SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
CONSULTING GROUP CAPITAL MARKETS FUNDS
(Name of Registrant as Specified In Its Charter)
James B. O'Connell
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(j)(1), or 14a-
6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-
11.
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3) Per unit price or other underlying value of transaction
computed pursuant to
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1 Set forth the amount on which the filing fee is calculated and state
how it was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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SMALL CAPITALIZATION GROWTH INVESTMENTS
CONSULTING GROUP CAPITAL MARKETS FUNDS
388 GREENWICH STREET
NEW YORK, NEW YORK 10013
Notice of Special Meeting of Shareholders
To the Shareholders of Small Capitalization Growth Investments:
Notice is hereby given that a Special Meeting of Shareholders
(the "Meeting") of Small Capitalization
Growth Investments (the "Portfolio") of Consulting Group
Capital Markets Funds (the "Fund"), will be held at
388 Greenwich Street, New York, New York, 22nd Floor, on
May 19, 1995, at 9:00 a.m., local time, for the following
purposes:
1. To consider and vote upon a proposal to approve a new advisory agreement
between the Fund,
on behalf of the Portfolio, and PB Newco, Inc., a Delaware corporation
("PB Newco") and a wholly-owned
subsidiary of United Asset Management Corporation ("UAM") pursuant to
which PB Newco will act as adviser
with respect to assets of the Portfolio, effective
upon the acquisition of substantially all of the assets of Pilgrim
Baxter & Associates, Ltd., the existing adviser, by UAM.
2. To transact such other business as may properly come
before the Meeting or any adjournments
thereof.
All Shareholders are cordially invited to attend
the Meeting. Regardless of whether you plan to attend
the Meeting, please complete, sign and date the enclosed
Proxy and return it promptly in the enclosed envelope
so that a quorum will be present and a maximum number of
shares may be voted. If you are present at the
Meeting, you may change your vote, if desired, at that time.
Shareholders of record at the close of business on
March 20, 1995 are entitled to notice of and to vote at
the meeting or any adjournment thereof.
By Order of the Board of Trustees,
Christina T. Sydor
Secretary
New York, New York
March 27, 1995
PROMPT EXECUTION AND RETURN OF THE ENCLOSED PROXY
IS REQUESTED. A SELF-ADDRESSED, POSTAGE-PAID
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
Small Capitalization Growth Investments
Consulting Group Capital Markets Funds
388 Greenwich Street, 22nd Floor
New York, New York 10013
PROXY STATEMENT
Special Meeting of Shareholders
May 19, 1995
This proxy statement is furnished in connection with the
solicitation of proxies by the Board of Trustees of
Consulting Group Capital Markets Funds (the "Fund") on behalf of
Small Capitalization Growth Investments (the
"Portfolio") for use at the Special Meeting of Shareholders to
be held at the offices of the Fund on May 19, 1995 at
9:00 a.m., local time, and at any adjourned session thereof
(such meeting and any adjournment thereof are hereinafter
referred to as the "Meeting"). The purpose of the Meeting is to
consider and vote upon a proposal to approve a new
advisory agreement between the Fund, on behalf of the
Portfolio, and PB Newco, Inc., a Delaware corporation ("PB
Newco") and a wholly-owned subsidiary of United Asset Management
Corporation ("UAM") pursuant to which PB
Newco will act as adviser with respect to the assets of the
Portfolio, effective upon the acquisition of substantially all
of the assets of Pilgrim Baxter & Associates, Ltd.
("Pilgrim Baxter"), the existing adviser, by UAM.
Shareholders of the Portfolio (the "Shareholders") of
record at the close of business on March 20, 1995 are
entitled to vote at the Meeting. As of March 20, 1995, the
approximate number of shares of common stock ("shares")
issued and outstanding for the Small Growth Capitalization
Investments was _______________. Each share is
entitled to one vote and each fractional share is entitled
to a proportionate fractional vote on each matter to be acted
upon at the Meeting.
In addition to the solicitation of proxies by mail,
Trustees and officers of the Fund and officers and
employees of Smith Barney, Inc., ("Smith Barney"), the
Distributor of the Fund, Smith Barney Mutual Fund
Management Inc. ("Funds Management") the Administrator
for the Fund, may solicit proxies in person or by
telephone. Persons holding shares as nominees will,
upon request, be reimbursed for their reasonable expenses
incurred in sending soliciting materials to
their principals. The cost of solicitation will
be borne by Pilgrim Baxter. The
Proxy and this Proxy Statement are being mailed
to the Shareholders on or about March 27, 1995.
Shares represented by duly executed proxies will be voted
in accordance with the instructions given. Proxies
may be revoked at any time before they are exercised by
a written revocation received by the Fund at 388 Greenwich
Street, New York, New York, by properly executing a
later-dated proxy, or by attendance at the Meeting and voting in
person.
In the event that sufficient votes in favor of the proposals
set forth in the Notice of Meeting and this Proxy
Statement are not received by the time scheduled for the
Meeting, the persons named as proxies may move one or
more adjournments of the Meeting to permit further solicitation
of proxies with respect to any such proposals. In
determining whether to adjourn the Meeting, the following factors
may be considered: the nature of the proposals
that are the subject of the Meeting, the percentage of votes
actually cast, the percentage of negative votes actually
cast, the nature of any further solicitation and the information
to be provided to shareholders with respect to the
reason for the solicitation. Any such adjournment will require
the affirmative vote of a majority of the shares present
at the Meeting. The persons named as proxies will vote in favor
of such adjournment those shares which they are
entitled to vote and which have voted in favor of such adjournment
those shares which they are entitled to vote and
which have voted in favor of such proposals . The costs of any such
additional solicitation and of any adjourned
session will be borne by Pilgrim Baxter.
APPROVAL OF THE NEW ADVISORY AGREEMENT FOR THE PORTFOLIO
Background
The Meeting has been called for the purpose of considering
a new advisory agreement for the Portfolio as a
result of a proposed transaction (the "Proposed Transaction")
whereby UAM would acquire substantially all of the
assets of Pilgrim Baxter, the current investment adviser of
the Portfolio. UAM would then contribute such assets to
PB Newco, which would carry on the business of Pilgrim Baxter
under Pilgrim Baxter's current name (Pilgrim Baxter
and PB Newco are hereinafter sometimes collectively referred to
as the "Adviser"). The Proposed Transaction
represents an ownership change and, as such, has the effect of
terminating the existing advisory agreement between
the Fund, on behalf of the Portfolio, and Pilgrim Baxter (the
"Existing Advisory Agreement"). Accordingly,
shareholders are being asked to approve the New Advisory Agreement
embodying exactly the same terms and fees
with the Adviser under its new ownership. The Fund's Board of
Trustees, including a majority of the non-interested
Trustees (those Trustees who are not parties to the New Advisory
Agreement, or interested persons of such parties),
has approved the New Advisory Agreement, subject to approval by
the shareholders of the Portfolio, to become
effective upon the consummation of the Proposed Transaction.
Description of the Existing Advisory Agreement and
the New Advisory Agreement
Pilgrim Baxter currently serves as the Fund's investment adviser
pursuant to the Existing Advisory
Agreement. Under the Existing Advisory Agreement and the
New Advisory Agreement, the Adviser is entitled to a
fee, which is calculated daily and paid monthly, at an
annual rate of 0.030% of the Portfolio's average daily net assets.
For its fiscal year ended August 31, 1994, Small
Capitalization Growth Investments incurred an investment advisory
expense of $388,852.
Except for the change in Adviser and different
effective and termination dates, the terms of the New
Advisory Agreement are identical in all respects to the terms
of the Existing Advisory Agreement. The form of the
New Advisory Agreement is attached to this Proxy
Statement as Exhibit A, and the description of the New Advisory
Agreement set forth in this Proxy Statement is qualified
in its entirety by reference to Exhibit A.
The Existing Advisory Agreement and the New Advisory
Agreement provide that the Adviser, in return for
its fee, will (1) provide a program of continuous investment
management for the Fund in accordance with the Fund's
investment objective, policies and limitations, (2) make
investment decisions for the Fund, and (3) place orders to
purchase and sell securities for the Fund, subject to the
supervision of the Fund's Trustees. The Existing Advisory
Agreement and the New Advisory Agreement provide that the
Adviser will provide adequate office space, facilities
and personnel to perform its advisory services for the Fund.
The Existing Advisory Agreement and the New Advisory
Agreement provide that the Fund will pay all its
expenses for services not provided by the Adviser. These
expenses include, among others: the fees and expenses of
trustees of the Fund who are not "interested persons" of the
Adviser or the Administrator; travel expenses of
officers, trustees and employees of the Fund who are
officers, directors or employees of the Adviser, or Smith
Banrey, or Funds Management related to attendance at meetings
of the Fund's Board of Trustees or committees
thereof; the cost of the Fund's legally required fidelity
bond; interest expenses; taxes, brokerage fees and
commissions; fees and expenses of registering and qualifying
the Fund and its shares for distribution under Federal
and state securities laws; expenses of preparing, printing
and distributing prospectuses and other material to existing
shareholders; fees to the custodian and transfer agent; payments
to the Funds Management for maintaining the
Fund's financial books and records and calculating its daily net
value; auditing and legal expenses; insurance
expenses; association membership dues; and the expense of annual
and semi-annual reports to shareholders,
shareholders' meetings and proxy solicitations. The Fund is also
liable for such non-recurring expenses as may arise,
including litigation to which the Fund may be a party. The Fund
may have an obligation to indemnify its trustees and
officers with respect to such litigation.
The Existing Advisory Agreement and the New Advisory Agreement
provide that the Adviser shall not be
liable for any error of judgment or mistake of law or for losses
to the Fund or its shareholders, provided that the
Adviser is not protected from liability to the Fund or to its
shareholders resulting from the Adviser's misfeasance,
bad faith or gross negligence in performance of its duties under
the Advisory Agreement, or from reckless is
disregard of its duties and obligations.
Each of the Existing Advisory Agreement and the New Advisory Agreement
has an initial term of two years
from its effective date, and thereafter shall continue for
successive annual periods, provided the continuation is
approved by the Fund's Trustees or by vote of a majority of its
outstanding voting securities, as well as by a majority
of the Fund's Trustees who are not "interested persons" as defined
in the 1940 Act. The Existing Advisory
Agreement and the New Advisory Agreement may be terminated at any
time without penalty by the Fund or the
Adviser on 60 day's written notice and will automatically terminate
in the event of its assignment.
Information Regarding Pilgrim Baxter and PB Newco
Pilgrim Baxter is a Pennsylvania corporation with its principal
address at 1255 Drummers Lane, Suite 300,
Wayne, PA 19087. Pilgrim Baxter is registered under the Investment
Advisers Act of 1940 (the "Advisers Act"). PB
Newco, a Delaware corporation and an indirect wholly-owned
subsidiary of UAM, as of the closing date of the
Proposed Transaction, will be registered under the Advisers Act,
and have the same address as, and employ the
same key personnel as, Pilgrim Baxter did previously.
The Pilgrim Baxter stockholders who also act as its executive
officers and directors, and other officers of the
Adviser are listed below. The principal occupation of
each is with the Adviser. Each of the individuals named below
will hold the same position with PB Newco following the
consummation of the Proposed Transaction, but will not
own any common stock or other ownership interest in PB Newco.
% Ownership
of
Name Position(s) with Adviser Pilgrim Baxter
Harold J. Baxter Director, Chairman and Chief Executive 42.35%
Officer
Gary L. Pilgrim Director, President, Secretary, Treasurer 42.35%
and Chief Investment Officer
Bruce J. Muzina Director and Portfolio Manager 9.60%
Brian F. Bereznak Director and Chief Operating Officer 3.60%
Donna S. Archer Chief Financial Officer .90%
Arline M. Wolstenholme Director of Operations .60%
Loraine E. McEvoy Marketing Associate .60%
Pilgrim Baxter has been in the investment advisory business
since 1982 and as of December 31, 1994 had
approximately $4 billion in assets under management. Its clients
are primarily tax-exempt organizations such as
pension plans and charitable institutions. Pilgrim Baxter is also
general partner of and adviser to two hedge funds.
Exhibit B to this Proxy Statement identifies all investment companies
for which Pilgrim Baxter serves as investment
adviser or subadviser, the fees charged by Pilgrim Baxter and the
size of each such investment company. Certain
advisory agreements for investment companies identified on Exhibit B
to which Pilgrim Baxter is a party require or
permit Pilgrim Baxter to reduce or waive its fees under certain circumstances.
After the Proposed Transaction, PB Newco will be an indirect,
wholly-owned subsidiary of United Asset
Management Corporation, a New York Stock Exchange listed holding company
principally engaged, through
affiliated firms, in providing institutional investment management
services and acquiring institutional investment
management firms like Pilgrim Baxter. Its wholly-owned subsidiaries
operate as investment advisers, and, as of
December 31, 1994, the UAM group had collectively approximately $104
billion of assets under management. The
investment management firms that comprise the UAM group are located
throughout the United States. UAM strives
for diversification in the variety of asset classes with regard to
which its investment advisory subsidiaries provide
investment management services. UAM's corporate headquarters is
located at One International Place, Boston,
Massachusetts 02110. After the Proposed Transaction, the Adviser will
be a direct subsidiary of United Asset
Management Holdings, Inc. ("UAM Holdings"). UAM Holdings' address is
103 Springer Building, 3411 Silver Side
Road, Wilmington, Delaware 19810.
The Acquisition Agreement
UAM, PB Newco, Pilgrim Baxter and the shareholders of Pilgrim Baxter
(the "Pilgrim Baxter Shareholders")
have entered into an acquisition agreement dated as of
February 3, 1995 (the "Acquisition Agreement") which
contemplates that the Adviser will become a wholly-owned
subsidiary of UAM. In addition, the Acquisition
Agreement contemplates that certain key personnel of Pilgrim Baxter,
including Gary L. Pilgrim and Harold J. Baxter,
will enter into long-term employment agreements with PB Newco.
This will assure that PB Newco will continue to
operate with its same investment personnel and officers.
The same persons who are presently responsible for the
investment policies of Pilgrim Baxter will continue to direct the
investment policies of PB Newco following the
consummation of the Proposed Transaction. No changes in Pilgrim
Baxter's method of operation, or the location
where it conducts its business, are contemplated.
The Acquisition Agreement provides that Pilgrim Baxter will
sell UAM substantially all of the assets of
Pilgrim Baxter, including certain advisory contracts, customer
lists, books, records, all goodwill associated with the
assets being sold and the exclusive right to use the name of Pilgrim
Baxter as all or part of a trade or corporate name.
The purchase price is payable in a combination of promissory notes
of UAM and warrants to purchase UAM stock.
In addition, UAM will make cash bonus payments and issue additional
warrants to purchase UAM stock if PB
Newco surpasses certain annualized revenue and asset management
thresholds over the next two years. In addition,
UAM will make cash bonus payments to certain Pilgrim Baxter Shareholders
and other Pilgrim Baxter personnel. The
total purchase price is subject to certain preclosing adjustments
and conditions.
UAM, PB Newco and certain of the Pilgrim Baxter Shareholders have
also agreed to enter into a revenue
sharing agreement under which UAM and PB Newco will share PB Newco's
revenues. That agreement is intended to
allow the key executives of Pilgrim Baxter to participate in
PB Newco's growth in a substantial manner and make
operating decisions freely within the limits of PB Newco's share
of revenues. The revenue sharing agreement recites
that Pilgrim Baxter key executives will continue to have authority
over the investment management process.
Section 15(f) of the 1940 Act provides that when a change in the
control of an investment adviser occurs,
the investment adviser or any of its affiliated persons may receive
any amount or benefit in connection therewith as
long as two conditions are satisfied. First, no "unfair burden"
may be imposed on the investment company as a
result of the transaction relating to the change of control, or
any express or implied terms, conditions or
understandings applicable thereto. The term "unfair burden," as
defined in the 1940 Act, includes any arrangement
during the two-year period after the change in control whereby
the investment adviser (or predecessor or successor
adviser), or any interested person of any such adviser, receives
or is entitled to receive any compensation, directly or
indirectly, from the investment company or its security holders
(other than fees for bona fide investment advisory or
other services) or from any person in connection with the
purchase or sale of securities or other property to, from, or
on behalf of the investment company (other than fees for bona fide
principal underwriting services). No such
compensation arrangements are contemplated in the Proposed
Transaction. In the Acquisition Agreement, Pilgrim
Baxter and PB Newco have agreed to use their best efforts to
ensure that the Proposed Transaction will not cause the
imposition of an unfair burden on the Portfolios.
The second condition is that, during the three-year period
immediately following consummation of the
transaction, at least 75% of the investment company's board of
directors must not be "interested persons" of PB
Newco or Pilgrim Baxter within the meaning of the 1940 Act.
In the Acquisition Agreement, Pilgrim Baxter and PB
Newco have agreed to use their best efforts to ensure that the
second condition is met.
There are a number of conditions precedent to the closing of
the Proposed Transaction. Such conditions
include, among other things, that all regulatory filings, applications
and notifications and all third-party consents will
have been duly and properly made or obtained, and that consents
will have been obtained from a specified
percentage of Pilgrim Baxter's current clients including
the Portfolios among others, as required by applicable law.
If the conditions for the Proposed Transaction are not met
and the acquisition is not completed, the Existing
Advisory Agreement will remain in effect. In the event the
Proposed Transaction is completed but the New Advisory
Agreement is not approved by the Portfolio's shareholders, the
Trustees and the Funds Management will promptly
seek to enter a new advisory arrangement for the Portfolio,
subject to approval by the Portfolio's shareholders.
Trustees' Considerations
The Board of Trustees believes that the terms of the New
Advisory Agreement are fair to, and in the best
interest of, the Fund, the Portfolio, and the Shareholders.
The Board of Trustees, including all of the non-interested
Trustees, recommends approval by the Shareholders of the New
Advisory Agreement between PB Newco and the
Fund in making this recommendation, the Trustees carefully
evaluated the experience of Pilgrim Baxter's key
personnel in institutional investing, the quality of services
PB Newco is expected to provide to the Portfolio,
including, but not limited to: (1) the fee and expense ratios of
comparable mutual funds; (2) the performance of the
Portfolio since commencement of operations; (3) the nature and
quality of the services expected to be rendered to the
Portfolio by PB Newco; (4) the distinct investment objectives
and policies of the Portfolios; (5) that the compensation
payable to PB Newco by the Portfolio under the proposed New
Advisory Agreement will be at the same rate as the
compensation payable to the Adviser under the Existing Advisory
Agreement; (6) that the terms of the Existing
Advisory Agreement will be unchanged under the New Advisory
Agreement except for different effective and
termination dates; (7) the history, reputation, qualification
and background of Pilgrim Baxter and UAM, as well as the
qualifications of their personnel and their respective financial
conditions; (8) the commitment of the parties to the
Acquisition Agreement to pay or reimburse the Fund for the
expenses of the Fund incurred in connection with the
Proposed Transaction; (9) Pilgrim Baxter's investment performance
record; (10) the benefits expected to be realized as
a result of PB Newco's affiliation with UAM; and (11) other factors
deemed relevant. The Board of Trustees also
considered the benefits that are derived by the Adviser
from the relationship with the Fund such as soft dollar
arrangements by which brokers provide research to the
Fund or the Adviser in return for allocating fund brokerage.
See "Portfolio Transactions" below.
Pilgrim Baxter has advised the Board of Trustees that it
expects that there will be no dilution in the scope
and quality of advisory service provided to the Portfolio
as a result of the Proposed Transaction. Accordingly, the
Board of Trustees believes that the Portfolio should receive
investment advisory services under the New Advisory
Agreement equal or superior to those they currently receive
under the Existing Advisory Agreement, at the same fee
levels.
Required Vote
Approval of the New Advisory Agreement with respect to a
Portfolio requires the affirmative vote of a
majority of the outstanding shares of that Portfolio. As defined
in the 1940 Act, "majority of the outstanding shares"
means the vote of (i) 67% or more of the Portfolio's outstanding
shares present at a meeting, if the holders of more
than 50% of the outstanding shares of the Portfolio are
present or represented by proxy, or (ii) more than 50% of the
Portfolio's outstanding shares, whichever is less.
Abstentions and "broker non-votes" will not be counted
for or against any proposal to which they relate,
but will be counted for purposes of determining whether a
quorum is present. Abstentions and "broker non-votes"
will be counted as votes present for purposes of determining
a "majority of the outstanding voting securities"
present at the Meeting, and will therefore have the effect
of counting against the proposal to which they relate.
THE TRUSTEES, INCLUDING ALL OF THE INDEPENDENT TRUSTEES, RECOMMEND THAT
SHAREHOLDERS OF THE PORTFOLIO VOTE "FOR" THE NEW ADVISORY AGREEMENT.
Additional Information on Beneficial Owners
The following table sets forth certain information as
of March 20, 1995 concerning each person who is a
beneficial owner of more than 5% of the Shares of the
Fund because he, she or it possessed or shared voting or
investment power with respect to such Shares.
Name and Address
Amount of Beneficial
Ownership (Shares)
Percent
of Fund
As of March 20, 1995, the number of shares of the Fund
beneficially owned by (i) each Trustee and (ii) all
officers and Trustees as a group, and the percent of the
shares of the Fund so owned, were as follows:
Name
Shares
Owned
Percent of
Fund
Portfolio Transactions with Affiliated Broker-Dealers
To the extent consistent with applicable provisions of the
1940 Act and the rules and exemptions adopted
by the SEC under the 1940 Act, the Board has
determined that transactions for the Portfolio may be executed through
Smith Barney and other affiliated broker-dealers if,
in the judgment of the Investment Adviser, the use of an affiliated
broker-dealer is likely to result in price and execution
at least as favorable as those of other qualified broker-dealers.
The Board periodically reviews the commissions paid by
the Trust to determine if the commissions paid over
representative periods of time were reasonable in relation
to the benefits inuring to the Trust. During the fiscal year
ended August 31, 1994 the Trust incurred total brokerage commissions
on portfolio transactions of $6,309,327, of
which $202,699, or 3.21% of the aggregate was paid to Smith Barney
during the Trust's last fiscal year. During this
time the Portfolio paid no commisions to Smith Barney.
Shareholder Proposals
As a Massachusetts business trust, the Trust does not hold
annual shareholder's meetings. Shareholders
wishing to submit proposals for inclusion in a proxy statement
for a subsequent meeting of shareholders must submit
their proposals for inclusion in the proxy materials in writing
to the Secretary of the Trust, c/o Consulting Group
Capital Markets Funds, 388 Greenwich Street, 22nd Floor, New York,
New York 10013
Shareholder Request for Special Meeting
Shareholders holding at least 10% of the Trust's outstanding
voting securities (as defined in the 1940 Act)
may require the calling of meeting of shareholders for the
purpose of voting on the removal of voting on the removal
of any Board member of the Trust. Meetings of shareholders
for any other purpose also shall be called by the
Board members when requested in writing by shareholders holding
art least 10% of the shares then outstanding or, if
the Board members shall fail to call or give notice of any
meeting of shareholders for a period of 30 days after such
application, shareholders holding at 10% of the shares then
outstanding may call and give notice of such meeting.
Reports to Shareholders
The Fund will furnish, without charge, a copy of the
most recent Annual Report to Shareholders of the
Portfolios and the most recent Semi-annual Report
succeeding such Annual Report, if any, on request. Writen
requests should be directed to Fund at 388 Greenwich
Street, 22nd Floor, New York, New York 10013 or by
calling 1-800-423-7922.
Other Matters
The Trustees do not know of any matters to be presented at the
Meeting other than those set forth in this
Proxy Statement. If any other business should come before the
Meeting, the persons named in the accompanying
proxy will vote thereon in accordance with their best judgment.
By Order of the Board of Trustees
Christina T. Sydor
Secretary
March 27, 1995
SHAREHOLDERS ARE URGED TO COMPLETE, SIGN AND DATE
THE ENCLOSED PROXY AND RETURN IT PROMPTLY.
CONSULTING GROUP CAPITAL MARKETS FUNDS
FORM OF
INVESTMENT ADVISORY AGREEMENT
May_, 1995
Pilgrim Baxter & Associates, Inc.
1255 Drummers Lane, Suite 200
Wayne, PA 19087
Dear Sirs:
Under an agreement (the "Management Agreement") between
Consulting Group Capital Markets
Funds, a Massachusetts business trust (the "Trust"), and
Smith Barney Mutual Funds 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 Pilgrim
Baxter & Associates, Inc. (the
"Adviser") with respect to the Adviser's serving as
an investment adviser of Small Capitalization Growth
Investments (the "Portfolio"), as 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 Advisor.
(b) The Manager, with the approval of the Trust, hereby
appoints the Advisor to continue to
act as an investment advisor to the Portfolio for the
periods and on the terms set forth in this Agreement.
The Advisor 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 Advisor
will (i) manage the portion of the Portfolio's assets
allocated to the Advisor upon the recommendation of
the Manager and the approval 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 with respect to
Allocated Assets.
(b) The Advisor will keep the Trust and the Manager informed
of developments materially
affecting the Portfolio and shall, on the Advisor's own
initiative, furnish to the Trust and the Manager from
time to time whatever information the Advisor believes
appropriate for this purpose.
(c) The Advisor 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.
Section 3. Brokerage
(a) The Advisor 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 Advisor may
place orders with respect to Allocated Assets with Smith Barney
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 Advisor
will use its best efforts to seek the
best overall terms available. In assessing the best
overall terms available for any portfolio transaction, the
Advisor 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 Advisor 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 Advisor or an affiliate
exercise investment discretion.
Section 4. Information Provided to the Manager and the Trust
(a) The Advisor 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 Advisor 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 Advisor agrees that it will immediately notify the
Manager and the Trust in the event
that the Advisor or any of its affiliates: (i) becomes
subject to a statutory disqualification that prevents the
Advisor from serving as investment advisor 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 Advisor 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 Advisor
respecting or relating to the Advisor 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 Advisor represents that it is an investment adviser
registered under the Advisers Act
and other applicable laws and that the statements contained
in the Advisor'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 Advisor agrees to maintain the completeness
and accuracy of its registration on Form
ADV in accordance with all legal requirements relating
to that Form. The Advisor 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 Advisor 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 Advisor 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 Advisor a fee that is computed daily and paid monthly at
the annual rate of .30% 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 net asset value of the Portfolio (the
"Portfolio Advisory Fee"). The Portfolio Advisory Fee
payable to the Advisor 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 Advisor, 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 Advisor 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 Advisor shall exercise its best judgment in
rendering the services provided by it under this
Agreement. The Advisor 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 Advisor
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 Advisor 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 Advisor'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 Advisor
are not exclusive, and nothing in this
agreement shall prevent the Advisor 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; provided, however, that the Advisor
agrees that neither it nor any of its affiliated
persons (as defined in the Act) shall accept retention as
investment adviser, investment manager or similar
service provider during the pendency of this Agreement and
for the period of one (1) year after the
termination of this Agreement with or for the benefit of any
investment company registered under the Act
that seeks as a primary market for its shares asset allocation
programs similar in nature or market to
TRAK Personalized Investment Advisory Service.
(b) The proviso set forth in paragraph (a) of this Section 9
shall not apply to the continuation
of any contractual relationship to which the Advisor is a party
that is in effect on the date of this
Agreement.
(c) When the Advisor recommends the purchase or sale of
a security for other investment
companies and other clients, and at the same time the Advisor
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.
(d) The Trust and the Manager understand and acknowledge
that the persons employed by
the Advisor 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 Advisor
or any affiliate of the Advisor to engage in and devote
time and attention to other businesses or to render
services of whatever kind or nature, subject to the proviso
set forth in paragraph (a) of this Section 9.
Section 10. Duration and Termination
(a) This Agreement shall become effective on the
commencement of operations 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 sixty (60) days' written notice
to the Advisor 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 sixty (60)
days' written notice to the Manager and the
Trust or (iii) by the Advisor at any time without penalty, upon
ninety (90) 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 Advisor 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.
SMITH BARNEY MUTUAL FUNDS
MANAGEMENT INC.
By: _____________________________
Name: Christina T. Sydor
Title: Secretary
Agreed and Accepted:
PILGRIM BAXTER & ASSOCIATES, INC.
By: _____________________________
Name:
Title:
TRAK/AGMTS/INVADV/PBA.DOC
Exhibit B
List of Investment Companies for which
Pilgrim Baxter Serves as
an Investment Adviser or Subadviser
Investment Company
Type of
Service
Provided
Assets as
of 12/31/94
(In Millions)
Advisory Fee Schedule
Fro
m
To
Fee
The PBHG Funds
PBHG Growth Fund
PBHG Emerging Growth Fund
PBHG Large Cap Growth
Fund
PBHG Select Equity Fund
PBHG International Fund
Advisory(1)
Advisory(1)
Advisory(1)
Advisory(1)
Advisory(1)
$
744.4
$
176.4
$ 0
$ 0
$
14.0
0.85%
0.85%
0.75%
0.85%
1.00%
SEI Institutional Managed Trust
Small Cap Growth Portfolio
Advisory(2)
$
97.7
0.50%
Smith Barney Trust for "TRAK"
Investments
Advisory(3)
$
218.1
0.30%
Diversified Investment Advisers,
Inc.
Sub-Advisory(4)
$
53.9
0.50%
Managers Special Equity Fund
Sub-Advisory(4)
$
35.4
0.50%
SEI Variable Annuity Fund
Sub-Advisory(4)
$ 0
_
AAL Smaller Company Stock
Fund
Sub-Advisory(4)
$
198.3
$ -
$50,000,000
0.50%
50,000,001
100,000,000
0.45%
100,000,001
150,000,000
0.40%
150,000,001
200,000,000
0.35%
200,000,001
-
0.30%
(1) Pilgrim Baxter has waived a portion of its fees with
regard to the PBHG International Fund to keep total expenses
below 2.25% and has agreed to waive a portion of its
fees with regard to each other PBHG Fund to keep total expenses below
1.50%.
(2) Pilgrim Baxter, along with two other investment advisers,
manages a portion of this fund's total assets, based upon
allocations determined by the fund's board of directors.
(3) Pilgrim Baxter receives only a portion of the advisory
fees paid by this Fund; the total advisory fee paid by the Smith
Barney Trust for "TRAK" Investments is .60% of the Fund's
average daily net assets.
(4) The fees paid to Pilgrim Baxter for sub-advisory
services to these funds comprise only a portion of the total advisory
fees paid by the funds.
This proxy, if properly executed, will be voted in the manner directed by
the undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE PROPOSAL(S) LISTED BELOW. Please refer to the Proxy
Statement for a discussion of the Proposal. Please indicate your vote by
an "X" in the appropriate box below.
1. To approve the Investment Advisory Agreement FOR *
AGAINST * ABSTAIN *
with Pilgrim Baxter & Associates, Inc.
VOTE THIS PROXY CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
(Please Detach at Perforation Before Mailing)
..........................................................................
..........................................................................
.............
Consulting Group Capital Markets Funds - Small Capitalization Growth
Investments
Special Meeting of Shareholders on April 19, 1995
The undersigned holder of shares of the above named portfolio (the
"Portfolio"), of Consulting Group Capital Markets Funds (the "Trust"),
hereby appoints Heath B. McLendon, Leonard Reinhart, Christina T. Sydor
and Lee D. Augsburger as attorneys and proxies for the undersigned, with
full powers of substitution and revocation, to represent the undersigned
and to vote on behalf of the undersigned all shares of the Portfolio that
the undersigned is entitled to vote at the meeting of shareholders of the
Trust to be held at the offices of the Trust, 388 Greenwich Street, New
York, New York, 22nd Floor, at 12:00 p.m. on the date indicated above and
any adjournments thereof (the "Meeting"). The undersigned hereby
acknowledges receipt of the Notice of Meeting and Proxy Statement, and
hereby instructs said attorneys and proxies to vote said shares as
indicated hereon. In their discretion, the proxies are authorized to vote
upon such other business as may properly come before the Meeting. A
majority of the proxies present and acting at the Meeting in person or by
substitute (or, if only one shall be so present, then that one) shall have
and may exercise all of the power and authority of said proxies hereunder.
The undersigned hereby revokes any proxy previously given.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE
Note: Please sign exactly as your name appears on this Proxy. If joint
owners, EITHER may sign this Proxy. When signing as attorney, executor,
administrator, trustee, guardian or corporate officer, please give your
full title.
DATE: ________________________________
________________________________
________________________________
Signature(s) (Title(s), if applicable)
PH02/66668.2
PH02/66668.2
