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:
[ ] Preliminary Proxy Statement
[X] 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):
[ ] $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.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to
Exchange Act Rule 0-11:1
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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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3) Filing Party:
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4) Date Filed:
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SMALL CAPITALIZATION GROWTH INVESTMENTS
A PORTFOLIO OF
CONSULTING GROUP CAPITAL MARKETS FUNDS
388 GREENWICH STREET
NEW YORK, NEW YORK 10013
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
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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 certain assets of the Portfolio,
effective upon the acquisition by UAM of substantially all of the assets
of Pilgrim Baxter & Associates, Ltd., the existing adviser.
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 28, 1995
PROMPT EXECUTION AND RETURN OF THE ENCLOSEDPROXY IS REQUESTED. A SELF-
ADDRESSED, POSTAGE- PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
<PAGE>
SMALL CAPITALIZATION GROWTH INVESTMENTS
A PORTFOLIO OF
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 certain assets of the
Portfolio, effective upon the acquisition by UAM of substantially all of the
assets of Pilgrim Baxter & Associates, Ltd. ("Pilgrim Baxter"), the existing
adviser.
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 16,700,579.683.
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 Funds Management Inc. (the
"Manager"), the investment manager and administrator for the Fund, and The
Shareholder Services Group, Inc. ("TSSG"), a subsidiary of First Data
Corporation, the transfer agent 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 28, 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
<PAGE>
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. In the
event that a quorum is not present at the meeting, or in the event that a
quorum is present but sufficient votes to approve the proposal are not
received, the persons named as proxies may propose one or more adjournments of
the meeting to permit further solicitation of proxies. In determining whether
to adjourn the meeting, the following factors may be considered: the nature of
proposals that are 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 reasons for the solicitation.
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.
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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, dated March 10, 1995 which was last approved
by shareholders on that date. 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 0.30% 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 Portfolio in accordance with the Portfolio's
investment objective, policies and limitations, (2) make investment decisions
for the Portfolio, 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 Portfolio.
The Existing Advisory Agreement and the New Advisory Agreement provide that
the Portfolio 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
Manager; travel expenses of officers, Trustees and employees of the Fund who
are officers, directors or employees of the Adviser, Smith Barney, or Manager
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 Manager for maintaining the
Fund's financial books and records and calculating its daily net asset 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.
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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 Portfolio or its shareholders, provided that the Adviser is
not protected from liability to the Portfolio 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 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.
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<TABLE>
<CAPTION>
% OWNERSHIP
OF
NAME POSITION(S) WITH ADVISER PILGRIM BAXTER
---- ------------------------ --------------
<S> <C> <C>
Harold J. Baxter Director, Chairman and Chief 42.35%
Executive Officer
Gary L. Pilgrim Director, President, Secretary, 42.35%
Treasurer and Chief
Investment Officer
Bruce J. Muzina Director and Portfolio Manager 9.60%
Brian F. Bereznak Director and Chief Operating 3.60%
Officer
Donna S. Archer Chief Financial Officer .90%
Arline M. Wolstenholme Director of Operations .60%
Loraine E. McEvoy Marketing Associate .60%
</TABLE>
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, UAM
collectively had 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
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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
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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 Portfolio.
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 Portfolio 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
Manager 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. 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
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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 Portfolio for the expenses of the Portfolio 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 Portfolio such as soft dollar arrangements by which
brokers provide research to the Portfolio 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.
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As of the Record Date, to the knowledge of the Trust and its Board, no single
shareholder or "group" (as that term is used in Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), beneficially owned more
than 5% of the outstanding shares of the Portfolio. As of March 20, 1995, the
number of shares of the Portfolio beneficially owned by each Trustee and all
officers as a group, were as follows:
<TABLE>
<CAPTION>
SHARES
NAME OWNED
---- -------
<S> <C>
H. John Ellis.......................................................... 527.405
Donald G. Robinson..................................................... 87.966
Total of officers and trustees......................................... 615.371*
</TABLE>
* The group beneficially owned less than 1% of the shares of the Portfolio.
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 Fund 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 Fund's last fiscal year. During this time the
Portfolio paid no commissions to Smith Barney.
SHAREHOLDER PROPOSALS
As a Massachusetts business trust, the Fund 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 Fund, 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 Fund'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 Fund. Meetings of shareholders for any other
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purpose also shall be called by the Board members when requested in writing by
shareholders holding at 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. Written 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 28, 1995
SHAREHOLDERS ARE URGED TO COMPLETE, SIGN AND DATE
THE ENCLOSED PROXY AND RETURN IT PROMPTLY.
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<PAGE>
EXHIBIT A
CONSULTING GROUP CAPITAL MARKETS FUNDS
FORM OF
INVESTMENT ADVISORY AGREEMENT
May 19, 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 Adviser.
(b) The Manager, with the approval of the Trust, hereby appoints the Adviser
to continue 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.
A-1
<PAGE>
SECTION 2. PORTFOLIO MANAGEMENT DUTIES
(a) Subject to the supervision of the Manager and the Trust's Board of
Trustees, the Adviser will (i) manage the portion of the Portfolio's assets
allocated to the Adviser upon the recommendation of the Manager and the
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 Adviser will keep the Trust and the Manager informed of developments
materially affecting the Portfolio and shall, on the Adviser's own initiative,
furnish to the Trust and the Manager from time to time whatever information the
Adviser believes appropriate for this purpose.
(c) The Adviser agrees that it will comply with the Investment Company Act of
1940, as amended (the "Act"), and all rules and regulations thereunder, all
applicable federal and state laws and regulations and with any applicable
procedures adopted by the Trust's Board of Trustees.
SECTION 3. BROKERAGE
(a) The Adviser agrees that it will place orders pursuant to its investment
determinations with respect to Allocated Assets either directly with the issuer
or with brokers or dealers selected by it in accordance with the standards
specified in paragraphs (b) and (c) of this Section 3. The Adviser may place
orders with respect to Allocated Assets with 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 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 exercises investment
discretion.
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<PAGE>
SECTION 4. INFORMATION PROVIDED TO THE MANAGER AND THE TRUST
(a) The Adviser agrees that it will make available to the Manager and the
Trust promptly upon their request copies of all of its investment records and
ledgers with respect to the Portfolio to assist the Manager and the Trust in
monitoring compliance with the Act and the Investment Advisers Act of 1940, as
amended (the "Advisers Act"), as well as other applicable laws. The Adviser
will furnish the Trust's Board of Trustees with respect to the Portfolio such
periodic and special reports as the Manager and the Board of Trustees may
reasonably request.
(b) The Adviser agrees that it will immediately notify the Manager and the
Trust in the event that the Adviser or any of its affiliates: (i) becomes
subject to a statutory disqualification that prevents the Adviser from serving
as investment 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 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 statements
therein not misleading. The Adviser agrees to maintain the completeness and
accuracy of its registration on Form ADV in accordance with all legal
requirements relating to that Form. The Adviser acknowledges that it is an
"investment adviser" to the Portfolio within the meaning of the Act and the
Advisers Act.
SECTION 5. BOOKS AND RECORDS
In compliance with the requirements of Rule 31a-3 under the Act, the Adviser
hereby agrees that all records that it maintains for the Trust are the property
of the Trust and further agrees to surrender promptly to the Trust copies of
any such records upon the Trust's request. The Adviser further agrees to
preserve for the periods prescribed by Rule 31a-2 under the Act the records
required to be maintained by Rule 31a-1 under the Act and to preserve the
records required by Rule 204-2 under the Advisers Act for the period specified
in that Rule.
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<PAGE>
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 0.30% 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 Adviser shall be reduced in the same proportion as the
Portfolio Advisory Fee bears to the Manager's fee from the Portfolio to the
extent, in any fiscal year of the Portfolio, the aggregate expenses of the
Portfolio (including fees pursuant to this Agreement and the Trust's
Administration Agreement with the Administrator, but excluding interest, taxes,
brokerage fees, and, if permitted by state securities commissions,
extraordinary expenses) exceed the expense limitation of any state having
jurisdiction over the Portfolio.
(b) The Portfolio Advisory Fee for the period from the date this Agreement
becomes effective to the end of the month during which this Agreement becomes
effective shall be prorated according to the proportion that such period bears
to the full monthly period. Upon any termination of this Agreement before the
end of a month, the fee for such part of that month shall be prorated according
to the proportion that such period bears to the full monthly period and shall
be payable upon the date of termination of this Agreement.
(c) For the purpose of determining fees payable to the Adviser, the value of
the Portfolio's net assets shall be computed at the time and in the manner
specified in the Trust's Prospectus and/or the Statement of Additional
Information.
SECTION 7. COSTS AND EXPENSES
During the term of this Agreement, the Adviser will pay all expenses incurred
by it and its staff in connection with the performance of its services under
this Agreement, including the payment of salaries of all officers and employees
who are employed by it and the Trust.
SECTION 8. STANDARD OF CARE
The Adviser shall exercise its best judgment in rendering the services
provided by it under this Agreement. The Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Manager or
the Fund in connection with the matters to which this Agreement relates,
provided that nothing in this Agreement shall be deemed to protect or purport
A-4
<PAGE>
to protect the Adviser against any liability to the Manager or the Trust or to
holders of the Trust's shares representing interests in the Portfolio to which
the Adviser would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or by
reason of the Adviser's reckless disregard of its obligations and duties under
this Agreement.
SECTION 9. SERVICES TO OTHER COMPANIES OR ACCOUNTS
(a) It is understood that the services of the Adviser are not exclusive, and
nothing in this Agreement shall prevent the Adviser from providing similar
services to other investment companies (whether or not their investment
objectives and policies are similar to those of the Trust) or from engaging in
other activities; provided, however, that the Adviser 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 provision set forth in paragraph (a) of this Section 9 shall not
apply to the continuation of any contractual relationship to which the Adviser
is a party that is in effect on the date of this Agreement.
(c) 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.
(d) 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, 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 May 19, 1995, or, if a later
date, the date for approval by shareholders of the Portfolio and shall continue
for two years from that date, and thereafter shall continue automatically for
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<PAGE>
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 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 sixty (60) days' written
notice to the Manager and the Trust or (iii) by the Adviser 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 hereof 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 Portfolio or the Manager.
A-6
<PAGE>
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: Heath B. McLendon
Title: President
Agreed and Accepted:
PILGRIM BAXTER & ASSOCIATES, INC.
By: ____________________________________
Name:
Title:
A-7
<PAGE>
EXHIBIT B
LIST OF INVESTMENT COMPANIES FOR WHICH
PILGRIM BAXTER SERVES AS
AN INVESTMENT ADVISER OR SUBADVISER
<TABLE>
<CAPTION>
TYPE OF ASSETS AS ADVISORY FEE SCHEDULE
SERVICE OF 12/31/94 ----------------------------
INVESTMENT COMPANY PROVIDED (IN MILLIONS) FROM TO FEE
------------------ -------- ------------- ----------- ----------- ----
<S> <C> <C> <C> <C> <C>
The PBHG Funds
PBHG Growth Fund........ Advisory(/1/) $744.4 0.85%
PBHG Emerging Growth
Fund.................. Advisory(/1/) $176.4 0.85%
PBHG Large Cap Growth
Fund.................. Advisory(/1/) $ 0 0.75%
PBHG Select Equity Fund. Advisory(/1/) $ 0 0.85%
PBHG International Fund. Advisory(/1/) $ 14.0 1.00%
SEI Institutional
Managed Trust Small
Cap Growth Portfolio.. Advisory(/2/) $ 97.7 0.50%
Consulting Group Capital
Markets Funds--Small
Capitalization Growth
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%
</TABLE>
-----------
(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 Consulting Group Capital Markets
Funds--Small Capitalization Growth Investments is 0.30% 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.
B-1
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 May 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
Portfolio to be held at the offices of the Trust, 388 Greenwich Street,
22nd Floor, New York, New York, at 9:00 a.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)
shared/shearsn2/TRAK/proxy/0495crd.doc
