CONSULTING GROUP CAPITAL MARKETS FUNDS
INVESTMENT ADVISORY AGREEMENT
February 1, 2005
Delaware Management Company, a series of
Delaware Management Business Trust
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, 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 Delaware Management
Company, a series of Delaware Management Business Trust (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 Portfolio's 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 Prospectus, the Statement of Additional
Information and the Trust Agreement have been or will be submitted to the
Adviser. The Manager will notify the Adviser of any changes to any of the
foregoing documents on a timely basis.
(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; (iii)
place orders to purchase and sell securities and, where appropriate,
commodity futures contracts and options of any type with respect to
Allocated Assets; and (iv) vote proxies if such responsibility is
delegated to the Adviser by the Board of Trustees.
(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 to the Adviser. When engaging in transactions in
securities or other assets for the Portfolio with any adviser to any other
fund or portfolio under common control with the Portfolio, including any
adviser that is a principal underwriter or an ?affiliated person?
(as defined in the Act) of a principal underwriter in connection with such
transactions, the Adviser or any of its ?affiliated persons? will not consult
(other than for purposes of complying with Rule 12d3-1(a) and (b)) with such
other 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 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 best execution. In assessing the best execution
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 execution, 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 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
such periodic and special reports with respect to the Allocated Asset as
the Manager and the Board of Trustees may reasonably request.
(b) As permitted by applicable law, 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) will become the subject of an
enforcement action by the SEC or other regulatory authority that may
reasonably have a material adverse effect on the Portfolio. 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 in all material
respects 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 with respect to the Allocated Assets within the meaning of
the Act and the Advisers Act.
(d) The Adviser confirms that neither it nor any of its
?affiliated persons? (as defined in the Act) are affiliated persons of:
(i) the Manager, (ii) any adviser to the Portfolio or any affiliated person
of that adviser; or (iii) the promoter, underwriter, officer, board member,
member of an advisory board, or employee of the Portfolio or the Trust.
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 available to 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%, multiplied by the average
daily value of Allocated Assets (the "Portfolio Advisory Fee").
(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 of the Trust who are employed by
the Adviser. It is understood that the Adviser does not, by this Agreement,
undertake to assume or pay any costs or expenses of the Trust or Portfolio.
Section 8. Standard of Care
The Adviser shall exercise its best judgment in rendering the services
provided by it under this Agreement in respect of the Allocated Assets.
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 separate accounts and 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 February 1, 2005
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,
recognized air courier or facsimile.
If to the Manager: Xxxxx Xxxxxx Fund Management LLC
c/o Citigroup Asset Management
000 Xxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Attention: R. Xxx Xxxxxx
President
If to the Adviser: Delaware Management Company, a series
of
Delaware Management Business Trust
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxxxx X. Maestro
Title: General Counsel
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: R. Xxx Xxxxxx
Title: President
Accepted:
Delaware Management Company, a series of
Delaware Management Business Trust
By: ______________________________
Name:
Title:
