CONSULTING GROUP CAPITAL MARKETS FUNDS
INVESTMENT ADVISORY AGREEMENT
November 7, 1997
Xxxxxxxxxx Asset Management, LLC
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 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 Xxxxxxxxxx Asset
Management, LLC (the "Adviser") with respect to the Adviser's serving as
an investment adviser to 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.
(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; 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 by providing a copy of
the adviser's periodic client report, and shall, on the Adviser's own
initiative, furnish to the Trust and the Manager from time to time in
the Adviser's discretion, whatever other information the Adviser
believes appropriate for this purpose.
(c) The Adviser agrees that with respect to the Allocated Assets
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.
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 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
affiliates: (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. 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 0.50% 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"). 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 of
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 affiliate of the Adviser to
engage in and devote time and attention to other businesses or to render
services of whatever kind or nature, subject to the proviso set forth in
paragraph (a) of this Section 9.
Section 10. Duration and Termination
(a) This Agreement shall become effective on November 7, 1997
or, if a later date, the date it is approved by shareholders of the
Portfolio 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 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.
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:
Xxxxxxxxxx Asset Management, LLC
By: ______________________________
Name: Xxxxx Xxxxxxxx
Title: Executive Vice President
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