CONSULTING GROUP CAPITAL MARKETS FUNDS
FORM OF
INVESTMENT ADVISORY AGREEMENT
April 1, 1998
Mellon Capital Management Corporation
000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Dear Sirs:
Under an agreement (the "Management Agreement")
between the Consulting Group Capital Markets Funds, a
Massachusetts business trust (the "Trust"), and Mutual
Management Corp., (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 Mellon
Capital Management Corporation (the "Adviser") with respect
to the Adviser's serving as an investment adviser of Small
Capitalization Value Equity 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 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 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.
(d) Subject to the direction of the Manager, the
Adviser is authorized to undertake cross-trading of the
Portfolio with other investment funds, accounts or
portfolios sponsored, maintained, or managed by the Adviser
or an affiliate in accordance with Section I of the
Department of Labor Prohibited Transaction Exemption 95-56
granted to the Mellon Bank, N.A. and its affiliates (the
"Exemption"). The Manager acknowledges receipt of a copy of
the notice entitled "Cross-Trading Information" and that it
is fully informed of the cross-trading techniques which will
be utilized for the Portfolio as described in the Exemption.
(e) The Manager consents to the Adviser's use of the
alternate disclosure and recordkeeping standards under the
Commodity Futures Trading Commission ("CFTC") Rule 4.7 with
respect to futures trading, which alternate standards are
available to the Adviser on account of the Trust's status as
an investment company registered under the Investment
Company Act of 1940 (not formed for the specific purpose of
opening an exempt account with Adviser) with securities
holdings of at least $2,000,000.
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 xxxxxx 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 0.06% on the balance 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.
Section 10. Duration and Termination
(a) This Agreement shall become effective on April
1, 1998 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.
(e) The Adviser shall not be responsible or liable
for any losses to the Portfolio or Trust resulting from
nationalization, expropriation, devaluation, seizure or
similar action by any governmental authority, de facto or de
jure; or enactment, promulgation, imposition or enforcement
by any governmental authority of currency restrictions,
exchange controls, levies or other charges affecting the
securities and other property; or acts of war, terrorism,
insurrection or revolution; or acts of God; or any other
similar event beyond the control of the Adviser or its
agents. This section shall survive the termination of this
Agreement.
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.
PURSUANT TO AN EXEMPTION FROM THE CFTC IN CONNECTION WITH
ACCOUNTS OF QUALIFIED ELIGIBLE CLIENTS, THIS BROCHURE OR
ACCOUNT DOCUMENT IS NOT REQUIRED TO BE AND HAS NOT BEEN
FILED WITH THE CFTC. THE CFTC DOES NOT PASS UPON THE MERITS
OF PARTICIPATING IN A TRADING PROGRAM OR UPON THE AEDEQUACY
OR ACCURACY OF COMMODITY TRADING ADVISOR DISCLOSURE.
CONSEQUENTLY THE CFTC HAS NOT REVIEWED OR APPROVED THIS
TRADING PROGRAM OR THIS BROCHURE OR ACCOUNT DOCUMENT.
MUTUAL MANAGEMENT
CORP.
By:
____________
_________________
Name: Xxxxx
X. XxXxxxxx
Title:
President
Accepted:
Mellon Capital Management Corporation
By: ______________________________
Name:
Title:
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