Exhibit E(i)
Distribution Agreement
DISTRIBUTION AGREEMENT
THIS AGREEMENT made as of February 26, 2007 between COMMONWEALTH
INTERNATIONAL SERIES TRUST (the "Trust"), having an office at 0000 Xxx Xxxxxx
#000, Xxxxxxx, Xxxxx 00000, and BISYS Fund Services Limited Partnership
("Distributor"), having an office at 000 Xxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx
00000.
WHEREAS, the Trust is an open-end management investment company, organized
as a Massachusetts Business Trust, and registered with the Securities and
Exchange Commission (the "Commission") under the Investment Company Act of 1940,
as amended (the "1940 Act"); and
WHEREAS, it is intended that Distributor act as the distributor of the
shares of beneficial interest ("Shares") of each series of the Trust, as listed
on Schedule A, and such series as are hereafter created (all of the foregoing
series individually referred to herein as a "Fund" and collectively as the
"Funds").
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services as Distributor.
1.1 Distributor will act as agent of Trust on behalf of each Fund for the
distribution of the Shares covered by the registration statement of Trust then
in effect under the Securities Act of 1933, as amended (the "Securities Act")
and the 1940 Act. As used in this Agreement, the term "registration statement"
shall mean the registration statement of the Trust and any amendments thereto,
then in effect, including Parts A (the Prospectus), B (the Statement of
Additional Information) and C of each registration statement, as filed on Form
N-1A, or any successor thereto, with the Commission, together with any
amendments thereto. The term "Prospectus" shall mean the then-current form of
Prospectus and Statement of Additional Information used by the Funds, in
accordance with the rules of the Commission, for delivery to shareholders and
prospective shareholders after the effective dates of the above-referenced
registration statements, together with any amendments and supplements thereto.
The Trust will notify Distributor in advance of any proposed changes to Schedule
A to this Agreement.
1.2 Consistent with the understanding between the Funds and the
Distributor, Distributor may solicit orders for the sale of the Shares and may
undertake such advertising and promotion as it believes is reasonable in
connection with such solicitation. The Trust understands that Distributor is now
and may in the future be the distributor of the shares of many other investment
companies or series, including investment companies having investment objectives
similar to those of the Trust. The Trust further understands that shareholders
and potential shareholders in the Trust may invest in shares of such other
investment companies. The Trust agrees that Distributor's obligations to other
investment companies shall not be deemed in conflict with its obligations to the
Trust under this Section 1.2.
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1.3 Consistent with the understanding between the Funds and the
Distributor, and subject to the last sentence of this Section 1.3, Distributor
may engage in such activities as both parties deem appropriate in connection
with the promotion and sale of the Shares, including without limitation entering
into dealer agreements and other selling agreements with broker-dealers and
other intermediaries; advertising; compensation of underwriters, dealers and
sales personnel; the printing and mailing of Prospectuses to prospective
shareholders other than current shareholders; and the printing and mailing of
sales literature. Distributor shall have no obligation to make any payments to
any third parties, whether as financing of commissions, sales concessions or
similar payments; finder's fees; compensation; or otherwise, unless: (i)
Distributor has received a corresponding payment from the applicable Fund's
Distribution Plan (as defined in Section 2 of this Agreement), the Fund's
investment adviser (the "Adviser") or from another source as may be permitted by
applicable law, and (ii) such corresponding payment has been approved by the
Trust's Board of Trustees (the "Board").
1.4 In its capacity as distributor of the Shares, all activities of the
Distributor and its partners, agents, and employees shall comply with all
applicable laws, rules and regulations, including, without limitation, the 1940
Act, all applicable rules and regulations promulgated by the Commission
thereunder, and all applicable rules and regulations adopted by any securities
association registered under the Securities Exchange Act of 1934. During the
term of this Agreement, Distributor shall maintain its legal status as a
distributor and shall comply with applicable laws, rules and regulations,
including those of the NASD, applicable to it. Distributor shall review written
advertisements and sales literature for compliance with NASD requirements.
1.5 Whenever in their judgment such action is warranted by unusual market,
economic or political conditions or by abnormal circumstances of any kind, the
Trust's officers may upon reasonable notice instruct the Distributor to decline
to accept any orders for or make any sales of the Shares until such time as
those officers deem it advisable to accept such orders and to make such sales.
1.6 The Trust agrees to inform the Distributor from time to time of the
states in which the Fund or its administrator has registered or otherwise
qualified Shares for sale, and the Trust agrees at its own expense to execute
any and all documents and to furnish any and all information and otherwise to
take all actions that may be reasonably necessary in connection with the
qualification of the Shares for sale in such states as the Distributor may
designate.
1.7 The Trust shall furnish from time to time, for use in connection with
the sale of the Shares, such supplemental information with respect to the Funds
and the Shares as Distributor may reasonably request; and the Trust warrants
that the statements contained in any such supplemental information will fairly
show or represent what they purport to show or represent. The Trust shall also
furnish Distributor upon request with: (a) unaudited semi-annual statements of
the Funds' books and accounts prepared by the Trust, and (b) from time to time
such additional information regarding the Funds as the Distributor may
reasonably request.
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1.8 The Trust represents and warrants to Distributor that: (a) all
registration statements, and each Prospectus, filed by the Trust with the
Commission under the Securities Act and the 1940 Act shall be prepared in
conformity with requirements of said Acts and rules and regulations of the
Commission thereunder; (b) all Trust related advertisement or sales literature
shall be prepared in conformity with requirements of applicable laws and
regulations; (c) the registration statement and Prospectus and advertisement or
sales literature shall contain all statements required to be stated therein in
conformity with said Acts, laws and regulations and the rules and regulations of
the Commission thereunder or other applicable regulatory authority, and all
statements of fact contained in any such registration statement, Prospectus and
advertisement or sales literature are true and correct in all material respects;
(d) neither any registration statement nor any Prospectus nor any advertisement
or sales literature includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading to a purchaser of the Shares; (e) no portfolio
securities transactions of the Funds, or commissions in connection therewith,
shall be directed to any dealer by the Funds, the Adviser, or any of their
respective affiliates, in connection with any fees that are not permitted by
Rule 12b-1 under the 1940 Act ("Non-Rule 12b-1 Fees") payable to any dealer; (f)
each Fund or the Adviser has implemented policies and procedures required by
Rule 12b-1(h)(2)(ii) under the 1940 Act and has determined that the criteria
used to select broker-dealers that both execute Fund portfolio transactions and
promote or sell the Shares is reasonable; and (g) each Fund's Prospectus
contains such disclosure with respect to fees paid and charges imposed in
connection with the sale of the Shares as is necessary to comply with all laws,
rules and regulations, including, without limitation, disclosure of all Non-Rule
12b-1 Fees as required by Rule 2830(l) of the NASD Conduct Rules, as well as the
nature and extent of the Non-Rule 12b-1 Fees, or such Non-Rule 12b-1 fees and
charges will be in compliance with the rules and regulations of the NASD,
including, without limitation, Rule 2830 of the NASD Conduct Rules, as they may
be amended from time to time.
The foregoing representations and warranties shall continue throughout the term
of this Agreement and be deemed to be of a continuing nature, applicable to all
Shares distributed hereunder. The Distributor may, but shall not be obligated
to, request from time to time such amendment or amendments to any registration
statement and such supplement or supplements to any Prospectus as, in the light
of future developments, may, in the opinion of the Distributor's counsel, be
necessary or advisable. If the Trust shall not propose any amendment or
amendments and/or supplement or supplements within 45 days after receipt by the
Trust of a written request from Distributor to do so, Distributor may, at its
option, terminate this Agreement, provided such request is consistent with the
obligations of the Trust under any applicable laws or regulations or other
agreements by which it is bound. In such case, the Distributor will be held
harmless from, and indemnified by Trust for, any liability or loss resulting
from the failure to implement such amendment. The Trust shall not file any
amendment to any registration statement or supplement to any Prospectus without
giving Distributor reasonable notice thereof in advance; provided, however, that
nothing contained in this Agreement shall in any way limit the Trust's right to
file at any time such amendments to any registration statement and/or
supplements to any Prospectus, of whatever character, as the Trust may deem
advisable, such right being in all respects absolute and unconditional.
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1.9 The Trust authorizes the Distributor and dealers to use any then
current Prospectus in the form furnished by the Trust from time to time in
connection with the sale of the Shares.
1.10 The Distributor may utilize agents in its performance of its services
and, with prior notice to the Trust, appoint in writing other parties qualified
to perform specific administration services reasonably acceptable to the Trust
(individually, a "Sub-Agent") to carry out some or all of its responsibilities
under this Agreement; provided, however, that a Sub-Agent shall be the agent of
the Distributor and not the agent of the Trust, and that the Distributor shall
be fully responsible for the acts of such Sub-Agent and shall not be relieved of
any of its responsibilities hereunder by the appointment of a Sub-Agent.
1.11 The Distributor shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Trust in connection with the
matters to which this Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the Distributor's part in the
performance of its obligations under this Agreement, from reckless disregard by
the Distributor of its obligations under this Agreement, or from the
Distributor's failure to comply with laws, rules and regulations applicable to
it in connection with its activities hereunder. So long as Distributor acts in
good faith, the Trust agrees to indemnify, defend and hold harmless the
Distributor, its officers, partners, employees, subsidiaries, affiliates, and
any person who controls the Distributor within the meaning of Section 15 of the
Securities Act, (collectively, "Distributor Indemnitees"), from and against any
and all claims, demands, liabilities and expenses (including the reasonable cost
of investigating or defending such claims, demands or liabilities and any
reasonable counsel fees incurred in connection therewith) (collectively,
"Claims") which the Distributor Indemnitees may incur under the Securities Act,
or under common law, or otherwise, arising out of or based upon: (a) the
Distributor acting as distributor of the Funds; (b) the Distributor or any
subsidiary or affiliate of the Distributor acting as a member of the National
Securities Clearing Corporation (or any successor or other entity performing
similar functions) ("NSCC") on behalf of the Trust; (c) the Distributor or any
subsidiary or affiliate of the Distributor entering into selling agreements,
dealer agreements, participation agreements, NSCC Trust SERV or Networking
agreements or similar agreements (collectively, "Dealer Agreements") with
financial intermediaries on behalf of the Trust; (d) any of the following: (i)
any untrue statement, or alleged untrue statement, of a material fact contained
in any registration statement or any Prospectus, (ii) any omission, or alleged
omission, to state a material fact required to be stated in any registration
statement or any Prospectus or necessary to make the statements therein not
misleading, or (iii) any untrue statement, or alleged untrue statement, of a
material fact in any Trust-related or provided advertisement or sales
literature, or any omission, or alleged omission, to state a material fact
required to be stated therein to make the statements therein not misleading, in
either case notwithstanding the exercise of reasonable care in the preparation
or review thereof by the Distributor, (e) the breach by the Trust of any
provision of this Agreement, including without limitation a breach by the Trust
of its obligations with respect to any Fund's transfer agent as set forth in
Section 1.15 of this Agreement, to the extent applicable; or (f) the electronic
processing of orders over the internet at the Trust's request; provided,
however, that the Trust's agreement to indemnify the Distributor Indemnitees
pursuant to this Section 1.11 shall not be construed to cover any Claims (A)
pursuant to subsection (d) above to the extent such untrue statement, alleged
untrue statement, omission, or alleged omission, was furnished in writing, or
omitted from the relevant writing furnished, as the case may be, to the Trust by
the Distributor for use in the registration statement or in corresponding
statements made in the Prospectus, advertisement or sales literature; (B)
arising out of or based upon the willful misfeasance, bad faith or gross
negligence of the Distributor in the performance of its obligations under this
Agreement or the Distributor's reckless disregard of its obligations under this
Agreement; or (C) arising out of or based upon the Distributor's failure to
comply with laws, rules and regulations applicable to it in connection with its
activities hereunder.
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In the event of a Claim for which the Distributor Indemnitees may be
entitled to indemnification hereunder, the Distributor shall fully and promptly
advise the Trust in writing of all pertinent facts concerning such Claim,
including the identification of the parties against whom the Claim is made but
failure to do so in good faith shall not affect the Trust's indemnification
obligation under this Agreement, except to the extent that the Trust is
materially prejudiced thereby. The Trust will be entitled to assume the defense
of any suit brought to enforce any such Claim if such defense shall be conducted
by counsel of good standing chosen by the Trust and approved by the Distributor,
which approval shall not be unreasonably withheld. In the event any such suit is
not based solely on an alleged untrue statement, omission, or wrongful act on
the Trust's part, the Distributor shall have the right to participate in the
defense. In the event the Trust elects to assume the defense of any such suit
and retain counsel of good standing so approved by the Distributor, the
Distributor Indemnitees in such suit shall bear the fees and expenses of any
additional counsel retained by any of them, but in any case where the Trust does
not elect to assume the defense of any such suit or in case the Distributor
reasonably withholds approval of counsel chosen by the Trust, the Trust will
reimburse the Distributor Indemnitees named as defendants in such suit, for the
reasonable fees and expenses of any counsel retained by them to the extent
related to a Claim covered under this Section 1.11. The Trust's indemnification
agreement contained in this Section 1.11 shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of the
Distributor Indemnitees, and shall survive the delivery of any Shares.
1.12 The Distributor agrees to indemnify, defend and hold harmless the
Trust, its officers, trustees, directors, employees, and any person who controls
the Trust within the meaning of Section 15 of the Securities Act (collectively,
"Trust Indemnitees"), from and against any and all Claims which the Trust
Indemnitees may incur under the Securities Act or under common law or otherwise,
arising out of or based upon (a) any untrue statement, or alleged untrue
statement, of a material fact contained in any registration statement,
Prospectus, or Trust-related advertisement or sales literature, or upon any
omission, or alleged omission, to state a material fact in such materials that
would be necessary to make the information therein not misleading, which untrue
statement, alleged untrue statement, omission, or alleged omission, was
furnished in writing, or omitted from the relevant writing furnished, as the
case may be, to the Trust by the Distributor for use in the registration
statement or in corresponding statements made in the Prospectus, or
advertisement or sales literature; (b) the willful misfeasance, bad faith or
gross negligence of the Distributor in the performance of its obligations under
this Agreement, or the Distributor's reckless disregard of its obligations under
this Agreement, or (c) the Distributor's failure to comply with laws, rules and
regulations applicable to it in connection with its activities hereunder (other
than in respect of Fund-related advertisements or sales literature that fail to
comply with applicable laws despite the Distributor's exercise of reasonable
care in the preparation and review thereof); provided, however, that the
Distributor's agreement to indemnify the Trust Indemnitees pursuant to this
Section 1.12 shall not be construed to cover any Claims (A) arising out of or
based upon the willful misfeasance, bad faith or gross negligence of the Trust
in the performance of its obligations under this Agreement or the Trust's
reckless disregard of its obligations under this Agreement; or (B) arising out
of or based upon the Trust's failure to comply with laws, rules and regulations
applicable to it in connection with its activities hereunder.
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In the event of a Claim for which the Trust Indemnitees may be entitled to
indemnification hereunder, the Trust shall fully and promptly advise the
Distributor in writing of all pertinent facts concerning such Claim, but failure
to do so in good faith shall not affect the Distributor's indemnification
obligations under this Agreement except to the extent that the Distributor is
materially prejudiced thereby. The Distributor will be entitled to assume the
defense of any suit brought to enforce any such Claim if such defense shall be
conducted by counsel of good standing chosen by the Distributor and approved by
the Trust, which approval shall not be unreasonably withheld. In the event any
such suit is not based solely on an alleged untrue statement, omission, or
wrongful act on the Distributor's part, the Trust shall have the right to
participate in the defense. In the event the Distributor elects to assume the
defense of any such suit and retain counsel of good standing so approved by the
Trust, the Trust Indemnitees in such suit shall bear the fees and expenses of
any additional counsel retained by any of them, but in any case where the
Distributor does not elect to assume the defense of any such suit or in case the
Trust reasonably withholds approval of counsel chosen by the Distributor, the
Distributor will reimburse the Trust Indemnitees named as defendants in such
suit, for the reasonable fees and expenses of any counsel retained by them to
the extent related to a Claim covered under this Section 1.12. The Distributor's
indemnification agreement contained in this Section 1.12 shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of the Trust Indemnitees, and shall survive the delivery of any Shares.
1.13 No Shares shall be offered by either the Distributor or the Trust
under any of the provisions of this Agreement and no orders for the purchase or
sale of Shares hereunder shall be accepted by the Trust if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the
Securities Act or if and so long as a current Prospectus as required by Section
10(b)(2) of said Securities Act is not on file with the Commission; provided,
however, that: (a) the Distributor will not be obligated to cease offering
shares until it has received from the Trust written notice of such events, and
(b) nothing contained in this Section 1.13 shall in any way restrict or have an
application to or bearing upon the Trust's obligation to repurchase Shares from
any shareholder in accordance with the provisions of the Trust's Prospectus,
Agreement and Declaration of Trust, or By-laws.
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1.14 The Trust agrees to advise the Distributor as soon as reasonably
practical by a notice in writing delivered to the Distributor:
(a) of any request by the Commission for amendments to the
registration statement or Prospectus then in effect or for
additional information;
(b) in the event of the issuance by the Commission of any stop
order suspending the effectiveness of the registration
statement or Prospectus then in effect or the initiation by
service of process on the Trust of any proceeding for that
purpose;
(c) of the happening of any event that makes untrue any statement
of a material fact made in the registration statement or
Prospectus then in effect or which requires the making of a
change in such registration statement or Prospectus in order
to make the statements therein not misleading; and
(d) of any other event which could reasonably be expected to have
a material adverse impact upon the offering of Shares or the
Distributor's provision of services under this Agreement.
For purposes of this section, informal requests by or acts of the Staff of
the Commission shall not be deemed actions of or requests by the Commission
unless they would reasonably be expected to have a material negative impact upon
the offering of Shares.
1.15 During any period for which a party other than Distributor or one of
its affiliates acts as any Fund's transfer agent ("Transfer Agent"), the
following provisions shall apply:
(a) The Trust shall ensure that the Transfer Agent complies with all
requirements of law and all provisions of Dealer Agreements that are applicable
to the Transfer Agent or the services provided by Transfer Agent, or that are
within the control of the Transfer Agent, including without limitation laws and
Dealer Agreement provisions with respect to: (i) providing shareholder account
data to the dealer or other third parties; (ii) facilitating the transfer of
Shares held directly with the Transfer Agent; (iii) indemnifying a dealer
against claims to which the dealer may become subject insofar as any Claim
arises out of or is based on any error or alleged error made in the calculation
of any Fund's net asset value per Share, to the extent that the Transfer Agent
is responsible for such error or alleged error; (iv) providing to Distributor
such information required by Distributor to facilitate payment of Rule 12b-1
fees to dealers in a timely and accurate manner; (v) transmitting purchase and
redemption orders for Shares through the NSCC Fund/SERV system ("Fund/SERV") or
in certain circumstances through such other means; (vi) making payment for
purchases and redemptions of Shares on the settlement date and as otherwise
required by the dealer through Fund/SERV; (vii) notifying the dealer whenever an
error is made in the calculation of any Fund's net asset value; (viii) rejecting
transactions in Shares originating in states or jurisdictions in which the Fund
shares are not qualified for sale; and (ix) complying with applicable
escheatment requirements.
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(b) The Trust will ensure that the Transfer Agent provides to Distributor
at least quarterly (or more frequently to the extent required by law applicable
to the Distributor) certifications of the Transfer Agent in a form reasonably
acceptable to the Distributor with respect to the Funds' compliance with
anti-money laundering laws, sales caps, breakpoints, and such other
certifications as Distributor shall reasonably request from time to time.
1.16 The Trust will ensure that any service provider to the Trust and/or
the Funds other than Distributor or one of its affiliates provides to
Distributor such cooperation and information as the Distributor shall reasonably
request from time to time, including, without limitation, information to
facilitate the Distributor's compliance with federal securities laws, as defined
within Rule 38a-1(e)(1) under the 1940 Act..
1.17 NOTWITHSTANDING ANY PROVISION IN THIS AGREEMENT TO THE CONTRARY,
UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY
INCIDENTAL, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR SIMILAR DAMAGES,
INCLUDING LOST REVENUE, LOST PROFITS OR LOST OR DAMAGED DATA, EVEN IF SUCH PARTY
HAS BEEN ADVISED OF THE POSSIBILITY OR LIKELIHOOD OF SUCH DAMAGES.
2. Fees.
2.1 (a) Attached as Schedule B to this Agreement are all plans of
distribution under Rule 12b-1 under the 1940 Act approved by the Funds and in
effect (collectively, the "Distribution Plan"). The Funds will deliver to
Distributor promptly after any changes thereto updated copies of the
Distribution Plan. For its services under this Agreement, the Distributor shall
be compensated and reimbursed for its expenses as set forth on Schedules C and D
to this Agreement. If the Funds have a Distribution Plan that permits and
authorizes them to compensate and reimburse the Distributor and required Board
approvals have been given, then the Funds shall be responsible for all such
compensation and reimbursements or such portions of it as have been permitted
and authorized under the Distribution Plan. It is contemplated by the
Distributor that the Adviser shall compensate and reimburse the Distributor for
its provision to the Funds of any distribution services for which the Funds are
not authorized to compensate and reimburse the Distributor, provided that
compensation and reimbursements other than the base fee and NASD fees and
expenses (allocable to the Trust), have been mutually agreed to in writing by
the Adviser and the Distributor. The fees set forth on Schedules C and D are
subject to change by Distributor upon 90 days advance notice.
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(b) It is expected as of the date of this Agreement that the services to
be provided by the Distributor under this Agreement may be provided at "less
than cost" (i.e., the compensation and reimbursements paid to the Distributor
will be less than the cost of providing such services). The Distributor has
estimated its costs based on certain assumptions about the level of service that
will be provided to the Company and the Funds, and there can be no guarantee
that Distributor's estimate will be accurate. The Distributor will review its
costs to provide services under this Agreement periodically, and the Distributor
reserves the right to adjust its compensation and reimbursements, after the
initial term, if the Distributor determines that such compensation and
reimbursements are not approximately equal to the cost of providing such
services.
2.2 In the event that the Distributor is requested or authorized by the
Trust or is required by governmental regulation, summons, subpoena,
investigation, examination or other legal or regulatory process to produce
documents or personnel with respect to services provided by the Distributor to
the Trust or any Fund, the Trust will, so long as the Distributor is not the
subject of the investigation or proceeding in which the information is sought,
pay the Distributor for its professional time (at its standard billing rates)
and reimburse the Distributor for its out-of-pocket expenses (including
reasonable attorneys fees) incurred in responding to such requests or
requirements.
2.3 In the event that the Trust is requested or authorized by the
Distributor or is required by governmental regulation, summons, subpoena,
investigation, examination or other legal or regulatory process to produce
documents or personnel with respect to services rendered by the Distributor to
the Trust or any Fund under this Agreement, the Distributor will, so long as the
Trust is not the subject of the investigation or proceeding in which the
information is sought, pay the Trust for its professional time (at its standard
billing rates not to exceed BISYS' standard rates) and reimburse the Trust for
its out-of-pocket expenses (including reasonable attorneys fees) incurred in
responding to such requests or requirements.
3. Sale and Payment.
3.1 As of the date of this Agreement, there are no Shares subject to a
sales load. To the extent Shares do become subject to a sales load, this Section
3 shall be applicable. Shares of a Fund may be subject to a sales load and may
be subject to the imposition of a distribution fee pursuant to the Distribution
Plan referred to above. To the extent that Shares of a Fund are sold at an
offering price which includes a sales load or subject to a contingent deferred
sales load with respect to certain redemptions (either within a single class of
Shares or pursuant to two or more classes of Shares), such Shares shall
hereinafter be referred to collectively as "Load Shares" (and in the case of
Shares that are sold with a front-end sales load, "Front-end Load Shares", or
Shares that are sold subject to a contingent deferred sales load, "CDSL
Shares"). It is specifically understood and agreed that redemption fees payable
by frequent traders to the Fund to compensate for the expenses of trading
activity do not represent a contingent deferred sales load. Funds that issue
Front-End Load Shares shall hereinafter be referred to collectively as
"Front-End Load Funds." Funds that issue CDSL Shares shall hereinafter be
referred to collectively as "CDSL Funds." Front-end Load Funds and CDSL Funds
may individually or collectively be referred as "Load Funds." Under this
Agreement, the following provisions shall apply with respect to the sale of, and
payment for, Load Shares.
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3.2 The Distributor shall have the right to offer Load Shares at their net
asset value and to sell such Load Shares to the public against orders therefor
at the applicable public offering price, as defined in Section 4 hereof. The
Distributor shall also have the right to sell Load Shares to dealers against
orders therefor at the public offering price less a concession determined by the
Distributor, which concession shall not exceed the amount of the sales charge or
underwriting discount, if any, referred to in Section 4 below.
3.3 Prior to the time of delivery of any Load Shares by a Load Fund to, or
on the order of, the Distributor, the Distributor shall pay or cause to be paid
to the Load Fund or to its order an amount in same-day funds equal to the
applicable net asset value of such Shares. The Distributor may retain so much of
any sales charge or underwriting discount as is not allowed by the Distributor
as a concession to dealers.
3.4 With respect to CDSL Funds, the following provisions shall be
applicable:
(a) The Distributor shall be entitled to receive all contingent
deferred sales load charges, 12b-1 payments and all distribution and
service fees set forth in the Distribution Plan adopted by a CDSL Fund
(collectively, the "CDSL Payments") with respect to CDSL Shares. The
Distributor may assign or sell to a third party (a "CDSL Financing
Entity") all or a part of the CDSL Payments on CDSL Shares that the
Distributor is entitled to receive under this Agreement. The Distributor's
right to the CDSL Payments on such CDSL Shares, if assigned or sold to a
CDSL Financing Entity, shall continue after termination of this Agreement.
(b) Unless the Distributor is legally entitled to receive such fees
as the financing entity, the right to receive all CDSL Payments in respect
of periods subsequent to the termination of this Agreement shall terminate
upon termination of this Agreement. In the event Distributor assigns or
sells all or a part of the CDSL Payments to a CDSL Financing Entity and
this Agreement is subsequently terminated, Distributor shall have no
obligation to assist the CDSL Financing Entity in connection with such
CDSL Financing Entity's right to receive such CDSL Payments subsequent to
such termination.
(c) The Distributor shall not be required to offer or sell CDSL
Shares of a CDSL Fund unless and until it has received a binding
commitment (a "Commitment") from the Trust or a CDSL Financing Entity
satisfactory to the Distributor, which Commitment shall cover all initial
and ongoing expenses and fees related to the offer and sale of such CDSL
Shares including, but not limited to, dealer reallowances, financing
commitment fees, and legal fees. If at any time during the term of this
Agreement the then-current CDSL financing is terminated through no fault
of the Distributor, the Distributor shall have the right to immediately
cease offering or selling CDSL Shares until substitute financing becomes
effective.
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(d) The Distributor and the Trust hereby agree that the terms and
conditions set forth herein regarding the offer and sale of CDSL Shares
may be amended upon approval of both parties in order to comply with the
terms and conditions of any agreement with a CDSL Financing Entity to
finance the costs for the offer and sale of CDSL Shares so long as such
terms and conditions are in compliance with the Distribution Plan.
4. Public Offering Price.
The public offering price of a Load Share shall be the net asset value of
such Load Share next determined, plus any applicable sales charge, all as set
forth in the current Prospectus of the Load Fund. The net asset value of Load
Shares shall be determined in accordance with the then-current Prospectus of the
Load Fund.
5. Issuance of Shares.
The Trust reserves the right to issue, transfer or sell Load Shares at net
asset values (a) in connection with the merger or consolidation of the Trust or
the Load Fund(s) with any other investment company or the acquisition by the
Trust or the Load Fund(s) of all or substantially all of the assets or of the
outstanding Shares of any other investment company; (b) in connection with a pro
rata distribution directly to the holders of Shares in the nature of a stock
dividend or split; (c) upon the exercise of subscription rights granted to the
holders of Shares on a pro rata basis; (d) in connection with the issuance of
Load Shares pursuant to any exchange and reinvestment privileges described in
any then-current Prospectus of the Load Fund; and (e) otherwise in accordance
with any then-current Prospectus of the Load Fund.
6. Term, Duration and Termination.
This Agreement shall become effective with respect to each Fund as of the
date first written above (the "Effective Date") (or, if a particular Fund is not
in existence on such date, on the earlier of the date an amendment to Schedule A
to this Agreement relating to that Fund is executed or the Distributor begins
providing services under this Agreement with respect to such Fund) and, unless
sooner terminated as provided herein, shall continue for a two year period
following the Effective Date. Thereafter, if not terminated, this Agreement
shall continue with respect to a particular Fund automatically for successive
one-year terms, provided that such continuance is specifically approved at least
annually (a) by the vote of a majority of those members of the Board who are not
parties to this Agreement or interested persons of any such party, cast in
person at a meeting for the purpose of voting on such approval and (b) by the
vote of the Board or the vote of a majority of the outstanding voting securities
of such Fund. This Agreement is terminable without penalty with 60 days' prior
written notice, by the Board, by vote of a majority of the outstanding voting
securities of the Trust, or by the Distributor. This Agreement will also
terminate automatically in the event of its assignment. (As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"interested persons" and "assignment" shall have the same meaning as ascribed to
such terms in the 1940 Act.)
11
7. Privacy.
Nonpublic personal financial information relating to consumers or
customers of the Funds provided by, or at the direction of, the Trust to the
Distributor, or collected or retained by the Distributor to perform its
obligations as distributor, shall be considered confidential information. The
Distributor shall not disclose or otherwise use any nonpublic personal financial
information relating to present or former shareholders of the Funds other than
for the purposes for which that information was disclosed to the Distributor,
including use under an exception in Rules 13, 14 or 15 of Securities and
Exchange Commission Regulation S-P in the ordinary course of business to carry
out those purposes. The Distributor shall have in place and maintain physical,
electronic and procedural safeguards reasonably designed to protect the
security, confidentiality and integrity of, and to prevent unauthorized access
to or use of, records and information relating to consumers and customers of the
Funds. The Trust represents to the Distributor that it has adopted a Statement
of its privacy policies and practices as required by Securities and Exchange
Commission Regulation S-P and agrees to provide the Distributor with a copy of
that statement annually.
8. Anti-Money Laundering Compliance.
8.1 Each of Distributor and the Trust acknowledges that it is a financial
institution subject to the USA Patriot Act of 2001 and the Bank Secrecy Act
(collectively, the "AML Acts"), which require, among other things, that
financial institutions adopt compliance programs to guard against money
laundering. Each represents and warrants to the other that it is in compliance
with and will continue to comply with the AML Acts and applicable regulations in
all relevant respects. The Distributor shall also provide written notice to each
person or entity with which it entered an agreement prior to the date hereof
with respect to sale of the Trust's Shares, such notice informing such person of
anti-money laundering compliance obligations applicable to financial
institutions under applicable laws and, consequently, under applicable
contractual provisions requiring compliance with laws.
8.2 The Distributor shall include specific contractual provisions
regarding anti-money laundering compliance obligations in agreements entered
into by the Distributor with any dealer that is authorized to effect
transactions in Shares of the Trust.
12
8.3 Each of Distributor and the Trust agrees that it will take such
further steps, and cooperate with the other as may be reasonably necessary, to
facilitate compliance with the AML Acts, including but not limited to the
provision of copies of its written procedures, policies and controls related
thereto ("AML Operations"). Distributor undertakes that it will grant to the
Trust, the Trust's anti-money laundering compliance officer and regulatory
agencies, reasonable access to copies of Distributor's AML Operations, books and
records pertaining to the Trust only. It is expressly understood and agreed that
the Trust and the Trust's compliance officer shall have no access to any of
Distributor's AML Operations, books or records pertaining to other clients of
Distributor.
9. Notices.
Any notice provided hereunder shall be sufficiently given when sent by
registered or certified mail, or by nationally recognized overnight courier, to
the party required to be served with such notice at the following address: if to
the Trust, to it at 0000 Xxx Xxxxxx #000, Xxxxxxx, Xxxxx 00000, Attention:
President with a copy to Fund Counsel at Rabil & Ropka, 000 Xxxxx Xxxx Xxxx,
Xxxxxxxxxxxx, Xxx Xxxxxx 00000; and if to Distributor, to it at 000 Xxxxxx
Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, Attention: Broker Dealer Chief Compliance
Officer, with a copy to BISYS Distribution Services, 0000 Xxxxxxx Xxxx,
Xxxxxxxx, Xxxx 00000, Attention: President, or at such other address as such
party may from time to time specify in writing to the other party pursuant to
this Section.
10. Confidentiality.
During the term of this Agreement, the Distributor and the Trust may have
access to confidential information relating to such matters as either party's
business, trade secrets, systems, procedures, manuals, products, contracts,
personnel, and clients. As used in this Agreement, "Confidential Information"
means information belonging to the Distributor or the Trust which is of value to
such party and the disclosure of which could result in a competitive or other
disadvantage to either party, including, without limitation, financial
information, business practices and policies, know-how, trade secrets, market or
sales information or plans, customer lists, business plans, and all provisions
of this Agreement. Confidential Information includes information developed by
either party in the course of engaging in the activities provided for in this
Agreement, unless: (i) the information is or becomes publicly known without
breach of this Agreement, (ii) the information is disclosed to the other party
by a third party not under an obligation of confidentiality to the party whose
Confidential Information is at issue of which the party receiving the
information should reasonably be aware, or (iii) the information is
independently developed by a party without reference to the other's Confidential
Information. Each party will protect the other's Confidential Information with
at least the same degree of care it uses with respect to its own Confidential
Information, and will not use the other party's Confidential Information other
than in connection with its obligations hereunder. Notwithstanding the
foregoing, a party may disclose the other's Confidential Information if (i)
required by law, regulation or legal process or if requested by any Agency; (ii)
it is advised by counsel that it may incur liability for failure to make such
disclosure; (iii) requested to by the other party; provided that in the event of
(i) or (ii) the disclosing party shall give the other party reasonable prior
notice of such disclosure to the extent reasonably practicably and cooperate
with the other party (at such other party's expense) in any efforts to prevent
such disclosure.
13
10. Governing Law .
This Agreement shall be construed in accordance with the laws of the State
of Delaware, without regard to Delaware's conflicts of laws principles and the
applicable provisions of the 1940 Act.
11. Prior Agreements.
This Agreement constitutes the complete agreement of the parties as to the
subject matter covered by this Agreement, and supersedes all prior negotiations,
understandings and agreements bearing upon the subject matter covered by this
Agreement.
12. Amendments.
No amendment to this Agreement shall be valid unless made in writing and
executed by both parties hereto.
13. Matters Relating to the Trust as a Massachusetts Business Trust.
It is expressly agreed that the obligations of the Trust hereunder shall
not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust personally, but shall bind only the property of
the Trust. The execution and delivery of this Agreement have been authorized by
the Trust, and this Agreement has been signed and delivered by authorized
officers of the Trust, acting as such, and neither such authorization by the
Trust nor such execution and delivery by such officer shall be deemed to have
been made by any of them individually or to impose any liability on them
personally, but shall bind only the property of the Trust.
* * * * * *
14
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 written
above.
COMMONWEALTH INTERNATIONAL
SERIES TRUST
By: /s/ Xxxxxx Xxxxxxx
---------------------------
Name: Xxxxxx Xxxxxxx
Title: President
BISYS Fund Services Limited Partnership
By: BISYS Fund Services, Inc.,
its General Partner
By: /s/ Xxxx Xxxxxxx
---------------------------
Name: Xxxx Xxxxxxx
Title: President
15
SCHEDULE A
FUNDS
Commonwealth Japan Fund
Commonwealth Australia/New Zealand Fund
Commonwealth Global Fund
Commonwealth Real Estate Securities Fund
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SCHEDULE B
DISTRIBUTION PLAN
[Trust to insert copies]
17
SCHEDULE C
COMPENSATION OF THE DISTRIBUTOR
1. BASIC DISTRIBUTION SERVICES. For providing the distribution entity and
related infrastructure and platform, including requisite registrations and
qualifications, premises, personnel, compliance, ordinary Board meeting
preparation, maintenance of selling agreements, clearance of advertising and
sales literature with regulators, ordinary supervisory services, and overhead,
the Distributor shall receive an annual fee of $20,000 (base fee), billed
monthly.
2. SPECIAL DISTRIBUTION SERVICES. For special distribution services mutually
agreed to in writing between the parties and the Adviser, including those set
forth on Schedule D to this Agreement, such as filing appropriate documentation
for advisory representatives to qualify as registered representatives of the
Distributor (provided that the Adviser is solely responsible for its
representatives' meeting examination requirements) and their related
registrations and fees, additional personnel, registrations, marketing services,
printing and fulfillment, website services, proprietary distribution expertise
for particular circumstances, and any other services in addition to the basic
distribution services covered by Paragraph 1 above, the Distributor shall be
reimbursed promptly upon invoicing its fees and expenses for such services,
including: (a) all mutually agreed to costs to support additional personnel; (b)
regulatory fees including NASD CRD costs associated with marketing materials;
and (c) printing, postage and fulfillment costs mutually agreed to in writing
between the parties and the Adviser, and (d) amounts payable under additional
agreements mutually agreed to in writing between the parties and the Adviser to
which Distributor is a party.
3. SPECIAL CONDUIT SITUATIONS. If the Distribution Plan, or any other Fund plans
of distribution under Rule 12b-1 that contemplate up front and/or recurring
commission and/or service payments to broker dealers, retirement plan
administrators or others by the Distributor with respect to back-end loads,
level loads, or otherwise, unless expressly agreed otherwise in writing between
the parties, all such payments shall be made to the Distributor, which shall act
as a conduit for making such payments to such broker-dealers, retirement plan
administrators or others.
4. OTHER PAYMENTS BY THE DISTRIBUTOR. If the Distributor is required to make any
payments to third parties in respect of distribution, which payments are
contemplated and agreed to by the parties to this Agreement or otherwise arise
in the ordinary course of business, the Distributor shall be promptly reimbursed
for such payments upon invoicing them.
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5. FEE ADJUSTMENTS. The fixed fees and other fees expressed as stated dollar
amounts in this Schedule C and in this Agreement are subject to annual
increases, commencing on the one-year anniversary date of the date of this
Agreement, in an amount equal to the percentage increase in consumer prices for
services as measured by the United States Consumer Price Index entitled "All
Services Less Rent of Shelter," or a similar index should such index no longer
be published, since such one-year anniversary or since the date of the last fee
increase, as applicable.
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Services Fees
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1. Wholesaling Personnel Services Wholesaling Personnel Services Fees
Wholesaling Personnel may be external wholesalers and/or internal For each individual constituting the Wholesaling Personnel
wholesalers. employed by the Distributor pursuant to this Agreement, the
Distributor shall receive annually an amount equal to the sum
Services include soliciting support of the Funds with selling of:
broker dealers; participating in promotional meetings,
presentations, conferences and other and forums; identifying high (i) all compensation paid annually by the Distributor to the
potential personnel of the Adviser and selling broker dealers; employee attributable to services rendered to the Trust; plus
and assisting with mail solicitations and literature fulfillment.
(ii) a management oversight fee equal to:
(a) if one to four Wholesaling Personnel are employed, 30%
of the salary compensation and 5% of the bonus or
commission compensation, or
(b) if five or more Wholesaling Personnel are employed,
25% of the salary compensation and 5% of the bonus or
commission compensation;
plus
(iii) 18% of the total compensation (covering costs of the
Distributor's employee benefits that are provided by the
Distributor) to the extent related directly to services
rendered to the Trust.
In addition, the Distributor shall be reimbursed for all
related costs to support, educate and train and maintain
compliance oversight of Wholesaling Personnel and other
personnel such as sales management, marketing and
performance reporting personnel (including time and
expenses, continuing education, seminars, rent, supplies,
phone, computers, firm element, license, registration)
Upon any termination of Wholesaling Personnel at the request
of the Funds or upon termination of this Agreement by the
Funds for any reason other than cause, the Distributor will
be reimbursed its severance costs with respect to such
terminated Wholesaling Personnel.
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2. Registration of Personnel: Registration of Personnel Fees:
Services include filing appropriate documentation for advisory $5,000 per registration per year, plus out-of-pocket
representatives to qualify as registered representatives of the expenses.
Distributor (provided that the Adviser is solely responsible for
its representatives' meeting examination requirements) and their $5,000 per Office of Supervisory Jurisdiction per year.
related registrations and fees.
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3. Marketing and Related Services Marketing and Related Services Fees
Marketing Execution: services include identification and Marketing Execution: Quote available upon request.
development of appropriate marketing and communications programs,
projects and other initiatives; collaboration on initiating, Performance Reporting
researching, developing, and delivering appropriate sales and
marketing materials; and management of marketing and advertising Monthly Reports
projects.
Monthly Updating and Typesetting -- $850 - $1,000 per
Performance Reporting: services include creation of templates for sheet per month (for an All-in-One style report)
monthly fact sheets and quarterly fact sheets; populating
templates with performance data obtained from third parties; and Initial Design and Setup (1-time charge) -- $500 per
coordinating steps needed for final printing and distribution. sheet
Creative Communication and Editorial Services: services include Quarterly Reports
preparing drafts of textual commentary and management discussion
and analysis for annual; and semi-annual reports, including Quarterly Updating and Typesetting -- $300 - $350 per
portfolio manager interviews; providing creative design and Fund sheet per Share Class per quarter
direction; and coordinating production, including typesetting
(initial composition and changes to composition), charts and Initial Design and Setup per Fund sheet (1-time charge)
ancillary items. -- $500 per Fund sheet
Production Timing: Annual & Semi-Annual Reports
o No timing guarantees can be made for completion of monthly and Coordination:
quarterly fact sheets where any of the information needed to
produce the reports is generated by service providers other o $3,000 Initial Fee (includes Chairman's Letter and 1st
than the Distributor. However, a basic estimate of turnaround Fund)
time may be given based upon when the unit receives all
necessary data in good order. Under normal conditions, the o $500 for each additional Fund
Performance Reporting unit expects to make proofs ready for
review (either printed or electronic PDF format) by the 4th NOTE: The above charges do not include the typesetting,
business day after the final piece of data is received. If printing, shipping, fulfillment, Xxxxx filing or
compliance review is necessary (e.g., when Morningstar ratings quick-turnaround charges that may be incurred from the
data is used) an additional 2 days may be required for review. financial printer. The above fees are for coordinating
the project only.
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21
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Creative Communication and Editorial Services
o Printing turnaround (once the factsheets are signed-off by the Quote available upon request.
client) is usually approximately 4-5 calendar days with most
jobs shipping by the 5th day.
o If requested, final electronic PDF files may be generated and
e-mailed on the day the job is signed-off on by the client.
These PDFs may be distributed and printed as necessary until
the final printed pieces arrive.
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4 FRC Services FRC's program components include: FRC Services Fees
- Mutual Fund Views on the News and Monitor Publications Mutual Fund Views on the News and Monitor Publications:
$7,650.00.
-Market Analytics Publications
-Advanced Research Publications Market Analytics Publications: Quote available upon request.
-Subject Matter Expert Direct Access
Advanced Research Publications:
The Trust acknowledges that certain FRC publications may be
provided only to parties that have entered into a written o White Papers - FRC Vision (typical cost is approximately
agreement or addendum that sets forth the terms of use of such $2,500)
publications and the associated fee. The Trust will notify the
Distributor whether the Trust or the Adviser or both will enter o Research Studies (costs vary, however typically range
into such an agreement or addendum. The Trust acknowledges that between $6,000 and $12,500)
if only one of the Trust or the Adviser enters into such
agreement or addendum, the other party will be prohibited from Subject Matter Expert Direct Access: Quote available upon
receiving or using such publications. request
Other FRC Fees:
o All subsequent content and support hours may be purchased
at a 20% discount from standard pricing.
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22
Expenses Applicable to Distribution Services
Except as expressly set forth above and in Schedule C of this agreement,
out-of-pocket expenses incurred by Distributor in the performance of its
services under this Agreement are not included in the above fees. Such
out-of-pocket expenses, which shall be paid by the Trust to the extent
they are attributable to the Trust and have been mutually agreed upon
(except as otherwise agreed herein, such as NASD and audit fees and
expenses), may include, without limitation o reasonable travel and
entertainment costs;
o expenses incurred by the Distributor in qualifying, registering and
maintaining the registration of the Distributor and each individual
comprising Wholesaling Personnel as a registered representative of
the Distributor under applicable federal and state laws and rules of
the NASD, e.g., CRD fees and state fees;
o Sponsorships, Promotions, Sales Incentives;
23
o any and all compensation to be paid to a third party as paying agent
for distribution activities (platform fees, finders fees, sub-TA
fees, 12b-1 pass thru, commissions, etc.);
o costs and expenses incurred for telephone service, photocopying and
office supplies;
o advertising costs;
o costs for printing, paper stock and costs of other materials,
electronic transmission, courier, talent utilized in sales materials
(e.g. models), design output, photostats, photography, and
illustrations;
o packaging, shipping, postage, and photocopies;
o taxes that are paid or payable by the Distributor or its affiliates
in connection with its services hereunder, other than taxes
customarily and actually imposed upon the income that the
Distributor receives hereunder; and
o amounts paid to the NASD based on Distributor's revenue and/or the
number of Distributor's registered representatives attributable to
the Trust.
24
