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:
LETTER FROM THE CHAIRMAN
A SPECIAL NOTICE TO SHAREHOLDERS OF
CONSULTING GROUP CAPITAL MARKETS FUNDS
OCTOBER 27, 1997
DEAR SHAREHOLDER:
As an investor in the Consulting Group Capital Markets Funds (the "Trust"),
you are cordially invited to attend a special shareholder meeting on December
18, 1997 at 2:00 P.M., to be held at 388 Greenwich Street, New York, New York,
22nd Floor. The Securities and Exchange Commission ("SEC") no longer requires
open-end mutual funds to hold annual shareholder meetings. However, special
meetings are periodically necessary to elect Trustees, appoint auditors and to
update certain policies and restrictions described in the prospectus to
reflect the changing investment environment. These considerations prompt a
special meeting for the Trust.
Enclosed for your review is a proxy statement which describes the proposals
that will be submitted to shareholders for approval at the meeting.
1. ELECT TRUSTEES OF THE TRUST
Proposal One asks that you elect Trustees of the Trust to serve until their
respective successors are elected and qualified. The pages following Proposal
One provide a brief description of each nominee's background and current
status with the Trust.
The Board of Trustees recommends that you vote "FOR" election of the
nominees to the Board.
2. RATIFY THE TRUSTEES' SELECTION OF ACCOUNTANTS
Proposal Two asks that you ratify the selection of independent accountants
of the Trust. KPMG Peat Marwick LLP has been selected by the Board of Trustees
subject to shareholder approval.
The Board of Trustees recommends that you vote "FOR" ratification of the
selection of KPMG Peat Marwick LLP as independent accountants for the Trust.
3. TO APPROVE AN AMENDMENT TO THE MANAGEMENT AGREEMENT
Proposal Three requests that shareholders of Small Capitalization Value
Equity Investments and International Equity Investments approve an amendment
to the management agreement between the Trust, on behalf of Small
Capitalization Value Equity Investments and International Equity Investments,
and Smith Barney Mutual Funds Management Inc., the Investment Manager. The
Investment Manager recently undertook a survey of existing small
capitalization value and
<PAGE>
international equity advisors to ascertain their capacity to manage portfolio
assets and current fees. The results of the Investment Manager's survey
demonstrated with respect to each of these Portfolios that the level of fees
paid to the Advisor by the Investment Manager was no longer competitive with
what other advisors for other similar funds were receiving. The Investment
Manager recommended to the Board of Trustees that the management fee paid by
these Portfolios be increased so that the Investment Manager would be in a
position to increase fees it pays to the Portfolio's current Advisor(s) and/or
to use the flexibility provided by an increased fee to attract additional
quality advisors. The Trustees unanimously approved, and voted to recommend
that shareholders of these Portfolios approve an amendment to the Trust's
management agreement on behalf of these Portfolios. If approved by
shareholders, the increase in management fee will be applied fully to increase
the compensation of each Portfolio's current and prospective Advisors and
therefore will not result in increased compensation or profitability to the
Investment Manager.
The Board of Trustees recommends that you vote "FOR" the proposed amendment
to the management agreement between the Trust, on behalf of Small
Capitalization Value Equity Investments and International Equity Investments
and the Trust's Investment Manager, Smith Barney Mutual Funds Management Inc.
4. APPROVE PROPOSED CHANGES TO THE TRUST'S FUNDAMENTAL INVESTMENT POLICIES
Proposal Four requests that you approve certain changes to the fundamental
policies (i.e., those that require shareholder approval of amendments) of the
Trust in order to modernize them in view of certain regulatory, business or
industry developments that have occurred since their adoption. The three
principal objectives of this proposal are:
a) To simplify policies to make them consistent among investment
companies distributed by Smith Barney Inc.;
b) To eliminate or make non-fundamental certain policies that are not
required to be fundamental by the Investment Company Act of 1940, as
amended ("1940 Act"), the primary statute that governs mutual funds. The
Trustees would then have the flexibility to make changes in non-
fundamental policies without the expense of obtaining shareholder
approval, but they would notify shareholders of any such future changes;
and
c) To reclassify as "non-fundamental" or eliminate certain policies that
had previously been adopted to meet requirements under state securities
laws which laws are no longer applicable.
As described more fully in the proxy statement, many of the changes are
currently not expected to result in changes in the investment techniques or
<PAGE>
operations of the Trust. In most instances, the changes permit the Board of
Trustees to determine whether the implementation of a new technique or policy
is appropriate.
The Board of Trustees recommends that you vote "FOR" reclassification,
modification and/or elimination of the Trust's fundamental policies as
described in the proxy statement.
YOUR VOTE IS IMPORTANT!
We ask that you review the attached proxy statement. If you do not plan to
attend the meeting, we ask that you complete, sign, date and return the proxy
as soon as possible in the enclosed postage-paid envelope. Thank you in
advance for your attention and vote with regard to these important proposals.
Sincerely,
/s/Heath B. McLendon
Heath B. McLendon
Chairman of the Board
Consulting Group Capital Markets Funds
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
CONSULTING GROUP CAPITAL MARKET FUNDS
222 DELAWARE AVENUE, WILMINGTON, DELAWARE 19801
----------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
CONSULTING GROUP CAPITAL MARKETS FUNDS
TO BE HELD ON DECEMBER 18, 1997
----------------------
TO THE SHAREHOLDERS:
Notice is hereby given that a Special Meeting of shareholders of the
Consulting Group Capital Markets Funds (the "Trust") will be held on December
18, 1997 at 2:00 p.m. at 388 Greenwich Street, New York, New York, 22nd Floor,
for the following purposes:
(1) To elect Trustees of the Trust;
(2) To ratify the selection of KPMG Peat Marwick LLP as the independent
accountants of the Trust;
(3) To approve or disapprove an amendment to the management agreement
between the Trust, with respect to Small Capitalization Value Equity
Investments and International Equity Investments and the Portfolios'
investment manager, Smith Barney Mutual Funds Management Inc.;
(4) To approve or disapprove the reclassification, modification and/or
elimination of certain fundamental investment policies; and
(5) 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 October 20, 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
October 27, 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>
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of assistance to
you and avoid the time and expense to the Portfolios involved in validating
your vote if you fail to sign your proxy card(s) properly.
1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card(s).
2. Joint Accounts: Either party may sign, but the name of the party
signing should conform exactly to the name shown in the registration on
the proxy card(s).
3. All Other Accounts: The capacity of the individual signing the proxy
card(s) should be indicated unless it is reflected in the form of
registration. For example:
<TABLE>
<CAPTION>
REGISTRATION VALID SIGNATURE
------------ ---------------
<S> <C>
CORPORATE ACCOUNTS
(1) ABC Corp.......................................... ABC Corp.
(2) ABC Corp.......................................... John Doe, Treasurer
(3) ABC Corp.
c/o John Doe, Treasurer.......................... John Doe
(4) ABC Corp. Profit Sharing Plan..................... John Doe, Trustee
TRUST ACCOUNTS
(1) ABC Trust......................................... Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee
u/t/d 12/28/78................................... Jane B. Doe
CUSTODIAL OR ESTATE ACCOUNTS
(1) John B. Smith, Cust.
f/b/o John B. Smith, Jr. UGMA.................... John B. Smith
(2) Estate of John B. Smith........................... John B. Smith, Executor
</TABLE>
2
<PAGE>
CONSULTING GROUP CAPITAL MARKETS FUNDS
222 DELAWARE AVENUE, WILMINGTON, DELAWARE 19801
PROXY STATEMENT
----------------------
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD
DECEMBER 18, 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
Special Meeting of Shareholders of each portfolio that comprises the Trust
(each a "Portfolio" and collectively the "Portfolios") to be held at 388
Greenwich Street, 22nd Floor, New York, New York on December 18, 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.
The costs of soliciting proxies for the Special 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 Portfolios.
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. Such representatives and employees will not receive additional
compensation for solicitation activities. In addition, shareholders of the
Portfolios 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. Persons holding shares as nominees
1
<PAGE>
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 at the above address. It is anticipated that
proxies and proxy statements will be mailed to shareholders on or about
October 27, 1997.
Each share is entitled to one vote and any fractional share is entitled to a
fractional vote. If the enclosed proxy is properly executed and returned in
time to be voted at the Special Meeting, the shares represented thereby will
be voted in accordance with the instructions marked thereon. Unless
instructions to the contrary are marked thereon, a proxy will be voted FOR the
election of the nominees for Trustees ("Board Members"), FOR the other matters
listed in the accompanying Notice of Special Meeting of Shareholders and FOR
any other matters deemed appropriate. If you properly execute the enclosed
proxy and give no voting instructions, your shares will be voted FOR the
proposals set forth herein. Abstentions will be counted as present for
purposes of determining a quorum, but will not be counted as voting. Broker
non-votes (i.e., proxies received from brokers or nominees indicating that
such persons have not received instructions from the beneficial owner or other
persons entitled to vote the shares on a particular matter with respect to
which the broker or nominees do not have discretionary power) will be treated
the same as abstentions.
Proposal 1 requires for approval the affirmative vote of a plurality of the
votes cast at the meeting in person or by proxy ("Plurality vote") for all
Portfolios that comprise the Trust voting as a single class. Proposal 2
requires the affirmative vote of a majority of the votes cast at the meeting
with a quorum present. Because abstentions and broker non-votes are not
treated as shares voted, abstentions and broker non-votes have no impact on
Proposals 1 and 2.
The Investment Company Act of 1940, as amended (the "1940 Act"), provides
that Proposals No. 3 and 4 require approval by an affirmative vote of the
holders of a "majority of the outstanding voting securities" of each affected
Portfolio voting as a separate class. As used in the 1940 Act, a vote of the
holders of a "majority of the outstanding voting securities" 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 ("Majority Vote").
2
<PAGE>
Under the Master Trust Agreement of the Trust, a quorum is constituted by
the presence in person or by proxy of the holders of a majority of the
outstanding shares of a Portfolio entitled to vote at the Special 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 any of the proposals are not
received, the persons named as proxies may propose 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 reasons for the
solicitation. Any adjournment will require the affirmative vote of a majority
of those shares represented at the Meeting in person or by proxy. The persons
named as proxies will vote in favor of such adjournment those shares that they
are entitled to vote and that have been voted in favor of such proposal. A
shareholder vote may be taken on one or more of the proposals in this proxy
statement prior to any adjournment if sufficient votes have been received for
approval.
The Board of Trustees have fixed the close of business on October 20, 1997
for the determination of shareholders of the Trust entitled to notice of and
to vote at the Meeting. At the close of business on October 20, 1997, the
following numbers of shares of each Portfolio were issued and outstanding.
<TABLE>
<CAPTION>
CONSULTING GROUP CAPITAL MARKETS FUNDS SHARES
- -------------------------------------- ---------------
<S> <C>
Government Money Investments.................................... 396,401,153.276
Intermediate Fixed Income Investments........................... 47,165,328.204
Long-Term Bond Investments...................................... 22,672,338.324
Municipal Bond Investments...................................... 6,462,207.170
Mortgage Backed Investments..................................... 17,544,582.150
Balanced Investments............................................ 7,710,474.925
Large Capitalization Value Equity Investments................... 130,606,898.506
Large Capitalization Growth Investments......................... 108,240,130.220
Small Capitalization Value Equity Investments................... 44,751,313.091
Small Capitalization Growth Investments......................... 43,296,869.592
International Equity Investments................................ 110,013,324.003
International Fixed Income Investments.......................... 15,524,378.980
Emerging Markets Equity Investments............................. 25,397,811.838
</TABLE>
As of October 20, 1997, to the knowledge of each Portfolio and the Board, no
single shareholder or "group" (as that term is used in Section 13(d) of the
Securities Exchange Act of 1934), except as set forth in the table below,
owned beneficially or of record more than 5% of the outstanding shares of a
Portfolio.
3
<PAGE>
<TABLE>
<CAPTION>
REGISTRATION FUND SHARES PERCENT
- ------------ ----------------- ------------- -------
<S> <C> <C> <C>
Boatmens Trust Company .............. Internat'l Fixed 948,847.747 6.1120%
FAO Maritz Inc. Retirement Plan
Acct. #011007037375/Julius Baer
Attn.: Mutual Funds LBT00P2
P.O. Box 14737
St. Louis, MO 63178-4737
SBC Trust Company as TTEE............ Balanced 1,462,821.958 18.9719%
The Health Care Authority of Morgan
County--
City of Decatur
Attn.: Lisa Snyder
201 North Walnut Street, 9th FL
Wilmington, DE 19801
SB Corp. Trust Cust.................. Balanced 844,924.469 10.9581%
Synthes (U.S.A.)
Attn.: Lisa Snyder
201 North Walnut Street, 9th FL
Wilmington, DE 19801
SBC Trust Company TTEE............... Balanced 585,776.725 7.5972%
TST Inc.
Attn.: Jody Tournat
2032 E. 220th St.
Long Beach, CA 90810
SB Corp. Trust Cust.................. Balanced 562,119.668 7.2903%
Marketing Specialist Sales Co.
Attn.: Lisa Snyder
201 North Walnut Street, 9th FL
Wilmington, DE 19801
</TABLE>
As of the Record Date, the officers and Board members of each Portfolio
beneficially owned less than 1% of the shares of each Portfolio.
4
<PAGE>
PROPOSAL 1: ALL PORTFOLIOS
TO ELECT TRUSTEES OF THE TRUST
The first proposal to be considered at the Meeting is the election of
Trustees of the Trust.
Each of the nominees is currently serving as a Trustee of the Trust. Each
nominee has consented to serve as a Trustee if elected at the Meeting. If a
designated nominee declines or otherwise becomes unavailable for election,
however, the proxy confers discretionary power on the persons named therein to
vote in favor of a substitute nominee or nominees.
If elected, the Trustees will hold office without limit in time subject to
the Emeritus Program/1/ adopted by the Trust and except that any Trustee may
resign and any Trustee may be removed at any meeting of shareholders called
for that purpose by a majority of the votes entitled to be cast for the
election of Trustees. In case a vacancy shall exist for any reason, the
remaining Trustees may fill the vacancy by appointing another Trustee,
provided that after giving effect to such appointment at least two-thirds of
the Trustees have been elected by shareholders. If at any time less than a
majority of the Trustees holding office have been elected by shareholders, the
Trustees then in office will call a shareholders meeting for the purpose of
electing Trustees.
The Trust has an Audit Committee and a Nominating Committee, each consisting
of all Trustees who are not "interested persons" (as defined in the 1940 Act)
of the Trust ("independent Board members"). The Audit Committee reviews the
scope and results of the Trust's annual audit with the Trust's independent
accountants and recommends the engagement of accountants. Included among the
functions of the Nominating Committee is the selection and nomination for
appointment and election of candidates to serve as Trustees who are
independent Board members. The Nominating Committee also coordinates with
Trustees who are "interested persons" in the selection and election of Trust
officers and will consider nominees recommended by shareholders to serve as
Trustees, provided that shareholders submit such recommendations in compliance
with all the pertinent provisions of Rule 14a-8 under the Securities Exchange
Act of 1934. Exhibit A hereto sets forth certain information regarding the
fees paid to
- -----------
/1/ The Trust has adopted an Emeritus Program for Board Members pursuant to
which the Board and the management of the Trust can continue to receive the
benefits of the experience of long time Board Members after they have
resigned from the Board. Pursuant to this Program, Board Members with 10
years of service may agree to provide services as an emeritus trustee at age
72 and must retire from the Board at age 80. Service as an emeritus trustee
is limited to 10 years. Each emeritus trustee agrees to be available for
consultation with the Board and management of the Trust and may attend Board
meetings.
5
<PAGE>
independent Board members, the aggregate remuneration paid to independent
Board members as a group during the last calendar year of the Trust and the
number of Board, Audit Committee and Nominating Committee meetings the Trust
has held in the last calendar year. Each nominee for Trustee attended at least
75% of the meetings that were held in the last calendar year. The executive
officers of the Trust are set forth in Exhibit B hereto. Each officer of the
Trust will serve at the discretion of the Board.
Set forth in the following table are the nominees for election as a Board
member of the Trust, together with certain other information. "Interested
persons" of the Trust, as defined in the 1940 Act, by virtue of their
positions as officer or director of the Trust's investment manager,
distributor or one of their affiliates, are marked by an asterisk. Other
directorships include directorships, general partnerships or trusteeships of
companies that are required to report to the Securities and Exchange
Commission (the "SEC"), other than registered investment companies. For
purposes of this Proxy Statement, the address of each Board Member is P.O. Box
9133, Hingham, MA 02043-9133.
NOMINEES FOR ELECTION TO THE BOARD
<TABLE>
<CAPTION>
NAME, AGE, PRINCIPAL OCCUPATION AND OTHER
DIRECTORSHIPS** DURING THE PAST FIVE YEARS TRUSTEE SINCE
------------------------------------------ -------------
<S> <C>
Walter E. Auch, Jr., age 76. 1991
Consultant to companies in the financial services industry;
Director of Pimco Advisers L.P., Brinson Partners; Nicholas-
Applegate (each a registered investment adviser); Legend
Properties, a real estate management company; Banyan Realty
Trust; Banyan Land Fund II; Geotek Communications Inc., an
international wireless communications company.
Martin Brody, age 76. 1991
Private Investor
Armon Kamesar, age 70. 1994
Chairman of TEC, an international organization of Chief
Executive Officers; Trustee, U.S. Bankruptcy Court.
Stephen E. Kaufman, Jr., age 64. 1991
Attorney.
*Heath B. McLendon, age 64. 1991
Managing Director of Smith Barney and Chairman of the Board of
Smith Barney Strategy Advisers Inc. and President of SBMFM;
Chairman of the Board and Investment Officer of 41 Smith
Barney Mutual Funds. Prior to July 1993, Senior Executive Vice
President of Shearson Lehman Brothers Inc., Vice Chairman of
Shearson Asset Management, a Director of PanAgora Asset
Management, Inc. and PanAgora Asset Management Limited.
</TABLE>
6
<PAGE>
THE TRUSTEES, INCLUDING A MAJORITY OF THE INDEPENDENT BOARD MEMBERS, RECOMMEND
THAT SHAREHOLDERS VOTE "FOR" THE ELECTION OF EACH NOMINEE
PROPOSAL 2: ALL PORTFOLIOS
TO RATIFY THE SELECTION OF KPMG PEAT MARWICK LLP AS THE INDEPENDENT
ACCOUNTANTS OF THE TRUST
The second proposal to be considered at the Special Meeting is the
ratification of the selection of KPMG Peat Marwick LLP ("KPMG") as the
independent accountants for the Trust for the fiscal year ending August 31,
1998.
KPMG, 345 Park Avenue, New York, New York 10154, has served as independent
accountants for the Trust for the last fiscal year and have been selected to
serve in this capacity for each Portfolio's current fiscal year by at least a
majority of the independent Board members. KPMG has no direct or indirect
financial interest in the Trust, or any of its affiliates. Representatives of
KPMG are expected to be present at the Meeting and will be given the
opportunity to make a statement if they so desire and will respond to
appropriate questions.
REQUIRED VOTE
Ratification of the selection of KPMG as independent accountants for the
Trust must be approved by a majority of the votes cast at the meeting with a
quorum present.
THE TRUSTEES, INCLUDING A MAJORITY OF THE INDEPENDENT BOARD MEMBERS, RECOMMEND
THAT THE SHAREHOLDERS VOTE "FOR" RATIFICATION OF THE SELECTION OF INDEPENDENT
ACCOUNTANTS.
PROPOSAL 3: SMALL CAPITALIZATION VALUE EQUITY PORTFOLIO AND INTERNATIONAL
EQUITY PORTFOLIO ONLY
TO APPROVE OR DISAPPROVE AN AMENDMENT TO THE CURRENT MANAGEMENT AGREEMENT
BACKGROUND
SBMFM serves as the investment manager for each Portfolio in accordance with
the terms of a management agreement dated July 30, 1993 (the "Management
7
<PAGE>
Agreement")./2/ 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 Investment Advisors ("Advisors") for each Portfolio, 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 all Advisors to the Portfolios.
The Portfolios themselves pay no fees to any Advisor.
The Trust has received an exemption (the "Exemption") from certain
provisions of the 1940 Act that would otherwise require 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, which require, among other things that: (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 material changes to the Current Management Agreement
between the Trust and the Manager requires shareholder approval.
- -----------
/2/ In the Current Management Agreement, the Trust is referred to under its
former name, the Trust for TRAK Investments.
8
<PAGE>
A. MANAGEMENT FEE INCREASE BETWEEN THE TRUST, WITH RESPECT TO SMALL
CAPITALIZATION VALUE EQUITY INVESTMENTS ("SMALL CAP VALUE PORTFOLIO") AND
SBMFM
The Advisors currently employed by the Manager to serve the Small Cap Value
Portfolio are NFJ Investment Group ("NFJ") and BGI Barclays Global Investors
("BGI"), each managing approximately fifty percent (50%) of the Portfolio's
assets./3/ With respect to the portion of the Portfolio allocated to it, BGI
seeks to track the performance of the Russell 2000 Value Index, while NFJ,
with respect to the remainder of the Portfolio, invests primarily in a
diversified portfolio of common stocks that it considers undervalued. With
respect to the portion of the Small Cap Value Portfolio's net assets allocated
to NFJ, the Small Cap Value 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 BGI, the Manager has agreed to waive
fees so that 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 NFJ receiving 0.30% of the value of the
average net assets allocated to it and BGI receiving 0.15% of the first $200
million of the average value of the net assets allocated to it, 0.10% of the
next $100 million and 0.05% thereafter. As a consequence of these fees, for
its services to the Small Cap Value Portfolio, the Manager retains fees on an
annual basis equal to 0.30% of the Small Cap Value Portfolio's average daily
net assets.
At the Board of Trustees meeting held on June 5, 1997, the Manager reported
that advisors using the techniques and possessing the skills and performance
records comparable to NFJ frequently are paid in excess of 0.30% of the
average daily value of net assets. Concern was also expressed by the Manager
that if NFJ's fees from the Small Cap Value Portfolio were substantially below
what NFJ could command from other clients, it might decline to continue to
serve the Small Cap Value Portfolio or to manage additional Small Cap Value
Portfolio assets. Accordingly, the Manager, as part of a strategic review of
the Trust's Portfolios, recommended that the advisory fee available to be paid
to Advisors of the Small Cap Value Portfolio be increased in order to more
appropriately compensate NFJ and/or to use the increased flexibility provided
by an increased fee to attract additional quality advisors that would
complement NFJ's strategy and reduce any potential capacity restraints. The
Manager informed the Board that it was in the process of conducting a survey
of existing small cap value investment advisors to ascertain their capacity
and fee structures.
At the Board of Trustees meeting held on September 4, 1997, the Manager
reported to the Board the results of its survey of small cap value investment
- -----------
/3/ 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 to time.
9
<PAGE>
advisors. The survey compared the Small Cap Value Portfolio's current and
proposed total expense ratio and management fees to funds managed by fifteen
of the top performing small cap value advisors (the "Group") as published in
the Wall Street Journal and the 561 funds which comprise the Simfund Small
Company Average ("Simfund Group")./4/ The Small Cap Value Portfolio's current
expense ratio is 0.87% while the expense ratio would be 0.97 % after giving
effect to the proposed fee increase, both of which are below the peer Group
Average of 1.17% and the Simfund Small Company Average of 1.46%. The survey
also showed that the Small Cap Value Portfolio's management and administrative
fee were 0.72% while the average gross management and administrative fee for
funds comprising the Simfund Average was 0.93%. The survey demonstrated that
the Small Cap Value Portfolio's total expense ratio and management fees, both
before and after the proposed increase was below that of other similar funds.
Based on the statistical data provided to the Board, and the Manager's
extensive experience retaining experienced investment advisors, the Manager,
with respect to the Small Cap Value Portfolio recommended that the Board of
Trustees consider an amendment to the Management Agreement (the "Proposed Fee
Amendment") reflecting an increase in the management fee payable to the
Manager from 0.60% to 0.80% of the average net assets of the Small Cap Value
Portfolio, so that it in turn could increase the fee payable to NFJ and/or
certain prospective Advisors. No fee increase is contemplated for BGI (or
other Advisors using similar strategies and techniques) and the Manager will
continue to waive fees so that fees it retains after payments to advisors will
not exceed 0.30%. At this meeting, the Trustees who are independent Board
members 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 Fee Amendment and
determined to submit the Proposed Management Fee Amendment to shareholders of
the Small Cap Value Portfolio for their approval.
If the proposal is approved by shareholders, the Manager proposes to apply
fully the increase in management fee to compensate NFJ at a more competitive
rate and/or negotiate and enter into, subject to the approval of the Board of
Trustees, an investment advisory agreement with an additional investment
advisor(s) utilizing the flexibility provided by the proposed increase to
compensate this Advisor at a more competitive rate. It is therefore not
anticipated that the increase in the management fee will result in increased
profitability to the Manager.
Exhibit D sets forth the form of the Management Agreement, the terms of
which are, except for the fees with respect to the Small Cap Value Portfolio
and the International Equity Portfolio identical to the current Management
Agreement.
- -----------
/4/ The Simfund Small Company Average consists of 561 mutual funds with a
similar investment objective.
10
<PAGE>
FEE TABLES
The following table shows for the fiscal year ended August 31, 1997: (a) the
actual operating expenses for the Small Cap Value Portfolio's shares as a
percentage of average net assets, and (b) the pro forma operating expenses
assuming the Proposed Management Fee Amendment 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 Small Cap Value 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 Value Equity Investments (as of 8/31/97) (as of 8/31/97)
- --------------------------------------------- --------------- ---------------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Annual TRAK Fee 1.50% 1.50%
- -------------------------------------------------------------------------------
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
Management fees 0.73% 0.83%*
12b-1 fees None None
Other expenses 0.17 0.17
TOTAL OPERATING EXPENSES 0.90% 1.00%
</TABLE>
- -----------
* The 0.20% increase in management fees results in a 0.10% expense increase on
the Small Cap Value Portfolio's net assets as a result of the 50% allocation
of assets between the Portfolio's Advisors.
EXAMPLES
The following examples are intended to assist a shareholder 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..................................... $24 $74 $127 $271
Proposed Fee.................................... $25 $77 $132 $281
</TABLE>
The following table shows on a comparative basis for the fiscal year ended
August 31, 1997 the Small Cap Value Portfolio's aggregate management fee under
the current Management Agreement and on a pro forma basis under the Proposed
Management Fee Amendment. Actual management fees under both the current
Management Agreement and Proposed Management Fee Amendment are calculated
daily based on the net assets of the Small Cap Value Portfolio. The table
11
<PAGE>
also shows the difference between the actual and pro forma management fees as
a percentage of the actual fee:
<TABLE>
<CAPTION>
ACTUAL AGGREGATE PRO FORMA AGGREGATE DIFFERENCE
MANAGEMENT FEE FOR MANAGEMENT FEE FOR BETWEEN ACTUAL
FISCAL YEAR ENDED FISCAL YEAR ENDED AND PRO FORMA
AUGUST 31, 1997 AUGUST 31, 1997 (AS % OF ACTUAL)
- ------------------ ------------------- ----------------
<S> <C> <C>
$3,760,654 $4,304,771 15%
</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 Small Cap Value Portfolio. Independent legal counsel advised
independent Board members regarding the matters to be considered and the
standards to be used in their evaluation of the Proposed Management Fee
Amendment.
In reaching their unanimous decision to approve the Proposed Management Fee
Amendment, the Trustees evaluated the information and documentation provided
by the Manager and considered such factors as they deemed appropriate. These
factors included, among others: (1) the Manager's findings as to the increased
costs associated with retaining quality advisory services for the Small Cap
Value Portfolio in the current market environment; (2) the relationship of the
Small Cap Value Portfolio's proposed management fee to the fees of comparable
mutual funds; (3) the impact of the proposed increase in management fee on the
Small Cap Value Portfolio's expense ratio; and (4) the relationship of the
Small Cap Value Portfolio's pro forma expense ratio to the expense ratios of
comparable mutual funds. In addition, the Trustees considered the performance
of the Small Cap Value 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.
B. MANAGEMENT FEE INCREASE BETWEEN THE TRUST, WITH RESPECT TO INTERNATIONAL
EQUITY INVESTMENTS ("INTERNATIONAL EQUITY PORTFOLIO") AND SBMFM
The Advisors currently employed by the Manager to serve the International
Equity Portfolio are Oechsle International Advisors, L.P. ("Oechsle") and
State Street Global Advisors ("State Street"), each of which manages
approximately fifty percent (50%) of the International Equity Portfolio's
assets. Oechsle is an active advisor to the International Equity Portfolio,
while State Street seeks to track the performance of the Morgan Stanley
Capital International Europe, Australia and Far East ("EAFE") Index. With
respect to the portion of the International Equity Portfolio's net assets
allocated to Oechsle, the International Equity Portfolio pays fees to the
Manager at the annual rate of 0.70% of the International Equity
12
<PAGE>
Portfolio's average daily net assets and with respect to the balance of net
assets allocated to State Street, the rate is 0.37% of the average daily net
assets. The Manager, in turn, pays fees to each Advisor, with Oechsle
receiving 0.40% and State Street receiving 0.07% of the International Equity
Portfolio's average daily net assets. As a consequence of these fees for its
services to the International Equity Portfolio the Manager retains fees on an
annual basis equal to 0.30% of the International Equity Portfolio's average
daily value of net assets.
At the Board of Trustees meeting held on June 5, 1997, the Manager reported
that advisors using the techniques and possessing the skills and performance
records comparable to Oechsle frequently are paid in excess of 0.40% of the
average daily value of net assets. Concern was also expressed by the Manager
that if Oecshle's fees from the International Equity Portfolio were
substantially below what Oechsle could command from other clients, it might
decline to serve the International Equity Portfolio or to manage additional
International Equity Portfolio assets. Accordingly, the Manager, as part of a
strategic review of the Trust's Portfolios, recommended that a search be
conducted for an additional active advisor to the International Equity
Portfolio that would complement Oechsle's growth strategy and reduce any
potential capacity restraints the advisor might face should the Portfolio
experience an increase in assets. In addition, the Manager told the Board that
it was in the process of conducting a more extensive survey of existing
international equity investment advisors to ascertain their capacity and fee
structure.
At the Board of Trustees meeting held on September 4, 1997, the Manager
informed the Board of Trustees that it had contacted approximately 15
potential advisors, each of which had indicated that the International Equity
Portfolio's current fee structure would prevent them from taking on the
assignment. The Manager then reported to the Board the results of its survey
which consisted of reviewing a peer group of the 25 largest international
equity mutual funds with similar investment objectives to ascertain their
level of fees. The results from this survey indicated that the International
Equity Portfolio's current expense ratio of 0.97%, which was comprised of a
0.74% management fee and 0.23% of other expenses was below the peer group
average of 1.21%. In addition, the Manager compared the International Equity
Portfolio's expense ratio to the Simfund International Growth Average which
contained 315 mutual funds with a similar investment objective and found that
the International Equity Portfolio's total expense ratio of 0.97% was
significantly below the Simfund average of 1.61%/5/.
- -----------
/5/ The Manager discussed with the Board the effect of fee waivers. The net fee
for the Simfund International Growth Average was 0.75%, only slightly higher
than the net fee for the International Equity Portfolio. However, as the
Manager informed the Board, the total expense ratio for funds that comprise
the Simfund average is higher given the impact of 12b-1 fees and the
significant amount some funds charge their shareholders in the form of
"other expenses."
13
<PAGE>
The Manager's survey demonstrated that the International Equity Portfolio's
expense ratio both before and after the proposed increase was below that of
other similar funds.
Based on the statistical data provided to the Board and the Manager's
extensive experience retaining experienced investment advisors, the Manager
with respect to the International Equity Portfolio recommended that the Board
of Trustees consider an amendment to the current Management Agreement
("Proposed Management Fee Amendment") reflecting an increase in the management
fee payable to the Manager from 0.70% to 0.80% of the average net assets of
the International Equity Portfolio, so that it in turn could increase the fee
payable to Oechsle and/or certain prospective Advisors. No fee increase is
contemplated for State Street (or other Advisors using similar strategies and
techniques and the Manager will continue to waive fees so that fees it retains
after payments to Advisors will not exceed 0.30%. At this meeting, the
independent Board members 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 Fee Amendment and determined to submit the Proposed Management Fee
Amendment to shareholders of the International Equity Portfolio for their
approval.
If the proposal is approved by shareholders, 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 which
could complement Oechsle, utilizing the flexibility provided by the proposed
increase in the management fee to compensate these Advisors at competitive
rates. The increase in the management fee will not result in increased
compensation or profitability to the Manager.
Exhibit D sets forth the form of the Management Agreement, the terms of
which are, except for the fees with respect to the International Equity
Portfolio and Small Cap Value Portfolio, identical to the current Management
Agreement.
FEE TABLES
The following table shows for the International Equity Portfolio during the
fiscal year ended August 31, 1997: (a) the actual operating expenses for the
International Equity Portfolio's shares as a percentage of average net assets,
and (b) the pro forma operating expenses assuming the Proposed Management Fee
Amendment 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 International Equity Portfolio. Actual expenses may vary from
year to year and may be higher or lower than those shown below.
14
<PAGE>
<TABLE>
<CAPTION>
Actual Pro Forma
International Equity Investments (as of 8/31/97) (as of 8/31/97)
- -------------------------------- --------------- ---------------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Annual TRAK Fee 1.50% 1.50%
- -------------------------------------------------------------------------------
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
Management fees 0.74% 0.79%*
12b-1 fees None None
Other expenses 0.23 0.23
TOTAL OPERATING EXPENSES 0.97% 1.02%
</TABLE>
- -----------
* The 0.10% increase in management fees results in a 0.05% expense increase on
the International Equity Portfolio's net assets as a result of the 50%
allocation of assets between the International Equity Portfolio's Advisors.
EXAMPLES
The following examples are intended to assist a shareholder 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 $77 $132 $281
Proposed Fee.................................... $26 $78 $134 $286
</TABLE>
The following table shows on a comparative basis for the fiscal year ended
August 31, 1997 the International Equity 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
Management Agreement and Proposed Management Fee Amendment are calculated
daily based on the net assets of the International Equity 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 PRO FORMA AGGREGATE DIFFERENCE
MANAGEMENT FEE FOR MANAGEMENT FEE FOR BETWEEN ACTUAL
FISCAL YEAR ENDED FISCAL YEAR ENDED AND PRO FORMA
AUGUST 31, 1997 AUGUST 31, 1997 (AS % OF ACTUAL)
- ------------------ ------------------- ----------------
<S> <C> <C>
$7,358,476 $7,873,110 7%
</TABLE>
15
<PAGE>
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 International Equity Portfolio. Independent legal counsel
advised the independent Board members regarding the matters to be considered
and the standards to be used in their evaluation of the Proposed Management
Fee Amendment.
In reaching their decision to unanimously approve the Proposed Management
Fee Amendment, 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 International Equity Portfolio in the current market environment; (2) the
relationship of the International Equity Portfolio's proposed management fee
to the fees of comparable mutual funds; (3) the impact of the proposed
increase in management fee on the International Equity Portfolio's expense
ratios; and (4) the relationship of the International Equity Portfolio's pro
forma expense ratio to the expense ratios of comparable mutual funds. In
addition, the Trustees considered the performance of the International Equity
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 of the Small Cap Value Portfolio, with respect to Proposal 3(A)
and shareholders of the International Equity Portfolio with respect to
Proposal 3(B) approve the Proposed Management Fee Amendment, which requires a
Majority Vote of the respective Portfolios.
If approved by the shareholders of a Portfolio, the Proposed Management Fee
Amendment would become effective as soon as practicable following the Special
Meeting. If the Proposed Management Fee Amendment is not approved by a
Portfolio's shareholders, the Manager will continue to serve as that
Portfolio's Manager under the terms of the current Management Agreement.
YOUR TRUSTEES UNANIMOUSLY RECOMMEND THAT YOU VOTE FOR THE PROPOSED MANAGEMENT
FEE AMENDMENT AS IT PERTAINS TO THE SMALL CAP VALUE AND INTERNATIONAL EQUITY
PORTFOLIOS.
ADDITIONAL INFORMATION CONCERNING THE MANAGER
SBMFM is a registered investment advisor whose principal offices are located
at 388 Greenwich Street, New York, NY 10013. SBMFM is a wholly-owned
16
<PAGE>
subsidiary of Smith Barney Holdings Inc. ("Holdings"), which is in turn a
wholly-owned subsidiary of Travelers Group Inc. ("Travelers"). SBMFM renders
investment advice to individuals and institutional investors and as of July
31, 1997 had aggregate assets under management in excess of $81 billion. The
principal executive offices of Travelers and Holdings are located at 388
Greenwich Street, New York, New York 10013.
The name and address of each Portfolio's investment advisor(s), principal
underwriter and Administrator are set forth in Exhibit C hereto.
PROPOSAL 4:
TO APPROVE OR DISAPPROVE THE RECLASSIFICATION, MODIFICATION AND/OR ELIMINATION
OF CERTAIN FUNDAMENTAL INVESTMENT POLICIES
The 1940 Act requires a registered investment company, like the Trust, to
have certain specific investment policies that can be changed only by a
Majority Vote of its shareholders. Investment companies may also elect to
designate other policies that may be changed only by a shareholder vote. Both
types of policies are referred to as "fundamental" policies. Certain
fundamental policies have been adopted in the past by the Trust to reflect
regulatory, business or industry conditions that are no longer in effect.
Accordingly, the Trustees authorized a review of the Trust's fundamental
policies with the following goals: (i) to simplify, modernize and make
consistent with those of other investment companies distributed by Smith
Barney, the Trust's policies that are required to be fundamental; (ii) to
reclassify as non-fundamental any policies that are not required to be
fundamental under the 1940 Act or the positions of the staff of the SEC in
interpreting the 1940 Act, in which case, depending on the circumstances, the
policy would be either eliminated, or adopted by the Board as a non-
fundamental policy in the same or a modified form; and (iii) to re-classify as
non-fundamental or to eliminate certain policies previously required under
state securities laws. Non-fundamental policies can be changed by the Board
without shareholder approval, subject to compliance with applicable SEC
disclosure requirements.
This proposal seeks shareholder approval of changes that are intended to
accomplish the foregoing goals. Shareholders of any particular Portfolio will
be able to vote for or against or abstain from voting with respect to each of
the proposed changes applicable to such Portfolio. The proposed changes to the
fundamental policies are discussed in detail below. By reducing to a minimum
those policies that can be changed only by a shareholder vote, the Trust
should be able to avoid the costs and delay associated with a shareholder
meeting and enhance the ability of each Advisor to manage the Trust's
Portfolio in a changing
17
<PAGE>
regulatory or investment environment. Accordingly, investment management
opportunities generally will be increased. Before a Portfolio engages in any
new investment policy, the Board of Trustees must approve it.
The percentage limitations contained in the restrictions described below
apply at the time of purchases of securities.
If these investment policy changes are approved by shareholders at the
meeting, the Trust's Prospectus and Statement of Additional Information will
be amended or supplemented in order to reflect the elimination, amendment
and/or reclassification of the investment policies. Shareholders will be
notified by the Trust of any future investment policy changes, either in the
Trust's Prospectus or Statement of Additional Information, which are updated
at least annually, or in other Trust correspondence.
A. ALL PORTFOLIOS (EXCEPT INTERNATIONAL FIXED INCOME INVESTMENTS)
MODIFICATION OF THE FUNDAMENTAL POLICY RELATING TO DIVERSIFICATION
Each Portfolio has the following fundamental policies regarding
diversification:
A Portfolio, other than International Fixed Income Investments, will not
purchase securities (other than U.S. Government Securities) of any issuer
if, as a result of the purchase, more than 5% of the value of the
Portfolio's total assets would be invested in the securities of the
issuer, except that up to 25% of the value of the Portfolio's total assets
may be invested without regard to this 5% limitation; and
A Portfolio, other than International Fixed Income Investments, will not
purchase more than 10% of the voting securities of any one issuer, or more
than 10% of the securities of any class of any one issuer, except that
this limitation is not applicable to the Portfolio's investments in U.S.
Government Securities, and up to 25% of the Portfolio's assets may be
invested without regard to these 10% limitations.
Under the 1940 Act, a "diversified" fund is permitted to invest, with
respect to 75% of its assets, up to 5% of its assets in one issuer, provided
that the investment represents less than 10% of the issuer's voting
securities. Although the policies recited above comply with the 1940 Act, the
Board of Trustees believes that these restrictions should be revised to
conform to a limitation that is expected to become the standard for all funds
managed by SBMFM. Adoption of the proposed limitation on concentration is not
expected to affect the way a portfolio is managed, the investment performance
of a portfolio, or the securities or
18
<PAGE>
investments in which a portfolio invests. Set forth below is the Portfolio's
policy on diversification, as proposed to be modified:
A Portfolio, other than International Fixed Income Investments, will not
deviate from the definition of a "diversified company" as defined in the
1940 Act and rules thereunder.
B. ALL PORTFOLIOS (EXCEPT MUNICIPAL BOND INVESTMENTS)
MODIFICATION OF THE FUNDAMENTAL POLICY REGARDING INDUSTRY CONCENTRATION
Each Portfolio has the following fundamental policy that prohibits it from
concentrating its investments in any one industry:
A Portfolio, other than Municipal Bond Investments, will invest no more
than 25% of the value of its total assets in securities of issuers in any
one industry, the term industry being deemed to include the government of
a particular country other than the United States. This limitation is not
applicable to a Portfolio's investments in U.S. Government Securities.
It is proposed that this policy be modified to conform to a limitation that
is expected to become the standard for all funds managed by SBMFM. The
modified policy will not involve any change in the manner in which each of the
Portfolios' assets are currently managed. Set forth below is the Portfolios'
policy on industry concentration, as proposed to be modified:
A Portfolio, except Municipal Bond Investments, will not invest more than
25% of its total assets in securities, the issuers of which conduct their
principal business activities in the same industry. For purposes of this
limitation, U.S. government securities and securities of state or
municipal governments and their political subdivisions are not considered
to be issued by members of any industry.
C. ALL PORTFOLIOS
MODIFICATION OF THE FUNDAMENTAL POLICY REGARDING BORROWING
Each Portfolio has the following fundamental policy with respect to
borrowing:
A Portfolio will not borrow money, except that a Portfolio may borrow from
banks for temporary or emergency (not leveraging) purposes, including the
meeting of redemption requests that might otherwise require the untimely
disposition of securities, in an amount not to exceed one-third of the
value of the Portfolio's total assets (including the amount borrowed)
valued at market
19
<PAGE>
less liabilities (not including the amount borrowed) at the time the
borrowing is made, except that Mortgage Backed Investments may engage in
forward roll transactions and Emerging Markets Equity Investments may
engage in reverse repurchase transactions. Whenever a Portfolio's
borrowings exceed 5% of the value of its total assets, the Portfolio,
other than Mortgage Backed Investments and Emerging Markets Equity
Investments, will not make any additional investments.
The language of this policy is proposed to be revised to conform to a
limitation that is expected to become the standard for all funds managed by
SBMFM. In addition, those Portfolios that do not already have authority are
proposed to be granted authority to engage in reverse repurchase agreements
and forward roll transactions.
Under a reverse repurchase agreement, a Portfolio would sell securities and
agree to repurchase them at a mutually agreed date and price. At the time the
Portfolio enters into a reverse repurchase agreement, it will establish and
maintain a segregated account with an approved custodian containing cash or
liquid securities having a value not less than the repurchase price (including
accrued interest). Reverse repurchase agreements involve the risk that the
market value of the securities may decline prior to the repurchase date. In
addition, the cash proceeds of the sales may be invested in securities or
other instruments. In the event the buyer of the securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, such buyer or
its trustee or receiver may receive an extension of time to determine whether
to enforce the Portfolio's obligation to repurchase the securities, and the
Portfolio's use of the proceeds of the reverse repurchase agreement may
effectively be restricted pending such decision.
A Portfolio may enter into forward roll transactions, in which it sells
fixed income securities for delivery in the current month and simultaneously
contracts to repurchase substantially similar (same type, coupon and maturity)
securities on a specified future date. During the roll period, the Portfolio
would forgo principal and interest paid on such securities. The Portfolio
would be compensated by the difference between the current sales price and the
forward price for the future purchase, as well as by the interest earned on
the cash proceeds of the initial sale. Set forth below is each Portfolio's
policy on borrowing, as proposed to be modified:
A Portfolio will not borrow money, except that (a) the Portfolio may
borrow from banks for temporary or emergency (not leveraging) purposes,
including the meeting of redemption requests which might otherwise require
the untimely disposition of securities, in an amount not exceeding 33 1/3%
of the value of the Portfolio's total assets (including the amount
borrowed) valued at the lesser of cost or market, less liabilities (not
including the amount borrowed) valued at the time the borrowing is made
and (b) a Portfolio may,
20
<PAGE>
to the extent consistent with its investment policies, enter into reverse
repurchase agreements, forward roll transactions and similar investment
strategies and techniques.
D. ALL PORTFOLIOS
ELIMINATION OF THE FUNDAMENTAL POLICY RESTRICTING ITS ABILITY TO PLEDGE
ASSETS
The Board of Trustees has approved, subject to shareholder approval, the
elimination of the following fundamental policy restricting its ability to
pledge its assets to other parties:
A Portfolio will not pledge, hypothecate, mortgage or otherwise encumber
its assets, except to secure permitted borrowings.
The elimination of this fundamental investment limitation regarding pledging
assets would remove all restrictions on the ability of each Portfolio to
pledge, mortgage, hypothecate or otherwise encumber its assets, except for
those restrictions imposed by or under the 1940 Act, and would leave the
imposition of any further limits on pledging activities to the sole discretion
of the Board, subject to applicable SEC disclosure requirements.
The Portfolios' current fundamental investment limitation on pledging assets
may conflict with their ability to engage in permitted borrowings, purchase
securities on a when-issued or delayed delivery basis, lend Portfolio
securities, enter into escrow arrangements in connection with writing options,
enter into collateral arrangements in connection with investments involving
futures contracts and options thereon and possibly engage in other investments
and arrangements that may develop in the future. The Board has approved the
elimination of the Portfolio's fundamental investment limitation restricting
pledging of assets to avoid these potential conflicts and to secure greater
flexibility for the future.
The potential conflict between a Portfolio's pledging and borrowing
limitations, for instance, arises because banks generally require borrowers
such as a Portfolio to pledge assets in order to collateralize the amount
borrowed. Each Portfolio is currently permitted to borrow from banks for
temporary or emergency purposes in limited amounts and in most cases to pledge
assets to secure permitted borrowings. Loan agreements between investment
companies and banks generally require collateral or provide that the bank may,
at its option, require collateral for future outstanding loans. The amount of
required collateral, however, generally exceeds the principal amount of the
loan. Therefore, the limitation on the amount of Portfolio securities that it
is permitted to pledge effectively reduces the maximum borrowing ability of
the Portfolio to below the amount it is permitted to borrow. The Board
believes that the pledging limitation should be eliminated to ensure that each
Portfolio's flexibility to consider borrowing money temporarily as a means of
raising cash is not limited by restrictions in its ability to pledge assets.
21
<PAGE>
E. ALL PORTFOLIOS
MODIFICATION OF THE FUNDAMENTAL POLICY REGARDING LENDING
Each Portfolio has the following fundamental policy prohibiting it from
lending its assets to other persons:
A Portfolio will not lend any funds or other assets, except through
purchasing debt obligations, lending portfolio securities and entering
into repurchase agreements consistent with the Portfolio's investment
objective and policies.
The language of this policy is proposed to be revised to conform to a
limitation that is expected to become the standard for all funds managed by
SBMFM.
Set forth below is the Trust's policy on lending, as proposed to be
modified:
A Portfolio will not make loans. This restriction does not apply to: (a)
the purchase of debt obligations in which a Portfolio may invest
consistent with its investment objectives and policies (including
participation interests in such obligations); (b) repurchase agreements;
and (c) loans of its portfolio securities.
F. ALL PORTFOLIOS
MODIFICATION OF THE FUNDAMENTAL POLICY REGARDING UNDERWRITING OF
SECURITIES OF OTHER ISSUERS
Each Portfolio has the following fundamental policy prohibiting it from
acting as an underwriter of securities:
A Portfolio will not act as an underwriter of securities, except that the
Portfolio may acquire restricted securities under circumstances in which,
if the securities were sold, the Portfolio might be deemed to be an
underwriter for purposes of the 1933 Act.
The language of the policy is proposed to be standardized but not changed
substantively. The modification will clarify that each Portfolio will not be
deemed to be an underwriter by reason of disposing of Portfolio securities.
The modification will not involve any change in the manner in which each
Portfolio is currently managed.
Set forth below is each Portfolio's policy on underwriting, as proposed to
be modified:
A Portfolio will not engage in the business of underwriting securities
issued by other persons, except to the extent that a Portfolio may
technically be deemed to be an underwriter under the Securities Act of
1933, as amended, in disposing of Portfolio securities.
22
<PAGE>
G. ALL PORTFOLIOS
MODIFICATION OF THE FUNDAMENTAL POLICY REGARDING PURCHASE OF SECURITIES ON
MARGIN
Each Portfolio has the following fundamental policy that prohibits it from
purchasing securities on margin:
A Portfolio will not purchase securities on margin, except that the
Portfolio may obtain any short-term credits necessary for the clearance of
purchases and sales of securities. For purposes of this restriction, the
deposit or payment of initial or variation margin in connection with
futures contracts or options on futures contracts will not be deemed to be
a purchase of securities on margin.
If approved by shareholders, the language of the Portfolios' policy
regarding purchasing securities on margin would be standardized and
modernized, allowing the Board of Trustees to respond more rapidly to the
availability of new instruments and strategies. Set forth below is the
Portfolios' policy on purchasing securities on margin, as proposed to be
modified or adopted:
A Portfolio will not purchase any securities on margin (except for such
short-term credits as are necessary for the clearance of purchases and
sales of Portfolio securities). For purposes of this restriction, the
deposit or payment by a Portfolio of underlying securities and other
assets in escrow and collateral agreements with respect to initial or
maintenance margin in connection with futures contracts and related
options and options on securities, indexes or similar items is not
considered to be the purchase of a security on margin.
H. ALL PORTFOLIOS
MODIFICATION OF THE FUNDAMENTAL POLICY REGARDING THE PURCHASE OR SALE OF
REAL ESTATE, REAL ESTATE LIMITED PARTNERSHIP INTERESTS OR COMMODITIES
Each Portfolio has the following fundamental policies with respect to
investments in real estate or commodities contracts:
A Portfolio will not purchase or sell real estate or real estate limited
partnership interests, except that it may purchase and sell mortgage
related securities and securities of companies that deal in real estate or
interests therein.
A Portfolio will not purchase or sell commodities or commodity contracts
(except currencies, forward currency contracts, stock index and interest
rate futures contracts and related options and other similar contracts).
23
<PAGE>
If approved by shareholders these restrictions would be amended to permit a
Portfolio to invest in securities of companies that deal in mortgages and real
estate and securities secured by real estate and interests therein. In
addition, the modified restriction reserves for the Portfolios the freedom of
action to hold and sell real estate acquired as a result of a Portfolio's
ownership of securities. For example, this modified policy would allow a
Portfolio to dispose of real estate in the event that it acquired real estate
as the result of a default or securities it holds.
Although no Portfolios has any current intention of expanding the range of
instruments it is currently permitted to purchase, the modification of this
policy would permit the Portfolio greater flexibility to respond to market and
other developments. Any future change in a Portfolio's manner of investing or
the instruments it may purchase would require Board approval and appropriate
disclosure to shareholders.
Set forth below are the Portfolios policies regarding the purchase or sale
of real estate or commodities, as proposed to be modified:
A Portfolio will not purchase or sell real estate, real estate mortgages,
commodities or commodity contracts, but this restriction shall not prevent
a Portfolio from (a) investing in and selling securities of issuers
engaged in the real estate business and securities which are secured by
real estate or interests therein; (b) holding or selling real estate
received in connection with securities it holds; (c) trading in futures
contracts and options on futures contracts or (d) investing in or
purchasing real estate investment trust securities.
I. ALL PORTFOLIOS
RECLASSIFICATION AS NON-FUNDAMENTAL THE FUNDAMENTAL POLICY REGARDING
INVESTMENTS IN OIL, GAS OR OTHER MINERAL EXPLORATION OR DEVELOPMENT
PROGRAMS
Each Portfolio has the following fundamental policy prohibiting it from
investing in any oil, gas or other mineral exploration or development program:
A Portfolio will not invest in oil, gas or other mineral leases or
exploration or development programs.
This investment restriction was adopted to address requirements under
certain state securities laws, but is not required to be fundamental. The
Board believes that this investment restriction should be reclassified as a
non-fundamental policy to respond to regulatory developments. If approved by
shareholders, the Board currently intends to adopt a substantially similar
non-fundamental policy.
24
<PAGE>
J. ALL PORTFOLIOS
RECLASSIFICATION AS NON-FUNDAMENTAL THE FUNDAMENTAL POLICY REGARDING SHORT
SALES
Each Portfolio has the following fundamental restriction regarding short
sales:
A Portfolio will not make short sales of securities or maintain a short
position, unless at all times when a short position is open it owns an
equal amount of the securities or securities convertible into or
exchangeable for, without payment of any further consideration, securities
of the same issue as, and equal in amount to, the securities sold short
("short sales against the box"), and unless not more than 10% of the
Portfolio's net assets (taken at market value) is held as collateral for
such sales at any one time. It is the Portfolios' present intention to
make short sales against the box only for the purpose of deferring
realization of gain or loss for federal income tax purposes.
It is proposed that shareholders approve the elimination of this fundamental
restriction.
In a short sale, an investor sells a borrowed security and has a
corresponding obligation to the lender to return the identical security. In an
investment technique known as a short sale "against the box," an investor
sells short while owning the same security in the same amount, or having the
right to obtain equivalent securities. The investor could have the right to
obtain equivalent securities, for example through its ownership of warrants,
options or convertible bonds.
If the proposal is approved, the current fundamental limitation will be
replaced with a non-fundamental limitation which could be changed without a
shareholder vote. The proposed non-fundamental limitation is as follows:
Each Portfolio will not make short sales of securities, unless it owns
or has the right to obtain securities equivalent in kind and amount to the
securities sold short and provided that transactions in futures contracts
and options are not deemed to constitute selling securities short.
Short sales may not be appropriate for all of the Portfolios. If the
proposal is approved, the Board of Trustees of the Portfolios will determine
the appropriateness of short sales on a Portfolio by Portfolio basis.
Currently, selling securities short would not be permitted by any of the
existing Portfolios. However, the Trust is considering creating a Portfolio in
the future that would employ such a strategy. Appropriate disclosure of this
practice will also be included in the Trust's Prospectus and/or Statement of
Additional Information.
25
<PAGE>
OTHER MATTERS
The Trustees of the Trust know of no other matters that may come before the
Special Meeting. If any such matters should properly come before the Special
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 Consulting
Group Capital Markets Funds, 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
October 27, 1997
26
<PAGE>
EXHIBIT A
BOARD OF TRUSTEES 1996 COMPENSATION
<TABLE>
<CAPTION>
AMOUNTS PAID DURING MOST RECENT WALTER E. MARTIN ARMON STEPHEN E. HEATH B.
CALENDAR YEAR TO BOARD MEMBERS AUCH BRODY KAMESAR KAUFMAN MCLENDON
- ------------------------------- --------- -------- ------- ---------- --------
<S> <C> <C> <C> <C> <C>
From Consulting Group Capital
Markets Funds.................. $32,582 $ 31,586 $32,686 $33,746 $ 0
From Other Smith Barney Mutual
Funds.......................... $ 5,354 $ 92,700 $ 5,950 $58,650 $ 0
------- -------- ------- ------- ---
$37,936 $124,286 $38,636 $92,396 $ 0
</TABLE>
A-1
<PAGE>
EXHIBIT B
EXECUTIVE OFFICERS OF THE TRUST
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND
NAME OF EXECUTIVE OFFICER AGE BUSINESS EXPERIENCE FOR PAST 5 YEARS
------------------------- --- ------------------------------------
<C> <C> <S>
Lewis E. Daidone 40 Managing Director of Smith Barney; Director and Senior Vice
President of Smith Barney Mutual Funds Management Inc.;
Senior Vice President and Treasurer of 41 Funds of Smith
Barney Mutual Funds.
Heath B. McLendon 64 Managing Director of Smith Barney, Chairman of the Board of
Smith Barney Strategy Advisers Inc. and President of Smith
Barney Mutual Funds Management Inc.; Prior to 1993, Senior
Executive Vice President of Shearson Lehman Brothers Inc.;
Vice Chairman of Asset Management Division of Shearson
Lehman Brothers Inc.; A director of PanAgora Asset
Management, Inc. and PanAgora Asset Management Limited.
Christina Sydor 46 Managing Director of Smith Barney; General Counsel, and
Secretary of Smith Barney Mutual Funds Management Inc. and
Secretary of 41 Smith Barney Mutual Funds.
</TABLE>
B-1
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
C-1
<PAGE>
EXHIBIT C
NAMES AND ADDRESSES OF INVESTMENT ADVISORS,
DISTRIBUTORS, ADMINISTRATORS AND OFFICERS
Unless otherwise indicated in this Exhibit D, the following information
applies to all Portfolios:
INVESTMENT MANAGER OFFICERS*:
Smith Barney Mutual Heath B. McLendon, Chairman of the Board and Chief
Funds Management, Inc. Executive Officer
388 Greenwich Street
New York, NY 10013
Lewis E. Daidone, Senior Vice President and
Treasurer
DISTRIBUTOR:
Christina Sydor, Secretary
Smith Barney Inc. 388
Greenwich Street New
York, NY 10013
<TABLE>
<CAPTION>
FUND INVESTMENT ADVISORS OFFICERS
---- ------------------- --------
<S> <C> <C>
Intermediate Fixed Standish, Ayer & Wood, Inc.
Income Investments One Financial Center
Government Money Boston, Mass. 02111
Investments
Long-Term Bonds National Asset Management Corp.
Investments 101 South Fifth Street
Louisville, KY
Municipal Bond Smith Affiliated Capital Corp.
Investments 880 Third Avenue
New York, NY 10022
Mortgage Backed Atlantic Portfolio Analytics &
Investments Management Inc.
201 East Pine Street, Suite 600
Orlando, FL 32801
Balanced Investments Palley-Needleman Asset
Management, Inc.
800 Newport Center Drive, Suite
450
Newport Beach, CA 92660
</TABLE>
C-2
<PAGE>
<TABLE>
<CAPTION>
FUND INVESTMENT ADVISORS OFFICERS
---- ------------------- --------
<S> <C> <C>
Large Capitalization The Boston Company Asset
Value Equity Investments Management, Inc.
One Boston Place
Boston, MA
Parametric Portfolio Associate
7310 Columbia Center
710 Fifth Avenue
Seattle, WA 98104
Large Capitalization Provident Investment Counsel Inc.
Growth Investments 300 North Lake Avenue
Pasadena, CA 91101
Boston Structured Advisors/
PanAgora Asset Management, Inc.
260 Franklin Street
Boston, MA 02110
Small Capitalization NFJ Investment Group
Value Equity Investments 2121 San Jacinto Street, Suite
1440
Dallas, TX 75201
BZW Barclays Global Fund Advisors
45 Fremont Street
San Francisco, CA 94105
Small Capitalization Mellon Capital Management Corp.
Growth Investments 595 Market Street, Suite 3000
San Francisco, CA 94105
International Equity Oechsle International Advisors
Investments One International Place
Boston, MA 02110
State Street Global Advisors
Two International Place
Boston, Ma 02110
International Fixed Julius Baer Investment Management
Income Investments Inc.
330 Madison Avenue
New York, NY 10017
Emerging Markets Equity John Govett & Co. Limited
Investments 250 Montgomery Street
San Francisco, CA 94104
</TABLE>
C-3
<PAGE>
EXHIBIT D
INVESTMENT MANAGEMENT AGREEMENT
July 30, 1993
Smith, Barney Advisers, Inc./1/
1345 Avenue of the Americas
New York, New York 10105
Dear Sirs:
The Trust for TRAK Investments (the "Trust")/2/, 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
- -----------
/1/ Now called Smith Barney Mutual Funds Management Inc.
/2/ Now called Consulting Group Capital Markets Funds.
D-1
<PAGE>
(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 expenses, 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
D-2
<PAGE>
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 savable 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.
D-3
<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.
D-4
<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.
D-5
<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
D-6
<PAGE>
APPENDIX I
PORTFOLIOS OF CONSULTING GROUP CAPITAL MARKETS FUNDS
<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%
. Long-Term Bond Investments.................................. .40%
. Municipal Bond Investments.................................. .40%
. Mortgage Backed Investments................................. .50%
. Balanced Investments........................................ .60%
. Large Capitalization Value Equity Investments............... .60%
. Small Capitalization Value Equity Investments............... .80%*
. Large Capitalization Growth Investments..................... .60%
. Small Capitalization Growth Investments..................... .80%**
. International Equity Investments............................ .80%*
. International Fixed Income Investments...................... .50%
. Emerging Markets Equity Investments......................... .90%
</TABLE>
- -----------
* Effective December 18, 1997
** Effective March 31, 1997
VOTE THIS VOTING INSTRUCTION CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
NOTRE: YOUR PROXY IS NOT VALID UNLESS IT IS SIGNED BELOW.
(Please Detach at Perforation Before Mailing)
..............................................................................
..............................................................................
..............................................................................
....................
PORTFOLIO NAME PRINTS HERE
MEETING DATE AND TIME PRINTS HERE
The undersigned holder of shares of the above-nmaed portfolio
(the"Portfolio") of Consulting Group
Capital Markets Funds , hereby appoints Heath B. McLendon, Christina T. Sydor
and David A. Barnett, 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 December 18, 1997 at
2:00 pm and any adjournment or adjournments thereof. 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
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
NOTE: YOUR PROXY IS NOT VALID UNLESS IT IS SIGNED ON THE
REVERSE SIDE.
(Please Detach at Perforation Before Mailing)
..............................................................................
..............................................................................
..............................................................................
....................
Please vote by filling in the boxes below.
1. To elect Trustees of the Trust. FOR FOR ALL EXCEPT WITHHOLD ALL
As Marked Below
Walter A. Auch; Martin Brody; Armon Kamesar; Stephen Kaufman;
Heath B. McLendon
To withhold authority to vote for any individual nominee, print that
nominee's name on the line below.
___________________________________________________________________________
2.To ratify the selection of KPMG Peat Marwick LLP as FOR AGAINST ABSTAIN
independent accountants of the Trust.
FOR AGAINST ABSTAIN
3A. To approve an amendment to the management agreement
between the Trust with respect to
Small Capitalization Value Equity Investments and
the Trust's manager, Smith Barney Mutual Funds
Management Inc.
3B. To approve an amendment to the management agreement
between the Trust with respect to
International Equity Investments and
the Trust's manager, Smith Barney Mutual Funds
Management Inc.
4. FOR AGAINST ALL ABSTAIN ALL
To approve or disapprove the reclassification, modification and/or
elimination of certain fundamental investment policies.
(4A) Diversification
(4B) Industry Concentration
(4C) Borrowing
(4D) Pledging Assets
(4E) Lending
(4F) Underwriting of Securities
(4G) Margin Purchases
(4H) Real Estate
(4I) Oil, Gas or Other Mineral Exploration
(4J) Short Sales
To vote against a particular proposed change, refer to the proxy
statement for the changes applicable
to the Fund and write the sub-proposal number on the line below.
1
