CONSULTING GROUP CAPITAL MARKETS FUNDS
INVESTMENT ADVISORY AGREEMENT
April 15, 1999
Pegasus Investments, Inc.
Xxx Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Dear Sirs:
Under an agreement (the "Management Agreement") between the
Consulting Group Capital Markets Funds, a Massachusetts business trust
(the "Trust"), and SSBC Fund 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 Pegasus Investments,
Inc. (the "Adviser") with respect to the Adviser's serving as an
investment adviser of Multi-Strategy Market Neutral 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 by the Manager and subject to
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 and options of any type 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, with respect to the management of the
Allocated Assets, it will comply with applicable provisions of 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, provided in writing or such other means as they may
agree, to the Adviser.
(d) The Manager will provide to the Adviser at the end of each
calendar month a list (the "Monthly List") of the securities comprising
the Allocated Assets as of such month end. The Adviser agrees that it
will review the Monthly List and promptly alert the Manager's controller,
by facsimile at (000) 000-0000 or such other means as they may agree, as
to any discrepancies between the Adviser's records of such holdings and
the Monthly List. Upon the specific request of the Manager, the Adviser
shall provide to the Manager the Adviser's opinion as to the value of a
security included in the Allocated Assets in order to assist the Manager,
or the Trust's Board of Trustees, as the case may be, in determining the
value of such security.
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, but need not, place orders with respect to Allocated
Assets with (i) the Manager or its affiliates (ii) the Adviser or its
affiliates or (iii) any other adviser to the Portfolio 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. In connection with underwritten
fixed-price new issues of securities, the Adviser may receive new issue
credits from managers or members of the underwriting syndicate for
research services (as defined above). In connection with agency
transactions, the Adviser may cause the Portfolio to pay to a broker-
dealer a commission in excess of that another broker-dealer may charge for
the same transaction, if the Adviser determines in good faith that the
commission charged is reasonable in relation to the value of brokerage and
research services (as defined above) provided by such broker, viewed
either in terms of the particular transaction or the Adviser's overall
responsibilities with respect to accounts over which the Adviser exercises
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 1.20%, multiplied by the average
daily value of Allocated Assets (the "Portfolio Advisory Fee").
(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 of the Trust who are employed by the Adviser.
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 matters 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. The Adviser shall be responsible solely for the management of
the Allocated Assets, and the Adviser's compliance with the Act, rules and
regulations thereunder, other federal and state laws, and written
procedures of the Trust's Board of Trustees will be determined solely by
reference to the Allocated Assets. The Adviser shall have no liability
with respect to the actions of any of any other investment adviser to the
Portfolio and shall not be charged with knowledge of the holdings or
transaction of any position of the Portfolio other than the Allocated
Assets.
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.
Section 10. Duration and Termination
(a) This Agreement shall become effective on April 15, 1999 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 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 written
notice to the Manager, Adviser 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. Limitation of Liability
The Manager and Adviser agree that the obligations of the Trust
under this Agreement shall not be binding upon any of the Board members,
shareholders, nominees, officers, employees or agents, whether past,
present or future, of the Trust individually, but are binding only upon
the assets and property of the Portfolio, as provided in the Master Trust
Agreement of Trust. The execution and delivery of this Agreement have
been duly authorized by the Manager and the Adviser, and signed by an
authorized officer of each acting as such.
Section 13. Notices
Any written notice required by or pertaining to this Agreement shall
be personally delivered to the party for whom it is intended, at the
address stated below, or shall be sent to such party by prepaid first
class mail or facsimile.
If to the Manager: SSBC Fund Management Inc.
000 Xxxxxxxxx Xxxxxx, 00xx xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxxxxx X. Xxxxx, Esq.
General Counsel and Corporate Secretary
If to the Adviser: Pegasus Investments, Inc.
Xxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxx Xxxxxxx
Managing Director
Section 14. 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.
SSBC FUND MANGEMENT INC.
By:
__________________________
___
Name: Xxxxxxxxx X. Xxxxx
Title: General Counsel and
Secretary
Accepted:
Pegasus Investments, Inc.
By: ______________________________
Name:
Title:
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