CONSULTING GROUP CAPITAL MARKETS FUNDS
INVESTMENT ADVISORY AGREEMENT
March 11, 1997
Xxxxxx Associates, Inc.
000 Xxxxxxxxxx Xxxx., Xxxxx 000
Xxxxxx, XX 00000
Dear Sirs:
Under an agreement (the "Management Agreement") between the
Consulting Group Capital Markets Funds, a Massachusetts business trust
(the "Trust"), and Xxxxx Xxxxxx Mutual Funds Management Inc. (the
"Manager"), the Manager serves as the Trust's investment manager and has
the responsibility of evaluating, recommending, supervising and
compensating investment advisers to each series of the Trust.
The Manager hereby confirms its agreement with Xxxxxx Associates,
Inc. (the "Adviser") with respect to the Adviser's serving as an
investment adviser of Small Capitalization Growth Investments (the
"Portfolio"), a series of the Trust, as follows:
Section 1. Investment Description; Appointment
(a) The Trust desires to employ the Portfolio's capital by
investing and reinvesting in investments of the kind and in accordance
with the investment objectives, policies and limitations specified in its
Master Trust Agreement dated April 12, 1991, as amended from time to time
(the "Trust Agreement"), in the prospectus (the "Prospectus") and in the
statement of additional information (the "Statement of Additional
Information") filed with the Securities and Exchange Commission (the
"SEC") as part of the Trust's Registration Statement on Form N-1A, as
amended from time to time (the "Registration Statement"), and in the
manner and to the extent as may from time to time be approved in the
manner set forth in the Trust Agreement. Copies of the Trust's
Prospectus, the Statement of Additional Information and the Trust
Agreement have been or will be submitted to the Adviser. Manager will
provide to the Adviser, any changes made to such documents at or if
practical prior to the time such changes become effective.
(b) The Manager, with the approval of the Trust, hereby appoints
the Adviser to act as an investment Adviser to the Portfolio for the
periods 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.
Section 2. Portfolio Management Duties
(a) Subject to the supervision of the Manager and the Trust's
Board of Trustees, the Adviser will (i) manage the portion of the
Portfolio's assets allocated to the Adviser upon the recommendation of
the Manager and the review of the Board of Trustees ("Allocated Assets")
in accordance with the Portfolio's investment objectives, policies and
limitations as stated in the Trust's Prospectus and Statement of
Additional Information; (ii) make investment decisions with respect to
Allocated Assets without prior consultation with the Manager or the
Trust; and (iii) place orders to purchase and sell securities and, where
appropriate, commodity futures contracts with respect to Allocated
Assets.
(b) The Adviser will keep the Trust and the Manager informed of
developments materially affecting the Portfolio and shall, on the
Adviser's own initiative, furnish to the Trust and the Manager from time
to time whatever information the Adviser believes appropriate for this
purpose.
(c) The Adviser agrees that it will comply with the Investment
Company Act of 1940, as amended (the "Act"), and all rules and
regulations thereunder, all applicable federal and state laws and
regulations, and with any applicable procedures adopted by the Trust's
Board of Trustees and provided to the Adviser.
Section 3. Brokerage
(a) The Adviser agrees that it will place orders pursuant to its
investment determinations with respect to Allocated Assets either
directly with the issuer or with brokers or dealers selected by it in
accordance with the standards specified in paragraphs (b) and (c) of this
Section 3. The Adviser may place orders with respect to Allocated Assets
with Xxxxx Xxxxxx Mutual Funds Management Inc. or its affiliates in
accordance with Section 11(a) of the Securities Exchange Act of 1934 and
Rule 11a2-2(T) thereunder, Section 17(e) of the Act and Rule 17e-1
thereunder and other applicable laws and regulations.
(b) In placing orders with brokers and dealers, the Adviser will
use its best efforts to seek the best overall terms available. In
assessing the best overall terms available for any portfolio transaction,
the Adviser will consider all factors it deems relevant including, but
not limited to, the breadth of the market in the security, the price of
the security, the financial condition and execution capability of the
broker or dealer and the reasonableness of any commission for the
specific transaction and on a continuing basis.
(c) In selecting brokers or dealers to execute a particular
transaction and in evaluating the best overall terms available, the
Adviser may consider the brokerage and research services (as those terms
are defined in Section 28(e) of the Securities Exchange Act of 1934)
provided to the Trust and/or other accounts over which the Adviser or an
affiliate exercise investment discretion.
Section 4. Information Provided to the Manager and the Trust
(a) The Adviser agrees that it will make available to the Manager
and the Trust promptly upon their reasonable request copies of all of its
investment records and ledgers with respect to the Portfolio to assist
the Manager and the Trust in monitoring compliance with the Act and the
Investment Advisers Act of 1940, as amended (the "Advisers Act"), as well
as other applicable laws. The Adviser will furnish the Trust's Board of
Trustees with respect to the Portfolio such periodic and special reports
as the Manager and the Board of Trustees may reasonably request.
(b) The Adviser agrees that it will immediately notify the
Manager and the Trust in the event that the Adviser or any of its
subsidiaries: (i) becomes subject to a statutory disqualification that
prevents the Adviser from serving as investment Adviser pursuant to this
Agreement; or (ii) is or expects to become the subject of an
administrative proceeding or enforcement action by the SEC or other
regulatory authority that would effect the Trust or that could have a
material adverse effect upon the Adviser's ability to fulfill its
obligations under this Agreement. The Adviser has provided the
information about itself set forth in the Registration Statement and has
reviewed the description of its operations, duties and responsibilities
as stated therein and acknowledges that they are true and correct and
contain no material misstatement or omission, and it further agrees to
notify the Manager and the Trust's Administrator immediately of any
material fact known to the Adviser respecting or relating to the Adviser
that is not contained in the Prospectus or Statement of Additional
Information of the Trust, or any amendment or supplement thereto, or any
statement contained therein that becomes untrue in any material respect.
(c) The Adviser represents that it is an investment adviser
registered under the Advisers Act and other applicable laws and that the
statements contained in the Adviser's registration under the Advisers Act
on Form ADV, as of the date hereof, are true and correct and do not omit
to state any material fact required to be stated therein or necessary in
order to make the statement therein not misleading. The Adviser agrees
to maintain the completeness and accuracy of its registration on Form ADV
in accordance with all legal requirements relating to that Form. The
Adviser acknowledges that it is an "investment adviser" to the Portfolio
within the meaning of the Act and the Advisers Act.
Section 5. Books and Records
In compliance with the requirements of Rule 31a-3 under the Act,
the Adviser hereby agrees that all records that it maintains for the
Trust are the property of the Trust and further agrees to surrender
promptly to the Trust copies of any such records upon the Trust's
request. The Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 under the Act the records required to be
maintained by Rule 31a-1 under the Act and to preserve the records
required by Rule 204-2 under the Advisers Act for the period specified
in that Rule.
Section 6. Compensation
(a) In consideration of services rendered pursuant to this
Agreement, the Manager will pay the Adviser a fee that is computed daily
and paid monthly at the annual rate of 0.30% of the average daily net
assets of the Portfolio, multiplied by a fraction, the numerator of which
is the average daily value of Allocated Assets and the denominator of
which is the average daily value of the Portfolio's total assets (the
"Portfolio Advisory Fee"). Such Portfolio Advisory fee shall be
increased to 0.50% beginning on the third (3) business day after the
Manager receives shareholder approval of an increase in its management
fee. The Portfolio Advisory Fee payable to the Adviser shall be reduced
in the same proportion as the Portfolio Advisory Fee bears to the
Manager's fee from the Portfolio to the extent, in any fiscal year of the
Portfolio, the aggregate expenses of the Portfolio (including fees
pursuant to this Agreement and the Trust's Administration Agreement with
the Administrator, but excluding interest, taxes, brokerage fees, and, if
permitted by state securities commissions, extraordinary expenses) exceed
the expense limitation of any state having jurisdiction over the
Portfolio.
(b) The Portfolio Advisory Fee for the period from the date this
Agreement becomes effective to the end of the month during which this
Agreement becomes effective shall be prorated according to the proportion
that such period bears to the full monthly period. Upon any termination
of this Agreement before the end of a month, the fee for such part of
that month shall be prorated according to the proportion that such period
bears to the full monthly period and shall be payable upon the date of
termination of this Agreement.
(c) For the purpose of determining fees payable to the Adviser,
the value of the Portfolio's net assets shall be computed at the time and
in the manner specified in the Trust's Prospectus and/or the Statement of
Additional Information.
Section 7. Costs and Expenses
During the term of this Agreement, the Adviser will pay all
expenses incurred by it and its staff in connection with the performance
of its services under this Agreement, including the payment of salaries
of all officers and employees who are employed by it and the Trust.
Section 8. Standard of Care
The Adviser shall exercise its best judgment in rendering the
services provided by it under this Agreement. The Adviser shall not be
liable for any error of judgment or mistake of law or for any loss
suffered by the Manager or the Trust in connection with the matter to
which this Agreement relates, provided that nothing in this Agreement
shall be deemed to protect or purport to protect the Adviser against any
liability to the Manager or the Trust or to holders of the Trust's shares
representing interests in the Portfolio to which the Adviser would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or by reason of
the Adviser's reckless disregard of its obligations and duties under this
Agreement.
Section 9. Services to Other Companies or Accounts
(a) It is understood that the services of the Adviser are not
exclusive, and nothing in this agreement shall prevent the Adviser from
providing similar services to other investment companies (whether or not
their investment objectives and policies are similar to those of the
Trust) or from engaging in other activities.
(b) When the Adviser recommends the purchase or sale of a
security for other investment companies and other clients, and at the
same time the Adviser recommends the purchase or sale of the same
security for the Trust, it is understood that in light of its fiduciary
duty to the Trust such transactions will be executed on a basis that is
fair and equitable to the Trust.
(c) The Trust and the Manager understand and acknowledge that the
persons employed by the Adviser to assist in the performance of its
duties under this Agreement will not devote their full time to that
service; nothing contained in this Agreement will be deemed to limit or
restrict the right of the Adviser or any subsidiary of the Adviser to
engage in and devote time and attention to other businesses or to render
services of whatever kind or nature.
Section 10. Duration and Termination
(a) This Agreement shall become effective on March 11, 1997,
except as otherwise set forth herein in Section 6(a), and shall continue
for two years from that date, and thereafter shall continue automatically
for successive annual periods, provided such continuance is specifically
approved at least annually by (i) the Trust's Board of Trustees or (ii) a
vote of a majority of the Portfolio's outstanding voting securities (as
defined in the Act), provided that the continuance is also approved by a
majority of the Trustees who are not "interested persons" (as defined in
the Act) of the Trust, by vote cast in person at a meeting called for the
purpose of voting on such approval.
(b) Notwithstanding the foregoing, this Agreement may be
terminated (i) by the Manager at any time without penalty, upon sixty
(60) days, written notice to the Adviser and the Trust, (ii) at any time
without penalty by the Trust, upon the vote of a majority of the Trust's
Trustees or by vote of the majority of the Trust's outstanding voting
securities, upon notice to the Manager and the Trust or (iii) by the
Adviser at any time without penalty, upon sixty (60) days' written notice
to the Manager and the Trust.
(c) This Agreement will terminate automatically in the event of
its assignment (as defined in the Act and in rules adopted under the
Act).
Section 11. Amendments
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 whom enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be
effective until approved in accordance with applicable law.
Section 12. Miscellaneous
(a) This Agreement shall be governed by the laws of the State of
New York, provided that nothing herein shall be construed in a manner
inconsistent with the Act, the Advisers Act, or rules or orders of the
SEC thereunder.
(b) The captions of this Agreement are included for convenience
only and in no way define or limit any of the provisions thereof or
otherwise affect their construction or effect.
(c) 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 not be affected thereby and, to this extent, the
provisions of this Agreement shall be deemed to be severable.
(d) Nothing herein shall be construed as constituting the Adviser
as an agent of the Trust or the Manager.
Section 13. Counterparts
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
If the terms and conditions described above are in accordance with your
understanding, kindly indicate your acceptance of this Agreement by
signing and returning to us the enclosed copy of this Agreement.
XXXXX XXXXXX MUTUAL FUNDS
MANAGEMENT INC.
By:
_________________________
____
Name: Xxxxx X. XxXxxxxx
Title: President
Accepted:
Xxxxxx Associates, Inc.
By: ______________________________
Name:
Title:
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