CONSULTING GROUP CAPITAL MARKETS FUNDS INVESTMENT ADVISORY AGREEMENT
Exhibit (d)(14)
CONSULTING GROUP CAPITAL MARKETS FUNDS
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT
October 28, 2009
Pacific Investment Management Company LLC
000 Xxxxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
000 Xxxxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Ladies and Gentlemen:
Under an agreement (the “Agreement”) between the Consulting Group Capital Markets Funds, a
Massachusetts business trust (the “Trust”), and Consulting Group Advisory Services 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 Pacific Investment Management Company LLC (the
“Adviser”) with respect to the Adviser’s serving as an investment adviser for that portion of the
assets of the Trust’s series (each, a “Portfolio” and, together, the “Portfolios”) listed on
Appendix A, as follows:
Section 1. Investment Description; Appointment
(a) The Trust desires to employ the Portfolios’ 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 Portfolios 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 portions of the Portfolios’ assets allocated to the Adviser by the Manager and
subject to the review of the Board of Trustees (the “Allocated Assets”) in accordance with the
Portfolios’ 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. The Manager
understands that the Adviser does not guarantee that any investment objectives will be achieved.
(b) To the extent responsibility therefore is delegated to the Adviser by the Trust’s Board of
Trustees, the Adviser shall be responsible for voting all proxies related to Allocated Assets, in
accordance with Adviser’s “Proxy Voting Policies and Procedures,” as may be amended from time to
time. The Adviser shall
maintain a record of how the Adviser voted and such record shall be available to the Manager
upon its request. The right of Adviser to vote proxies shall continue until the earlier of the
termination of the Agreement or such time as the Board of Trustees specifically revokes Adviser’s
authority to vote proxies and specifically reserves such right to the Manager or to another.
(c) The Adviser will keep the Trust and the Manager informed of developments materially
affecting the Portfolios 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.
(d) 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 “1940
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. When engaging in transactions in
securities or other assets for the Portfolios with any adviser to any other fund or portfolio under
common control with the Portfolios, including any adviser that is a principal underwriter or an
“affiliated person” (as defined in the 0000 Xxx) 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.
(e) 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.
(f) The Adviser may from time to time seek research assistance and rely on investment
management resources available to it through its affiliated companies, but in no case shall such
reliance relieve the Adviser of any of its obligations hereunder, nor shall the Manager, the Trust
or the Portfolios be responsible for any additional fees or expenses hereunder as a result.
(g) The Adviser shall have no responsibility under this Agreement with respect to the
management of assets of the Portfolios other than the portion of the Portfolios’ assets with
respect to which the Adviser provides investment advice.
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
Portfolios 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 1940 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 Portfolios 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 Portfolios to
assist the Manager and the Trust in monitoring compliance with the 1940 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) 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 reasonably 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 Portfolios with respect to the Allocated Assets within
the meaning of the 1940 Act and the Advisers Act.
(d) The Manager acknowledges that it is an investment adviser registered under the Advisers
Act and other applicable laws. The Manager further acknowledges that the appointment of the
Adviser has been duly authorized and the transactions contemplated herein are in conformity with
the Trust’s governing documents.
Section 5. Books and Records
In compliance with the requirements of Rule 31a-3 under the 1940 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 1940 Act the
records required to be maintained by Rule 31a-1 under
the 1940 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
The Manager will pay the Adviser, with respect to each Portfolio on Appendix A attached
hereto, the compensation specified in Appendix A. Such fees will be computed daily and paid
monthly, calculated at an annual rate based on the Allocated Assets’ average daily net assets as
determined by the Trust’s accounting agent. Compensation for any partial period shall be pro-rated
based on the length of the period.
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 Portfolios.
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 Portfolios 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. Adviser shall not be liable for any act or
omission of the custodian bank. The Adviser shall be responsible solely for the management of the
Allocated Assets, and the Adviser’s compliance with the 1940 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 Portfolios and shall not be charged
with knowledge of the holdings or transaction of any position of the Portfolios other than the
Allocated Assets.
If the custodian enters into securities lending transactions on behalf of the Portfolios, the
Trust or the custodian shall be responsible for ensuring that the securities or other assets in the
Portfolios are available for sale at all times. The Trust or the custodian shall be liable for any
loss resulting from the sale by the Adviser of a security that is not available in the Portfolios
for settlement as a result of such securities lending transactions. Subject to the Adviser’s
applicable standard of care as set forth in Section 8 of this Agreement, to the extent that the
Adviser initiates any securities lending transactions, the Adviser shall be responsible for
ensuring that the securities involved in such transactions are available to settle any trades
initiated by the Adviser.
The Adviser is expressly authorized to rely upon any and all instructions, approvals and
notices given on behalf of the Trust by any one or more of those persons designated as
representatives of the Trust whose names, titles and specimen signatures appear in Appendix B
attached hereto. The Manager on behalf of the Trust may amend such Appendix B from time to time by
written notice to the Adviser. The Adviser shall continue to rely upon these instructions until
notified by the Manager to the contrary.
Section 9. Indemnification
(a) The Manager agrees to indemnify and hold harmless the Adviser from and against any and all
claims, losses, liabilities or damages (including reasonable attorneys’ fees and other related
expenses) (“Losses”),
howsoever arising, from or in connection with this Agreement or the performance by the Adviser
of its duties hereunder; provided however that the Manager will not indemnify the Adviser for
Losses resulting from the Adviser’s willful misfeasance, bad faith or gross negligence in the
performance of its duties or from the Adviser’s reckless disregard of its obligations and duties
under this Agreement.
(b) The Adviser agrees to indemnify and hold harmless the Manager from and against any and all
Losses resulting from the Adviser’s willful misfeasance, bad faith, or gross negligence in the
performance of, or from reckless disregard of, the Adviser’s obligations and duties under this
Agreement; provided however that the Adviser will not indemnify the Manager for Losses resulting
from the Manager’s willful misfeasance, bad faith or gross negligence in the performance of its
duties or from the Manager’s reckless disregard of its obligations and duties under this Agreement.
Section 10. 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.
(d) Provided the investment objectives of the Portfolios are adhered to, the Manager agrees
that the Adviser may aggregate sales and purchase orders of securities, commodities and other
investments held in the Portfolios with similar orders being made simultaneously for other accounts
managed by the Adviser or with accounts of the affiliates of Adviser, if in the Adviser’s
reasonable judgment such aggregation shall result in an overall economic benefit to the Portfolios,
taking into consideration the advantageous selling or purchase price, brokerage commission and
other expenses. The Manager acknowledges that the determination of such economic benefit to the
Portfolios by the Adviser represents the Adviser’s evaluation that each of the Portfolios is
benefited by relatively better purchase or sales prices, lower commission expenses and beneficial
timing of transactions or a combination of these and other factors.
Section 11. Duration and Termination
This Agreement shall become effective as of the 28th day of October, 2009, and shall continue
in effect for a period of two years from the date of execution. Thereafter, this Agreement shall
continue automatically for successive annual periods, provided such continuance is specifically
approved at least annually by (i) the board of trustees of the Trust (the “Board”) or (ii) a vote
of a “majority” (as defined in the 0000 Xxx) of each of the Portfolio’s outstanding voting
securities, provided that in either event the continuance also is approved by a majority of the
Board who are not “interested persons” (as defined in the 0000 Xxx) of any party to this Agreement,
by vote cast in person at a meeting called for the purpose of voting on such approval. This
Agreement is terminable, without penalty, at any time, by the Manager, by the Board, or by vote of
holders of a majority (as defined in the 0000 Xxx) of each of the Portfolio’s shares; or on 60
days’ written notice by the Adviser, and will terminate five business days after the Adviser
receives written notice of the termination of the
Management Agreement between the Trust and the Manager. This Agreement also will terminate
automatically in the event of its assignment (as defined in the 1940 Act).
Section 12. Confidentiality
The parties hereto understand that any information or recommendation supplied by either party
in connection with the performance of their obligations hereunder is to be regarded as confidential
and for use only by the Manager, the Adviser, the Trust or such persons the Manager or the Adviser
may designate in connection with the Portfolios.
Section 13. 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 14. Limitation of Liability
The Manager and Adviser agree that the obligations of the Trust under this Agreement shall not
be binding upon any members of the Board, 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 each of the Portfolios, 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 15. Delivery of Documents
Concurrently with the execution of this Agreement, the Adviser is delivering to the Manager a
copy of Part II of its Form ADV, as revised, on file with the Securities and Exchange Commission.
The Manager acknowledges receipt of such copy.
The Adviser also has delivered to the Manager a copy of its Disclosure Document, as amended,
dated [February 13, 2009], on file with the Commodity Futures Trading Commission. The Manager
hereby acknowledges receipt of such copy.
Section 16. 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: | The Consulting Group | |||
| c/o Citigroup Investment Advisory Services LLC 000 Xxxxxxxxx Xxx |
||||
| Xxx Xxxx, XX 00000 | ||||
| Fax: (000) 000-0000 | ||||
| Attention: General Counsel | ||||
| If to the Adviser: | Pacific Investment Management Company LLC 000 Xxxxxxx Xxxxxx Xxxxx |
|||
| Xxxxxxx Xxxxx, XX 00000 |
| Fax: (000) 000-0000 | ||||
| Attention: General Counsel | ||||
| Email: XXXXxxxxxx@xxxxx.xxx | ||||
| cc: Xxxx Xxxxxx, Executive Vice President | ||||
| Email: xxxx.xxxxxx@xxxxx.xxx |
Section 17. 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 1940 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 Manager and the Adviser each agree that it shall promptly notify the other (i) of any
changes regarding the information about itself in this Agreement, or (ii) if any of its
representations or warranties hereunder are no longer true or completely accurate.
(f) This Agreement may be amended at any time but only by the mutual agreement of the parties,
in writing.
(g) This Agreement constitutes the entire agreement between the parties and supersedes in
their entirety all prior agreements between the parties relating to the subject matter hereof.
(h) This Agreement shall be executed in two counterparts, each of which shall be considered to
be an original.
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.
| THE MANAGER: | ||||
| CONSULTING GROUP ADVISORY SERVICES LLC | ||||
| By: | /s/ XXXXXXX XXXXXXXX | |||
| Name: | Xxxxxxx Xxxxxxxx | |||
| Title: | COO — CGCM Funds | |||
| THE ADVISER: | ||||
| PACIFIC INVESTMENT MANAGEMENT COMPANY LLC | ||||
| By: | /s/ XXXXX X. XXXXXX | |||
| Name: | Xxxxx X. Xxxxxx | |||
| Title: | Managing Director | |||
Appendix A
FEE SCHEDULE
For the services provided by Adviser to the Allocated Assets, pursuant to the attached Investment
Advisory Agreement, the Manager will pay the Adviser a fee, computed daily and payable monthly,
based on the average daily net assets of the Allocated Assets at the following annual rates of the
average daily net assets of the Allocated Assets as determined by the Trust’s accounting agent:
| PORTFOLIO | RATE | |
International Fixed Income Investments
|
[Redacted per exemption] | |
Core Fixed Income Investments
|
[Redacted per exemption] |
Appendix B
Designated Representatives
of
International Fixed Income Investments & Core Fixed Income Investments
(PIMCO Account Nos. 1385 and 1085)
October 28, 2009
| Name/Title | Signature | |||
