CIGNA INVESTMENT SECURITIES, INC.
Philadelphia, Pennsylvania
March 15, 2002
To Our Shareholders:
The Annual Meeting of Shareholders of CIGNA Investment Securities, Inc.
will be held at The Colony Club, Baystate West, 1500 Main Street, Springfield,
Massachusetts 01115 on Tuesday April 30, 2002 at 11:30 a.m., Eastern Time.
Formal notice of the meeting appears on the next page and is followed by the
proxy statement.
We hope you will find it convenient to attend the meeting, but we urge you
in any event to complete and return the enclosed proxy card in the envelope
provided. It is very important that your proxy card be received as soon as
possible so that the necessary quorum will be represented at the meeting. If
you do attend, you may vote in person if you so desire.
The Annual Report of CIGNA Investment Securities, Inc. for the year ended
December 31, 2001 has previously been mailed to you.
Sincerely,
/s/ RICHARD H. FORDE
RICHARD H. FORDE
Chairman of the Board
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
SHAREHOLDERS ARE URGED TO INDICATE THEIR VOTING INSTRUCTIONS ON THE
ENCLOSED PROXY CARD, DATE AND SIGN IT, AND RETURN IT IN THE ACCOMPANYING
ENVELOPE. YOUR PROMPT ATTENTION IS APPRECIATED.
- --------------------------------------------------------------------------------
CIGNA INVESTMENT SECURITIES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Shareholders of CIGNA Investment Securities, Inc.
The Annual Meeting of Shareholders of CIGNA Investment Securities, Inc.
(the "Fund") will be held at The Colony Club, Baystate West, 1500 Main Street,
Springfield, Massachusetts 01115 on Tuesday, April 30, 2002 at 11:30 a.m.,
Eastern Time, for the following purposes:
(1) To elect five Directors to serve until the next Annual Meeting of
Shareholders or until the election and qualification of their
successors.
(2) To reorganize the Fund from a Delaware corporation to a Massachusetts
business trust.
(3) To remove the fundamental investment policy concerning investment in
other investment companies.
(4) To transact such other business as may properly come before the
meeting or any postponement or adjournment thereof.
Holders of record of the shares of the Fund at the close of business on
March 11, 2002 are entitled to vote at the meeting.
/s/ Jeffrey S. Winer
Jeffrey S. Winer
Secretary
Philadelphia, Pennsylvania
March 15, 2002
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS OF
CIGNA INVESTMENT SECURITIES, INC.
This proxy statement is furnished in connection with the solicitation of
proxies by the Directors of CIGNA Investment Securities, Inc. (the "Fund") for
use at the Annual Meeting of Shareholders of the Fund to be held at The Colony
Club, Baystate West, 1500 Main Street, Springfield, Massachusetts 01115 on
Tuesday, April 30, 2002 at 11:30 a.m., Eastern Time, and at any postponement or
adjournment thereof.
Any person executing a proxy may revoke it at any time prior to its use by
executing a new proxy or by registering with the Secretary of the Fund at the
meeting and requesting a revocation. Executed proxies received by the Fund will
be voted in accordance with the directions specified on the proxy. A majority
of the outstanding shares of the Fund must be present at the meeting in person
or by proxy to constitute a quorum for the transaction of business.
For purposes of determining the presence of a quorum for transacting
business at the meeting and determining whether sufficient votes have been cast
FOR the proposals, abstentions (that is, votes that are marked "withheld") and
broker "non-votes" (that is, proxies from brokers or nominees indicating that
the broker or nominee has not received instructions from the beneficial owner
or other persons entitled to vote the shares on a particular matter with
respect to which the brokers or nominees do not have discretionary power) will
be treated as shares which are present. Abstentions and broker non-votes will
assist the Fund in obtaining a quorum. Abstentions will have no effect on the
outcome of the election of Directors, but will have the same effect as a vote
"against" the other proposals. Broker non-notes will have no effect on the
election of Directors or on the proposal to reorganize the Fund as a
Massachusetts business trust, but will have the same effect as a vote "against"
the proposal to remove the Fund's fundamental investment policy concerning
investment in other investment companies.
The Board of Directors recommends a vote FOR the election of Directors,
FOR the reorganization of the Fund from a Delaware corporation to a
Massachusetts business trust, and FOR the removal of the fundamental investment
policy concerning investment in other investment companies. If no specification
is made, the proxy will be voted FOR the election of Directors as listed, FOR
the reorganization of the Fund from a Delaware corporation to a Massachusetts
business trust, and FOR the removal of the fundamental investment policy
concerning investment in other investment companies, and at the discretion of
the proxy holders, on any other matters which properly come before the meeting
or at any postponement or adjournment. The Board of Directors does not know of
any actions to be considered at the meeting other than those referred to above.
Costs of soliciting proxies will be borne by the Fund. In addition to
solicitation of proxies by use of the mails, some of the officers of the Fund
and persons affiliated with CIGNA Corporation ("CIGNA") and its affiliated
companies may, without remuneration, solicit proxies in person or by telephone.
2
At the close of business on March 11, 2002, the record date for the
determination of shareholders entitled to vote at the meeting, there were
4,792,215 outstanding shares. Each share is entitled to one vote. This proxy
statement and the accompanying Notice of Annual Meeting of Shareholders and
form of proxy are being mailed on or about March 15, 2002 to shareholders of
record on the record date.
The principal executive offices of the Fund are located at Two Liberty
Place, 1601 Chestnut Street, Philadelphia, Pennsylvania 19192-2211 and the
mailing address of the Fund is P.O. Box 13856, Philadelphia, Pennsylvania
19101.
The Fund will furnish to a shareholder upon request, without charge, a
copy of the annual report. Requests may be made by writing to the Fund, P.O.
Box 13856, Philadelphia, Pennsylvania 19101, Attn: Alfred A. Bingham III, or by
calling 1-800-426-5523.
PROPOSAL 1
ELECTION OF DIRECTORS
At the meeting, five Directors are to be elected by the shareholders of
the Fund. The Board of Directors has nominated and recommends the election of
Ms. Marnie Wagstaff Mueller and Messrs. Richard H. Forde, Russell H. Jones,
Paul J. McDonald and Farhan Sharaff. Each of the nominees other than Mr.
Sharaff is currently serving on the Board of Directors. Shareholders are asked
to elect Ms. Mueller and Messrs. Forde, Jones, McDonald and Sharaff as
Directors of the Fund, each to hold office until the next Annual Meeting of
Shareholders or until the election and qualification of his or her successor.
Each of the Directors of the Fund (other than Mr. Sharaff) also serves as
a Trustee of CIGNA High Income Shares ("CHIS"). TimesSquare Capital Management,
Inc. ("TimesSquare"), an indirect, wholly owned subsidiary of CIGNA, serves as
investment adviser to both the Fund and CHIS. CHIS will hold an annual meeting
on April 30, 2002, at which shareholders will be asked to elect Ms. Mueller and
Messrs. Forde, Jones, McDonald and Sharaff as Trustees.
All shares represented by valid proxies will be voted in the election of
Directors for the nominees unless authority to vote for a particular nominee is
withheld. Proxies cannot be voted for a greater number of persons than the
nominees named in the proxy statement. If any nominee should be unable to
serve, an event not now anticipated, proxies will be voted for such other
person as shall be designated by the Board of Directors of the Fund, or the
Board of Directors may reduce the number of Directors, as authorized by the
By-Laws. All of the nominees have agreed to serve if elected.
Messrs. Jones and McDonald were first elected to the Board in 1995. Mr.
Forde was appointed to the Board in 1998. Ms. Mueller was appointed to the
Board in 2001. Mr. Sharaff is not currently a member of the Board. Messrs.
Forde, Jones and McDonald were last elected by shareholders on April 23, 2001.
3
The following table sets forth the number of shares of the Fund and shares
of all mutual funds in the CIGNA family of mutual funds beneficially owned by
those nominees who served on the Board of Directors during 2001 and by the
Fund's Directors and officers as a group. The information provided is as of
December 31, 2001. As of December 31, 2001, neither the Directors as a group
nor the Directors and officers as a group owned beneficially more than 1% of
the outstanding shares of the Fund.
Nominees who are not Dollar Range of Aggregate Dollar Range of Equity Securities
"interested persons" Equity Securities in All Funds Overseen or to be Overseen by
of the Fund in the Fund Director in Family of Investment Companies
- ------------------------- ------------------- --------------------------------------------
Russell H. Jones $10,001-$50,000 $10,001-$50,000
Paul J. McDonald $1-$10,000 $10,001-$50,000
Marnie Wagstaff Mueller None None
Nominees who are Dollar Range of Aggregate Dollar Range of Equity Securities
"interested persons" Equity Securities in All Funds Overseen or to be Overseen by
of the Fund in the Fund Director in Family of Investment Companies
- ---------------------- ------------------- --------------------------------------------
Richard H. Forde $1-$10,000 $1-$10,000
Farhan Sharaff None None
Neither Russell Jones, Paul McDonald nor Marnie Mueller or any of their
immediate family members own any securities issued by CIGNA Corporation.
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Fund's Directors and executive officers, and
persons who own more than 10% of a registered class of the Fund's equity
securities ("10% shareholders"), to file with the Securities and Exchange
Commission ("SEC") and the New York Stock Exchange reports of ownership and
reports of changes in ownership of common stock and other equity securities of
the Fund. Officers, Directors and 10% shareholders are required by SEC
regulations to furnish the Fund with copies of all Section 16(a) forms they
file. Based solely on review of the copies of such reports received by the
Fund, or written representations from certain persons that no such reports were
required to be filed for those persons, the Fund believes all Section 16(a)
filing requirements applicable to officers, Directors and 10% shareholders were
satisfied.
The following tables show information for each nominee, including age,
present position, principal occupation or employment during the last five
years, principal affiliations, including any directorships presently held in
companies that have issued publicly-held securities and any material interest
in or relationship with TimesSquare and any of its affiliated persons presently
and during the preceding five years. The Fund does not have a principal
underwriter or administrator. Each nominee currently serves as a director of
the Fund, and as a Trustee of CIGNA Funds Group, CIGNA Variable Products Group
and CIGNA High Income Shares, except that Mr. Forde and Ms. Mueller are not
Trustees of CIGNA Variable Products Group, and Mr. Sharaff is a Trustee of
CIGNA Variable Products Group only.
4
Nominees who are not "interested persons" of the Fund
Number of Other
Term of Portfolios Directorships
Name, Position Office** and Principal in Fund Held by
Address* Held with Length of Occupation(s) Complex Director or
And Age Fund Time Served During Past 5 Years Overseen Nominee
- ------------------------------------------------------------------------------------------------
Russell H. Director Director Vice President (Investor 14 None
Jones since 1995 Relations, Public
57 Relations) and Treasurer,
Kaman Corporation
(helicopters and aircraft
components, industrial)
- ------------------------------------------------------------------------------------------------
Paul J. Director Director Special Advisor to Board 14 Director -
McDonald since 1995 of Directors, Friendly Ice Western
58 Cream Corporation Massachusetts
(family restaurants and Electric
dairy products); Company
previously, Senior
Executive Vice President
and Chief Financial
Officer, Friendly Ice
Cream Corporation
- ------------------------------------------------------------------------------------------------
Marnie Director Director Diocesan Consultant, 11 None
Wagstaff since 2001 Episcopal Diocese of
Mueller Connecticut; previously,
64 Visiting Professor of
Health Economics,
Wesleyan University
Nominees who are "interested persons" of the Fund, and Fund Officers
Number of Other
Term of Portfolios Directorships
Name, Position Office** and Principal in Fund Held by
Address* Held with Length of Occupation Complex Director or
And Age Fund Time Served During Past 5 Years Overseen Nominee
- ------------------------------------------------------------------------------------------------
Farhan -- Nominee, Chief Investment 3 Director of
Sharaff not Officer, CIGNA various
51 currently Corporation and subsidiaries
a Director President, TimesSquare of CIGNA
Capital Management, Corporation
Inc.; previously, Chief
Investment Officer,
Zurich Scudder
Investments Ltd; Chief
Investment Officer of
Private Banking Group,
Citibank
5
Number of Other
Term of Portfolios Directorships
Name, Position Office** and Principal in Fund Held by
Address* Held with Length of Occupation Complex Director or
And Age Fund Time Served During Past 5 Years Overseen Nominee
- ------------------------------------------------------------------------------------------------
Richard H. Chairman Director & Managing Director, 14 Director of
Forde of the President CIGNA Retirement & various
48 Board of since 1998 Investment Services, Inc. subsidiaries
Directors, and TimesSquare Capital of CIGNA
President Management, Inc. Corporation
- ------------------------------------------------------------------------------------------------
Alfred A. Vice Officer CIGNA Funds Treasurer; 14 --
Bingham, President Since 1979 Assistant Vice President,
III 57 and TimesSquare Capital
Treasurer Management, Inc.
- ------------------------------------------------------------------------------------------------
Jeffrey S. Vice Officer Senior Counsel, 14 --
Winer President Since 1994 CIGNA Corporation
44 and
Secretary
- ------------------------------------------------------------------------------------------------
* All Directors and officers have a mailing address c/o TimesSquare Capital
Management, Inc., 280 Trumbull Street, H16C, Hartford, CT 06103
** Each Director's term of office will be until the next annual meeting of
shareholders or until the election of the Director's successor.
No officer of the Fund and no Director of the Fund who received any
remuneration from the Fund during 2001 was serving as a director, officer or
employee of TimesSquare, CIGNA or any of its subsidiaries. The other current
Directors, taken as a group, were paid or accrued Director fees for 2001 from
the Fund in the aggregate amount of $21,300. Under current compensation
arrangements, these Directors will be entitled to receive from the Fund an
annual retainer of $5,100 plus a fee of $400 for each Board meeting attended
and $400 for each Committee meeting attended. These Directors will also be
entitled to receive, as compensation for their services as Trustees, an annual
retainer of $2,000, a $400 Board meeting fee, and a $400 Committee meeting fee
from CIGNA Variable Products Group, an annual retainer of $4,000, a $800 Board
meeting fee and $800 Committee meeting fee from CIGNA Funds Group, and an
annual retainer of $7,100, a $400 Board meeting fee, and a $400 Committee
meeting fee from CIGNA High Income Shares. All Directors are entitled to
receive reimbursements for expenses incurred in connection with each Board and
Committee meeting attended. These reimbursements of expenses are allocated
among the Fund, each series of CIGNA Funds Group and CIGNA Variable Products
Group, and CIGNA High Income Shares so that each entity pays an amount based on
its net assets as a percentage of the aggregate net assets of such entities.
The following table sets forth compensation paid by the Fund and by the
CIGNA fund complex to Directors in 2001:
6
Total
Compensation
from Fund
and CIGNA
Fund
Aggregate Complex
Name of Person, Compensation Paid to
Position with Fund from Fund Directors (f)
- ------------------ --------- -------------
Hugh R. Beath, Director (a) ................................ $ 7,100 $28,200
Richard H. Forde, President, Chairman and Director ......... 0 0
Russell H. Jones, Director (b) ............................. 7,100 28,200
Thomas C. Jones, Director (c) .............................. 0 0
Paul J. McDonald, Director (d) ............................. 7,100 28,200
Marnie Wagstaff Mueller, Director (e) ...................... 0 0
------- -------
$21,300 $84,600
======= =======
- ------
(a) All but $5,239 of Mr. Beath's 2001 compensation was deferred under a plan
for all CIGNA funds in which he had an aggregate balance of $299,232 as of
December 31, 2001. Mr. Beath retired from the Board in 2001.
(b) All but $5,239 of Mr. R. Jones' 2001 compensation was deferred under a plan
for all CIGNA funds in which he had an aggregate balance of $22,462 as of
December 31, 2001.
(c) Mr. T. Jones retired from CIGNA and resigned from the Board in March 2002.
(d) Mr. McDonald's balance in the CIGNA funds deferred compensation plan was
$135,401 as of December 31, 2001.
(e) Ms. Mueller was appointed to the Board in October 2001.
(f) There were three investment companies other than the Fund in the CIGNA fund
complex.
The Board of Directors held four Board meetings during 2001. Each Director
attended more than 75% of the aggregate meetings of the Board and Committees on
which such Director served during the year.
The Board of Directors has three standing committees as follows:
Audit Committee
The Audit Committee makes recommendations to the full Board as to the firm
of independent accountants to be selected, reviews the methods, scope and
results of audits and fees charged by such independent accountants, and reviews
the Fund's internal accounting procedures and controls.
The Fund has an Audit Committee comprised of only "Independent Directors"
(as defined in the regulations of the New York Stock Exchange ("NYSE") of the
Fund, who are also not "interested persons" (as defined in the Investment
Company Act of 1940) of the Fund. The Audit Committee reviews the process for
preparing and reviewing financial statements and other audit-related matters as
they arise throughout the year. The Audit Committee makes recommendations to
the full Board as to the firm of
7
independent accountants to be selected. In making its recommendations, the
Audit Committee reviews the nature and scope of the services to be provided.
In discharging its oversight responsibility as to the audit process, the
Audit Committee discussed with management the process for preparation and
review of the audited financial statements for the last fiscal year. The Audit
Committee also reviewed the non-audit services to be provided by the
independent accountants of the Fund. The independent accountants,
PricewaterhouseCoopers LLP (PWC), discussed with the Board the matters required
to be discussed by Statement on Auditing Standards No. 61. In addition, the
Audit Committee obtained from the independent accountants a formal written
statement consistent with Independence Standards Board Standard No. 1,
"Independence Discussions with Audit Committees," describing all relationships
between the independent accountants and the Fund that might bear on the
independent accountants' independence. The Audit Committee also discussed with
the independent accountants any relationships that may impact their objectivity
and independence and satisfied itself as to the independent accountants'
independence. The Board also reviewed the fees charged by such independent
accountants for the various services provided and reviewed the Fund's internal
accounting procedures and controls.
For the fiscal year ended December 31, 2001, PWC performed both audit and
non-audit services for the Fund. Audit services consisted of examinations of
the Fund's financial statements and review and consultation in connection with
filings with the SEC. Non-audit services included reviewing tax returns of the
Fund and providing tax planning advice.
PWC also serves as independent accountants for CIGNA High Income Shares
and for each of the series of shares of CIGNA Funds Group and CIGNA Variable
Products Group and performs services for all such entities similar to the
services performed for the Fund. PWC also serves as independent accountants for
CIGNA.
Representatives of PWC may attend the meeting and be provided an
opportunity to make a statement and to respond to questions from shareholders.
FEES PAID TO INDEPENDENT ACCOUNTANTS FOR AUDIT SERVICES
For the audit of the Fund's annual financial statements for the fiscal
year ended December 31, 2001, included in the Fund's annual report to
shareholders for that fiscal year, the Fund paid or accrued $30,000 to PWC.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
For the fiscal year ended December 31, 2001, the Fund, TimesSquare, and
entities controlling, controlled by or under common control with TimesSquare
which provide services to the Fund, did not pay or accrue any fees for
financial information systems design and implementation services by PWC.
OTHER NON-AUDIT AND NON-SYSTEM SERVICES
For the fiscal year ended December 31, 2001, the Fund, TimesSquare, and
entities controlling, controlled by or under common control with TimesSquare
which provide
8
services to the Fund paid or accrued aggregate fees of approximately $108,800
in audit fees, and $329,000 for other services provided by PWC. The Audit
Committee has determined that the provision of the services described above is
compatible with maintaining the independence of PWC.
The Board of Trustees has adopted a written charter which sets forth the
Audit Committee's structure, duties and powers, and methods of operation which
is attached hereto as Appendix A. Each member of the Audit Committee must be
financially literate and at least one member must have prior accounting
experience or related financial management expertise. The Board of Trustees has
determined, in accordance with applicable regulations of the NYSE, that each
member of the Audit Committee is financially literate and has prior accounting
experience or related financial management expertise. The current members of
the Committee are Messrs. Jones and McDonald (Chairperson) and Ms. Mueller (Mr.
Beath was also a member of the Audit, Nominating and Contracts Committees
during 2001 before his retirement. Ms. Mueller became a member of all three
Committees upon her appointment to the Board in October 2001). All members of
the Audit Committee meet the independence standards of the NYSE listing
standards.
Contracts Committee
The Contracts Committee reviews the performance of the investment adviser
for the Fund, and makes recommendations to the Board of Directors concerning
the renewal of the investment advisory agreement. In performing its function,
the Committee obtains from TimesSquare information it deems necessary to
evaluate the terms of the investment advisory agreement and any changes or
amendments to or replacements of the agreement. The Committee held one meeting
in 2001. The current members of the Committee are Messrs. Jones (Chairperson)
and McDonald and Ms. Mueller, none of whom are interested persons of the Fund.
Nominating Committee
The Nominating Committee manages the development and maintenance of the
Board's membership, organization and compensation and it identifies and
recommends to the Board individuals to be nominated for election as Directors.
No policy or procedure has been established as to the recommendation of
Director nominees by shareholders. The Committee held two meetings in 2001. The
current members of the Committee are Messrs. Jones and McDonald and Ms. Mueller
(Chairperson), none of whom are interested persons of the Fund.
Required Vote
Each nominee for Director must be elected by a plurality of the shares of
the Fund voted at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" EACH OF THE
NOMINEES.
9
PROPOSAL 2
REORGANIZATION AS A MASSACHUSETTS BUSINESS TRUST
The Board of Directors has approved a plan to reorganize the Fund as a
Massachusetts business trust ("Trust"). The principal purpose of the
reorganization is to reduce the amount of state taxes that the Fund pays
annually. To proceed with the reorganization plan, we need shareholder
approval. The next few pages of this proxy statement discuss important details
of the reorganization plan, including the following:
o Why we want to reorganize the Fund.
o How we plan to accomplish the reorganization.
o How the reorganization will affect the Fund.
o How the proposed Massachusetts business trust compares to the Fund's
current legal structure.
o How many shareholder votes we need to approve the reorganization.
A. WHY WE WANT TO REORGANIZE YOUR FUND
The Fund will pay less taxes as a business trust. The Fund currently pays
franchise taxes to the State of Delaware. This tax applies because the Fund is
a Delaware corporation. The Fund also currently pays foreign franchise taxes to
the Commonwealth of Pennsylvania. This tax applies to the Fund because it is
headquartered in Pennsylvania and is a "foreign" corporation-that is, organized
as a corporation under the laws of a different state, Delaware. If the Fund
were instead organized in the form of a business trust (as many mutual funds
are) it would be exempt from the Pennsylvania foreign franchise tax. As part of
the reorganization, we will move the Fund's headquarters from Pennsylvania to
Massachusetts so that the Fund will not have to pay Delaware franchise taxes.
There will be no change in the Fund's shareholder servicing arrangements or any
other Fund operations.
The Fund paid a total of $25,000 in Pennsylvania foreign franchise taxes
and Delaware franchise taxes for its last fiscal year. If the Fund had been
organized as a Massachusetts business trust for the last fiscal year with a
Massachusetts headquarters, it would have paid no Delaware franchise taxes,
Pennsylvania foreign franchise taxes or personal property taxes.
We expect to save the Fund the amount of franchise taxes paid last year
annually by reorganizing it into a Massachusetts business trust. These
anticipated savings are based on the size of the Fund during its last fiscal
year.
Massachusetts law is favorable to mutual funds. We have proposed to
reorganize the Fund as a Massachusetts business trust because that state's
business trust law contains provisions that are well suited to mutual funds.
The reorganization will not change the day-to-day operation of the Fund.
10
B. HOW WE PLAN TO ACCOMPLISH THE REORGANIZATION
Agreement and Plan of Reorganization. The Board of Directors has approved
a written Agreement and Plan of Reorganization for the Fund. This document
spells out the terms and conditions that will apply to the Fund's
reorganization as a Massachusetts business trust.
Three steps to reorganize. In essence, the reorganization will be a
three-step process. The first step is already taken: we have established a
Massachusetts business trust especially for the Fund. Prior to the
reorganization, the Business Trust will issue a single share to the Fund.
Second, if this proposal is approved, the Fund will transfer all of its assets
and liabilities to the Business Trust. As part of this second step, the
Business Trust will open an account for each Fund shareholder. The Business
Trust will then credit these accounts with the exact number of full and
fractional shares that each shareholder owned in the Fund on the reorganization
date. And third, we will dissolve the Fund's Delaware corporate entity. The
name of the Massachusetts business trust is CIGNA Investment Securities. If
shareholders approve the proposals in this proxy statement, that will become
the new name of the Fund.
Effective as soon as practicable. If approved by shareholders, the
reorganization will take place as soon as practicable after the Fund receives
the necessary regulatory approvals and legal opinions. We think this could be
accomplished by May 15, 2002. However, at any time prior to the reorganization,
the Board of Directors may decide that it is in the best interest of the Fund
and its shareholders not to go forward with this project. If that happens, the
Fund will continue to operate as it is currently organized.
C. HOW THE REORGANIZATION WILL AFFECT THE FUND
The reorganization will have no impact on the Fund's net asset value. On
the day of the reorganization, the newly formed Business Trust's net asset
value per share will be the same as that of the Fund, and you will own the same
number of shares. Any declared but undistributed dividends or capital gains for
the Fund will carry over in the reorganization.
The Fund's Directors will continue as Trustees of the Business Trust.
Under Proposal 1, shareholders are asked to elect five Directors to the Fund's
Board of Directors. If the reorganization is approved by shareholders, the Fund
will vote the single share of the Business Trust to elect as Trustees of the
Business Trust (trustees of a trust are equivalent to directors of a
corporation) those persons who have been elected pursuant to Proposal 1. This
approach will satisfy the requirements of federal securities laws that require
a fund's directors or trustees to be elected by shareholders.
The reorganization is conditioned on tax-free treatment at the federal
level. We fully expect that the reorganization will have no federal income tax
consequences for you or the Fund. We will not proceed with the reorganization
until this point is confirmed by an opinion of counsel. Following the
reorganization, from a tax standpoint, the adjusted basis of the Fund shares
will be the same as before. We do not expect shareholders to incur any personal
state or local taxes as a result of the reorganization, but you should consult
your own tax adviser to be sure.
11
D. HOW THE PROPOSED MASSACHUSETTS BUSINESS TRUST COMPARES TO THE FUND'S CURRENT
LEGAL STRUCTURE
Federal securities laws have much to say about the way that mutual funds
operate, but they do not cover every aspect of a fund's existence. State law
and each fund's governing documents fill in most of the gaps. The following
discussion compares the state law and documents currently governing the Fund
with the state law and documents that will apply if it reorganizes as a
Massachusetts business trust. This discussion is not a comprehensive review of
all technical distinctions between the different legal structures. We simply
want you to know how a Massachusetts business trust compares in certain key
areas to a Delaware corporation--the Fund's present legal structure. For more
complete information, please refer to the proposed Agreement and Declaration of
Trust ("Trust Agreement") attached as Appendix B.
Shareholder liability. Shareholders of a Fund organized as a Delaware
corporation generally have no personal liability for the Fund's obligations.
With a Massachusetts business trust, while theoretically shareholders could
have personal liability for trust activities, practically speaking shareholders
generally have the same protection from personal liability that they would have
as shareholders of a Delaware corporation. The Trust Agreement disclaims
liability of the shareholders, Trustees or officers of the Trust for acts or
obligations of the Trust, which are binding only on the assets and property of
the Trust. The Trust Agreement provides for indemnification out of Trust
property for all loss and expense of any shareholder held personally liable for
the obligations of the Trust. The risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which
the Trust itself would be unable to meet its obligations and thus should be
considered remote.
Quorums for meeting of shareholders. As a Delaware corporation, a majority
of the issued and outstanding shares of the Fund entitled to vote at any
meeting of shareholders constitutes a quorum for the transaction of business at
the meeting. By contrast, the Trust Agreement provides that thirty percent of
the shares entitled to vote constitutes a quorum for the transaction of
business at a shareholders' meeting of the Business Trust.
Annual meeting of shareholders. Presently the Fund is required to hold an
annual meeting of shareholders pursuant to both the Delaware Business
Corporation Law and the rules of the New York Stock Exchange. No annual meeting
of Business Trust shareholders will be required under state law. Following the
Reorganization, the Business Trust will continue to hold meetings in accordance
with the rules of the New York Stock Exchange. However, if at a future date the
Business Trust is no longer required to hold annual meeting under stock
exchange rules, the Business Trust would be permitted to discontinue annual
meetings.
Inspection rights. As shareholder of a Delaware corporation, each Fund
shareholder has the right to inspect the records of the Fund for any proper
purpose reasonably related to such person's interest as a shareholder. The
Trust Agreement provides that Trustees may from time to time establish
reasonable standards with respect to shareholder inspection
12
of Business Trust records, including standards governing what information and
documents are to be furnished, at what time and location, and at whose expense.
Reorganization/Combination transactions. Under Delaware law, mergers or
consolidations of the Fund and sales of all or substantially all of its
property and assets must be approved by the Directors and vote of the holders
of a majority of outstanding shares entitled to vote. The Trust Agreement
permits the Business Trust to merge, consolidate or sell all or substantially
all of its assets with the approval of the Trustees and a majority of
shareholders participating at a meeting at which a quorum is present.
Charter amendment. As a Delaware corporation, an amendment to the Fund's
charter (its certificate of incorporation) must be approved by the Board of
Directors and a majority of its outstanding shares. The Trust Agreement permits
a majority of the Trustees to approve an amendment, provided that it would not
materially and adversely affect the rights of shareholders. Any amendment to
the Trust Agreement that would materially and adversely affect the rights of
shareholders could be approved by the Trustees and a majority of shareholders
participating in a meeting at which a quorum is present.
Shareholder appraisal rights. Delaware law provides that, in certain
circumstances, shareholders who dissent from a merger or consolidation have the
right to demand payment for their shares based on appraised value determined by
a court. Shareholders of the Business Trust will not have comparable rights
under the Trust Agreement or Massachusetts law.
Judicial interpretation. Although many registered investment companies are
organized as Massachusetts business trusts, the provisions of charter documents
such as the Trust Agreement have not received extensive scrutiny and
interpretation by the Massachusetts courts. Delaware law is widely regarded as
the most extensive and well-defined body of corporate law in the United States.
Delaware corporations are often guided by the extensive body of court decisions
interpreting Delaware's corporate law.
E. HOW MANY SHAREHOLDER VOTES WE NEED TO APPROVE THE REORGANIZATION
To go forward with the reorganization, a majority of the Fund's
outstanding shares must vote in favor of this proposal.
THE FUND'S BOARD OF DIRECTORS/TRUSTEES RECOMMENDS THAT YOU APPROVE THE
REORGANIZATION.
Your "yes" vote on the reorganization proposal (Proposal 2) will be
treated as a vote to elect those persons who are elected pursuant to Proposal
1. Following the reorganization, the Trustees will serve until the next
election or until their terms are for some reason terminated.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL 2.
13
PROPOSAL 3
TO REMOVE THE FUNDAMENTAL INVESTMENT POLICY CONCERNING INVESTMENT IN OTHER
INVESTMENT COMPANIES.
The Fund has adopted certain investment restrictions or policies that are
"fundamental," meaning that as a matter of law they cannot be changed without
shareholder approval. Currently one of the Fund's fundamental restrictions
provides that:
"The Registrant [The Fund] will not purchase the securities of other
investment companies, except for the investment in such securities of funds
representing compensation otherwise payable to directors of the Registrant
pursuant to any deferred compensation plan existing at any time between the
Registrant and one or more of its directors."
While this investment restriction prohibits investments in other mutual funds,
the Investment Company Act of 1940, the primary law regulating investment
companies such as the Fund, permits a fund to invest in other funds, subject to
specific limitations. Generally, a fund may invest up to 5% of its assets in
another fund, and up to 10% of its assets in the aggregate in other funds.
Greater investments may also be permitted under exemptive orders granted by the
Securities and Exchange Commission.
If shareholders approve the elimination of this restriction, the Fund would be
able to invest in other funds, as permitted by applicable law. The Fund intends
to take advantage of an order the Fund obtained from the Securities and
Exchange Commission permitting it to invest its cash balances that have not
been invested in portfolio securities in the Money Market Fund, a series of
CIGNA Funds Group. This would enable the fund to efficiently invest its cash
positions. To avoid double advisory fees, TimesSquare, the investment adviser
to the Money Market Fund, will waive or credit its advisory fee for the Fund in
the amount of the advisory fee incurred by the Fund in connection with its
investment in the Money Market Fund. If the Fund invests in investment
companies besides the Money Market Fund, it would have to pay its own advisory
fees in addition to the fees and expenses of the other investment companies.
The Fund intends to invest in the Money Market Fund primarily for the purpose
of managing its cash position, not for market timing.
Removal of the investment restriction against investing in other funds will
permit the Fund to invest in other funds, as permitted by law, and in
particular will permit the Fund to invest up to 25% of its assets in the Money
Market Fund in accordance with the order the Fund received from the Securities
and Exchange Commission.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS APPROVE THE ELIMINATION OF
THIS RESTRICTION, AND VOTE "FOR" PROPOSAL 3.
To go forward with removing this fundamental policy, a majority of the
Fund's outstanding shares must vote in favor of this proposal.
14
Under the Investment Company Act of 1940, a majority of the voting securities
of the Fund means the lesser of (a) the vote of the holders of 67% or more of
the outstanding shares of the Fund present in person or by proxy at a meeting
of shareholders, if the holders of more than 50% of the outstanding shares are
present or represented by proxy; or (b) the vote of the holders of more than
50% of the outstanding shares of the Fund.
MANAGEMENT OF THE FUND
Information concerning the names, positions held with the Fund, principal
occupation or employment during the last five years, and current affiliations
of the executive officers of the Fund, other than for Mr. Forde, Chairman of
the Board and President of the Fund, is set out below. Information concerning
Mr. Forde is set out in Proposal 1 under the caption "Nominees". The executive
officers are elected annually by the Board of Trustees. As of December 31,
2001, executive officers of the Fund owned beneficially less than 1% of the
shares of the Fund and of CIGNA.
ALFRED A. BINGHAM III, 57, Vice President and Treasurer, CIGNA Funds Group,
CIGNA Variable Products Group, CIGNA High Income Shares and CIGNA Investment
Securities, Inc.; Assistant Vice President, TimesSquare.
JEFFREY S. WINER, 44, Senior Counsel, CIGNA; Vice President and Secretary,
CIGNA Funds Group, CIGNA Variable Products Group, CIGNA High Income Shares and
CIGNA Investment Securities, Inc.; previously Counsel, CIGNA.
15
OTHER BUSINESS
Shareholder Proposals for 2003
Shareholders may propose matters for inclusion in the proxy statement and
action at next year's annual meeting, subject to certain conditions. Any such
shareholder proposals intended to be presented at the 2003 annual meeting must
be received by management of the Fund prior to November 13, 2002 Shareholder
proposals not included in the proxy materials may be presented from the floor
at the annual meeting only if the shareholder notifies the Fund as to the
proposal's nature and certain additional information by January 21, 2003.
The management of the Fund does not know of any other matters to be brought
before the meeting. If any other matters are properly brought before the
meeting, proxies not limited to the contrary will be voted in accordance with
the best judgment of the person or persons acting under the proxies.
/s/ Jeffrey S. Winer
Jeffrey S. Winer
Secretary
Philadelphia, Pennsylvania
March 15, 2002
16
APPENDIX A
CIGNA INVESTMENT SECURITIES, INC.
AUDIT COMMITTEE CHARTER
1. The Audit Committee shall be composed entirely of Trustees/Directors who
are not "interested persons" of the Fund within the meaning of Section
2(a)(19) of the Investment Company Act of 1940, as amended. In addition, so
long as the Fund's shares are listed on the New York Stock Exchange (the
NYSE"), the composition of the Audit Committee shall meet such other
requirements as shall be imposed from time to time by the NYSE.
2. The purposes of the Audit Committee are:
(a) to oversee the Fund's accounting and financial reporting policies and
practices, its internal controls and, as appropriate, the internal
controls of one or more service providers;
(b) to oversee the quality and objectivity of the Fund's financial
statements and the independent audit thereof; and
(c) to act as a liaison between the Fund's independent accountants and the
full Board of Trustees/Directors (the "Board").
3. The function of the Audit Committee is to assure itself and the Board of
the integrity of financial information and controls maintained in
accordance with contracts, prospectuses and regulations. Management's
responsibility is to maintain appropriate systems for accounting and
internal control. The independent accountant's responsibility is to plan
and carry out a proper audit. The independent accountant's ultimate
accountability is to the Audit Committee and to the Board, which has the
ultimate authority and responsibility regarding the evaluation, appointment
and, when appropriate, the termination of the Fund's independent
accountants.
4. The Audit Committee shall have the following duties and powers:
(a) to recommend the selection, retention or termination of accountants
and, in connection therewith, to otherwise evaluate the independence
of the accountants, including whether the accountants provide any
consulting services to the manager and to request an annual
representation from the accountant of its independence from
management;
(b) to meet with the Fund's independent accountants, including private
meetings, as necessary (i) to review the arrangements for and scope of
the annual audit and any special audits; (ii) to discuss any matters
of concern relating to the Fund's financial statements, including any
adjustments to such statements recommended by the accountants, or
other results of said audit(s); (iii) to consider the accountants'
comments with respect to the Fund's financial policies, procedures and
internal accounting controls and management's responses thereto; and
(iv) to review the form of opinion the accountants propose to render
to the Board and shareholders;
A-1
(c) to consider the effect upon the Fund of any changes in accounting
principles or practices proposed by management or the accountants;
(d) to review the fees charged by the accountants for audit and non-audit
services;
(e) to investigate improprieties or suspected improprieties in fund
operations;
(f) to review any non-audit services to the Fund by its independent
accountants;
(g) to review the working relationship between the Fund's management and
the independent accountants;
(h) to review and discuss the Fund's audited financial statements with the
Fund's management;
(i) to report its activities to the Board on a regular basis, based on the
Committee's review and discussions with management and with the
independent accountants to make a recommendation to the Board as to
whether the Fund's audited financial statements should be included in
the Fund's annual report to shareholders and to make such other
recommendations with respect to the above and other matters as the
Committee may deem necessary or appropriate; and
(j) to prepare any audit committee report required to be included in a
Fund proxy statement.
5. The Committee shall meet at least annually and is empowered to hold special
meetings as circumstances require.
6. The Committee shall regularly meet with the Fund's Treasurer and internal
accountants for the management company and shall have the right of access
to the Fund's Treasurer, other officers and independent accountants.
7. The Committee shall require the independent accountants to provide the
Committee with an annual report regarding the independent accountants'
independence, which report shall include, but not be limited to, a formal
written statement setting forth all relationships between the independent
accountants and (a) the Fund or any of its officers or directors or (b) the
Fund's investment adviser(s). The Committee shall discuss such reports with
the independent accountants, and if necessary in the judgment of the
Committee, the Committee shall recommend that the Board take appropriate
action to ensure the independence of the independent accountants or replace
the independent accountants.
8. The Committee shall have the resources and authority appropriate to
discharge its responsibilities, including the authority to retain special
counsel and other experts or consultants at the Fund's expense.
9. The Committee shall review this Charter at least annually and recommend any
changes to the full Board.
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APPENDIX B
CIGNA INVESTMENT SECURITIES
AGREEMENT AND DECLARATION OF TRUST
_________________________, 2002
2002 Goodwin Procter LLP
All Rights Reserved
B-1
TABLE OF CONTENTS
Page
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1. NAME AND DEFINITIONS ...................................................... B-3
1.1 Name and Principal Office ............................................ B-3
1.2 Definitions .......................................................... B-3
2. PURPOSE OF TRUST .......................................................... B-4
3. THE TRUSTEES .............................................................. B-4
3.1 Number, Designation, Election, Term, etc ............................. B-4
3.2 Powers of Trustees ................................................... B-5
3.3 Certain Contracts .................................................... B-8
3.4 Payment of Trust Expenses and Compensation of Trustees ............... B-10
3.5 Ownership of Assets of the Trust ..................................... B-10
3.6 Action by Trustees ................................................... B-10
4. SHARES .................................................................... B-10
4.1 Description of Shares ................................................ B-10
4.2 Ownership of Shares .................................................. B-12
4.3 Investments in the Trust ............................................. B-12
4.4 No Pre-emptive Rights ................................................ B-13
4.5 Status of Shares and Limitation of Personal Liability ................ B-13
4.6 No Appraisal Rights .................................................. B-13
5. SHAREHOLDERS' VOTING POWERS AND MEETINGS .................................. B-13
5.1 Voting Powers ........................................................ B-13
5.2 Meetings ............................................................. B-14
5.3 Record Dates ......................................................... B-14
5.4 Quorum and Required Vote ............................................. B-14
5.5 Action by Written Consent ............................................ B-15
5.6 Inspection of Records ................................................ B-15
5.7 Additional Provisions ................................................ B-15
6. LIMITATION OF LIABILITY; INDEMNIFICATION .................................. B-15
6.1 Trustees, Shareholders, etc, Not Personally Liable; Notice ........... B-15
6.2 Trustee's Good Faith Action; Expert Advice; No Bond or Surety ........ B-15
6.3 Indemnification of Shareholders ...................................... B-16
6.4 Indemnification of Trustees, Officers, etc ........................... B-16
6.5 Compromise Payment ................................................... B-17
6.6 Indemnification Not Exclusive, etc ................................... B-17
6.7 Liability of Third Persons Dealing with Trustees ..................... B-18
7. MISCELLANEOUS ............................................................. B-18
7.1 Duration and Termination of Trust .................................... B-18
7.2 Reorganization ....................................................... B-18
7.3 Amendments ........................................................... B-18
7.4 Filing of Copies: References; Headings ............................... B-19
7.5 Applicable Law ....................................................... B-19
7.6 Resident Agent ....................................................... B-20
B-2
AGREEMENT AND DECLARATION OF TRUST
AGREEMENT AND DECLARATION OF TRUST made at Springfield, Massachusetts this
______ day of February, 2002, by the Trustees hereunder, and by the holders of
shares of beneficial interest to be issued hereunder as hereinafter provided.
WITNESSETH
WHEREAS this Trust has been formed to carry on the business of an
investment company;
WHEREAS this Trust is authorized to issue its shares of beneficial
interest, all in accordance with the provisions hereinafter set forth;
WHEREAS the Trustees have agreed to manage all property coming into their
hands as trustees of a Massachusetts business trust in accordance with the
provisions hereinafter set forth; and
WHEREAS this Trust is the successor to CIGNA Investment Securities, Inc.
(formerly known as INA Income and Convertible Fund and INA Investment
Securities, Inc.), which was organized as a Delaware corporation on June 28,
1972.
NOW, THEREFORE, the Trustees hereby declare that they will hold all cash,
securities and other assets which they may from time to time acquire in any
manner as Trustees hereunder IN TRUST to manage and dispose of the same upon
the following terms and conditions for the benefit of the holders from time to
time of shares of beneficial interest in this Trust.
1. NAME AND DEFINITIONS
1.1 Name and Principal Office. This Trust shall be known as "CIGNA
Investment Securities" and the Trustees shall conduct the business of the Trust
under that name or any other name or names as they may from time to time
determine. The principal office of the Trust shall be located at [____________,
Worcester, Massachusetts] or at such other location as the Trustees may from
time to time determine.
1.2 Definitions. Whenever used herein, unless otherwise required by the
context or specifically provided:
(a) "By-Laws" shall mean the By-Laws of the Trust as amended from time
to time;
(b) "Commission" shall have the meaning given it in the 1940 Act;
(c) "Declaration of Trust" shall mean this Agreement and Declaration of
Trust as amended or restated from time to time;
B-3
(d) "1940 Act" refers to the Investment Company Act of 1940 and the
Rules and Regulations thereunder, all as amended from time to time;
(e) "Shareholder" means a record owner of Shares;
(f) "Shares" refers to the transferable units of interest into which the
beneficial interest in the Trust (as the context may require) shall be divided
from time to time;
(g) "Trust" refers to the Massachusetts business trust established by
this Declaration of Trust, as amended from time to time; and
(h) "Trustees" refers to the Trustees of the Trust hereunder named
herein or elected in accordance with Article III.
2. PURPOSE OF TRUST
The purpose of the Trust is to operate as an investment company and to
offer Shareholders of the Trust an investment program primarily in securities
and debt instruments.
3. THE TRUSTEES
3.1 Number, Designation, Election, Term, etc.
(a) Trustees. The initial Trustees hereof shall be Richard H. Forde,
Russell H. Jones, Farhan Sharaff, Paul J. McDonald and Marnie Wagstaff Mueller.
(b) Number. The Trustees serving as such, whether named above or
hereafter becoming Trustees, may increase or decrease the number of Trustees to
a number other than the number theretofore determined. No decrease in the number
of Trustees shall have the effect of removing any Trustee from office prior to
the expiration of such Trustee's term, but the number of Trustees may be
decreased in conjunction with the removal of a Trustee in this pursuant to
subsection (e) of this Section 3.1.
(c) Election and Term. The Trustees shall be elected by Shareholders of
the Trust. Each Trustee, whether named above or hereafter becoming a Trustee,
shall serve as a Trustee of the Trust during the lifetime of this Trust and
until its termination as hereinafter provided except as such Trustee sooner
dies, resigns, retires or is removed. Subject to Section 16(a) of the 1940 Act,
the Trustees may elect their own successors and may, pursuant to Section 3.1(f)
hereof, appoint Trustees to fill vacancies.
(d) Resignation and Retirement. Any Trustee may resign or retire as a
Trustee, by written instrument signed by such Trustee and delivered to the other
Trustees or to any officer of the Trust, and such resignation or retirement
shall take effect upon such delivery or upon such later date as is specified in
such instrument.
B-4
(e) Removal. Any Trustee may be removed with or without cause at any
time: (i) by written instrument, signed by at least two-thirds of the number of
Trustees in office immediately prior to such removal, specifying the date upon
which such removal shall become effective; or (ii) by vote of Shareholders
holding not less than two-thirds of the Shares then outstanding, cast in person
or by proxy at any meeting called for the purpose; or (iii) by a written
declaration signed by Shareholders holding not less than two-thirds of the
Shares then outstanding and filed with the Trust's custodian.
(f) Vacancies. Any vacancy or anticipated vacancy resulting from any
reason, including without limitation the death, resignation, retirement, removal
or incapacity of any of the Trustees, or resulting from an increase in the
number of Trustees by the other Trustees may (but so long as there are at least
two remaining Trustees, need not unless required by the 1940 Act) be filled by a
majority of the remaining Trustees, subject to the provisions of Section 16(a)
of the 1940 Act, through the appointment in writing of such other person as such
remaining Trustees in their discretion shall determine and such appointment
shall be effective upon the written acceptance of the person named therein to
serve as a Trustee and agreement by such person to be bound by the provisions of
this Declaration of Trust, except that any such appointment in anticipation of a
vacancy to occur by reason of retirement, resignation or increase in number of
Trustees to be effective at a later date shall become effective only at or after
the effective date of said retirement, resignation or increase in number of
Trustees. As soon as any Trustee so appointed shall have accepted such
appointment and shall have agreed in writing to be bound by this Declaration of
Trust and the appointment is effective, the Trust estate shall vest in the new
Trustee, together with the continuing Trustees, without any further act or
conveyance.
(g) Effect of Death, Resignation, etc. The death, resignation,
retirement, removal or incapacity of the Trustees, or any one of them, shall not
operate to annul or terminate the Trust or to revoke or terminate any existing
agency or contract created or entered into pursuant to the terms of this
Declaration of Trust.
(h) No Accounting. Except to the extent required by the 1940 Act or
under circumstances which would justify removal for cause, no person ceasing to
be a Trustee as a result of death, resignation, retirement, removal or
incapacity (nor the estate of any such person) shall be required to make an
accounting to the Shareholders or remaining Trustees upon such cessation.
3.2 Powers of Trustees. Subject to the provisions of this Declaration of
Trust, the business of the Trust shall be managed by the Trustees, and they
shall have all powers necessary or convenient to carry out that responsibility
and the purpose of the Trust. The Trustees in all instances shall act as
principals, and are and shall be free from the control of the Shareholders. The
Trustees shall have full power and authority to do any and all acts and to make
and execute any and all contracts and instruments that they may consider
necessary or appropriate in connection with the management of the Trust. The
Trustees shall not be bound or limited by present or future laws or customs
with regard to investment by trustees or fiduciaries, but shall have full
authority and absolute power and control over the assets of the Trust and the
business of the Trust to the same extent
B-5
as if the Trustees were the sole owners of the assets of the Trust and the
business in their own right, including such authority, power and control to do
all acts and things as they, in their uncontrolled discretion, shall deem
proper to accomplish the purposes of this Trust. Without limiting the
foregoing, the Trustees may adopt By-Laws not inconsistent with this
Declaration of Trust providing for the conduct of the business and affairs of
the Trust and may amend and repeal them to the extent that such By-Laws do not
reserve that right to the Shareholders; they may sue or be sued in the name of
the Trust; they may as they consider appropriate elect and remove officers and
appoint and terminate agents and consultants and hire and terminate employees,
any one or more of the foregoing of whom may be a Trustee, and may provide for
the compensation of all of the foregoing; they may appoint from their own
number, and terminate, any one or more committees consisting of two or more
Trustees, including without implied limitation an executive committee, which
may, when the Trustees are not in session and subject to the 1940 Act, exercise
some or all of the power and authority of the Trustees as the Trustees may
determine; in accordance with Section 3.3 they may employ one or more advisers,
administrators, depositories and custodians and may authorize any depository or
custodian to employ subcustodians or agents and to deposit all or any part of
such assets in a system or systems for the central handling of securities and
debt instruments, retain transfer, dividend; accounting or Shareholder
servicing agents or any of the foregoing, provide for the distribution of
Shares by the Trust through one or more distributors, principal underwriters or
otherwise, and set record dates or times for the determination of Shareholders
or various of them with respect to various matters; they may compensate or
provide for the compensation of the Trustees, officers, advisers,
administrators, custodians, other agents, consultants and employees of the
Trust or the Trustees on such terms as they deem appropriate; and in general
they may delegate to any officer of the Trust, to any committee of the Trustees
and to any employee, adviser, administrator, distributor depository, custodian,
transfer and dividend disbursing agent, or any other agent or consultant of the
Trust such authority, powers, functions and duties as they consider desirable
or appropriate for the conduct of the business and affairs of the Trust,
including without implied limitation the power and authority to act in the name
of the Trust and of the Trustees, to sign documents and to act as
attorney-in-fact for the Trustees.
Without limiting the foregoing and to the extent not inconsistent with the
1940 Act or other applicable law, the Trustees shall have power and authority
for and on behalf of the Trust established hereunder:
(a) Investments. To invest and reinvest cash and other property, and to
hold cash or other property uninvested without in any event being bound or
limited by any present or future law or custom in regard to investments by
trustees;
(b) Disposition of Assets. To sell, exchange, lend, pledge, mortgage,
hypothecate, write options on and lease any or all of the assets of the Trust;
(c) Ownership Powers. To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities, debt instruments or
property; and to execute and deliver proxies or powers of attorney to such
person or persons as the Trustees shall deem
B-6
proper, granting to such person or persons such power and discretion with
relation to securities, debt instruments or property as the Trustees shall deem
proper;
(d) Subscription. To exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of securities or debt
instruments;
(e) Form of Holding. To hold any security; debt instrument or property
in a form not indicating any trust, whether in bearer, unregistered or other
negotiable form, or in the name of the Trustees or of the Trust or in the name
of a custodian, subcustodian or other depository or a nominee or nominees or
otherwise;
(f) Reorganization, etc. To consent to or participate in any plan for
the reorganization, consolidation or merger of any corporation or issuer, any
security or debt instrument of which is or was held in the Trust; to consent to
any contract, lease, mortgage, purchase or sale of property by such corporation
or issuer, and to pay calls or subscriptions with respect to any security or
debt instrument held in the Trust;
(g) Voting Trusts, etc. To join with other holders of any securities or
debt instruments in acting through a committee, depositary, voting trustee or
otherwise, and in that connection to deposit any security or debt instrument
with, or transfer any security or debt instrument to, any such committee,
depositary or trustee, and to delegate to them such power and authority with
relation to any security or debt instrument (whether or not so deposited or
transferred) as the Trustees shall deem proper, and to agree to pay, and to pay,
such portion of the expenses and compensation of such committee, depositary or
trustee as the Trustees shall deem proper;
(h) Compromise. To compromise, arbitrate or otherwise adjust claims in
favor of or against the Trust or any matter in controversy; including but not
limited to claims for taxes;
(i) Partnerships, etc. To enter into joint ventures, general or limited
partnerships and any other combinations or associations;
(j) Borrowing and Security. To borrow funds and to mortgage and pledge
the assets of the Trust or any part thereof to secure obligations arising in
connection with such borrowing;
(k) Guarantees, etc. To endorse or guarantee the payment of any notes or
other obligations of any person; to make contracts of guaranty or suretyship, or
otherwise assume liability for payment thereof; and to mortgage and pledge the
Trust property or any part thereof to secure any of or all such obligations;
(l) Insurance. To purchase and pay for entirely out of Trust property
such insurance as they may deem necessary or appropriate for the conduct of the
business, including, without limitation, insurance policies insuring the assets
of the Trust and payment of distributions and principal on its portfolio
investments, and insurance policies insuring the Shareholders, Trustees,
officers, employees, agents, consultants,
B-7
investment advisers, managers, administrators, distributors, principal
underwriters, or independent contractors, or any thereof (or any person
connected therewith), of the Trust individually against all claims and
liabilities of every nature arising by reason of holding, being or having held
any such office or position, or by reason of any action alleged to have been
taken or omitted by any such person in any such capacity, including any action
taken or omitted that may be determined to constitute negligence, whether or
not the Trust would have the power to indemnify such person against such
liability; and
(m) Pensions, etc. To pay pensions for faithful service, as deemed
appropriate by the Trustees, and to adopt, establish and carry out pension,
profit-sharing, share bonus, share purchase, savings, thrift and other
retirement, incentive and benefit plans, trusts and provisions, including the
purchasing of life insurance and annuity contracts as a means of providing such
retirement and other benefits, for any or all of the Trustees, officers,
employees and agents of the Trust.
3.3 Certain Contracts. Subject to compliance with the provisions of the
1940 Act, but notwithstanding any limitations of present and future law or
custom in regard to delegation of powers by trustees generally, the Trustees
may, at any time and from time to time and without limiting the generality of
their powers and authority otherwise set forth herein, enter into one or more
contracts with any one or more corporations, trusts, associations,
partnerships, limited partnerships, other type of organizations, or individuals
(a "Contracting Party"), to provide for the performance and assumption of some
or all of the following services, duties and responsibilities to, for or on
behalf of the Trust and/or the Trustees, and to provide for the performance and
assumption of such other services, duties and responsibilities in addition to
those set forth below as the Trustees may determine appropriate:
(a) Advisory. Subject to the general supervision of the Trustees and in
conformity with the stated policy of the Trustees with respect to the
investments of the Trust to manage such investments and assets, make investment
decisions with respect thereto, and to place purchase and sale orders for
portfolio transactions relating to such investments and assets;
(b) Administration. Subject to the general supervision of the Trustees
and in conformity with any policies of the Trustees with respect to the
operations of the Trust, to supervise all or any part of the operations of the
Trust, and to provide all or any part of the administrative and clerical
personnel, office space and office equipment and services appropriate for the
efficient administration and operations of the Trust;
(c) Distribution. To distribute the Shares of the Trust, to be principal
underwriter of such Shares, and/or to act as agent of the Trust in the sale of
Shares and the acceptance or rejection of orders for the purchase of Shares;
(d) Custodian and Depository. To act as depository for and to maintain
custody of the property of the Trust and accounting records in connection
therewith;
B-8
(e) Transfer and Dividend Disbursing Agency. To maintain records of the
ownership of outstanding Shares, the issuance and redemption and the transfer
thereof, and to disburse any dividends declared by the Trustees and in
accordance with the policies of the Trustees and/or the instructions of any
particular Shareholder to reinvest any such dividends;
(f) Shareholder Servicing. To provide service with respect to the
relationship of the Trust and its Shareholders, records with respect to
Shareholders and their Shares, and similar matters; and
(g) Accounting. To handle all or any part of the accounting
responsibilities, whether with respect to the Trust's properties, Shareholders
or otherwise.
The same person may be the Contracting Party for some or all of the
services, duties and responsibilities to, for and of the Trust and/or the
Trustees, and the contracts with respect thereto may contain such terms
interpretive of or in addition to the delineation of the services, duties and
responsibilities provided for, including provisions that are not inconsistent
with the 1940 Act relating to the standard of duty of and the rights to
indemnification of the Contracting Party and others, as the Trustees may
determine. Nothing herein shall preclude, prevent or limit the Trust or a
Contracting Party from entering into sub-contractual arrangements relating to
any of the matters referred to in Sections 3.3(a) through (g) hereof.
The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, manager,
adviser, principal underwriter or distributor or agent of or for any
Contracting Party, or of or for any parent or affiliate of any Contracting
Party or that the Contracting Party or any parent or affiliate thereof is a
Shareholder or has an interest in the Trust, or that
(ii) any Contracting Party may have a contract providing for the
rendering of any similar services to one or more other corporations,
trusts, associations, partnerships, limited partnerships or other
organizations, or have other business or interests,
(iii) shall not affect the validity of any contract for the
performance and assumption of services, duties and responsibilities to, for
or of the Trust and/or the Trustees or disqualify any Shareholder, Trustee
or officer of the Trust from voting upon or executing the same or create
any liability or accountability to the Trust or its Shareholders, provided
that in the case of any relationship or interest referred to in the
preceding clause (i) on the part of any Trustee, or officer of the Trust
either (x) the material facts as to such relationship or interest have been
disclosed to or are known by the Trustees not having any such relationship
or interest and the contract involved is approved in good faith by a
majority of such Trustees not having any such relationship or interest
(even though such unrelated or disinterested Trustees are less than a
quorum of all of the Trustees), (y) the material facts as to such
relationship
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or interest and as to the contract have been disclosed to or are known by
the Shareholders entitled to vote thereon and the contract involved is
specifically approved in good faith by vote of the Shareholders, or (z) the
specific contract involved is fair to the Trust as of the time it is
authorized, approved or ratified by the Trustees or by the Shareholders.
3.4 Payment of Trust Expenses and Compensation of Trustees. The Trustees
are authorized to pay or to cause to be paid out of the principal or income of
the Trust, or partly out of principal and partly out of income, as the Trustees
deem fair, all expenses, fees, charges, taxes and liabilities incurred or
arising in connection with the Trust, or in connection with the management
thereof, including, but not limited to, the Trustees' compensation and such
expenses and charges for the services of the Trust's officers, employees,
investment adviser, administrator, distributor, principal underwriter, auditor,
counsel, depository, custodian, transfer agent, dividend disbursing agent,
accounting agent, Shareholder servicing agent, and such other agents,
consultants, and independent contractors and such other expenses and charges as
the Trustees may deem necessary or proper to incur. Without limiting the
generality of any other provision hereof, the Trustees shall be entitled to
reasonable compensation from the Trust for their services as Trustees and may
fix the amount of such compensation.
3.5 Ownership of Assets of the Trust. Title to all of the assets of the
Trust shall at all times be considered as vested in the Trustees.
3.6 Action by Trustees. Except as otherwise provided by the 1940 Act or
other applicable law, this Declaration of Trust or the By-Laws, any action to
be taken by the Trustees on behalf of or with respect to the Trust may be taken
by a majority of the Trustees present at a meeting of Trustees (a quorum,
consisting of at least one-half of the Trustees then in office, being present),
within or without Massachusetts, including any meeting held by means of a
conference telephone or other communications equipment by means of which all
persons participating in the meeting can hear each other at the same time, and
participation by such means shall constitute presence in person at a meeting,
or by written consents of a majority of the Trustees then in office (or such
larger or different number as may be required by the 1940 Act or other
applicable law).
4. SHARES
4.1. Description of Shares.
(a) Generally. The beneficial interest in the Trust shall be divided
into Shares, all with $.10 par value and of one class; provided, however, that
the Trustees shall have the authority from time to time to issue Shares in one
or more other classes, as they deem necessary or desirable.
The number of authorized Shares thereof that may be issued is unlimited,
and the Trustees may issue Shares for such consideration and on such terms as
they may determine (or for no consideration if pursuant to a Share dividend or
split-up), all without action or approval of the Shareholders. All Shares when
so issued on the terms determined by the
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Trustees shall be fully paid and non-assessable. The Trustees may hold as
treasury Shares, reissue for such consideration and on such terms as they may
determine, or cancel, at their discretion from time to time, any Shares
reacquired by the Trust.
The Trustees may from time to time close the transfer books or establish
record dates and times for the purposes of determining the holders of Shares
entitled to be treated as such, to the extent provided or referred to in
Section 5.3.
Any Trustee, officer or other agent of the Trust, and any organization in
which any such person is interested may acquire, own, hold and dispose of
Shares of the Trust to the same extent as if such person were not a Trustee,
officer or other agent of the Trust; and the Trust may issue and sell or cause
to be issued and sold and may purchase Shares from any such person or any such
organization subject only to the general limitations, restrictions or other
provisions applicable to the sale or purchase of Shares generally.
(b) Dividends. Dividends and distributions on Shares may be paid with
such frequency as the Trustees may determine, which may be daily or otherwise
pursuant to a standing resolution or resolutions adopted only once or with such
frequency as the Trustees may determine, to the holders of Shares, from such of
the income and capital gains, accrued or realized, from the assets belonging to
the Trust. All dividends and distributions on Shares shall be distributed pro
rata to the holders of Shares in proportion to the number of Shares held by such
holders at the date and time of record established for the payment of such
dividends or distributions, except that in connection with any dividend or
distribution program or procedure the Trustees may determine that no dividend or
distribution shall be payable on Shares as to which the Shareholder's purchase
order and/or payment have not been received by the time or times established by
the Trustees under such program or procedure. Such dividends and distributions
may be made in cash or Shares or a combination thereof as determined by the
Trustees or pursuant to any program that the Trustees may have in effect at the
time for the election by each Shareholder of the mode of the making of such
dividend or distribution to that Shareholder.
The Trustees shall have full discretion, to the extent not inconsistent
with the 1940 Act, to determine which items shall be treated as income and
which items as capital; and each such determination and allocation shall be
conclusive and binding upon the Shareholders.
(c) Liquidation. In the event of the liquidation or dissolution of the
Trust, the holders of Shares shall be entitled to receive, when and as declared
by the Trustees, the excess of the assets belonging to the Trust, over the
liabilities of the Trust. The assets so distributable to the holders of Shares
shall be distributed among such holders in proportion to the number of Shares
held by them and recorded on the books of the Trust.
(d) Voting. On each matter submitted to a vote of the Shareholders, each
holder of a Share shall be entitled to one vote for each whole Share standing in
his name on the books of the Trust.
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(e) Transfer. Shares shall be transferable on the records of the Trust
only by the record holder thereof or by such holder's agent thereunto duly
authorized in writing, upon delivery to the Trustees or the Transfer Agency of a
duly executed instrument of transfer, together with any certificate or
certificates (if issued) for such Shares and such evidence of the genuineness of
each such execution and authorization and of other matters as may reasonably be
required. Upon such delivery the transfer shall be recorded on the register of
the Trust. Until such record is made, the Shareholder of record shall be deemed
to be the holder of such Shares for all purposes hereunder, and neither the
Trustees nor any Transfer Agent or registrar nor any officer, employee or agent
of the Trust shall be affected by any notice of the proposed transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees or the Transfer
Agent; but until such record is made, the Shareholder of record shall be deemed
to be the holder of such Shares for all purposes hereunder and neither the
Trustees nor any Transfer Agent or registrar nor any officer or agent of the
Trust shall be affected by any notice of such death, bankruptcy or
incompetence, or other operation of law.
(f) Equality. Except as provided herein or in the instrument designating
and establishing any class of Shares, all Shares shall represent an equal
proportionate interest in the assets belonging to the Trust (subject to the
liabilities belonging to the Trust) and each Share of a class shall be equal to
each other Share of the Trust. The Trustees may from time to time divide or
combine the Shares into a greater or lesser number of Shares without thereby
changing the proportionate beneficial interest in the assets belonging to the
Trust.
(g) Fractions. Any fractional Share, if any such fractional Share is
outstanding, shall carry proportionately all the rights and obligations of a
whole Share, including rights and obligations with respect to voting, receipt of
dividends and distributions, redemption of Shares, and liquidation of the Trust.
4.2 Ownership of Shares. The ownership of Shares shall be recorded on the
books of the Trust or of a transfer or similar agent for the Trust. No
certificates certifying the ownership of Shares need be issued except as the
Trustees may otherwise determine from time to time. The Trustees may make such
rules as they consider appropriate for the issuance of Share certificates, the
use of facsimile signatures, the transfer of Shares and similar matters. The
record books of the Trust as kept by the Trust or any transfer or similar
agent, as the case may be, shall be conclusive as to who are the Shareholders
and as to the number of Shares held from time to time by each such Shareholder.
4.3 Investments in the Trust. The Trustees may accept investments in the
Trust from such persons and on such terms and for such consideration, not
inconsistent with the provisions of the 1940 Act, as they from time to time
authorize. The Trustees may authorize any distributor, principal underwriter,
custodian, transfer agent or other person to accept orders for the purchase of
Shares that conform to such authorized terms and
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to reject any purchase orders for Shares whether or not conforming to-such
authorized terms.
4.4 No Pre-emptive Rights. Shareholders shall have no pre-emptive or other
right to subscribe to any additional Shares or other securities issued by the
Trust.
4.5 Status of Shares and Limitation of Personal Liability. Shares shall be
deemed to be personal property giving only the rights provided in this
instrument. Every Shareholder by virtue of having become a Shareholder shall be
held to have expressly assented and agreed to the terms hereof and to have
become a party hereto. The death of a Shareholder during the continuance of the
Trust shall not operate to terminate the Trust nor entitle the representative
of any deceased Shareholder to an accounting or to take any action in court or
elsewhere against the Trust or the Trustees, but only to the rights of said
decedent under this Trust. Ownership of Shares shall not entitle the
Shareholder to any title in or to the whole or any part of the Trust property
or right to call for a partition or division of the same or for an accounting,
nor shall the ownership of Shares constitute the Shareholders partners. Neither
the Trust nor the Trustees, nor any officer, employee or agent of the Trust
shall have any power to bind personally any Shareholder, nor except as
specifically provided herein to call upon any Shareholder for the payment of
any sum of money or assessment whatsoever other than such as the Shareholder
may at any time personally agree to pay.
4.6 No Appraisal Rights. Shareholders shall have no right to demand
payment for their shares or to any other rights of dissenting shareholders in
the event the Trust participates in any transaction which would give rise to
appraisal or dissenters' rights by a shareholder of a corporation organized
under Chapter 156B of the General Laws of the Commonwealth of Massachusetts, or
otherwise.
5. SHAREHOLDERS' VOTING POWERS AND MEETINGS
5.1 Voting Powers. The Shareholders shall have power to vote only (i) for
the election or removal of Trustees as provided in Section 3.1, (ii) with
respect to any contract with a Contracting Party as provided in Section 3.3 as
to which Shareholder approval is required by the 1940 Act, (iii) with respect
to any termination or reorganization of the Trust to the extent and as provided
in Sections 7.1 and 7.2, (iv) with respect to any amendment of this Declaration
of Trust to the extent and as provided in Section 7.3, (v) to the same extent
as the stockholders of a Massachusetts business corporation as to whether or
not a court action, proceeding or claim should or should not be brought or
maintained derivatively or as a class action on behalf of the Trust or the
Shareholders and (vi) with respect to such additional matters relating to the
Trust as may be required by the 1940 Act, this Declaration of Trust, the
By-Laws or any registration of the Trust with the Commission (or any successor
agency) or any state, or as the Trustees may consider necessary or desirable.
There shall be no cumulative voting in the election of Trustees. Shares may be
voted in person or by proxy. Proxies may be given by or on behalf of a
Shareholder orally or in writing or pursuant to any computerized, telephonic,
or mechanical data gathering process. A proxy with respect to Shares held in
the name of two or more persons shall be valid if executed or otherwise given
by or on behalf of any
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one of them unless at or prior to exercise of the proxy the Trust receives a
specific written notice to the contrary from any one of them. A proxy
purporting to be executed or otherwise given by or on behalf of a Shareholder
shall be deemed valid unless challenged at or prior to its exercise and the
burden of proving invalidity shall rest on the challenger. Until Shares are
issued, the Trustees may exercise all rights of Shareholders and may take any
action required by law, this Declaration of Trust or the By-Laws to be taken by
Shareholders.
5.2 Meetings. No annual or regular meeting of Shareholders is required.
Special meetings of Shareholders may be called by the Trustees from time to
time for the purpose of taking action upon any matter requiring the vote or
authority of the Shareholders as-herein provided or upon any other matter
deemed by the Trustees to be necessary or desirable. Written notice of any
meeting of Shareholders shall be given or caused to be given by the Trustees by
mailing such notice at least seven days before such meeting, postage prepaid,
stating the time, place and purpose of the meeting, to each Shareholder at the
Shareholder's address as it appears on the records of the Trust.
5.3 Record Dates. For the purpose of determining the Shareholders who are
entitled to vote or act at any meeting or any adjournment thereof, or who are
entitled to participate in any dividend or distribution, or for the purpose of
any other action, the Trustees may from time to time close the transfer books
for such-period, not exceeding 30 days (except at or in connection with the
termination of the Trust), as the Trustees may determine; or without closing
the transfer books the Trustees may fix a date and time not more than 90 days
prior to the date of any meeting of Shareholders or other action as the date
and time of record for the determination of Shareholders entitled to vote at
such meeting or any adjournment thereof or to be treated as Shareholders of
record for purposes of such other action, and any Shareholder who was a
Shareholder at the date and time so fixed shall be entitled to vote at such
meeting or any adjournment thereof or to be treated as a Shareholder of record
for purposes of such other action, even though such Shareholder has since that
date and time disposed of such Shareholder's Shares, and no Shareholder
becoming such after that date and time shall be so entitled to vote at such
meeting or any adjournment thereof or to be treated as a Shareholder of record
for purposes of such other action.
5.4 Quorum and Required Vote. Except as otherwise provided by the 1940 Act
or other applicable law, thirty percent of the Shares entitled to vote shall be
a quorum for the transaction of business at a Shareholders' meeting, but any
lesser number shall be sufficient for adjournments. Any meeting of
shareholders, whether or not a quorum is present, may be adjourned for any
lawful purpose provided that no meeting shall be adjourned for more than six
months beyond the originally scheduled meeting date. Any adjourned session or
sessions may be held, within a reasonable time after the date set for the
original meeting without the necessity of further notice. A majority of the
Shares voted, at a meeting of which a quorum is present shall decide any
questions and a plurality shall elect a Trustee, except when a different vote
is required or permitted by any provision of the 1940 Act or other applicable
law or by this Declaration of Trust or the By-Laws.
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5.5 Action by Written Consent. Subject to the provisions of the 1940 Act
and other applicable law, any action taken by Shareholders may be taken without
a meeting if a majority of Shareholders entitled to vote on the matter (or such
larger proportion thereof as shall be required by the 1940 Act or by any
express provision of this Declaration of Trust or the By-Laws) consent to the
action in writing and such written consents are filed with the records of the
meetings of Shareholders. Such consent shall be treated for all purposes as a
vote taken at a meeting of Shareholders.
5.6 Inspection of Records. The records of the Trust shall be open to
inspection by Shareholders for any lawful purpose reasonably related to a
Shareholder's interest as a Shareholder. The Trustees may from time to time
establish reasonable standards, including standards governing what information
and documents are to be furnished, at what time and location and at whose
expense with respect to a Shareholder's inspection of Trust records.
5.7 Additional Provisions. The By-Laws may include further provisions for
Shareholders' votes and meetings and related matters not inconsistent with the
provisions hereof.
6. LIMITATION OF LIABILITY; INDEMNIFICATION
6.1 Trustees, Shareholders, etc, Not Personally Liable; Notice. All
persons extending credit to, contracting with or having any claim against the
Trust shall look only to the assets of the Trust for payment under such credit,
contract or claim; and neither the Shareholders of the Trust nor the Trustees,
nor any of the Trust's officers, employees or agents, whether past, present or
future, shall be personally liable therefor. Every note, bond, contract,
instrument, certificate. or undertaking and every other act or thing whatsoever
executed or done by or on behalf of the Trust, or the Trustees or any of them
in connection with the Trust shall be conclusively deemed to have been executed
or done only by or for the Trust or the Trustees and not personally. Nothing in
this Declaration of Trust shall protect any Trustee or officer against any
liability to the Trust or the Shareholders to which such Trustee or officer
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
office of Trustee or of such officer.
Every note, bond, contract, instrument, certificate or undertaking made or
issued by the Trustees or by any officers or officer shall give notice that
this Declaration of Trust is on file with the Secretary of the Commonwealth of
Massachusetts and shall recite to the effect that the same was executed or made
by or on behalf of the Trust or by them as Trustees or Trustee or as officers
or officer and not individually and that the obligations of such instrument are
not binding upon any of them or the Shareholders individually but are binding
only upon the assets and property of the Trust, but the omission thereof shall
not operate to bind any Trustees or Trustee or officers or officer or
Shareholders or Shareholder individually.
6.2 Trustee's Good Faith Action; Expert Advice; No Bond or Surety. The
exercise by the Trustees of their powers and discretion hereunder shall be
binding upon everyone
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interested. A Trustee shall be liable for such Trustee's own willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee, and for nothing else, and
shall not be liable for errors of judgment or mistakes of fact or law. Subject
to the-foregoing, (a) the Trustees shall not be responsible or liable in any
event for any neglect or wrongdoing of any officer, agent, employee,
consultant, adviser, administrator, distributor or principal underwriter,
custodian or transfer, dividend disbursing, Shareholder servicing or accounting
agent of the Trust, nor shall any Trustee be responsible for the act or
omission of any other Trustee; (b) the Trustees may take advice of counsel or
other experts with respect to the meaning and operation of this Declaration of
Trust and their duties as Trustees, and shall be under no liability for any act
or omission in-accordance with such advice or for failing to follow such
advice; and (c) in discharging their duties, the Trustees, when acting in good
faith, shall be entitled to rely upon the books of account of the Trust and
upon written reports made to the Trustees by any officer appointed by them, any
independent public accountant, and (with respect to the subject matter of the
contract involved) any officer, partner or responsible employee of a
Contracting Party appointed by the Trustees pursuant to Section 3.3. The
Trustees as such shall not be required to give any bond or surety or any other
security for the performance of their duties.
6.3 Indemnification of Shareholders. In case any Shareholder (or former
Shareholder) of the Trust shall be charged or held to be personally liable for
any obligation or liability of the Trust solely by reason of being or having
been a Shareholder and not because of such Shareholder's acts or omissions or
for some other reason, the Trust (upon proper and timely request by the
Shareholder) shall assume the defense against such charge and satisfy any
judgment thereon, and the Shareholder or former Shareholder (or such
Shareholder's heirs, executors, administrators or other legal representatives
or in the case of a corporation or other entity, its corporate or other general
successor) shall be entitled out of the assets of the Trust estate to be held
harmless from and indemnified against all loss and expense arising from such
liability.
6.4 Indemnification of Trustees, Officers, etc. The Trust shall indemnify
(from the assets of the Trust) each of its Trustees and officers (including
persons who serve at the Trust's request as directors, officers or trustees of
another organization in which the Trust has any interest as a shareholder,
creditor or otherwise [hereinafter referred to as a "Covered Person"]) against
all liabilities, including but not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and expenses, including
reasonable accountants' and counsel fees, incurred by any Covered Person in
connection with the defense or disposition of-any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may have been involved
as a party or otherwise or with which such person may be or may have been
threatened, while in office or thereafter, by reason of being or having been
such a Trustee or officer, director or trustee, except with respect to any
matter as to which it has been determined that such Covered Person had acted
with willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of such Covered Person's office (such
conduct referred to hereafter as "Disabling Conduct"). A determination that the
Covered Person is entitled to indemnification may be made by (i) a final
decision on the merits by a court or other
B-16
body before whom the proceeding was brought that the person to be indemnified
was not liable by reason of Disabling Conduct, (ii) dismissal of a court action
or an administrative proceeding against a Covered Person for insufficiency of
evidence of Disabling Conduct, or (iii) a reasonable determination, based upon
a review of the facts, that the indemnitee was not liable by reason of
Disabling Conduct by (a) a vote of a majority of a quorum of Trustees who are
neither "interested persons" of the Trust as defined in section 2(a)(19) of the
1940 Act nor parties to the proceeding, or (b) an independent legal counsel in
a written opinion. Expenses, including accountants and counsel fees so incurred
by any such Covered Person (but excluding amounts paid in satisfaction of
judgments, in compromise or as fines or penalties), may be paid from time to
time by the Trust in advance of the final disposition of any such action, suit
or proceeding, provided that the Covered Person shall have undertaken to repay
the amounts so paid to the Trust in question if it is ultimately determined
that indemnification of such expenses is not authorized under this Article VI
and (i) the Covered Person shall have provided security for such undertaking,
(ii) the Trust shall be insured against losses arising by reason of any lawful
advances, or (iii) a majority of a quorum of the disinterested Trustees who are
not a party to the proceeding, or an independent legal counsel in a written
opinion, shall have determined, based on a review of readily available facts
(as opposed to a full trial-type inquiry), that there is reason to believe that
the Covered Person ultimately will be found entitled to indemnification.
6.5 Compromise Payment. As to any matter disposed of by a compromise
payment by any such Covered Person referred to in Section 6.4, pursuant to a
consent decree or otherwise, no such indemnification either for any payment or
for any other expenses shall be provided unless such indemnification shall be
approved (a) by a majority of the disinterested Trustees who are not parties to
the proceeding or (b) by an independent legal counsel in a written opinion.
Approval by the Trustees pursuant to clause (a) or by independent legal counsel
pursuant to clause (b) shall not prevent the recovery from any Covered Person
of any amount paid to such Covered Person in accordance with any of such
clauses as indemnification if such Covered Person is subsequently adjudicated
by a court of competent jurisdiction to have been liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such Covered
Person's office.
6.6 Indemnification Not Exclusive, etc. The right of indemnification
provided by this Article VI shall not be exclusive of or affect any other
rights to which any such Covered Person may be entitled. As used in this
Article VI, "Covered Person" shall include such person's heirs, executors and
administrators, an "interested Covered Person" is one against whom the action,
suit or other proceeding in question or another action, suit or other
proceeding on the same or similar grounds is then or has been pending or
threatened, and a "disinterested" person is a person against whom none of such
actions, suits or other proceedings or another action, suit or other proceeding
on the same or similar grounds is then or has been pending or threatened.
Nothing contained in this Article shall affect any rights to indemnification to
which personnel of the Trust, other than Trustees and officers, and other
persons may be entitled by contract or otherwise under law, nor the power of
the Trust to purchase and maintain liability insurance on behalf of any such
person.
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6.7 Liability of Third Persons Dealing with Trustees. No person dealing
with the Trustees shall be bound to make any inquiry concerning the validity of
any transaction made or to be made by the Trustees or to see to the application
of any payments made or property transferred to the Trust or upon its order.
7. MISCELLANEOUS
7.1 Duration and Termination of Trust. Unless terminated as provided
herein, the Trust shall continue without limitation of time and, without
limiting the generality of the foregoing, no change, alteration or modification
with respect to the Trust shall operate to terminate the Trust. The Trust may
be terminated at any time by a majority of the Trustees then in office subject
to a favorable vote of a majority of the outstanding voting securities, as
defined in the 1940 Act.
Upon termination, after paying or otherwise providing for all charges,
taxes, expenses and liabilities, whether due or accrued or anticipated as may
be determined by the Trustees, the Trust shall in accordance with such
procedures as the Trustees consider appropriate reduce the remaining assets to
distributable form in cash, securities or other property, or any combination
thereof, and distribute the proceeds to the Shareholders.
7.2 Reorganization. The Trust may, either as the successor, survivor, or
non-survivor, (1) consolidate or merge with one or more other trusts,
sub-trusts, partnerships, associations, limited liability companies,
corporations or other entities organized under the laws of the Commonwealth of
Massachusetts or any other state of the United States, to form a new
consolidated or merged trust, partnership, association, limited liability
company, corporation or other entity under the laws of which any one of the
constituent entities is organized with the Trust to be the survivor or
non-survivor of such transaction, or (2) transfer all or substantially all of
its assets to one or more trusts or sub-trusts, partnerships, associations,
corporations or other entities organized under the laws of the Commonwealth of
Massachusetts or any other state of the United States, or have one or more such
entities merged into it, or transfer a substantial portion of its assets to it,
any such consolidation, merger or transfer to be upon such terms and conditions
as are specified in an agreement and plan of reorganization authorized and
approved by the Trustees and entered into by the Trust in connection therewith.
Any such consolidation, merger or transfer shall require the affirmative vote
of Shareholders in the manner contemplated by Section 5.4.
7.3 Amendments. All rights granted to the Shareholders under this
Declaration of Trust are granted subject to the reservation of the right to
amend this Declaration of Trust as herein provided, except that no amendment
shall repeal the limitations on personal liability of any Shareholder or
Trustee or repeal the prohibition of assessment upon the Shareholders without
the express consent of each Shareholder or Trustee involved. Subject to the
foregoing, the provisions of this Declaration of Trust (whether or not related
to the rights of Shareholders) may be amended at any time, so long as such
amendment does not materially adversely affect the rights of any Shareholder
with respect to which such amendment is or purports to be applicable and so
long as such amendment is not in contravention of applicable law, including the
1940 Act, by an
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instrument in writing signed by a majority of the then Trustees (or by an
officer of the Trust pursuant to the vote of a majority of such Trustees). Any
amendment to this Declaration of Trust that materially adversely affects the
rights of Shareholders may be adopted at any time by an instrument in writing
signed by a majority of the then Trustees (or by an officer of the Trust
pursuant to a vote of a majority of such Trustees) when authorized to do so by
the vote of Shareholders in the manner contemplated by Section 5.4. Subject to
the foregoing, any such amendment shall be effective as of any prior or future
time as provided in the instrument containing the terms of such amendment or,
if there is no provision therein with respect to effectiveness, upon the
execution of such instrument and of a certificate (which may be a part of such
instrument) executed by a Trustee or officer of the Trust to the effect that
such amendment has been duly adopted.
7.4 Filing of Copies: References; Headings. The original or a copy of this
instrument and of each amendment hereto shall be kept at the office of the
Trust where it may be inspected by any Shareholder. A copy of this instrument
and of each amendment hereto shall be filed by the Trust with the Secretary of
The Commonwealth of Massachusetts and with the Springfield City Clerk, as well
as any other governmental office where such filing may from time to time be
required, but the failure to make any such filing shall not impair the
effectiveness of this instrument or any such amendment. Anyone dealing with the
Trust may rely on a certificate by an officer of the Trust as to whether or not
any such amendments have been made, as to the identities of the Trustees and
officers, and as to any matters in connection with the Trust hereunder; and,
with the same effect as if it were the original, may rely on a copy certified
by an officer of the Trust to be a copy of this instrument or of any such
amendments. In this instrument and in any such amendment, references to this
instrument, and all expressions like "herein", "hereof" and "hereunder" shall
be deemed to refer to this instrument as a whole as the same may be amended or
affected by any such amendments. The masculine gender shall include the
feminine and neuter genders. Headings are placed herein for convenience of
reference only and shall not be taken as a part hereof or control or affect the
meaning, construction or effect of this instrument. This instrument may be
executed in any number of counterparts each of which shall be deemed an
original.
7.5 Applicable Law. This Declaration of Trust is made in The Commonwealth
of Massachusetts, and it is created under and is to be governed by and
construed and administered according to the laws of said Commonwealth,
including the Massachusetts Business Corporation Law as the same may be amended
from time to time, to which reference is made with the intention that matters
not specifically covered herein or as to which an ambiguity may exist shall be
resolved as if the Trust were a business corporation organized in
Massachusetts, but the reference to said Business Corporation Law is not
intended to give the Trust, the Trustees, the Shareholders or any other person
any right, power, authority or responsibility available only to or in
connection with an entity organized in corporate form. The Trust shall be of
the type referred to in Section 1 of Chapter 182 of the Massachusetts General
Laws and of the type commonly called a Massachusetts business trust, and
without limiting the provisions hereof, the Trust may exercise all powers which
are ordinarily exercised by such a trust.
B-19
7.6 Resident Agent. ________________________ , CIGNA Investment
Securities, __________________ is hereby designated as the initial resident
agent of the Trust in Massachusetts.
B-20
IN WITNESS WHEREOF, the undersigned Trustees hereunto executed this
document for CIGNA Investment Securities and its assigns, as of the day and
year first above written.
----------------------------------------
Richard H. Forde
----------------------------------------
Russell H. Jones
----------------------------------------
Farhan Sharaff
----------------------------------------
Paul J. McDonald
----------------------------------------
Marnie Wagstaff Mueller
B-21
[CIGNA LOGO]
CIGNA INVESTMENT SECURITIES, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Richard H. Forde and Jeffrey S. Winer and either
one of them, proxies of the undersigned, with the power of substitution, to vote
the shares of the undersigned at the Annual Meeting of Shareholders of CIGNA
Investment Securities, Inc. (the "Fund"), on Tuesday, April 30, 2002 at 11:30
a.m., Eastern Time, at The Colony Club, Baystate West, 1500 Main Street,
Springfield, Massachusetts, and at any adjournment thereof, in the manner
directed herein on the matters described in the notice and accompanying proxy
statement for the meeting. The Directors recommend that you vote "FOR" each of
the proposals. As to any other matter, the proxies shall vote in accordance with
their best judgment.
|------------------------------------------------------------------------------|
| PLEASE VOTE, DATE, AND SIGN ON REVERSE SIDE AND RETURN PROMPTLY IN THE |
| ENCLOSED ENVELOPE. |
|------------------------------------------------------------------------------|
|------------------------------------------------------------------------------|
| Please sign this proxy exactly as your name appears on the books of the |
| Fund. Joint owners should each sign personally. Trustees and other |
| fiduciaries should indicate the capacity in which they sign. If a |
| corporation or partnership, this signature should be that of an authorized |
| officer who should state his or her title. |
|------------------------------------------------------------------------------|
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ------------------------------------- ----------------------------------------
- ------------------------------------- ----------------------------------------
- ------------------------------------- ----------------------------------------
- --- Please mark
/X/ votes as in
- --- this example.
_________________________________________
CIGNA INVESTMENT SECURITIES, INC. FOR AGAINST ABSTAIN
_________________________________________ __ __ __
1. Election of Directors. 2. Reorganization of the Fund from | | | | | |
(01) Ms. Mueller (02) Mr. Forde a Delaware corporation to a |__| |__| |__|
(03) Mr. Jones, (04) Mr. McDonald and (05) Mr. Sharaff Massachusetts business trust.
__ __ __
3. Removal of the fundamental investment | | | | | |
__ __ policy concerning investment in other |__| |__| |__|
FOR | | | | WITHHELD investment companies.
ALL | | | | FROM ALL __ __ __
NOMINEES |__| |__| NOMINEES 4. In their discretion upon such other | | | | | |
matters as may properly come before |__| |__| |__|
the meeting.
__
| | This proxy will be voted as specified. If no specification is made,
| | the proxy will be voted in favor of the proposals shown on this
|__| ______________________________________ proxy card.
For all nominees except as noted above
__
Mark box at right if an address change or comment has been | |
noted on the reverse side of this card. |__|
Please be sure to sign and date this Proxy.
Signature: ___________________ Date: ____________________ Signature: _________________________ Date: ______________________