SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [XXX]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ XXX] 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)
DAVID A. BARNETT
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required
[ ] $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:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
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:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
A SPECIAL NOTICE TO SHAREHOLDERS OF
CONSULTING GROUP CAPITAL MARKETS FUNDS
SMALL CAPITALIZATION GROWTH INVESTMENTS
Dear Shareholder:
The Trustees of Consulting Group Capital Markets Funds (the "Trust")
recently have unanimously approved and voted to recommend that shareholders of
the Small Capitalization Growth Investments (the "Portfolio") approve a new
management agreement on behalf of the Portfolio with the Portfolio's
Investment Manager, Smith Barney Mutual Funds Management Inc. ("SBMFM" or the
"Manager").
Because of the strong performance of small capitalization stocks relative to
other asset classes and the rapid increase of these types of funds in the
market place over the last two years, the demand for well regarded investment
advisers who specialize in this area has grown tremendously. As a result of
these competitive pressures, the range of fees charged by these entities has
also increased. In fact, Pilgrim Baxter & Associates, Inc. ("PBA"), a current
Advisor to the Portfolio, informed the Board in the Fall of 1996 that its fee,
which had been set five years prior, was no longer competitive. For this
reason, PBA entered into discussions with the Manager about possibly
terminating its agreement with the Portfolio and has indicated that it will
terminate its agreement with the Manager regardless of shareholder approval or
disapproval of the proposal.
At the same time the Manager was in discussions with PBA, the Manager
undertook a survey of existing small capitalization investment advisors to
ascertain their capacity and current fees. Based on an independent review of
industry data that confirmed PBAs assertions, the Manager is seeking a fee
increase so that it can hire a well established investment adviser(s) in the
small capitalization discipline.
The proposed new management agreement increases the management fee from an
annual rate of 0.60% to 0.80% of the average net assets of the Portfolio. The
fee is payable to the Consulting Group, a division of the Manager, whose
responsibility is to select investment advisors to the Trust's various
portfolios (the "Advisors"), communicate performance expectations and
evaluations to the Advisors and ultimately recommend to the Trustees which
Advisor contracts should be renewed, modified or terminated. It is the current
practice of the Manager to compensate each Advisor by paying the fees received
by the portfolios directly to the Advisor. Therefore, any approved fee
increase will be paid to the Advisor by the Manager and not retained by the
Manager or its affiliates.
The Trustees have concluded that the proposed fee increase will enable the
Manager to appropriately increase the fee to the Portfolio's prospective
Advisors. If approved by shareholders, the increase in the management fee will
be applied fully to increase the compensation of the Portfolio's current and
prospective Advisors and therefore will not result in increased profitability
to the Manager.
<PAGE>
MEETING OF SHAREHOLDERS:
YOUR VOTE IS IMPORTANT
To consider the proposed increase in the management fee for the Portfolio,
the Trustees have called a Meeting of Shareholders to be held on March 31,
1997 and unanimously recommend that shareholders vote for the proposal. WE
STRONGLY INVITE YOUR PARTICIPATION BY ASKING YOU TO REVIEW, COMPLETE AND
RETURN YOUR PROXY PROMPTLY.
Detailed information about the proposal is described in the enclosed proxy
statement. Please read this proxy statement and then exercise your right to
vote by completing, dating and signing the enclosed proxy card. A self-
addressed, postage-paid envelope is enclosed for your convenience.
If you have any questions regarding the proposed transaction, please call
your Smith Barney Financial Consultant who will be pleased to assist you.
IT IS VERY IMPORTANT THAT YOUR VOTING INSTRUCTIONS BE RECEIVED PROMPTLY.
Sincerely,
Heath B. McLendon
Chairman of the Board
Consulting Group Capital
Markets Funds
February 7, 1997
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CONSULTING GROUP CAPITAL MARKETS FUNDS
222 DELAWARE AVENUE
WILMINGTON, DELAWARE 19801
----------------------
NOTICE OF MEETING OF SHAREHOLDERS
SMALL CAPITALIZATION GROWTH INVESTMENTS
TO BE HELD ON MARCH 31, 1997
----------------------
TO THE SHAREHOLDERS:
A Meeting of Shareholders of Small Capitalization Growth Investments (the
"Portfolio") of the Consulting Group Capital Markets Funds (the "Trust") will
be held on March 31, 1997 at 2:00 P.M. at 388 Greenwich Street, New York, New
York, 22nd Floor, for the following purposes:
(1) To approve or disapprove a new management agreement changing the fee
between the Trust on behalf of the Portfolio and the Portfolio's current
investment manager Smith Barney Mutual Funds Management Inc., and
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Shareholders of record at the close of business on January 31, 1997 will be
entitled to vote at the Meeting.
Please mark, date and sign the enclosed proxy and return it in the prepaid
envelope enclosed for your convenience to insure that your shares are
represented. THE PROMPT RETURN OF YOUR PROXY WILL SAVE THE EXPENSE OF FURTHER
MAILINGS. If you attend the Meeting you can revoke your proxy and vote your
shares in person if you wish.
By Order of the Trustees
Christina T. Sydor
Secretary
New York, New York
February 7, 1997
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS ARE URGED TO
MARK, DATE, SIGN AND RETURN THE PROXY IN THE ENCLOSED PREPAID ENVELOPE.
<PAGE>
CONSULTING GROUP CAPITAL MARKETS FUNDS
222 DELAWARE AVENUE
WILMINGTON, DELAWARE 19801
PROXY STATEMENT
----------------------
MEETING OF SHAREHOLDERS
SMALL CAPITALIZATION GROWTH INVESTMENTS
TO BE HELD
MARCH 31, 1997
----------------------
Proxies in the form enclosed with this Proxy Statement are solicited by the
Trustees of Consulting Group Capital Markets Funds (the "Trust") for use at a
Meeting of Shareholders of Small Capitalization Growth Investments (the
"Portfolio") to be held at 388 Greenwich Street, 22nd Floor, New York, New
York on Monday, March 31, 1997 at 2:00 P.M. or at any adjournment thereof. If
the enclosed form of proxy is executed and returned, it nevertheless may be
revoked at any time before it has been exercised by signing and sending to the
Trust a later dated proxy or written revocation, or by attending the meeting
and voting in person. A proxy when executed and not so revoked will be voted
in accordance with the specification marked thereon. If no choice is
specified, the proxy will be voted "FOR" Proposal No. 1.
The costs of soliciting proxies for the Meeting, including the costs of
preparing, printing and mailing the accompanying Notice of Meeting and this
Proxy Statement and the costs of the Meeting, will be borne by the Portfolio.
Proxy solicitations will be made primarily by mail but proxy solicitations may
also be made by telephone, telegraph or personal interviews by Trustees and
officers of the Trust and officers of Smith Barney Inc. ("Smith Barney"), the
Trust's distributor, the Consulting Group, a division of Smith Barney Mutual
Funds Management Inc. ("SBMFM" or the "Manager") and First Data Investor
Services Group, Inc. ("First Data"), the transfer agent for the Trust. In
addition, shareholders of the Portfolio may be called to ask if they would be
willing to have their votes recorded by telephone. The telephone voting
procedure is designed to authenticate the shareholder's identity by asking the
shareholder to provide his/her social security number, in the case of an
individual, or a taxpayer identification number, in the case of an entity. The
shareholder's telephone vote will be recorded and a confirmation will be sent
to the shareholder to ensure that the vote has been taken in accordance with
the shareholder's instructions. Shareholders voting by telephone may vote for
or against each proposal separately. Although a shareholder's vote may be
taken by telephone, each shareholder will receive a copy of this Proxy
Statement and may vote by mail using the enclosed proxy card. Although the
Trust
<PAGE>
has been advised that this telephonic voting system complies with
Massachusetts state law, the Trust will seek an opinion of Massachusetts
counsel prior to utilizing the telephone voting procedure. Persons holding
shares as nominees will, upon request, be reimbursed for their reasonable
expenses incurred in sending soliciting material to their principals.
The mailing address of the Trust is 222 Delaware Avenue, Wilmington,
Delaware 19801. The address of SBMFM and Smith Barney is 388 Greenwich Street,
New York, NY 10013. Copies of the Trust's annual report is available upon
request and without charge by calling your Smith Barney Financial Consultant
or by writing to the Trust. It is anticipated that proxies and proxy
statements will be mailed to shareholders on or about February 7, 1997.
The Investment Company Act of 1940, as amended (the "1940 Act"), provides
that Proposal No. 1 requires approval by an affirmative vote of the holders of
a "majority of the outstanding voting securities" of the Portfolio. As used in
the proxy statement, a vote of the holders of a "majority of the outstanding
voting securities" of the Portfolio means the vote of the lesser of (a) more
than 50% of the outstanding shares of the Portfolio or (b) 67% or more of such
shares present at a meeting if more than 50% of the outstanding shares of the
Portfolio are represented at the Meeting in person or by proxy.
For purposes of determining the presence of a quorum for transacting
business at the Meeting, abstentions and broker "non-votes" (i.e., proxies
from brokers or nominees indicating that such persons have not received
instructions from the beneficial owner or other persons entitled to vote
shares on a particular matter with respect to which the brokers or nominees do
not have discretionary power) will be treated as shares that are present but
which have not been voted. For this reason, abstentions and broker "non-votes"
will have the effect of a "no" vote for purposes of obtaining the requisite
approval of Proposal No. 1.
In the event that sufficient votes in favor of the proposal 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 the proposal. 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 the proposal.
Shareholders of record of the Portfolio at the close of business on January
31, 1997 (the "Record Date") will be entitled to be present and to vote at the
Meeting. Each share of beneficial interest is entitled to one vote and any
fractional shares are entitled to proportionate fractional votes. On the
Record Date there were
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<PAGE>
37,804,858.356 outstanding shares of beneficial interest of the Portfolio. As
of the Record Date, no single shareholder or "group" (as that term is used in
Section 13(d) of the Securities Exchange Act of 1934), beneficially owned more
than 5% of the outstanding shares of the Portfolio. In addition, all Trustees
and officers of the Trust, as a group, owned less than 1% of the outstanding
shares of the Portfolio on such date.
PROPOSAL 1: TO APPROVE OR DISAPPROVE A NEW MANAGEMENT AGREEMENT CHANGING THE FEE
BETWEEN THE TRUST ON BEHALF OF THE PORTFOLIO AND THE PORTFOLIO'S
CURRENT INVESTMENT MANAGER, SMITH BARNEY MUTUAL FUNDS MANAGEMENT
INC.
BACKGROUND
SBMFM (formerly known as Smith, Barney Advisors, Inc.) currently serves as
the investment manager for the Portfolio in accordance with the terms of a
management agreement dated July 30, 1993 (the "Current Management Agreement").
Subject to the supervision and direction of the Trust's Board of Trustees, the
Consulting Group, a division of the Manager, provides investment management
evaluation services principally by performing initial due diligence on
Advisors for the Portfolio, as well as the Trust's other investment
portfolios, and thereafter monitoring Advisor performance through quantitative
and qualitative analysis. In evaluating Advisors, the Manager considers, among
other factors, each Advisor's level of expertise; relative performance and
consistency of performance over a minimum period of five years; level of
adherence to investment discipline or philosophy; personnel, facilities and
financial strength; and quality of service and client communications. The
Manager has responsibility for communicating performance expectations and
evaluations to Advisors and ultimately recommending to the Board of Trustees
of the Trust whether Advisors' contracts should be renewed, modified or
terminated. The Manager provides written reports to the Board of Trustees
regarding the results of its evaluation and monitoring functions. The Manager
is also responsible for conducting all operations of the Trust except those
operations contracted to the Advisors, custodian, transfer agent or
administrator. The Manager is also responsible for compensating any Advisors
to the Portfolio. The Portfolio itself pays no fees to any Advisor.
The Advisors currently employed by the Manager to serve the Portfolio are
Pilgrim Baxter & Associates, Inc. ("PBA") and Mellon Capital Management
Corporation ("MCM"), which manage approximately thirty percent (30%) and
seventy percent (70%), respectively, of the Portfolio's assets. The Trust's
Board of Trustees may, upon advice from the Manager, allocate and reallocate
the management of the Portfolio's assets between Advisors in its discretion
from time
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<PAGE>
to time. With respect to the portion of the Portfolio's net assets allocated
to PBA, the Portfolio pays fees to the Manager at the annual rate of 0.60% of
the average daily value of such assets and with respect to the balance of net
assets allocated to MCM, the rate is 0.45% of the first $200 million of net
assets, 0.40% of the next $100 million of such assets and 0.35% thereafter.
The Manager, in turn, pays fees to each Advisor with PBA receiving 0.30% and
MCM receiving 0.15% of the first $200 million of the average daily value of
the net assets allocated to it, 0.10% of the next $100 million and 0.05%
thereafter.
The Trust has received an exemption (the "Exemption") from certain
provisions of the 1940 Act that would otherwise require the Trust and the
Manager to obtain formal shareholder approval prior to engaging and entering
into investment advisory agreements with Advisors. The relief is based on the
conditions set forth in the Exemption, that, among other things: (1) the
Manager will select, monitor, evaluate and allocate assets to the Advisors and
ensure that the Advisors comply with the relevant portfolio's investment
objective, policies and restrictions; (2) before a portfolio may rely on the
Exemption, the Exemption must be approved by the shareholders of the
portfolio; (3) shares of the portfolios relying on the Exemption will not be
subject to any sales loads or redemption fees or other charges for redeeming
shares; (4) the Trust will provide to shareholders certain information about a
new Advisor and its investment advisory contract within 90 days of the
engagement of a new Advisor; (5) the Trust will disclose in its Prospectus the
terms of the Exemption; and (6) the Trustees, including a majority of the
"non-interested" Trustees, must approve each investment advisory contract in
the manner required under the 1940 Act. As required by the Exemption, the
shareholders of each portfolio have voted to permit the Trust to replace or
add Advisors and to enter into investment advisory agreements with Advisors
upon approval of the Board of Trustees but without formal shareholder
approval. However, any changes to the Current Investment Management Agreement
between the Trust and the Manager still require Shareholder approval.
Throughout the Fall of 1996, the Manager apprised the Board of on-going
discussions with PBA, a current Advisor to the Portfolio regarding the level
of fees. That Advisor maintained that its fee (which had been set five years
prior) was no longer competitive. For this reason, PBA entered into
discussions with the Manager about possibly terminating its agreement with the
Portfolio. At the same time, the Manager undertook a survey of existing small
capitalization investment advisors to ascertain their capacity to advise the
Portfolio and current fees. Based on the assertions of PBA and the manager's
independent review of industry data, the Manager requested that the Board of
Trustees consider a new management agreement (the "Proposed Management
Agreement") reflecting an increase in the management fee payable to the
Manager from 0.60% to 0.80% of the average net assets of the Portfolio, so
that it in turn could increase the fee payable to certain
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<PAGE>
prospective Advisors. PBA has indicated that it intends to terminate its Sub-
advisory agreement with the manager regardless of Shareholder approval or dis-
approval of the proposal.
The Trustees of the Trust met on December 16, 1996 with respect to the
Portfolio to consider the new management fee proposed by the Manager. At this
meeting, the Trustees who are not interested persons of the Trust (the "Non-
Interested Trustees") met separately with their legal counsel and reviewed and
considered factors to be weighed and standards to be applied in evaluating the
Manager's proposed fee increase. After consideration of the Manager's proposal
and financial, statistical and other information supplied to the Trustees by
the Manager, the Trustees unanimously approved the Proposed Management
Agreement and determined to submit the Proposed Management Agreement to
shareholders of the Portfolio for their approval.
If the proposal is approved by Shareholders, as contemplated by the
Exemption, the Manager proposes to negotiate and enter into, subject to
approval of the Board of Trustees, investment advisory agreements with one or
more prospective Advisors to replace PBA utilizing the flexibility provided by
the proposed increase in the management fee to compensate these Advisors at
competitive rates. It is therefore not anticipated that the increase in the
management fee will result in increased profitability to the Manager.
Exhibit A sets forth the form of the Proposed Management Agreement, the
terms of which are, except for the fee and the commencement and termination
dates, substantively identical to the Current Management Agreement.
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<PAGE>
FEE TABLES
The following table shows for the Portfolio during the fiscal year ended
August 31, 1996: (a) the actual operating expenses for the Portfolio's shares
as a percentage of average net assets, and (b) the pro forma operating
expenses assuming the Proposed Management Agreement had been in effect
throughout the fiscal year. THE TABLE AND EXAMPLES BELOW SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OF THE PORTFOLIO.
ACTUAL EXPENSES MAY VARY FROM YEAR TO YEAR AND MAY BE HIGHER OR LOWER THAN
THOSE SHOWN BELOW.
<TABLE>
<CAPTION>
ACTUAL PRO FORMA
SMALL CAPITALIZATION GROWTH INVESTMENTS (AS OF 8/31/96) (AS OF 8/31/96)
- --------------------------------------- --------------- ---------------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charge imposed................... None None
Maximum annual TRAK Fee........................ 1.50% 1.50%
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
Management fees................................ 0.74% 0.85%*
12b-1 fees..................................... None None
Other expenses................................. 0.26 0.26
---- ----
TOTAL OPERATING EXPENSES......................... 1.00% 1.11%
==== ====
</TABLE>
- -----------
*The 0.20% increase in management fees results in a 0.11% increase in
management fees based on the Portfolio's net assets and the allocation of
assets among the Portfolio's advisors.
EXAMPLE
The following examples are intended to assist an investor in understanding
the various costs that an investor bore and will bear directly or indirectly
under both current and proposed fee arrangements. The examples assume payment
of operating expenses at the levels set forth in the table above.
An investor would pay the following expenses on a $1,000 investment,
assuming (1) 5.00% annual return and (2) redemption at the end of each time
period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Present Fee..................................... $25 $78 $133 $284
Proposed Fee.................................... $26 $81 $139 $294
</TABLE>
6
<PAGE>
The following table shows on a comparative basis for the fiscal year ended
August 31, 1996 the Portfolio's aggregate management fee under the Current
Management Agreement and on a pro forma basis under the Proposed Management
Agreement. Actual management fees under both the Current and the Proposed
Management Agreements are calculated daily based on the net assets of the
Portfolio. The table also shows the difference between the actual and pro
forma management fees as a percentage of the actual fee:
<TABLE>
<CAPTION>
ACTUAL AGGREGATE
MANAGEMENT FEE FOR PRO FORMA AGGREGATE DIFFERENCE
FISCAL YEAR ENDED MANAGEMENT FEE FOR BETWEEN ACTUAL
AUGUST 31, 1996 FISCAL YEAR ENDED AND PRO FORMA
(AFTER FEE WAIVERS) AUGUST 31, 1996 (AS % OF ACTUAL)
- ------------------- ------------------- ----------------
<S> <C> <C>
$2,217,550 $2,688,427 22%
</TABLE>
FACTORS CONSIDERED BY THE TRUSTEES
The Trustees have considered various matters in determining the
reasonableness and fairness of the proposed management fee to be paid to the
Manager by the Portfolio. Independent legal counsel advised the non-interested
Trustees regarding the matters to be considered and the standards to be used
in their evaluation of the Proposed Management Agreement.
In reaching their decision to unanimously approve the Proposed Management
Agreement, the Trustees evaluated the information and documentation provided
by the Manager and considered such factors as they deemed reasonably
necessary. These factors included, among others: (1) the Manager's findings as
to the increased costs associated with retaining quality advisory services for
the Portfolio in the current market environment; (2) the relationship of the
Portfolio's proposed management fee to the fees of comparable mutual funds;
(3) the impact of the proposed increase in management fee on the Portfolio's
expense ratio; and (4) the relationship of the Portfolio's pro forma expense
ratio to the expense ratios of comparable mutual funds. In addition, the
Trustees considered the performance of the Portfolio as well as available data
for comparable funds computed by Lipper Analytical Services, Inc. for one-
year, three-year, five-year and ten-year periods, as applicable.
RECOMMENDATION
Based upon the foregoing, the Board of Trustees unanimously recommends that
shareholders approve the Proposed Management Agreement.
If approved by the shareholders of the Portfolio, the Proposed Management
Agreement would become effective as soon as practicable following the Meeting.
If the Proposed Management Agreement is not approved by the Portfolio's
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shareholders, the Manager will continue to serve as the Portfolio's Manager
under the terms of the Current Management Agreement, and the Trustees and the
Manager will endeavor to retain the services of Advisors willing to serve
under the current fee arrangement.
If approved by shareholders the Proposed Management Agreement would continue
in effect for an initial two-year term and thereafter would continue in effect
only so long as its continuance is specifically approved at least annually by
the Trustees or by a vote of a "majority of the outstanding voting securities"
of the Portfolio, as defined in the 1940 Act, and, in either case, by the vote
of a majority of the non-interested Trustees cast in person at a meeting
called for the purpose of voting on such approval.
ADDITIONAL INFORMATION CONCERNING THE MANAGER
SBMFM, is a registered investment adviser whose principal offices are
located at 388 Greenwich Street, New York, NY 10013. SBMFM is a wholly-owned
subsidiary of Smith Barney Holdings Inc. ("Holdings") which is in turn a
wholly-owned subsidiary of Travelers Group Inc. ("Travelers"). The Manager
renders investment advice to a wide variety of investment company clients that
had as of December 31, 1996 aggregate assets under management in excess of $80
billion. The principal executive offices of Travelers and Holdings are located
at 388 Greenwich Street, New York, New York 10013.
YOUR TRUSTEES UNANIMOUSLY RECOMMEND THAT YOU VOTE FOR THE PROPOSED
MANAGEMENT AGREEMENT.
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OTHER MATTERS
The Trustees of the Trust know of no other matters that may come before the
Meeting. If any such matters should properly come before the meeting, it is
the intention of the persons named in the enclosed form of proxy to vote such
proxy in accordance with their best judgment.
The Trust does not hold shareholder meetings annually. Shareholders wishing
to submit proposals for consideration for inclusion in a proxy statement for
the next shareholder meeting should send their written proposals to SBMFM, 388
Greenwich Street, New York, NY 10013, 22nd Floor, c/o the Corporate Secretary.
YOU ARE REQUESTED TO MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY
PROMPTLY. NO POSTAGE IS REQUIRED ON THE ENCLOSED ENVELOPE.
By Order of the Trustees
Christina T. Sydor
Secretary
New York, New York
February 7, 1997
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THE TRUST FOR TRAK INVESTMENTS
INVESTMENT MANAGEMENT AGREEMENT
July 30, 1993
(as amended March 31, 1997)
Smith, Barney Advisers, Inc.
1345 Avenue of the Americas
New York, New York 10105
Dear Sirs:
The Trust for TRAK Investments (the "Trust"), a business trust formed under
the laws of The Commonwealth of Massachusetts, confirms its agreement with
Smith, Barney Advisers, Inc. (the "Manager") with respect to the Manager's
serving as investment manager of the Trust as set forth below.
SECTION 1. INVESTMENT DESCRIPTION; APPOINTMENT
The Trust desires to employ its 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 Manager. The Trust desires to employ and hereby appoints
the Manager to act as its investment manager. The Manager accepts the
appointment and agrees to furnish the services described in Section 2 of this
Agreement for the compensation set forth in Section 6 of, and Appendix I to,
this Agreement.
SECTION 2. SERVICES AS MANAGER; APPOINTMENT OF ADVISERS
(a) Subject to the supervision and direction of the Trust's Board of
Trustees, the Manager shall provide such services reasonably requested by the
Trust, including but not limited to the following:
(i) monitoring and supervising the services provided to the Trust by its
administrator (the "Administrator") pursuant to a separate agreement
between the Trust and the Administrator, a copy of which has been or will
be submitted to the Manager; and
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(ii) providing to the Trust investment management evaluation services
principally by performing initial due diligence on prospective investment
advisers ("Advisers") for each existing series of its shares of beneficial
interest and any series or class which the Trust may offer from time to
time in the future (each, a "Portfolio"), thereafter monitoring and
supervising Adviser performance through quantitative and qualitative
analysis as well as periodic in-person, telephonic and written
consultations with Advisers and considering and approving investments and
use of certain investment strategies when the Trust requests review and
consideration of such matters by the Manager. The Manager will be
responsible for communicating performance expectations and evaluations to
Advisers and ultimately recommending to the Board of Trustees of the Trust
whether Advisers' contracts should be renewed, modified or terminated. The
Manager will provide written reports to the Board of Trustees regarding
the results of its evaluation and monitoring functions. The Manager will
also be responsible for conducting all operations of the Trust except
those operations contracted to the Advisers, custodian, transfer agent and
Administrator.
(b) The Manager will, at its own expense, maintain sufficient staff, employ
or retain sufficient personnel, and consult with any other persons that it
determines may be necessary or useful to the performance of its obligations
under this Agreement.
SECTION 3. BROKERAGE
The Manager is authorized to permit the Advisers to execute portfolio
transactions for the Trust. In executing transactions and selecting brokers or
dealers, each 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 or
commodity interest, the price of the security or commodity interest, 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. 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.
SECTION 4. INFORMATION PROVIDED TO THE TRUST
The Manager will keep the Trust informed of developments materially
affecting the Portfolios and, in addition to providing the Trust with whatever
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statistical or other information the Trust may reasonably request with respect
to its investments, the Manager will, on its own initiative, furnish the Trust
from time to time with whatever information the Manager believes is
appropriate for this purpose.
SECTION 5. STANDARD OF CARE
The Manager shall exercise its best judgment in rendering the services
provided by it under this Agreement. The Manager shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Trust in
connection with the matters to which this Agreement relates, provided that
nothing in this Agreement shall be deemed to protect or purport to protect the
Manager against any liability to the Trust or to holders of the Trust's shares
of beneficial interest to which the Manager 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 Manager's reckless disregard
of its obligations and duties under this Agreement.
SECTION 6. COMPENSATION
(a) In consideration of services rendered pursuant to this Agreement, each
of the Trust's Portfolios will accrue daily and pay monthly a fee at the
annual rate applied to the value of that Portfolio's average daily net assets
as set forth in the schedule attached hereto as Appendix I.
(b) The fee for the period from the commencement of investment operations to
the end of the month during which investment operations commence will be
prorated according to the proportion that such period bears to the full
monthly period, and will be payable that month. 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 will be payable upon the date of termination of this
Agreement.
(c) For the purpose of determining fees payable to the Manager under this
Agreement, the value of the Trust's net assets will be computed in the manner
described in the Trust's current Prospectus and/or Statement of Additional
Information.
SECTION 7. COSTS AND EXPENSES
The Manager will bear all expenses 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 as well as the
payment of the fees of the Advisers.
12
<PAGE>
SECTION 8. REIMBURSEMENT TO THE TRUST
If, in any fiscal year of the Trust, the aggregate expenses of the Trust
(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 Trust, the Manager will reimburse the Trust to the extent required by
state law in the same proportion as its fees bear to the combined fees paid by
the Trust for investment management and administration. The Manager's expense
reimbursement obligation will be limited to the amount of its fees received
pursuant to this Agreement. Such expense reimbursement, if any, will be
estimated, reconciled and paid on a monthly basis.
SECTION 9. SERVICES TO OTHER COMPANIES OR ACCOUNTS
The Trust understands that the Manager and the Advisers may act as
investment managers or advisers to fiduciary and other managed accounts,
including other investment companies, and the Trust has no objection to the
Manager's and Advisers' so acting, provided that whenever the Trust and one or
more other accounts advised by an Adviser have available funds for investment,
investments suitable and appropriate for each will be allocated in accordance
with a formula believed to be equitable to each account or company. The Trust
recognizes that in some cases this procedure may adversely affect the size of
the position obtainable for the Trust. In addition, the Trust understands and
acknowledges that the persons employed by the Manager to assist in the
performance of the Manager's duties under this Agreement will not devote their
full time to such service and nothing contained in this Agreement shall be
deemed to limit or restrict the right of the Manager or any affiliate of the
Manager to engage in and devote time and attention to other businesses or to
render services of any kind or nature.
SECTION 10. TERM OF AGREEMENT
(a) This Agreement will become effective on the "Closing Date" as that term
is defined in that certain Asset Purchase Agreement executed among Smith
Barney, Harris Upham & Co. Incorporated, Primerica Corporation and Shearson
Lehman Brothers Inc., dated March 12, 1993 ("Effective Date"), and shall
continue for an initial term of two years from the Effective Date. Thereafter,
this Agreement 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 Trust's
outstanding voting securities (as defined in the Investment Company Act of
1940, as amended (the "Act")), provided that in either event the continuance
is also approved by a majority of Trustees who are not "interested persons"
(as defined in the Act) of any party to this Agreement, by vote cast in person
at a meeting called for the purpose of voting on such approval.
13
<PAGE>
(b) This Agreement is terminable, without penalty, on 60 days' written
notice, by the Trust's Trustees or by vote of holders of a majority of the
Trust's outstanding voting securities, or upon 90 days' written notice, by the
Manager.
(c) This Agreement will terminate automatically in the event of its
assignment (as defined in the Act or in rules adopted under the Act).
SECTION 11. FILING OF TRUST AGREEMENT
The Trust represents that a copy of the Trust Agreement is on file with the
Secretary of The Commonwealth of Massachusetts and with the Boston City Clerk.
SECTION 12. LIMITATION OF LIABILITY
The Manager is hereby expressly put on notice of the limitation of trustee
and shareholder liability as set forth in the Trust Agreement, and the Manager
agrees that obligations assumed by the Trust pursuant to this Agreement shall
be limited in all cases to the Trust and its assets. The Manager agrees that
any creditor or any Portfolio may look only to the assets of that Portfolio to
satisfy such creditor's debt. The Manager agrees that the Manager shall not
seek satisfaction of any such obligation from the holders of the Trust's
shares, nor from the Trustees of the Trust.
SECTION 13. 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 Investment Advisers Act of 1940, as amended, or rules or orders
of the Securities and Exchange Commission 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, stature, 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 Manager as an
agent of the Trust.
14
<PAGE>
If the foregoing is in accordance with your understanding, kindly indicate
your acceptance of this Agreement by signing and returning the enclosed copy
of this Agreement.
Very truly yours,
THE TRUST FOR TRAK INVESTMENTS
By: _________________________________________
Name: Heath B. McLendon
Title: Chairman
Accepted:
SMITH, BARNEY ADVISERS, INC.
By: _________________________________
Name: Christina T. Sydor
Title: Secretary
15
<PAGE>
APPENDIX I
PORTFOLIOS OF THE TRUST FOR TRAK INVESTMENTS
<TABLE>
<CAPTION>
MANAGER'S RATE
OF
FEE IN
ACCORDANCE
WITH SECTION 6 OF
THE AGREEMENT
-----------------
<S> <C>
.Government Money Investments................................. .15%
.Intermediate Fixed Income Investments........................ .40%
.Total Return Fixed Income Investments........................ .40%
.Municipal Bond Investments................................... .40%
.Mortgage Backed Investments.................................. .50%
.Balanced Investments......................................... .60%
.Large Capitalization Value Equity Investments................ .60%
.Small Capitalization Value Equity Investments................ .60%
.Large Capitalization Growth Investments...................... .60%
.Small Capitalization Growth Investments...................... .80%*
.International Equity Investments............................. .70%
.International Fixed Income Investments....................... .50%
.Emerging Markets Equity Investments.......................... .90%
</TABLE>
- -----------
* Assuming shareholder approval.
VOTE THIS VOTING INSTRUCTION CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
(Please Detach at Perforation Before Mailing)
..............................................................................
..............................................................................
..............................................................................
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CONSULTING GROUP CAPITAL MARKETS FUNDS - SMALL CAPITALIZATION GROWTH
INVESTMENTS
PROXY SOLICITED BY THE BOARD OF TRUSTEES
The undersigned holder of shares of beneficial interest of Consulting Group
Capital Markets Funds-Small Capitalization Growth Investments (the
"Portfolio") , hereby appoints Heath B. McLendon, Lewis E. Daidone and
Christina T. Sydor, 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
388 Greenwich Street, New York, New York on March 31, 1997 at 2:00 pm and any
adjournment or adjournments thereof. The undersigned hereby acknowledges
receipt of the Notice of Meeting and Proxy Statement dated February 7, 1997
and hereby instructs said attorneys and proxies to vote said shares as
indicated herein. 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)
__________________________
VOTE THIS VOTING INSTRUCTION CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
(Please Detach at Perforation Before Mailing)
..............................................................................
..............................................................................
..............................................................................
....................
Please indicate your vote by an "X" in the appropriate box below. 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.
1.To approve or disapprove a new management agreement
between Consulting Group Capital Markets Funds (on behalf of
Small Capitalization Growth Investments) and Smith Barney Mutual Funds
Management Inc. (the Portfolio's current investment
manager).
FOR AGAINST ABSTAIN
g:\funds\trak\1997\secdocs\proxy97.doc
