SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [XXX]
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Check the appropriate box:
[XXX] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or
Sec. 240.14a-12
CONSULTING GROUP CAPITAL MARKET 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):
[ ] $500 per each party to the controversy pursuant to Exchange
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[ ] Check box if any part of the fee is offset as provided by
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previous filing by registration statement number, or the
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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 A NEW MANAGEMENT AGREEMENT
Proposal Three requests that you approve a new management agreement
between the Trust, on behalf of Small Capitalization Value Equity
Investments and International Equity Investments, and the Investment
Manager for these two Portfolios, Smith Barney Mutual Funds Management
Inc. The Investment Manager recently undertook a survey of existing
small capitalization value and international equity advisors to
ascertain their capacity 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 to
their respective Advisors be increased to retain the Portfolio's current
Advisor(s) and/or use the increased 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, a new 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
profitability to the Investment Manager.
The Board of Trustees recommends that you vote "FOR" a new 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 our 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 polices 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 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 Trustee 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,
Heath B. McLendon
Chairman of the Board
Consulting Group Capital Markets Funds
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 a new management agreement between the
Trust, on behalf of 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.
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:
Registration Valid Signature
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
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. Although the Trust has been advised that this
telephonic voting system complies with Massachusetts state law, the
Trust will seek an opinion of Massachusetts counsel prior to utilizing
the telephone voting procedure. Persons holding shares as nominees will,
upon request, be reimbursed for their reasonable expenses incurred in
sending soliciting material to their principals.
The mailing address of the Trust is 222 Delaware Avenue,
Wilmington, Delaware 19801. The address of SBMFM and Smith Barney is
388 Greenwich Street, New York, NY 10013. Copies of the Trust's annual
report is available upon request and without charge by calling your
Smith Barney Financial
Consultant or by writing to the Trust 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.
Proposals 1 and 2 require 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. 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"). Abstentions and broker-Non-Votes will effectively
count as a vote against Proposals 3 and 4.
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.
Consulting Group Capital Markets Funds Shares
Government Money Investments
Intermediate Fixed Income Investments
Long-Term Bond Investments
Municipal Bond Investments
Mortgage Backed Investments
Balanced Investments
Large Capitalization Value Equity Investments
Large Capitalization Growth Investments
Small Capitalization Value Equity Investments
Small Capitalization Growth Investments
International Equity Investments
International Fixed Income Investments
Emerging Markets Equity Investments
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) or the Securities Exchange Act of 1934) owned beneficially or of
record more than 5% of the outstanding shares of a Portfolio. As of the
Record Date, the officers and Board members of each Portfolio
beneficially owned less than 1% of the shares of each Portfolio.
PROPOSAL 1: ALL PORTFOLIOS
TO ELECT TRUSTEES OF THE TRUST
The first proposal to be considered at the Meeting is the election
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 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 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 ADDRESS TO COME]
NOMINEES FOR ELECTION TO THE BOARD OF
CONSULTING GROUP CAPITAL MARKETS FUNDS
Name, Age, Principal Occupation and Other Directorships** During
the Past Five Years
Trustee of
Consulting
Group Capital
Markets Funds
Since
Walter E. Auch, Jr., age 76.
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; Banyan Realty Trust; Banyan Land Fund II; Geotek
Communications Inc.
1991
Martin Brody, age 76.
Private Investor
1991
Armon Kamesar, age 70.
Chairman of TEC, an international organization of Chief Executive
Officers; Trustee, U.S. Bankruptcy Court.
1994
Stephen E. Kaufman, Jr., age 64.
Attorney.
1991
*Heath B. McLendon, age 64.
Managing Director of Smith Barney and Chairman of the Board of
Smith Barney Strategy Advisers Inc. and President of Smith
Barney Mutual Funds Management; 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.
Chairman of the Board and Investment Officer of 41 Smith Barney
Mutual Funds.
1991
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 public 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 plurality 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 A NEW MANAGEMENT AGREEMENT BETWEEN THE
TRUST, ON BEHALF OF THE SMALL CAPITALIZATION VALUE EQUITY AND
INTERNATIONAL EQUITY PORTFOLIOS, AND THE PORTFOLIOS' INVESTMENT
MANAGER, SBMFM
Background
SBMFM (formerly known as Smith, Barney Advisors, Inc.) serves as
the investment manager for the Portfolios in accordance with the terms
of a management agreement dated July 30, 1993 (the "Current Management
Agreement") . Subject to the supervision and direction of the Trust's
Board of Trustees, the Consulting Group, a division of the Manager,
provides investment management evaluation services principally by
performing initial due diligence on Investment Advisors ("Advisors") for
each Portfolio, as well as the Trust's other investment Portfolios, and
thereafter monitoring Advisor performance through quantitative and
qualitative analysis. In evaluating Advisors, the Manager considers,
among other factors, each Advisor's level of expertise; relative
performance and consistency of performance over a minimum period of five
years; level of adherence to investment discipline or philosophy;
personnel, facilities and financial strength; and quality of service and
client communications. The Manager has responsibility for communicating
performance expectations and evaluations to Advisors and ultimately
recommending to the Board of Trustees of the Trust whether Advisors'
contracts should be renewed, modified or terminated. The Manager
provides written reports to the Board of Trustees regarding the results
of its evaluation and monitoring functions. The Manager is also
responsible for conducting all operations of the Trust except those
operations contracted to the Advisors, custodian, transfer agent or
administrator. The Manager is also responsible for compensating 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 requires, 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 would require shareholder approval.
A. MANAGEMENT FEE INCREASE BETWEEN THE TRUST, ON BEHALF OF 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") which each manage approximately fifty percent
(50%) of the Portfolio's assets. 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 management fee paid by 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 advisors. The survey compared the Small Cap Value
Portfolio's current and proposed total expense ratio to 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"). 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 was 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 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 a new management
agreement (the "Proposed Management Agreement") reflecting an increase
in the management fee payable to the Manager from 0.60% to 0.80% of the
average net assets of the Small Cap Value Portfolio, so that it in turn
could increase the fee payable to NFJ and/or certain prospective
Advisors. 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 Management Agreement and determined to submit the
Proposed Management Agreement 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 Proposed Management
Agreement, the terms of which are, except for the fee and the
commencement and termination dates, substantively identical to the
Current Management Agreement.
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 Agreement had been
in effect throughout the fiscal year. The table and examples below
should not be considered a representation of past or future expenses of
the Small Cap Value Portfolio. Actual expenses may vary from year to
year and may be higher or lower than those shown below.
Actual Pro Forma
Small Capitalization Value Equity Investments (as of 8/31/97) (as of
8/31/97)
Shareholder Transaction Expenses
Maximum 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%
________________
* 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:
1 Year 3 Years 5 Years 10
Years
Present Fee................................... $24 $74
$127 $271
Proposed Fee.............................. $25 $77 $132
$281
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 Agreement. Actual management fees
under both the Current and Proposed Management Agreements are calculated
daily based on the net assets of the Small Cap Value Portfolio. The
table also shows the difference between the actual and pro forma
management fees as a percentage of the actual fee:
Actual Aggregate
Management Fee
for Fiscal Year
Ended
August 31, 1997
Pro Forma
Aggregate
Management Fee
for
Fiscal Year
Ended
August 31, 1997
Difference
between
Actual and
Pro Forma (as
% of Actual)
$3,760,654
$4,304,771
15%
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 Agreement.
In reaching their unanimous decision to approve the Proposed
Management Agreement, 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, ON BEHALF OF
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 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 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. 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 indicted 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% . 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 a new management
agreement ("Proposed Management Agreement") 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. 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 Agreement and determined to submit the Proposed
Management Agreement 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. 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 proposed Management
Agreement, the terms of which are, except for the fee and the
commencement and termination dates, 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 Agreement had been in effect throughout the
fiscal year. The table and examples below should not be considered a
representation of past or future expenses of the International Equity
Portfolio. Actual expenses may vary from year to year and may be higher
or lower than those shown below.
Actual Pro Forma
International Equity Investments (as of 8/31/97) (as of 8/31/97)
Shareholder Transaction Expenses
Maximum 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%
________________
* 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:
1 Year 3 Years 5 Years 10
Years
Present Fee................................... $25 $77
$132 $281
Proposed Fee.............................. $26 $78 $134
$286
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 and Proposed Management
Agreements 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:
Actual Aggregate
Management Fee
for Fiscal Year
Ended
August 31, 1997
Pro Forma
Aggregate
Management Fee
for
Fiscal Year
Ended
August 31, 1997
Difference
between
Actual and
Pro Forma (as
% of Actual)
$7,358,476
$7,873,110
7%
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 Agreement.
In reaching their decision to unanimously approve the Proposed
Management Agreement, the Trustees evaluated the information and
documentation provided by the Manager and considered such factors as
they deemed reasonably necessary. These factors included, among others:
(1) the Manager's findings as to the increased costs associated with
retaining quality advisory services for the 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 with respect to
Proposal 3(A) and shareholders of the International Equity Portfolio
with respect to proposal 3(B) approve the Proposed Management Agreement
which requires a Majority Vote of the respective Portfolios.
If approved by the shareholders of a Portfolio, the Proposed
Management Agreement would become effective as soon as practicable
following the Special Meeting. If the Proposed Management Agreement 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.
If approved by shareholders of a Portfolio, the Proposed
Management Agreement would continue in effect for an initial two-year
term and thereafter would continue in effect only so long as its
continuance is specifically approved at least annually by the Trustees
or by a Majority Vote and in either case, by the vote of a majority of
the independent Board members cast in person at a meeting called for the
purpose of voting on such approval.
YOUR TRUSTEES UNANIMOUSLY RECOMMEND THAT YOU VOTE FOR THE PROPOSED
MANAGEMENT AGREEMENT 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 subsidiary of Smith Barney Holdings Inc. ("Holdings") which
is in turn a wholly-owned subsidiary of Travelers Group Inc.
("Travelers"). The Manager renders investment advice to 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 and (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 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 regulatory or investment environment.
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 polices recited above comply with the
1940 Act, the Board of Trustees believes that this restriction should be
standardized. 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
MODIFICATION OF THE FUNDAMENTAL POLICY REGARDING ISSUANCE
OF SENIOR SECURITIES
Each Portfolio is required to have a fundamental policy
prohibiting it from issuing senior securities. If approved by
shareholders, this policy would be adopted as fundamental. In its
proposed form, the policy would, by reference to the 1940 Act and its
rules and orders thereunder, maximize the Portfolios' flexibility to
take advantage of regulatory and market developments. For instance it
would make express each Portfolio's authority to establish separate
classes of shares to provide alternative methods of distribution by
stating that issuance of shares with respect to particular classes is
not considered to be the issuance of senior securities for purposes of
this restriction. Any future change in the Portfolios' manner of
investing or the instruments it may purchase would require Board
approval and appropriate disclosure to shareholders, as described above.
Set forth below is each Portfolio's policy on issuance of senior
securities, as proposed to be adopted:
A Portfolio will not issue senior securities as
defined in the [1940 Act] and any rules and
orders thereunder, except as permitted under the
1940 Act.
C. 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. 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.
D. 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
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 standardized. 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 repurchase date. 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, to
the extent consistent with its investment
policies, enter into reverse repurchase
agreements, forward roll transactions and
similar investment strategies and techniques.
Whenever borrowings exceed 5% of the value of a
Portfolio's total assets, the Portfolio will not
make any additional investments, provided that,
for purposes of this restriction, short-term
credits for the clearance of transactions are
not considered borrowings.
.
E. 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 limitations
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 limitations on
pledging assets may conflict with its 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 limitations restricting pledging
of assets to avoid these potential conflicts and to secure greater
flexibility for the future.
The potential conflict between the 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 they are
permitted to borrow. The Board believes that the pledging limitations
should be eliminated to ensure that the Portfolio's flexibility to
consider borrowing money temporarily as a means of raising cash is not
limited by restrictions in their ability to pledge assets.
F. 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 standardized.
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.
G. 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. The
modification will clarify that each Portfolio will not be deemed to be
an underwriter by reason of disposing of Portfolio securities.
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.
H. 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.
I. 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).
If approved by shareholders the modified restriction would allow a
Portfolio to hold and sell real estate acquired as a result of a
Portfolios ownership of securities. For example, this modified policy
would allow a Portfolio to dispose of real estate in the event that it
acquires real estate as the result of a default on securities it holds.
The modified policy would also permit a Portfolio, without further
action by shareholders, to purchase futures contracts and options
thereon.
Although the Portfolios don't have any current intention of
expanding the range of instruments they are currently permitted to
purchase, the modification of this policy would provide the Portfolios
with greater flexibility to respond to market and other developments.
Any future change in a Portfolios 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 or
adopted:
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.
J. 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.
K. 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, 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.
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
Exhibit A
BOARD OF TRUSTEES 1996 COMPENSATION
Amounts Paid
During Most
Recent Calendar
Year to Board
Members
Walter E. Auch
Martin Brody
Armon Kamesar
Stephen E. Kaufman
Heath B. McLendon
From Consulting
Group Capital
Markets Funds
$37,936
$36,936
$38,636
$39,696
$0
From Other
Smith Barney
Mutual Funds
$0
$87,350
$0
$52,700
$0
$124,286
$92,396
Exhibit B
Executive Officers of the Trust
Principal Occupation and
Name of Executive Officer Age Business Experience For Past 5
Years
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.
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 Funds Management, Inc. Heath B. McLendon,
Chairman of the Board
and Chief Executive
388 Greenwich Street Officer
New York, NY 10013 Lewis E. Daidone, Senior Vice President
and Treasurer
Christina Sydor, Secretary
DISTRIBUTOR:
Smith Barney Inc.
388 Greenwich Street
New York, NY 10013
Fund Investment Advisors Officers
Intermediate Fixed Income Investments Standish, Ayer & Wood, Inc.
Government Money Investments One Financial Center
Boston, Mass. 02111
Long-Term Bonds Investments National Asset Management Corp.
101 South Fifth Street
Louisville, KY
Municipal Bond Investments Smith Affiliated Capital Corp.
880 Third Avenue
New York, NY 10022
Mortgage Backed Investments Atlantic Portfolio Analytics & 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
Large Capitalization Value Equity Investments The Boston
Company Asset Management, Inc.
One Boston Place
Boston, MA
Parametric Portfolio Associate
7310 Columbia Center
710 Fifth Avenue
Seattle, WA 98104
Large Capitalization Growth Investments Provident Investment Counsel Inc.
300 North Lake Avenue
Pasadena, CA 91101
Boston Structured Advisors/
PanAgora Asset Management, Inc.
260 Franklin Street
Boston, MA 02110
Small Capitalization Value Equity Investments NFJ Investment Group
2121 San Jacinto Street, Suite 1440
Dallas, TX 75201
BZW Barclays Global Fund Advisors
45 Fremont Street
San Francisco, CA 94105
Small Capitalization Growth Investments Mellon Capital Management Corp.
595 Market Street, Suite 3000
San Francisco, CA 94105
International Equity Investments Oechsle International Advisors
One International Place
Boston, MA 02110
State Street Global Advisors
Two International Place
Boston, Ma 02110
International Fixed Income Investments Julius Baer Investment Management Inc.
330 Madison Avenue
New York, NY 10017
Emerging Markets Equity Investments John Govett & Co. Limited
250 Montgomery Street
San Francisco, CA 94104
Exhibit D
PROPOSED INVESTMENT MANAGEMENT AGREEMENT
, 1997
Smith, Barney Advisers, Inc.
1345 Avenue of the Americas
New York, New York 10105
Dear Sirs:
The Trust for TRAK Investments (the "Trust"), a business trust
formed under the laws of The Commonwealth of Massachusetts, confirms its
agreement with Smith, Barney Advisers, Inc. (the "Manager") with respect
to the Manager's serving as investment manager of the Trust as set forth
below.
Section 1. Investment Description; Appointment
The Trust desires to employ its capital by investing and
reinvesting in investments of the kind and in accordance with the
investment objectives, policies and limitations specified in its Master
Trust Agreement dated April 12, 1991, as amended from time to time (the
"Trust Agreement"), in the prospectus (the "Prospectus") and in the
statement of additional information (the "Statement of Additional
Information") filed with the Securities and Exchange Commission (the
"SEC") as part of the Trust's Registration Statement on Form N-1A, as
amended from time to time (the "Registration Statement") and in the
manner and to the extent as may from time to time be approved in the
manner set forth in the Trust Agreement. Copies of the Trust's
Prospectus, the Statement of Additional Information and the Trust
Agreement have been or will be submitted to the Manager. The Trust
desires to employ and hereby appoints the Manager to act as its
investment manager. The Manager accepts the appointment and agrees to
furnish the services described in Section 2 of this Agreement for the
compensation set forth in Section 6 of, and Appendix I to, this
Agreement.
Section 2. Services as Manager; Appointment of Advisers
(a) Subject to the supervision and direction of the Trust's
Board of Trustees, the Manager shall provide such services reasonably
requested by the Trust, including but not limited to the following:
(i) monitoring and supervising the services provided to
the Trust by its administrator (the "Administrator") pursuant to a
separate agreement between the Trust and the Administrator, a copy
of which has been or will be submitted to the Manager; and
(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 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.
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.
(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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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
APPENDIX I
PORTFOLIOS OF CONSULTING GROUP CAPITAL MARKETS FUNDS
Manager's Rate
of
Fee in
Accordance
with Section 6 of
the Agreement
Government Money Investments
.15%
Intermediate Fixed Income Investments
.40%
Total Return Fixed Income Investments
.40%
Municipal Bond Investments
.40%
Mortgage Backed Investments
.50%
Balanced Investments
.60%
Large Capitalization Value Equity
Investments
.60%
Small Capitalization Value Equity
Investments
.80%*
Large Capitalization Growth Investments
.60%
Small Capitalization Growth Investments
.60%
International Equity Investments
.80%*
International Fixed Income Investments
.50%
Emerging Markets Equity Investments
.90%
* Assuming shareholder approval
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 [ ] 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.
The Trust for TRAK Investments is now called the Consulting Group
Capital Markets Funds
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.
The Simfund Small Company Average consists of 561 mutual funds
with a similar investment objective. 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."
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
dated October 27, 1997 and
hereby instructs said attorneys and proxies to vote said shares as indicated
herein. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the Meeting. A majority of the
proxies present and acting at the Meeting in person or by substitute (or, if
only one shall be so present, then that one) shall have and may exercise all
of the power and authority of said proxies hereunder. The undersigned hereby
revokes any proxy previously given.
PLEASE SIGN, DATE AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE
Note: Please sign exactly as your name appears on
this Proxy. If joint owners, EITHER may sign this
Proxy. When signing as attorney, executor,
administrator, trustee, guardian or corporate
officer, please give your full title.
Date:
Signature(s) (Title(s), if applicable)
__________________________
VOTE THIS VOTING INSTRUCTION CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
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 for the Fund.
FOR AGAINST ABSTAIN
3A. To approve or disapprove a new management agreement
between Consulting Group Capital Markets Funds (on behalf of
Small Capitalization Value Equity Investments) and Smith Barney Mutual Funds
Management Inc. (the Portfolio's current investment
manager).
3B. To approve or disapprove a new management agreement
between Consulting Group Capital Markets Funds (on behalf of
International Equity Investments) and Smith Barney Mutual Funds
Management Inc. (the Portfolio's current investment
manager).
4. FOR AGAINST ALL ABSTAIN ALL
To approve or disapprove the reclassification, modification and/or
elimination of certain fundamental investment policies.
(4A) Diversification
(4B) Senior Securities
(4C) Industry Concentration
(4D) Borrowing
(4E) Pledging Assets
(4F) Lending
(4G) Underwriting of Securities
(4H) Margin Purchases
(4I) Real Estate
(4J) Oil, Gas or Other Mineral Exploration
(4K) 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.
