ADVISORY AGREEMENT
AGREEMENT, made as of July 29, 2004 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 the SNAPSM Fund (the "Fund"), a series of the Company;
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 a continuous investment program, including investment
research and management with respect to all securities and investments and cash
equivalents in the 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. 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;
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(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).
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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
therefore a fee, computed daily and paid monthly, at an annual rate of .08 of 1%
of the first $1 billion of average daily net assets of the Fund and .06 of 1% of
the average daily net assets over $1 billion.
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.
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8. Duration and Termination. This Agreement shall 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 by: (a) 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; and (b) 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.
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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.,
on behalf of SNAPSM Fund
BY:
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PFM ASSET MANAGEMENT LLC
BY:
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