CONSULTING GROUP CAPITAL MARKETS FUNDS
INVESTMENT ADVISORY AGREEMENT
December 3, 2001
SSI Investment Management Inc.
000 Xxxxx Xxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
Ladies and Gentlemen:
Under an agreement (the "Management Agreement") between the Consulting
Group Capital Markets Funds, a Massachusetts business trust (the "Trust"), and
Xxxxx Xxxxxx Fund Management LLC, (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 SSI Investment
Management 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, as provided by the Manager; (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.
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(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.
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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 1.00% 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
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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 reasonable 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 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.
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Section 10. Duration and Termination
(a) This Agreement shall become effective on December 3, 2001 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 the 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: Xxxxx Xxxxxx Fund Management LLC
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxxxxx X. Xxxxx, Esq.
General Counsel and Corporate Secretary
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If to the Adviser: SSI Investment Management Inc.
000 Xxxxx Xxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxx Xx Xxxxxxxxxx
Title: Chairman and Chief Executive Officer
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.
XXXXX XXXXXX FUND MANAGEMENT LLC
By: ___________________________
Name: Xxxxxxxxx X. Xxxxx
Title: General Counsel and Secretary
Accepted:
SSI Investment Management Inc.
By: ______________________________
Name:
Title:
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