FORM OF INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this_______day of ____________________, 199__ by and
between COMMON SENSE TRUST, a Massachusetts business trust,
hereinafter referred to as the "TRUST,"
and____________________________, a_____________________corporation,
hereinafter referred to as the "Adviser."
The TRUST and the ADVISER agree as follows:
(1.) Appointment
a. The TRUST hereby appoints the ADVISER to act as investment
adviser to the TRUST's Common Sense________Fund (the "Fund") for the
period and on the terms set forth in this Agreement. The ADVISER
accepts such appointment and agrees to furnish the services herein set
forth for the compensation herein provided.
b. In the event that the TRUST establishes one or more funds with
respect to which it desires to retain the ADVISER to act as investment
adviser hereunder, it shall notify the ADVISER in writing. If the
ADVISER is willing to render such services it shall notify the TRUST
in writing whereupon such fund shall become a fund hereunder and the
compensation payable by such new fund to the ADVISER will be as agreed
in writing at that time.
(2.) Services Rendered and Expenses Paid by ADVISER
The ADVISER, subject to the control, direction and supervision of
the TRUST's Trustees and in conformity with applicable laws, the
TRUST's Declaration of Trust, Bylaws, registration statement,
prospectuses and the stated investment objectives, policies and
restrictions of the Fund, shall:
a. manage the investment and reinvestment of the TRUST's assets
including, by way of illustration, the evaluation of pertinent
economic, statistical, financial and other data, determination of
the industries and companies to be represented in the Fund, and
formulation and implementation of investment programs;
b. maintain a trading desk and place all orders for the purchase
and sale of portfolio investments for the account of the Fund of the
TRUST with brokers or dealers selected by the ADVISER;
c. conduct and manage the day-to-day operations of the TRUST
including, by way of illustration, the preparation of registration
statements, prospectuses, reports, proxy solicitation materials and
amendments thereto, the furnishing of legal services except for
services provided by outside counsel to the TRUST selected by the
Trustees, and the supervision of the TRUST's Treasurer and the
personnel working under his direction; and
d. furnish to the TRUST office space, facilities, equipment and
personnel adequate to provide the services described in paragraphs
a., b., and c. above and pay the compensation of each TRUST trustee
and TRUST officer who is an affiliated person of the ADVISER, except
the compensation of the TRUST's Treasurer and related expenses as
provided below.
In performing the services described in paragraph b. above, the
ADVISER shall use its best efforts to obtain for the TRUST and the
Fund the most favorable price and execution available and shall
maintain records adequate to demonstrate compliance with this
requirement. Subject to prior authorization by the TRUST's Trustees of
appropriate policies and procedures, the ADVISER may, to the extent
authorized by law, cause the TRUST to pay a broker or dealer that
provides brokerage and research services to the ADVISER an amount of
commission for effecting a fund investment transaction in excess of
the amount of commission another broker or dealer would have charged
for effecting that transaction. In the event of such authorization and
to the extent authorized by law the ADVISER shall not be deemed to
have acted unlawfully or to have breached any duty created by this
Agreement or otherwise solely by reason of such action.
Except as otherwise agreed, or as otherwise provided herein, the
TRUST shall pay, or arrange for others to pay, all its expenses other
than those expressly stated to be payable by the ADVISER hereunder,
which expenses payable by the TRUST shall include (i) interest and
taxes; (ii) brokerage commissions and other costs in connection with
the purchase and sale of fund investments; (iii) compensation of its
trustees and officers other than those who are affiliated persons of
the ADVISER; (iv) compensation of its Treasurer, compensation of
personnel working under the Treasurer's direction, and expenses of
office space, facilities, and equipment used by the Treasurer and such
personnel in the performance of their normal duties for the TRUST
which consist of maintenance of the accounts, books and other
documents which constitute the record forming the basis for the
TRUST's financial statements, preparation of such financial statements
and other TRUST documents and reports of a financial nature required
by federal and state laws, and participation in the production of the
TRUST's registration statement, prospectuses, proxy solicitation
materials and reports to shareholders; (v) fees of outside counsel to
and of independent accountants of the TRUST selected by the Trustees;
(vi) custodian, registrar and shareholder service agent fees and
expenses; (vii) expenses related to the repurchase or redemption of
its shares including expenses related to a program of periodic
repurchases or redemptions; (viii) expenses related to the issuance of
its shares against payment therefor by or on behalf of the subscribers
thereto; (ix) fees and related expenses of registering and qualifying
the TRUST and its shares for distribution under state and federal
securities laws; (x) expenses of printing and mailing of registration
statements, prospectuses, reports, notices and proxy solicitation
materials of the TRUST; (xi) all other expenses incidental to holding
meetings of the TRUST's shareholders including proxy solicitations
therefor; (xii) expenses for servicing shareholder accounts; (xiii)
insurance premiums for fidelity coverage and errors and omissions
insurance; (xiv) dues for the TRUST's membership in trade associations
approved by the Trustees; and (xv) such non-recurring expenses as may
arise, including those associated with actions, suits, or proceedings
to which the TRUST is a party and the legal obligation which the TRUST
may have to indemnify its officers and trustees with respect thereto.
To the extent that any of the foregoing expenses are allocated between
the TRUST and any other party, such allocations shall be pursuant to
methods approved by the Trustees.
(3.) Role of ADVISER
The ADVISER, and any person controlled by or under common control
with the ADVISER, shall be free to render similar services to others
and engage in other activities, so long as the services rendered to
the TRUST are not impaired.
Except as otherwise required by the Investment Company Act of 1940
("1940 Act") any of the shareholders, trustees, officers and employees
of the TRUST may be a shareholder, director, officer or employee of,
or be otherwise interested in, the ADVISER, and in any person
controlled by or under common control with the ADVISER, and the
ADVISER, and any person controlled by or under common control with the
ADVISER, may have an interest in the TRUST.
Except as otherwise agreed, in the absence of willful misfeasance,
bad faith, negligence, or reckless disregard of obligations or duties
hereunder on the part of the ADVISER, the ADVISER shall not be subject
to liability to the TRUST, or to any shareholder of the TRUST, for any
act or omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in the
purchase, holding or sale of any security.
(4.) Compensation Payable to ADVISER
The TRUST shall pay to the ADVISER, as compensation for the services
rendered, facilities furnished and expenses paid by the ADVISER, with
respect to the Fund, a monthly fee calculated at the following annual
rates:
A. Common Sense Emerging Growth Fund
Common Sense Growth Fund
Common Sense Growth and Income Fund
.65% of the first $1 billion of average daily net assets; .60% of
the next $1 billion; .55% of the next $1 billion; .50% of the next
$1 billion; and .45% of average daily net assets in excess of $4
billion.
B. Common Sense Government Fund
.60% of the first $1 billion of average daily net assets; .55% of
the next $1 billion; .50% of the next $1 billion; .45% of the next
$1 billion; .40% of the next $1 billion; and .35% of average daily
net assets in excess of $5 billion.
C. Common Sense International Equity Fund
1.00% of the Fund's average daily net assets.
D. Common Sense Municipal Bond Fund
.60% of the first $1 billion of average daily net assets; .55% of
the next $1 billion; .50% of the next $1 billion; and .45% of
average daily net assets in excess of $3 billion.
Average daily net assets of the Fund shall be determined by taking
the average of the net assets for each business day during a given
calendar month, made in the manner provided in the TRUST's Declaration
of Trust.
In the event that the ordinary business expenses of the Fund, for
any fiscal year should exceed the most restrictive expense limitation
applicable in the states where the TRUST's shares are qualified for
sale, unless waived, the compensation due to the ADVISER for such
fiscal year shall be reduced by the amount of such excess. The
ADVISER's compensation shall be so reduced by a reduction or a refund
thereof, at the time such compensation is payable after the end of
each calendar month during such fiscal year of the TRUST, and if such
amount should exceed such monthly compensation, the ADVISER shall pay
the Fund an amount sufficient to make up the deficiency, subject to
readjustment during the TRUST's fiscal year. For purposes of this
paragraph, all ordinary business expenses of the Fund include the
investment advisory fee and other operating costs paid by the Fund
except for (i) interest and taxes; (ii) brokerage commissions; (iii)
expenses incurred as a result of litigation in connection with a suit
involving a claim for recovery by the Fund; (iv) as a result of
litigation involving a defense against a liability asserted against
the TRUST and the Fund, provided that, if the ADVISER made the
decision or took the actions which resulted in such claim, it acted in
good faith without negligence or misconduct; (v) any indemnification
paid by the TRUST to its officers and trustees and the ADVISER in
accordance with applicable state and federal laws as a result of such
litigation; and (vi) amounts paid to PFS Distributors, Inc., the
distributor of the Trust's shares, in connection with a distribution
plan adopted by the Trust's Trustees pursuant to Rule 12b-1 under the
1940 Act.
If the ADVISER shall serve for less than the whole of any month, the
foregoing compensation shall be prorated.
(5.) Books and Records
In compliance with the requirements of the 1940 Act, the ADVISER
hereby agrees that, to the extent required by law, all records which
it maintains for the TRUST are the property of the TRUST and further
agrees to surrender promptly to the TRUST any of such records upon the
TRUST's request. The ADVISER further agrees to preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act the records
required to be maintained by Rule 31a-1 under the Act.
(6.) Duration and Termination
This Agreement will become effective with respect to the Fund on the
date hereof, and with respect to any additional funds, on the date of
receipt by the TRUST of notice from the ADVISER in accordance with
Section 1(b) hereof that the ADVISER is willing to serve as investment
adviser with respect to such fund, provided that this Agreement (as
supplemented by the terms specified in any notice and agreement
pursuant to Section 1(b) hereof) shall have been approved by the
shareholders of the Fund subject to this Agreement, in accordance with
the requirements under the 1940 Act, and, unless sooner terminated as
provided herein, shall continue in effect for a period of two years.
Thereafter, if not terminated, this Agreement shall continue in effect
as to a particular Fund for successive periods of twelve months each,
provided such continuance is specifically approved at least annually,
(a) by the vote of a majority of those members of the TRUST's Trustees
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,
and (b) by the TRUST's Trustees or by vote of a majority of the
outstanding voting securities of the Fund. Notwithstanding the
foregoing, this Agreement may be terminated as to the Fund at any
time, without the payment of any penalty, by the TRUST (by vote of the
TRUST's Trustees 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.
(7.) Amendment of this Agreement
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the
party against which enforcement of the change, waiver, discharge or
termination is sought. No amendment of this Agreement shall be
effective as to the Fund until approved by vote of a majority of the
outstanding voting securities of the Fund if such vote is required by
the ▇▇▇▇ ▇▇▇.
(8.) Miscellaneous Provisions
For the purposes of this Agreement, the terms "affiliated person",
"assignment," "interested person," and "majority of the outstanding
voting securities" shall have their respective meanings defined in the
1940 Act and the Rules and Regulations thereunder, subject, however,
to such exemptions as may be granted to either the ADVISER or the
TRUST by the Securities and Exchange Commission, or such interpretive
positions as may be taken by the Commission or its staff, under said
Act, and the term "brokerage and research services" shall have the
meaning given in the Securities Exchange Act of 1934 and the Rules and
Regulations thereunder.
The Declaration of Trust establishing Common Sense Trust, dated
January 29, 1987, a copy of which, together with all amendments
thereto (the "Declaration"), is on file in the office of the Secretary
of the Commonwealth of Massachusetts, provides that the name "Common
Sense Trust" refers to the Trustees under the Declaration collectively
as Trustees, but not as individuals or personally; and no Trustee,
shareholder, officer, employee or agent of said TRUST shall be held to
any personal liability, nor shall resort be had to their private
property for the satisfaction of any obligation or claim or otherwise
in connection with the affairs of said TRUST, but the Trust Estate
only shall be liable. All obligations of the TRUST under this
Agreement shall apply only on a Fund by Fund basis and the assets of
one Fund shall not be liable for the obligations of any other Fund.
The parties hereto each have caused this Agreement to be signed in
duplicate on its behalf by its duly authorized officer on the above
date.
COMMON SENSE TRUST
By:
Name:
Its:
By:
Name:
Its:
ADVAGT.DOC
