRUST, a
Massachusetts business trust (the "Trust"), with respect to its CGM FOCUS FUND
series (the "Series"), and CAPITAL GROWTH MANAGEMENT LIMITED PARTNERSHIP, a
Massachusetts partnership (the "Adviser").
WITNESSETH:
WHEREAS, the Trust and the Adviser wish to enter into an agreement setting
forth the terms upon which the Adviser will perform certain services for the
Series;
NOW THEREFORE, in consideration of the premises and covenants hereinafter
contained, the Trust and the Adviser agree as follows:
1. The Trust hereby employs the Adviser to manage the investment and
reinvestment of the assets of the Series and to perform the other services
herein set forth, subject to the supervision of the Board of Trustees of the
Trust. The Adviser hereby accepts such employment and agrees, at its own
expense, to render the services and to assume the obligations herein set forth,
for the compensation herein provided. The Adviser shall for all purposes herein
be deemed to be an independent contractor and shall, unless otherwise expressly
provided or authorized, have no authority to act for or represent the Trust in
any way or otherwise be deemed an agent of the Trust.
2. In carrying out its obligations to manage the investment and
reinvestment of the assets belonging to the Series, the Adviser shall:
(a) obtain and evaluate such economic, statistical and financial
data and information and undertake such additional investment research as
it shall believe necessary or advisable for the management of the
investment and reinvestment of the assets belonging to the Series in
accordance with the investment objective and policies of the Series;
(b) take such steps as are necessary to implement the investment
policies of the Series by purchase and sale of securities, including the
placing of orders for such purchase and sale; and
(c) regularly report to the Board of Trustees with respect to the
implementation of the investment policies of the Series.
3. All activities in connection with the management of the affairs of the
Series undertaken by the Adviser pursuant to this Agreement shall at all times
be subject to the supervision and control of the Board of Trustees, any duly
constituted committee thereof or any officer of the Trust acting pursuant to
like authority.
4. In addition to performing at its expense the obligations set forth in
section 2 hereof, the Adviser shall furnish to the Trust at the Adviser's own
expense or pay the expenses of the Trust for the following:
(a) office space in such place or places as may be agreed upon from
time to time, and all necessary office supplies, facilities and equipment;
(b) necessary executive and other personnel for managing the affairs
of the Series (exclusive of those related to and to be performed under
contract for custodial, transfer, dividend and plan agency services by the
bank selected to perform such services and exclusive of any managerial
functions described in section 5); and
(c) compensation, if any, of Trustees of the Trust who are
directors, officers, partners or employees of the Adviser or any
affiliated person (other than a registered investment company) of the
Adviser.
5. Nothing in section 4 hereof shall require the Adviser to bear, or to
reimburse the Trust for:
(a) any of the costs of printing and distributing the items referred
to in subsection (m) of this section 5, except as otherwise provided in
any agreement between the Trust and its principal underwriter in effect
from time to time relating to distribution of shares of the Series;
(b) compensation of Trustees of the Trust who are not directors,
officers, partners or employees of the Adviser or of any affiliated person
(other than a registered investment company) of the Adviser;
(c) registration, filing and other fees in connection with
requirements of regulatory authorities;
(d) the charges and expenses of the custodian appointed by the Trust
for custodial services;
(e) charges and expenses of independent accountants retained by the
Trust;
(f) charges and expenses of any transfer agents, paying agents, plan
agents and registrars appointed by the Trust;
(g) brokers, commissions and issue and transfer taxes chargeable to
the Trust in connection with securities transactions to which the Trust is
a party;
(h) taxes and fees payable by the Trust to Federal, State or other
governmental agencies;
(i) the cost of certificates representing shares of the Series;
(j) expenses of meetings of shareholders and Trustees of the Trust;
(k) charges and expenses of legal counsel retained by the Trust;
(l) interest, including interest on borrowings by the Trust;
(m) the cost of services, including services of counsel, required in
connection with the preparation of the Trust's registration statements and
prospectuses with respect to shares of the Series, including amendments
and revisions thereto, annual, semiannual and other periodic reports of
the Trust, and notices and proxy solicitation material furnished to
shareholders of the Trust or regulatory authorities, to the extent that
any such materials relate to the Series or to the shareholders thereof;
and
(n) the Trust's expenses of bookkeeping, accounting, auditing and
financial reporting, including related clerical expenses with respect to
the Series.
6. The services of the Adviser to the Trust hereunder are not to be deemed
exclusive and the Adviser shall be free to render similar services to others, so
long as its services hereunder are not impaired thereby.
7. As full compensation for all services rendered, facilities furnished
and expenses borne by the Adviser hereunder, the Trust shall pay the Adviser
compensation at the annual percentage rates of the corresponding levels of the
Series' average daily net assets set forth in the following chart:
Annual Average Daily
Percentage Rate Net Asset Value Levels
--------------- ----------------------
1.00% of the first $500,000,000;
0.95% of the next $500,000,000; and
0.90% of such assets in excess of $1,000,000,000.
Such compensation shall be payable monthly in arrears or at such
other intervals, not less frequently than quarterly, as the Board of Trustees of
the Trust may from time to time determine and specify in writing to the Adviser.
The Adviser hereby acknowledges that the Trust's obligation to pay such
compensation is binding only on the assets and property belonging to the Series.
8. It is understood that any of the shareholders, trustees, officers,
employees and agents of the Trust may be a partner, shareholder, director,
officer, employee or agent of, or be otherwise interested in, the Adviser, any
affiliated person of the Adviser, any organization in which the Adviser may have
an interest of any organization which may have an interest in the Adviser; that
the Adviser, any such affiliated person or any such organization may have an
interest in the Trust; and that the existence of any such dual interest shall
not affect the validity hereof or of any transactions hereunder except as
otherwise provided in the Agreement and Declaration of Trust, as amended or
restated, of the Trust and the partnership agreement of the Adviser,
respectively, or by specific provisions of applicable law.
9. The Adviser consents to the use by the Trust of the names "CGM Trust"
and "CGM Focus Fund," or other names embodying the words "Capital Growth
Management" or "CGM" in such forms as the Adviser shall in writing approve, but
only on condition that so long as this Agreement shall remain in force the Trust
shall fully perform, fulfill and comply with all provisions of this Agreement
expressed herein to be performed, fulfilled or complied with by it. No such name
shall be used by the Trust at any time or in any place for any purposes or under
any conditions except as in this paragraph provided.
Upon any termination of this Agreement by either party or upon the
violation of any of its provisions by the Trust, the Trust will, at the request
of the Adviser made within sixty days after the Adviser has knowledge of such
termination or violation, change its name so as to eliminate all reference to
"Capital Growth Management" or "CGM" and will not thereafter transact any
business in a name containing "Capital Growth Management" or "CGM" in any form
or combination whatsoever, or designate itself as the same business trust as or
successor to a business trust of such name, or otherwise use the name "Capital
Growth Management" or "CGM" or any other reference to the Adviser. Such
covenants on the part of the Trust shall be binding upon it, its Trustees,
officers, shareholders, creditors and all other persons claiming under or
through it.
10. This Agreement shall become effective as of the date of its execution,
and
(a) unless otherwise terminated, after June 1, 2006 this Agreement
shall continue in effect-only so long as such continuance is specifically
approved at least annually (i) by the Board of Trustees of the Trust or by
vote of a majority of the outstanding voting securities of the Series, and
(ii) by vote of a majority of the Trustees of the Trust Who are not
interested persons of the Trust or the Adviser, cast in person at a
meeting called for the purpose of voting on such approval;
(b) this Agreement may at any time be terminated on sixty days
written notice to the Adviser either by vote of the Board of Trustees of
the Trust or by vote of a majority of the outstanding voting securities of
the Series;
(c) this Agreement shall automatically terminate in the event of its
assignment;
(d) this Agreement may be terminated by the Adviser on ninety days
written notice to the Trust.
Termination of this Agreement pursuant to this section 10 shall be without
payment of any penalty.
11. This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Trust shall have been
approved by vote of a majority of the outstanding voting securities of the
Series and by vote of a majority of the Trustees of the Trust who are not
interested persons of the Trust or the Adviser, cast in person at a meeting
called for the purpose of voting on such approval.
12. For the purpose of this Agreement, the terms "vote of a majority of
the outstanding voting securities," "interested person," "affiliated person" and
"assignment" shall have their respective meanings defined in the Investment
Company Act of 1940, subject, however, to such exemptions as may be granted by
the Securities and Exchange Commission under said Act. References in this
Agreement to any assets, property or liabilities "belonging to" the Series shall
have the meaning defined in the Trust's Agreement and Declaration of Trust.
13. In the absence of willful misfeasance, bad faith or gross negligence
on the part of the Adviser, or reckless disregard of its obligations and duties
hereunder, the Adviser shall not be subject to any liability to the Trust, to
any shareholder of the Trust or to any other person, firm or organization, for
any act or omission in the course of, or connected with, rendering services
hereunder.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
CGM TRUST on behalf of its CGM FOCUS FUND series
By: /s/ Xxx Xxxxxxx
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Xxx Xxxxxxx, Treasurer
CAPITAL GROWTH MANAGEMENT LIMITED PARTNERSHIP
By: /s/ G. Xxxxxxx Xxxxxxx
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G. Xxxxxxx Xxxxxxx, Chairman and Treasurer
Kenbob, Inc., General Partner
A copy of the Amended and Restated Agreement and Declaration of Trust, as
amended, of CGM Trust is on file with the Secretary of State of the Commonwealth
of Massachusetts, and notice is hereby given that this Agreement is executed
with respect to the Series on behalf of the Trust by officers of the Trust as
officers and not individually and that the obligations of or arising out of this
Agreement are not binding upon any of the Trustees, officers or shareholders
individually but are binding only upon the assets and property belonging to the
Series.
