Exhibit 77)Q1)e
INVESTMENT SUB-ADVISORY AGREEMENT
CIGNA HIGH INCOME SHARES
AGREEMENT made as of this 29TH day of April 2003, between TimesSquare
Capital Management, Inc. (the "Adviser") and Xxxxxxxx Capital Management, Inc.,
a New York corporation (the "Sub-Adviser")
WHEREAS, CIGNA High Income Shares, a Massachusetts business trust (the
"Fund") is registered as a closed-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Adviser has entered into an Investment Advisory Agreement
dated April 5, 1988 (the "Advisory Agreement") with the Fund, pursuant to which
the Adviser acts as investment adviser to the Fund; and
WHEREAS, the Adviser, with the approval of the Fund, desires to retain
the Sub-Adviser to provide investment advisory services to the Adviser in
connection with the management of the Fund, and the Sub-Adviser is willing to
render such investment advisory services.
NOW, THEREFORE, the parties hereto agree as follows:
1. DUTIES OF THE SUB-ADVISER. Subject to supervision by the Adviser and
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the Fund's Board of Trustees, the Sub-Adviser shall manage such portion of
securities and other assets of the Fund entrusted to it hereunder (the
"Assets"), including the purchase, retention and disposition of the Assets, in
accordance with the Fund's investment objectives, policies and restrictions as
stated in the Fund's prospectus and statement of additional information, as
currently in effect and as amended or supplemented from time to time (referred
to collectively as the "Prospectus"), and subject to the following:
(a) The Sub-Adviser shall determine from time to time what
Assets will be purchased, retained or sold by the
Fund, and what portion of the Assets will be invested
or held uninvested in cash.
(b) In the performance of its duties and obligations under
this Agreement, the Sub-Adviser shall act in
conformity with the Fund's Prospectus and with the
instructions and directions of the Adviser and of the
Board of Trustees of the Fund and will conform to and
comply with the requirements of the 1940 Act, the
Internal Revenue Code of 1986, and all other
applicable federal and state laws and regulations, as
each is amended from time to time.
(c) The Sub-Adviser shall determine the Assets to be
purchased or sold by the Fund as provided in
subparagraph (a) and will place orders with or through
such persons, brokers or dealers to carry out the
policy with respect to brokerage set forth in the
Prospectus or as the Board of Trustees or the Adviser
may direct from time to time, in conformity with
federal securities laws. In executing Fund
transactions and selecting brokers or dealers, the
Sub-Adviser will use its best efforts to seek on
behalf of
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the Fund the best overall terms available.
In assessing the best overall terms available for any
transaction, the Sub-Adviser shall consider all
factors that it deems relevant, including the breadth
of the market in the security, the price of the
security, the financial condition and execution and
operational capability of the broker or dealer,
and the reasonableness of the commission, if any, both
for the specific transaction and on a continuing
basis. In evaluating the best overall terms
available, and in selecting the broker-dealer to
execute a particular transaction, the Sub-Adviser may
also consider the brokerage and research services
provided (as those terms are defined in Section 28(e)
of the Securities Exchange Act of 1934). Consistent
with any guidelines established by the Board of
Trustees of the Fund, the Sub-Adviser is authorized to
pay to a broker or dealer who provides such brokerage
and research services a commission for executing a
portfolio transaction for the Fund which is in excess
of the amount of commission another broker or dealer
would have charged for effecting that transaction if,
but only if, the Sub-Adviser determines in good faith
that such commission was reasonable in relation to the
value of the brokerage and research services provided
by such broker or dealer - - viewed in terms of that
particular transaction or terms of the overall
responsibilities of the Sub-Adviser to the Fund and
its other clients. In no instance, however, will the
Fund's Assets be purchased from or sold to the
Adviser, Sub-Adviser, or any affiliated person of
either the Fund, Adviser or the Sub-Adviser, acting as
principal in the transaction, except to the extent
permitted by the Securities and Exchange Commission
("SEC") and the 1940 Act.
(d) The Sub-Adviser shall maintain all books and records
with respect to transactions involving the Assets
required by subparagraphs (b)(5), (6), (7), (9), (10)
and (11) and paragraph (f) of Rule 31a-1 under the
1940 Act, including, without limitation, the
information specified in Schedule A attached hereto
and made a part of this Agreement. The Sub-Adviser
shall provide to the Adviser or the Board of Trustees
such periodic and special reports, balance sheets or
financial information, and such other information with
regard to its affairs as the Adviser or Board of
Trustees may reasonably request.
The Sub-Adviser shall keep the books and records
relating to the Assets required to be maintained by
the Sub-Adviser under this Agreement and shall timely
furnish to the Adviser all information relating to the
Sub-Adviser's services under this Agreement needed by
the Adviser to keep the other books and records of the
Fund required by Rule 31a-1 under the 1940 Act. The
Sub-Adviser shall also furnish to the Adviser any
other information relating to the Assets that is
required to be filed by the Adviser or the Fund with
the SEC or sent to shareholders under the
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1940 Act (including the rules adopted thereunder) or
any exemptive or other relief that the Adviser or the
Fund obtains from the SEC. The Sub-Adviser agrees that
all records that it maintains on behalf of the Fund
are property of the Fund and the Sub-Adviser will
surrender promptly to the Fund any of such records
upon the Fund's request; provided, however, that the
Sub-Adviser (i) shall not be required to provide any
material that is not legally required to be maintained
by or on behalf of the Fund and that constitutes
proprietary information or analyses of the
Sub-Adviser, except as may be required by law or legal
process; and (ii) may retain a copy of such records.
In addition, for the duration of this Agreement, the
Sub-Adviser shall preserve for the period prescribed
by Rule 31a-2 under the 1940 Act any such records as
are required to be maintained by it pursuant to this
Agreement, and shall transfer said records to any
successor sub-adviser upon the termination of this
Agreement (or, if there is no successor sub-adviser,
to the Adviser); provided, however, that the
Sub-Adviser (i) shall not be required to provide any
material that is not legally required to be maintained
by or on behalf of the Fund and that constitutes
proprietary information or analyses of the
Sub-Adviser, except as may be required by law or legal
process; and (ii) may retain a copy of such records.
(e) The Sub-Adviser shall provide the Fund's custodian on
each business day with information relating to all
transactions concerning the Fund's Assets in
accordance with the requirements set forth on Schedule
B attached hereto and made a part of this Agreement,
and such other information as may reasonably be
requested by Adviser.
(f) The investment management services provided by
the Sub-Adviser under this Agreement are not to be
deemed exclusive and the Sub-Adviser and its
employees and affiliates shall be free to render
similar services to others and effect transactions for
their account and the account of other clients, as
long as such services do not impair the services
rendered to the Adviser or the Fund. The Adviser and
the Fund understand and agree that nothing contained
in this Agreement shall be deemed to impose upon the
Sub-Adviser any obligation to purchase or sell, or
to recommend for purchase or sale, for the Fund
any security or other asset that the Sub-Adviser or
its employees or affiliates may purchase or sell for
their own account or for the account of any other
client, if in the sole discretion of the Sub-Adviser
it is for any reason undesirable or impracticable
to take such action or make such recommendation for
the Fund.
(g) The Sub-Adviser shall promptly notify the Adviser of
any financial condition that is likely to impair the
Sub-Adviser's ability to fulfill its commitment under
this Agreement.
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(h) The Sub-Adviser shall review all proxy solicitation
materials and be responsible for voting and handling
all proxies in relation to the securities held in the
Fund. The Adviser shall instruct the custodian and
other parties providing services to the Fund to
promptly forward misdirected proxies to the
Sub-Adviser.
(i) Services to be furnished by the Sub-Adviser under this
Agreement may be furnished through the medium of any
of the Sub-Adviser's partners, officers, or employees.
(j) The sub-adviser shall not, on behalf of the Fund,
purchase securities of CIGNA Corporation or of any
other entity identified by Adviser to Sub-Adviser in
writing.
(k) Sub-Adviser will maintain a written code of ethics
complying with the requirements of Rule 17j-1 under
the 1940 Act, will provide to the Fund a copy of the
code of ethics and evidence of its adoption, and will
make such reports to the Fund as required by Rule
17j-1 under the Act.
2. DUTIES OF THE ADVISER. The Adviser shall continue to have
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responsibility for all services to be provided to the Fund pursuant to the
Advisory Agreement (including, without limitation, management of those Fund
securities and assets that are not given to Sub-Adviser to manage) and shall
oversee and review the Sub-Adviser's performance of its duties under this
Agreement; provided, however, that in connection with its management of the
Assets, nothing herein shall be construed to relieve the Sub-Adviser of
responsibility for compliance with the Prospectus, the instructions and
directions of the Adviser and the Board of Trustees of the Fund, the
requirements of the 1940 Act, the Internal Revenue Code of 1986, and all other
applicable federal and state laws and regulations, as each is amended from time
to time.
3. DELIVERY OF DOCUMENTS. The Adviser has furnished the Sub-Adviser with
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Prospectus (es) of the Fund. The Adviser will promptly furnish to the
Sub-Adviser any and all amendments or other changes to the Prospectus, and the
Sub-Adviser shall not be charged with complying with any such amendment not so
delivered to the Sub-Adviser.
4. COMPENSATION TO THE SUB-ADVISER. For the services to be provided by
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the Sub-Adviser pursuant to this Agreement, the Adviser will pay the
Sub-Adviser, and the Sub-Adviser agrees to accept as full compensation therefor,
a sub-advisory fee at the rate and in the manner specified in Schedule C which
is attached hereto and made part of this Agreement. Except as may otherwise be
prohibited by law or regulation (including any then current SEC staff
interpretation), the Sub-Adviser may, in its discretion and from time to time,
waive a portion of its fee.
5. LIMIT OF LIABILITY; INDEMNIFICATION. Unless otherwise required by the
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1940 Act or other applicable law, (a) in the absence of willful misfeasance, bad
faith, gross negligence, or reckless disregard of its obligations or duties
hereunder ("Disabling Conduct") on the part of Sub-Adviser (and its officers,
managers, agents, employees, controlling persons, shareholders and any other
person or entity affiliated with Sub-
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Adviser), Sub-Adviser shall not be subject to liability to the Adviser or the
Fund (or their officers, managers, agents, employees, controlling persons,
shareholders and any other person or entity affiliated with the Fund or the
Adviser)for any act or omission in the course of, or connected with, rendering
services hereunder, including, without limitation, any error of judgment or
mistake of law or for any loss suffered by any of them in connection with the
matters to which this agreement relates. Except for such Disabling Conduct, the
Adviser shall indemnify and hold harmless Sub-Adviser (and its officers,
directors, agents, employees, controlling persons, shareholders and any other
person or entity affiliated with Sub-Adviser) (collectively, the "Indemnified
Parties") from and against all losses, claims, damages, liabilities or
litigation (including reasonable legal and other expenses) arising from
Sub-Adviser's conduct under this Agreement.
(b) Sub-Adviser agrees to indemnify and hold harmless Fund and
the Adviser (and their officers, managers, agents, employees, controlling
persons, shareholders and any other person or entity affiliated with the Fund or
the Adviser) against any and all losses, claims damages, liabilities or
litigation (including reasonable legal and other expenses), to which the Fund,
the Adviser or their affiliates or such officers, directors, agents, employees,
controlling persons or shareholders may become subject under the 1940 Act, under
other statutes, at common law or otherwise, which may be based upon such
Disabling Conduct by Sub-Adviser; provided, however, that in no case is
Sub-Adviser's indemnity in favor of any person deemed to protect or apply to
such person against any liability to which such person would otherwise be
subject by reasons of willful misfeasance, bad faith, or gross negligence in the
performance of his, or her or its duties or by reason of his, her or its
reckless disregard of such person's obligations and duties under this Agreement.
(c) Sub-Adviser shall not be liable to the Adviser or the Fund
for acts of Sub-Adviser which result from acts or omissions of the Adviser or
Fund, including, but not limited to, a failure by the Adviser to provide
accurate and current information with respect to any records maintained by the
Adviser or Fund, which records are not also maintained by Sub-Adviser, and the
Adviser shall indemnify and hold harmless the Indemnified Parties from and
against any and all losses, claims, damages, liabilities or litigation
(including reasonable legal and other expenses) arising from such acts or
omissions.
6. DURATION AND TERMINATION. This Agreement shall become effective upon
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its approval by the Fund's Board of Trustees and by the vote of a majority of
the outstanding voting securities of the Fund. This Agreement shall continue in
effect for a period of more than two years from the date hereof only so long as
continuance is specifically approved at least annually in conformance with the
1940 Act; provided, however, that this Agreement may be terminated with respect
to the Fund (a) by the Fund at any time, without the payment of any penalty, by
the vote of a majority of Trustees of the Fund or by the vote of a majority of
the outstanding voting securities of the Fund, (b) by the Adviser at any time,
without the payment of any penalty, on not more than 60 days' nor less than 30
days' written notice to the Sub-Adviser, or (c) by the Sub-Adviser at any time,
without the payment of any penalty, on 90 days' written notice to the Adviser.
This Agreement shall terminate automatically and immediately in the event of its
assignment, or in the event of a termination of the Adviser's agreement with
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the Fund. As used in this Section 6, the terms "assignment" and "vote of a
majority of the outstanding voting securities" shall have the respective
meanings set forth in the 1940 Act and the rules and regulations thereunder,
subject to such exceptions as may be granted by the SEC under the 1940 Act.
7. GOVERNING LAW. This Agreement shall be governed by the internal laws
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of the Commonwealth of Massachusetts, without regard to conflict of law
principles; provided, however, that nothing herein shall be construed as being
inconsistent with the 1940 Act.
8. SEVERABILITY. Should any part of this Agreement be held invalid by a
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court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors.
9. NOTICE. Any notice, advice or report to be given pursuant to this
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Agreement shall be deemed sufficient if delivered or mailed by certified or
overnight mail, postage prepaid, addressed by the party giving notice to the
other party at the last address furnished by the other party:
To the Adviser at: c/o CIGNA Corporation
000 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
H-16C
Attention: Mutual Fund Counsel
To the Sub-Adviser at: 000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000-0000
Attn: Xxxx X. Xxxxxxxx, President
with a copy to:
Xxxxxxx X. Xxxxxxxxx, Esq.
at the same address
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10. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
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understanding between the parties hereto, and supersedes all prior agreements
and understanding relating to this Agreement's subject matter. This Agreement
shall not be amended, nor shall any provision of this Agreement be modified or
waived, unless evidenced by the written consent of the parties hereto. This
Agreement may be executed in any number of counterparts, each of which shall be
deemed to be an original, but such counterparts shall, together constitute only
one instrument.
A copy of the Declaration of Trust of the Fund is on file with
the Secretary of State of the Commonwealth of Massachusetts, and notice is
hereby given that the obligations of this instrument are not binding upon any of
the Trustees, officers or shareholders of the Fund or the Trust.
Where the effect of a requirement of the 1940 Act reflected in
any provision of this Agreement is altered by a rule, regulation or order of the
SEC, whether of special or general application, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers.
TimesSquare Capital Management, Inc. Xxxxxxxx Capital Management, Inc.
/s/ Xxxxxxx X. Xxxxx /s/ Xxxx X. Xxxxxxxx
By: By:
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Name: Xxxxxxx X. Xxxxx Name: Xxxx X. Xxxxxxxx
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Title: Managing Director Title: President
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Schedule A
Records To Be Maintained By Sub-Adviser
*1. A record of each brokerage order, and all other Fund purchases and
sales, given by Sub-Adviser or on behalf of the Fund for, or in
connection with, the purchase or sale of securities, whether executed
or unexecuted. Such records shall include:
A. The name of the broker,
B. The terms and conditions of the order, and of any modification or
cancellation thereof,
C. The time of entry of cancellation,
D. The price at which executed,
E. The time of receipt of report of execution, and
F. The name of the person who placed the order on behalf of the Fund
(1940 Act Rule, 31a-1(b) (5) and (6)).
*2. A record for each fiscal quarter, completed within ten (10) days after
the end of the quarter, showing specifically the basis or bases upon
which the allocation of orders for the purchase and sale of Fund
securities to brokers or dealers, and the division of brokerage
commissions or other compensation on such purchase and sale orders were
made. The record:
A. Shall include the consideration given to:
(i) the sale of shares of the Fund
(ii) the supplying of services or benefits by brokers or
dealers to: (a) the Fund, (b) Adviser, (c)
Sub-Adviser, and (d) any person other than the
foregoing
(iii) Any other considerations other than the technical
qualifications of the brokers and dealers as such
B. Shall show the nature of the services or benefits made
available.
C. Shall describe in detail the application of any general or
specific formula or other determinant used in arriving at such
allocation of purchase and sale orders and such division of
brokerage commissions or other compensation.
D. The identities of the persons responsible for making the
determination of such allocation and such division of
brokerage commissions or other compensation (1940 Act, Rule
31a-1(b) (9)).
*3. A record in the form of an appropriate memorandum identifying the
person or persons, committees, or groups authorizing the purchase or
sale of Fund securities. Where an authorization is made by a committee
or group, a record shall be kept of the names of its members who
participate in the authorization. There shall be
Page 1 of 2
retained as part of this record any memorandum, recommendation, or
instruction supporting or authorizing the purchase or sale of Fund
securities and such other information as is appropriate to support the
authorization. Notwithstanding anything to the contrary in this
Schedule A or the Agreement, the Sub-Adviser shall not be required to
disclose any material that constitutes or is based upon the
Sub-Adviser's proprietary information or analyses.** (1940 Act, Rule
31a-1(b) (10))
*4. Such accounts, books and other documents as are required to be
maintained by registered investment advisers by rule adopted under
Section 204 of the Investment Advisers Act of 1940, to the extent such
records are necessary or appropriate to record Sub-Adviser's
transactions with the Fund. (1940 Act, Rule 31a-1(f)).
* Maintained as property of the Fund pursuant to 1940 Act Rule 31a-3(a).
** Such information might include: the current Form 10-K, annual and quarterly
reports, press releases, reports by analysts and from brokerage firms
(including their recommendations, i.e., buy, sell, hold), and any internal
reports or Fund manager reviews.
Page 2 of 2
SCHEDULE B
Communications With Custodian
Sub-Adviser should abide by certain rules and procedures in order to minimize
operational problems. Sub-Adviser will be required to have various records and
files (as required by regulatory agencies) at their offices. Sub-Adviser will
have to maintain a certain flow of information to State Street Bank & Trust
Company ("SSB"), the custodial bank for the Fund. Sub-Adviser will be required
to furnish SSB with daily information as to executed trades. SSB should receive
this data no later than the morning following the day of the trade. The
necessary information should be transmitted to SSB (1) via facsimile machine
(the direct line to the facsimile machine is 617-537-5375) or (2) via an
electronic communication system ("System") approved by SSB that meets the
following criteria:
o The System must provide a method by which State Street can reasonably
ensure that each communication received by it though the System actually
originated from the Sub-Adviser.
o Only persons properly authorized by Sub-Adviser's senior operations office
shall be authorized to access the System and enter information, and
Sub-Adviser must employ reasonably procedures to permit only authorized
persons to have access to the System.
o Sub-Adviser will create separate System files containing the daily-executed
securities trade information with respect to the Fund it manages, or
Sub-Adviser will transmit separately the trades for such Fund.
o SSB, through System or otherwise, will provide to Sub-Adviser prompt
certification or acknowledgment of SSB's receipt of each transmission by
Sub-Adviser of executed trade information.
o If the System malfunctions, Sub-Adviser will transmit all trade information
via facsimile transmission.
Upon receipt of brokers' confirmations, Sub-Adviser or SSB will be required to
notify the other party if any differences exist. The reporting of trades by the
Sub-Adviser to SSB must include the following:
o Purchase or Sale
o Security name
o Number of Shares or principal amount
o Price per share or bond
o Commission rate per share or bond, or if a net trade
o Executing broker
o Trade date
o Settlement date
o If security is not eligible for DTC
Page 1 of 2
o This information can be reported using your forms, if applicable
When opening accounts with brokers for the Fund, the account should be a cash
account. No margin accounts are to be maintained. The broker should be advised
to use SSB IDC's ID system number (N. 20997) to facilitate the receipt of
information by SSB. If this procedure is followed, DK problems will be held down
to a minimum and additional costs of security trades will not become an
important factor in doing business. Delivery and receipt instructions are
attached as Schedule 1. Sub-Adviser will be required to submit to SSB a daily
trade authorization report, either through a System or, if a facsimile
transmission is used, on a form signed by two authorized individuals prior to
settlement date and a list of authorized persons with specimen signatures must
have previously been sent to SSB (see Schedule 2). The daily trade authorization
report will contain information on which SSB can rely to either accept delivery
or deliver out of the account, securities as per Sub-Adviser trades. If
facsimile transmission is used, Sub-Adviser will use a form acceptable to SSB.
Page 2 of 2
Schedule 1
Mailing Instructions and Delivery Instructions:
Confirmation Instructions (copy of Broker Advice):
State Street Bank and Trust Company
Mutual Fund Services
0000 Xxxxxxxx Xxxxx (X0X)
Xxxxx Xxxxxx, XX 00000
For the account of CIGNA High Income Shares
Delivery Instructions:
All DTC Eligible Securities:
Depository Trust Company (DTC) #997 Custodian Services
#20997 Agent Bank
All Ineligible DTC Securities (i.e., Commercial Paper)
State Street Bank and Trust Company
State Street Boston-Securities Corp.
00 Xxxxxxxx
Xxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
"VS Payment" (Federal Funds on Commercial Paper Only)
For the account of CIGNA High Income Shares
All Government Issues:
Delivered through Book Entry of Federal Reserve
Bank to: State St Bos/Spec/Fund Name/Fund #
(VS Payment Federal Funds)
Foreign Holdings:
Please confer with Xxxx Xxxxx, State Street Bank,
(Phone: 000-000-0000) to obtain delivery instructions
of the State Street Global Custody Network
Schedule 2
Example of Authorized Signature Letter
(To Be Typed on Your Letterhead)
[DATE]
State Street Bank and Trust
Mutual Fund Services
0000 Xxxxxxxx Xxxxx (X0X)
Xxxxx Xxxxxx, XX 00000
Attention: CIGNA Charter Mutual Funds
RE: Persons Authorized To Executed Trades For CIGNA High Income Shares ("Fund")
The following list of individuals is authorized to execute and report trade
instructions on behalf of the Fund. Should there be any changes to the
authorized persons listed below, we will notify you immediately of those
changes.
NAME SIGNATURE
Sincerely yours,
Schedule C
Fees for Sub-Adviser Services
For investment management services provided to the Fund under this
Agreement, Adviser, as a fiduciary for the Fund, shall pay the
Sub-Adviser a fee determined by multiplying the average weekly total
asset value of the Fund assets managed by Sub-Adviser by the annual
rate specified below. All fees shall be calculated and paid quarterly
in arrears. The Adviser shall provide a written statement setting forth
the amount of the sub-advisory fee as soon as practicable after the
close of the applicable quarter, and the amount thereof shall be
payable within ten (10) business days after quarter-end. Fees for
partial periods shall be prorated for the portion of the period for
which services were rendered.
First $100 Million - 35 basis points
Thereafter - 32.5 basis points
In determining the fees payable to Sub-adviser, the average weekly
total asset value of Fund assets managed by Sub-adviser shall be based
on valuations of the assets furnished by the Fund's custodian.
