SCHEDULE 14A
(Rule 14a-101)
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)
(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CIGNA HIGH INCOME SHARES
------------------------
(Name of Registrant as Specified In Its Charter)
Not Applicable
------------------------
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Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a6(i)(1) and 0-11.
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number, or the Form or Schedule and the date of its filing.
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4) Date Filed:
CIGNA HIGH INCOME SHARES
Newton, Massachusetts
January [ ], 2005
To Our Shareholders:
You are cordially invited to attend a Special Meeting of Shareholders of
CIGNA High Income Shares (the "Fund"), to be held at The Colony Club, Baystate
West, 1500 Main Street, Springfield, Massachusetts 01115, on March 1, 2005 at
8:30 a.m., Eastern Time. Formal notice of the meeting appears on the next page
and is followed by the proxy statement.
Shareholders are being asked to approve a new advisory agreement for the
Fund with BlackRock Advisors, Inc. ("BlackRock Advisors"), a new sub-advisory
agreement with BlackRock Financial Management, Inc. ("BlackRock Financial
Management"), and to elect the individuals who serve as the trustees of the
BlackRock family of closed-end funds to serve as the Board of Trustees of the
Fund.
As you know, the Fund's current adviser is CIGNA Investment Advisors,
Inc., formerly known as TimesSquare Capital Management, Inc.("CIGNA Advisors").
In June 2004, CIGNA Advisors informed the Board of Trustees of the Fund that it
had decided to exit the business of managing investment companies. Promptly
thereafter, the Fund's independent Trustees undertook a search for a suitable
replacement. In the course of this process they evaluated numerous qualified
candidates to take over both the investment management and administrative duties
for the Fund. They also considered various structural alternatives including
continuation of the Fund as a separate legal entity and a reorganization of the
Fund into another closed-end fund. The proposals described in the enclosed Proxy
Statement - approval of advisory agreements with the BlackRock organization and
election of the persons serving as trustees of the BlackRock closed-end funds to
serve as the Trustees of your Fund - are the result of this process.
The Board of Trustees' recommendation of BlackRock Advisors as adviser and
BlackRock Financial Management as sub-advisor to the Fund is based upon a number
of factors, including the BlackRock, Inc. ("BlackRock") organization's record of
superior investment performance in managing closed-end, leveraged high yield
bond funds. BlackRock Advisors and BlackRock Financial Management are wholly
owned subsidiaries of BlackRock, which is one of the largest publicly traded
investment management firms in the United States with approximately $323.5
billion of assets under management as of September 30, 2004.
The BlackRock organization has over 15 years of experience managing
closed-end products and, as of September 30, 2004, advised a closed-end family
of 52 active funds with approximately $15 billion in assets.
If shareholders approve the proposed advisory and sub-advisory agreements
and elect the proposed trustees, BlackRock Advisors will change the name of the
Fund to BlackRock High Income Trust and bring the Fund into BlackRock's family
of closed-end funds. The Fund's ticker symbol will remain "HIS".
Please note that the Fund's investment management fees will not increase
as a result of approving BlackRock Advisors as adviser to the Fund. BlackRock
Advisors' proposed advisory fees are the same as the fees paid by the Fund to
its current investment adviser. BlackRock Advisors, not the Fund, will pay
BlackRock Financial Management's sub-advisory fees. In addition, BlackRock
Advisors has agreed that it will, for two years after beginning as investment
adviser to the Fund, waive its management fees to the extent necessary to keep
net Fund operating expenses (excluding interest expenses, extraordinary expenses
and broker costs) no higher than the Fund's net operating expenses as of the
date BlackRock Advisors begins managing the Fund.
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 High Income Shares for the year ended December
31, 2003 and the Semi-Annual Report for the period ending June 30, 2004 have
previously been mailed to you.
Sincerely,
RICHARD H. FORDE
Chairman of the Board
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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.
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CIGNA HIGH INCOME SHARES
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Shareholders of CIGNA High Income Shares:
A Special Meeting of Shareholders of CIGNA High Income Shares (the "Fund")
will be held at The Colony Club, Baystate West, 1500 Main Street, Springfield,
Massachusetts 01115, on March 1, , 2005 at 8:30 a.m., Eastern Time, for the
following purposes:
(1) To approve an advisory agreement between the Fund and BlackRock
Advisors, Inc. ("BlackRock Advisors") and a sub-advisory agreement among
the Fund, BlackRock Advisors and BlackRock Financial Management, Inc.
("BlackRock Financial Management").
(2) To elect new Trustees to serve until the next Annual Meeting of
Shareholders or until the election and qualification of their
successors.
(3) 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
January 10, 2005 are entitled to vote at the meeting.
Your vote is important, even if you don't own many shares. Please
complete, sign and return the enclosed proxy /voting instruction card.
Jeffrey S. Winer
Secretary
Newton, Massachusetts
January [ ], 2005
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS OF
CIGNA HIGH INCOME SHARES
This proxy statement is furnished in connection with the solicitation of
proxies by the Trustees of CIGNA High Income Shares (the "Fund") for use at a
Special Meeting of Shareholders of the Fund to be held at The Colony Club, 1500
Main Street, Springfield, Massachusetts 01115, on March 1, 2005 at 8:30 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 in 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
such persons have not received instructions from the beneficial owner or other
persons entitled to vote the shares on a particular matter with respect to which
the brokers or nominees do not have discretionary power) will be treated as
shares which are present and entitled to vote, but which have not voted on such
matter. For this reason, abstentions and broker non-votes will assist the Fund
in obtaining a quorum. Abstentions and broker non-votes will have no effect on
the election of Trustees, but will have the same effect as a vote "against" the
proposal to approve the advisory agreement and sub-advisory agreement.
The Board of Trustees recommends a vote FOR the approval of the advisory
agreement with BlackRock Advisors and of the sub-advisory agreement with
BlackRock Advisors and BlackRock Financial Management and FOR the election of
Trustees. If no specification is made, the proxy will be voted FOR the approval
of the advisory agreement and sub-advisory agreement, FOR the election of
Trustees as listed, and at the discretion of the proxy holders, on any other
matters which may properly come before the meeting or at any postponement or
adjournment. The Board of Trustees 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 BlackRock Advisors and by
CIGNA Investment Advisors, Inc. ("CIGNA Advisors"). The Fund will not incur any
costs in connection with this proxy solicitation. 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. The Fund has
also retained a proxy solicitor, The Altman Group, Inc., to assist in the
solicitation of proxies. The costs of retaining this firm, which will be fully
borne by BlackRock Advisors and CIGNA Advisors, will be $5,000 plus reasonable
out of pocket expenses.
BlackRock Advisors and CIGNA Advisors have agreed to indemnify and hold
the solicitation firm harmless against any liability incurred in connection with
the solicitation of proxies, unless the liability results from the firm's
negligence or
-2-
misconduct. The agreement with the solicitation firm will terminate upon
conclusion of the shareholder meeting or any adjournments of the meeting.
In the event a quorum is not present at the meeting, or in the event
sufficient votes to approve any of the proposals are not received, even though a
quorum is present at the meeting, the persons named as proxies may propose one
or more adjournments or postponements of the meeting to permit further
solicitation of proxies, provided that such persons determine such an
adjournment or postponement and additional solicitation are reasonable and in
the interests of shareholders of the Fund. A shareholder vote may be taken on
any proposal in this Proxy Statement prior to such adjournment if sufficient
votes have been received and such vote is otherwise appropriate. Any such
adjournment will require the affirmative vote of a majority of those shares
present at the meeting in person or by proxy.
At the close of business on January 10, 2005, the record date for the
determination of shareholders entitled to vote at the meeting, there were [
]outstanding shares. Each share is entitled to one vote. This proxy statement
and the accompanying Notice of Special Meeting of Shareholders and form of proxy
are being mailed on or about January 14, 2005, 2004 to shareholders of record on
the record date.
The principal executive offices of the Fund are located at (and its
mailing address is) 3 Newton Executive Park, Suite 200, Newton, Massachusetts
02462.
The Fund will furnish to a shareholder upon request, without charge, a
copy of the 2003 annual report and June 30, 2004 semi-annual report. Requests
may be made by writing to the Fund c/o CIGNA Investment Advisors, Inc., 280
Trumbull Street, H18E, Hartford, CT 06103, Attn: Alfred A. Bingham III, or by
calling 1-800-528.6718.
PROPOSAL ONE
APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT
The shareholders of the Fund are being asked to approve an investment
advisory agreement between the Fund and BlackRock Advisors and a sub-advisory
agreement among the Fund, BlackRock Advisors and BlackRock Financial Management.
The proposed advisory agreement and sub-advisory agreement are attached as
Appendix A-1 and A-2, respectively, to this Proxy Statement. At a meeting of the
Board of Trustees held on November 23, 2004, the Trustees of the Fund voted to
approve the advisory agreement with BlackRock Advisors and the sub-advisory
agreement with BlackRock Financial Management, subject to shareholder approval.
BACKGROUND
CIGNA Advisors, formerly known as TimesSquare Capital Management, Inc.,
the current advisor to the Fund, informed the Board of Trustees of the Fund in
June 2004 that it had decided to exit the business of managing investment
companies. Promptly thereafter, the Fund's independent Trustees undertook a
search for a suitable replacement to take over both investment management and
administrative duties for the Fund. At the direction of the independent
Trustees, CIGNA Advisors sent a written request for proposal to approximately
ten investment management firms with high yield bond management capabilities.
These requests for proposal solicited information on numerous pertinent topics,
including each firm's experience managing high yield bond portfolios in general
and high yield bond registered investment companies in particular; investment
performance; fund administration capabilities; biographical data of relevant
investment professionals; compliance and regulatory matters; and firm financial
statements. After reviewing responses from these firms, the independent Trustees
selected two firms, including BlackRock Advisors, as finalists and at a
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meeting of the Board of Trustees held on October 12, 2004 conducted in-person
interviews with representatives of both firms.
At the October 12 meeting, representatives of each advisory firm presented
detailed information to the Trustees, including background information on their
firm and its resources, their investment philosophy and process, historical
performance, special considerations entailed in managing a portfolio that uses
leverage such as the Fund, client service capabilities, information on portfolio
managers and analysts, and information on their firm's compliance capabilities
and resources.
Following the October 12th meeting, the Board of Trustees requested
additional information from each of the firms, including information on the
members of the boards of trustees of closed-end funds under their management,
how the firms would utilize the Fund's line of credit, and the firm's
expectations concerning the level of Fund operating expenses in the future.
Following review of this information, at a meeting held on November 23,
2004, the Board of Trustees selected BlackRock Advisors as the investment
adviser and BlackRock Financial Management as sub-advisor to the Fund and
approved the new advisory agreement with BlackRock Advisors and sub-advisory
agreement with BlackRock Financial Management, subject to shareholder approval.
In reaching this decision, the Trustees concluded that the BlackRock
organization has (a) a long-term record of superior performance in managing high
yield bonds as an asset class, and in particular in managing leveraged,
closed-end high-yield bond funds, with an emphasis on risk-adjusted returns and
capital preservation; (b) substantial research and portfolio management
resources and personnel focused exclusively on management of high yield bonds;
and (c) extensive resources dedicated to servicing closed-end fund shareholders
and has broad closed-end fund administration expertise. The Board of Trustees'
selection of BlackRock Advisors was also based on the fact that the advisory
fees under the new advisory agreement will be the same as under the existing
agreement with CIGNA Advisors. Further, BlackRock Advisors has committed, for
two years after commencement of its advisory agreement with the Fund, to
maintain the Fund's net operating expense ratio at a level no greater than that
of the Fund's net operating expense ratio as of the time that BlackRock Advisors
begins managing the Fund. The Board also considered that Fund non-advisory fee
expenses may decrease since the Fund will become part of the BlackRock family of
closed-end funds, and may benefit from the economies of scale associated with a
larger fund complex and potential for improved operating efficiencies.
In selecting BlackRock Advisors, the Trustees focused on the BlackRock
organization's superior investment and administrative capabilities in comparison
to the capabilities of the numerous other firms it considered as the new
investment adviser for the Fund, as well as BlackRock Advisor's willingness to
serve as investment adviser to the Fund at current fee levels. The Board
selected the firm it considered to be the best successor adviser available to
the Fund.
While the Trustees did not compare the advisory fees under the proposed
advisory agreement with BlackRock Advisors with those under other investment
advisory contracts, it had recently compared the advisory fees payable under the
CIGNA Advisors agreement with advisory fees paid by other high yield funds in
connection with the renewal of the CIGNA Advisors agreement and had concluded
that the fees were comparable. Since the Fund is a closed-end fund and is not
expected to increase in size (other than by potential appreciation of assets),
the Board did not consider whether the level of advisory fees reflects economies
of scale. The Board also did not consider the costs of services to be provided
and profits to be realized by BlackRock Advisors from its relationship with the
Fund.
-4-
During their evaluations, the Trustees were made aware of the fact that
BlackRock proposed to make certain payments to CIGNA Advisers in connection with
the acquisition of its closed-end fund business, but this did not influence the
Trustees' decision to recommend BlackRock Advisors as the adviser to the Fund.
The Board of Trustees also considered whether the Fund should be merged
into another closed-end high yield fund managed by BlackRock Advisors. The
Trustees concluded that, based on several factors such as the size of the Fund
and the negative impact that a merger would have on the Fund's borrowing
arrangements, it was in the Fund's and shareholders' best interests to maintain
the Fund as a separate investment company.
BlackRock Advisors is not affiliated with CIGNA Advisors or any of its
affiliates, and none of the Fund's Trustees and officers are employed by or
otherwise affiliated with BlackRock Advisors or BlackRock Financial Management
or, to their knowledge, with any affiliated persons of these organizations.
BLACKROCK ADVISORS - PORTFOLIO MANAGEMENT
If the advisory agreement and sub-advisory agreement are approved, the
assets of the Fund will be managed by a team of investment professionals at
BlackRock Financial Management, including the following individuals who will
have day-to-day responsibility: Jeff Gary, Managing Director of BlackRock
Financial Management since 2003, and Scott Amero, Managing Director of BlackRock
Financial Management since 1990. Jeff Gary is the head of BlackRock's High Yield
Team. Prior to joining BlackRock Financial Management, he was a Managing
Director and portfolio manager with AIG (American General) Investment Group.
Scott Amero is co-Head of BlackRock's Fixed Income Portfolio Management Group
and joined BlackRock Financial Management in 1990.
INFORMATION ABOUT THE PROPOSED ADVISORY AND SUB-ADVISORY AGREEMENTS
If approved by shareholders, the new advisory and sub-advisory agreements
will each remain in full force and effect until February 28, 2007, and, unless
terminated in accordance with their respective terms, will continue in full
force and effect indefinitely thereafter, but only so long as such continuance
is specifically approved at least annually by both (1) the Board of Trustees of
the Fund or by a vote of the majority of the outstanding voting securities (as
defined in the Investment Company Act of 1940 (the "1940 Act") of the Fund, and
(2) the vote of a majority of those Trustees of the Fund who are not parties to
the advisory or sub-advisory agreement or interested persons of such party, cast
in person at a meeting called for the purpose of voting on such approval.
THE NEW ADVISORY AGREEMENT WILL NOT RESULT IN A CHANGE IN ADVISORY FEES
PAID BY THE FUND. The Fund will pay BlackRock Advisors a fee for serving as
adviser to the Fund equal to the annual rate of 0.75% of the average weekly
total asset value of the Fund for the first $200 million of total Fund assets,
and 0.50% for all Fund assets in excess of $100 million payable monthly in
arrears. These are the same rates as under the current advisory agreement with
CIGNA Advisors. From this fee, BlackRock Advisors will pay BlackRock Financial
Management its sub-advisory fee for its services under the sub-advisory
agreement. The Fund may also, subject to approval by the Board of Trustees,
reimburse BlackRock Advisors for a pro rata share of certain costs of employees
who devote substantial time to operation of the Fund or other investment
companies managed by BlackRock Advisors. This reimbursement is similar to the
Fund's existing arrangements with CIGNA Advisors concerning reimbursement of
expenses of the Offices of the Treasurer and Secretary.
-5-
Under the new advisory agreement, BlackRock Advisors will, among other
things: (i) continuously furnish an investment program for the Fund; (ii) place
orders for the purchase and sale of securities for Fund; (iii) provide for
certain facilities and administrative services; (iv) prepare financial and other
reports required to be filed with the Securities and Exchange Commission; and
(v) generally manage, supervise and conduct the affairs and business of the
Fund. Under the new sub-advisory agreement, BlackRock Financial Management will
perform certain aspects of the day-to-day investment management of the Fund. The
Fund will be responsible for expenses related to, among other things: (i)
custodial, depository, accounting, pricing and trustee services; (ii) accounting
and auditing; (iii) brokerage and related costs; (iv) taxes; (v) registration
and filing fees; (vi) preparation and printing of certificates relating to the
issuance of securities;(vii) printing and mailing of proxy statements, reports
and other communications to shareholders; (viii) insurance; (ix) legal counsel
in connection with matters relating to the Fund; and (x) interest on borrowings
by the Fund. The forms of the new advisory and sub-advisory agreements are
attached to this proxy statement in Appendix A-1 and A-2, respectively, and the
description set forth in this proxy statement of the new advisory and
sub-advisory agreements is qualified in its entirety by reference to Appendix
A-1 and A-2.
The material differences between the new advisory agreement with BlackRock
Advisors and the existing advisory agreement with CIGNA Advisors include:
o the new agreement more explicitly identifies the administrative services
that BlackRock Advisors will perform for the Fund;
o the new agreement authorizes BlackRock Advisors and its affiliates to
engage in "agency cross" transactions, that is, transactions in which a
broker that is an affiliate of the advisor is on both sides of the
transaction. The Fund can revoke its consent to these transactions at any
time;
o the new agreement permits, at the discretion of the Fund's Board of
Trustees, the Fund to indemnify BlackRock Advisors against certain
liabilities. The Fund can not indemnify BlackRock Advisors for any
liabilities resulting from BlackRock Advisors' bad faith, willful
misfeasance, gross negligence or reckless disregard of its duties.
INFORMATION ON BLACKROCK ADVISORS AND BLACKROCK FINANCIAL MANAGEMENT
BlackRock Advisors, located at 100 Bellevue Parkway, Wilmington, Delaware
19809, and BlackRock Financial Management, located at 40 East 52nd Street, New
York, NY 10022, are each wholly owned subsidiaries of BlackRock, which is one of
the largest publicly traded investment management firms in the United States
with approximately $323.5 billion of assets under management as of September 30,
2004. BlackRock manages assets on behalf of institutional and individual
investors worldwide through a variety of equity, fixed income, liquidity and
alternative investment products, including the BlackRock Funds(TM) and BlackRock
Liquidity Funds(TM). In addition, BlackRock provides risk management and
investment system services to institutional investors under the BlackRock
Solutions(R) name.
The BlackRock organization has over 15 years of experience managing
closed-end products and, as of September 30, 2004, advised a closed-end family
of 52 active funds with approximately $15 billion in assets. Clients are served
from the company's headquarters in New York City, as well as offices in Boston,
Edinburgh, Hong Kong, San Francisco, Singapore, Sydney, Tokyo and Wilmington.
BlackRock is a member of The PNC Financial Services Group, Inc. ("PNC"), one of
the largest diversified financial services organizations in the United States.
BlackRock's shares are traded on the New York stock Exchange (BLK). As of
September 30, 2004, PNC owned approximately 71% of BlackRock's shares.
-6-
The executive officers and directors of BlackRock Advisors are:
NAME POSITION
- ---- --------
Laurence D. Fink Chief Executive Officer
Ralph L. Schlosstein President and Director
Robert S. Kapito Vice Chairman and Director
Robert P. Connolly General Counsel and Secretary
Paul L. Audet Director
Laurence J. Carolan Director
Kevin M. Klingert Director
John P. Moran Director
Thomas H. Nevin Director
Mark Steinberg Director
The executive officers and directors of BlackRock Financial Management are:
NAME POSITION
- --------------------------------------------------------------------------------
Laurence D. Fink Chairman, Chief Executive Officer and Director
Ralph L. Schlosstein President and Director
Robert S. Kapito Vice Chairman and Director
Paul L. Audet Chief Financial Officer
Robert P. Connolly General Counsel and Secretary
The address of each of these persons is 40 East 52nd Street, New York, New York
10022.
BlackRock Advisors serves as investment adviser for two closed-end funds and one
open-end fund with investment objectives similar to the Fund:
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Size of Fund (as of
Name of Fund September 30, 2004) Rate of Advisory Fee Fee waiver
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BlackRock High Yield $50 Million 1.48% N/A
Trust*
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BlackRock Strategic $106 Million 0.75% N/A
Bond Trust*
- --------------------------------------------------------------------------------
BlackRock Funds High $627 Million 0.50% 0.26%
Yield Bond Portfolio**
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* Closed-end
** Open-end
IMPACT ON EXISTING ADVISORY AGREEMENT WITH CIGNA ADVISORS AND SUB-ADVISORY
AGREEMENT WITH SHENKMAN CAPITAL MANAGEMENT, INC.
Upon commencement of the new advisory agreement with BlackRock Advisors,
the Fund's investment advisory agreement with CIGNA Advisors and sub-advisory
agreement with Shenkman Capital Management, Inc. ("Shenkman") will terminate.
The advisory agreement with CIGNA Advisors is dated April 5, 1988 and was
approved by shareholders in May 1988. The sub-advisory agreement with Shenkman
is dated April 29, 2003 and was approved by shareholders on the same date. The
Board of Trustees last renewed the advisory agreement with CIGNA Advisors and
the sub-advisory agreement with Shenkman on March 9, 2004.
During 2003, the Fund paid CIGNA Advisors $1,585,000 for services provided
under the investment advisory agreement. This amount included $66,000 for
reimbursement of a pro rata share of the costs of certain employees who devote a
substantial amount of their time to providing certain non-advisory services to
the Fund and other investment companies managed by CIGNA Advisors. These
services will not continue after commencement of the new advisory agreements.
CIGNA Advisors in turn paid Shenkman its sub-advisory fee.
-7-
RECOMMENDATION OF THE BOARD OF TRUSTEES
Based on its review, the Board of Trustees approved the selection of
BlackRock Advisors to serve as advisor to the Fund and BlackRock Financial
Management to serve as sub-advisor, and the proposed advisory and sub-advisory
agreements. The Board then directed that the selection of BlackRock Advisors as
advisor, BlackRock Financial Management as sub-advisor, and the proposed
advisory and sub-advisory agreements be submitted to shareholders for approval
with the Board's recommendation that shareholders of the Fund vote to approve
the proposed advisory and sub-advisory agreements.
Approval of the advisory and sub-advisory agreements requires the
affirmative vote of the lesser of either (a) 67% or more of the outstanding
shares of the Fund present at a meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present in person or represented by proxy or
(b) more than 50% of the outstanding shares of the Fund. If the proposal does
not receive the requisite shareholder approval, then the Trustees will meet to
consider possible alternatives, which might include resubmission of the proposal
for shareholder approval.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR PROPOSAL ONE
PROPOSAL TWO
ELECTION OF TRUSTEES
At the meeting, nine new Trustees are to be elected by the shareholders of
the Fund. The Board of Trustees has nominated and recommends the election of
Andrew F. Brimmer, Richard E. Cavanaugh, Kent Dixon, Frank J. Fabozzi, R. Glenn
Hubbard, Robert S. Kapito, Walter F. Mondale, Ralph L. Schlosstein and James
Clayburn LaForce, Jr. None of the nominees currently serves as a Trustee of the
Fund. The current Trustees of the Fund are not seeking re-election. Shareholders
are asked to elect these nominees as Trustees of the Fund, each to hold office
until the next Annual Meeting of Shareholders or until the election and
qualification of his successor. Each of the nominees currently serves as a
trustee or director of other closed-end funds for which BlackRock Advisors acts
as investment advisor. Members of the Nominating Committee, who are independent
Trustees of the Fund, along with their counsel, interviewed the nominees and
recommended their election as Trustees of the Fund.
All shares represented by valid proxies will be voted in the election of
Trustees 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 Trustees of the Fund, or the Board of
Trustees may reduce the number of Trustees, as authorized by the Declaration of
Trust. All of the nominees have agreed to serve if elected.
Information on Nominees
Certain information concerning the nominees is set forth in the table
below. Nominees who would, if elected, be interested persons of the Fund, as
defined in the Investment Company Act of 1940, as amended (the "Investment
Company Act") are denoted by an asterisk (*). Nominees who would, if elected, be
independent trustees are those who would not be interested persons of the Fund
or BlackRock Advisors and are denoted without an asterisk. The business address
of the nominees is 100 Bellevue Parkway, Wilmington, Delaware 19809, unless
specified otherwise below.
-8-
, Number of
Portfolios in
Name, Address Term of Principal Occupation BlackRock
Age Office and During the Fund Complex
and Position Length of Past Five Years and Overseen by
Held with Time Other Nominee for Other Directorships
Registrant Served** Affiliations Trustee held by Trustee
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INDEPENDENT Nominee President of Brimmer 52 Director of
NOMINEES: & Company, Inc., a CarrAmerica Realty
Andrew F. Washington, and Borg-Warner
Brimmer Corporation Automotive. Former
P.O. Box 4546 D.C.-based economic Director of
New York, NY and financial BankAmerica
10163-4546 consulting firm. Corporation (Bank of
Age: 77 Wilmer D. Barrett America), Bell South
Nominee Professor of Corporation, College
Economics, University Retirement Equities
of Massachusetts-- Fund (Trustee),
Amherst. Formerly Commodity Exchange,
member of the Board Inc. (Public
of Governors of the Governor),
Federal Reserve Connecticut Mutual
System. Former Life Insurance
Chairman, District of Company, E.I. du Pont
Columbia Financial de Nemours & Company,
Control Board. Lead Equitable Life
Trustee and Chairman Assurance Society of
of the Audit the United States,
Committee of each of Gannett Company,
the closed-end trusts Mercedes-Benz of
of which BlackRock North America, NCM
Advisors acts as Financial Corporation
investment advisor. (American Security
Bank), MNC Capital
Management, Navistar
International
Corporation, PHH
Corp. and UAL
Corporation (United
Airlines).
Richard E. Nominee President and Chief 52 Trustee, Airplanes
Cavanagh Executive Officer of Group, Aircraft
P.O. Box 4546 The Conference Board, Finance Trust (AFT)
New York, NY Inc., a leading and Educational
10163-4546 global business Testing from
Age: 58 membership 1995-present. Former
Nominee organization, from Service (ETS).
1995-present. Former Director, Arch Executive Dean
of the Chemicals, Fremont John F. Kennedy Group and
The School of Government Guardian Life
at Harvard University Insurance Company America.
from 1988-1995.
Acting Director,
Harvard Center for
Business and
Government
(1991-1993). Formerly
Partner (principal)
of McKinsey &
Company, Inc.
(1980-1988). Former
Executive Director of
Federal Cash
Management, White
House Office of
Management and Budget
(1977-1979).
Co-author, THE
WINNING PERFORMANCE
(best selling
management book
published in 13
national editions).
Kent Dixon Nominee Consultant/Investor. 52 Former Director of
P.O. Box 4546 Former President and ISFA (the owner of
New York, NY Chief Executive INVEST, a national
10163-4546 Officer of Empire securities brokerage
Age: 66 Federal Savings Bank service designed for
Nominee of America and Banc banks and thrift
PLUS Savings institutions).
Association, former
Chairman of the
Board, President and
Chief
-9-
Executive
Officer of Northeast
Savings.
Frank J. Fabozzi Nominee Consultant. Editor of 52 Director, Guardian
P.O. Box 4546 THE JOURNAL OF Mutual Funds Group
New York, NY PORTFOLIO MANAGEMENT (18 portfolios).
10163-4546 and Frederick Frank
Age: 55 Adjunct Professor of
Nominee Finance at the School
of Management at Yale
University. Author
and editor of several
books on fixed income
portfolio management.
Visiting Professor of
Finance and
Accounting at the
Sloan School of
Management, Media,
Massachusetts
NY Institute of
Technology from 1986
to August 1992.
R. Glenn Hubbard Dean of Columbia Business 52 Director of ADP Dex
P.O. Box 4546 School since July 1, KKR Financial Corporation
and New York, 2004; faculty and Ripplewood Holdings.
10163-4546 member of Columbia
Age: 46 University's
Nominee 2004; faculty member
of Columbia
University's Graduate
School of Arts
and Sciences since 1988;
Russell L. Carson
Professor of
Finance and Economics;
Deputy Assistant Secretary
of the U.S.
Treasury Department for Tax
Policy from 1991 to
1993; Chairman of the
U.S. Council of Economic
Advisers and Chairman of the
Economic Policy
Committee of the OECD
from February
2001 until March 2003.
James Clayburn Nominee Dean Emeritus of The 52 Director of Payden &
LaForce, Jr. John E. Anderson Rygel Investment
P.O. Box 4546 Graduate School of Trust, Metzler-Payden
New York, NY Management, Investment Trust,
10163-4546 University of Advisor Series Trust,
Age: 75 California since July Arena
Nominee 1, 1993. Acting Dean Pharmaceuticals, Inc.
of The School of and CancerVax
Business, Hong Kong Corporation.
University of Science
and Technology
1990-1993. From 1978
to September 1993,
Dean of The John E.
Anderson Graduate
School of Management,
University of
California.
Walter F. Nominee Senior Counsel, 52 Director of United
Mondale Dorsey & Whitney LLP, Health Foundation and
P.O. Box 4546 a law firm (January the Japan Society.
New York, NY 2004-present); Member of the Hubert
10163-4546 Partner, Dorsey & H. Humphrey Institute
Age: 76 Whitney LLP (December of Public Affairs
Nominee 1987-August 1993). Advisory Board, The
Formerly U.S. Mike and Maureen
Ambassador to Japan Mansfield Foundation,
(1993-1996). Dean's Board of
Formerly, Vice Visitors of the
President of the Medical School at the
United States, U.S. University of
Senator and Attorney
General of the
-10-
State of Minnesota. Minnesota, and the
1984 Democratic Mayo Foundation
Nominee for Advisory Council to
President of the the President.
United States.
Formerly Director of
Northwest Airlines
Corp., UnitedHealth
Group and RBC Dain
Rauscher, Inc.
INTERESTED Nominee Vice Chairman of 52 Chairman of the Hope
NOMINEES: BlackRock, Inc. Head & Heroes & Children's
Robert S. Kapito of BlackRock's Cancer Trustee and
Age: 47 Portfolio Management President Fund.
Nominee Group, a member of President of the
the Management Board of Directors of
Committee, the Periwinkle National
Investment Strategy Theatre for Young
Group, the Fixed Audiences. Director
Income and Global of Icruise.com, Corp.
Equity Investment
Strategy Group.
Responsible for the
portfolio management of the
Fixed Income, Domestic Equity
and International
Equity, Liquidity and
Alternative Investment Groups
of BlackRock. Currently,
President and Trustee of
each of the closed-end trusts
for which BlackRock
Advisors acts as investment
advisor.
Ralph L. Nominee Director since 1999 52 Chairman and
Schlosstein and President of President of the
Age: 53 BlackRock, Inc. since BlackRock Liquidity
Nominee its formation in 1998 Funds (10
and of BlackRock portfolios). Director
Inc.'s predecessor of Anthracite
entities since 1988. Capital, Inc. and
Member of BlackRock's Director of several
Management Committee of BlackRock's
and Investment alternative
Strategy Group. investment vehicles.
Formerly, Managing Currently, Member of
Director of Lehman the Visiting Board of
Brothers, Inc. and Overseers of the John
Co-head of its F. Kennedy School of
Mortgage and Savings Government at Harvard
Institutions Group. University, the
Currently, Chairman Financial
and Trustee of each Institutions Center
of the closed-end Board of the Wharton
trusts for which School of the
BlackRock Advisors University of
acts as investment Pennsylvania, Trustee
advisor. of Trinity School in
New York City, Trustee
of New Visions for Public
Education in New York and
of The Public Theatre.
Member of the Board of
Advisers of Marujupa LLC.
Formerly, a Director of
Pulte Corporation
and a Member of Fannie
Mae's Advisory Council.
** Each Trustee's term of office will be until the next annual meeting of
shareholders or until the election of the Trustee's successor.
None of the nominees have received any compensation from the Fund.
-11-
The following table sets forth the number of shares of the Fund and shares of
all funds in the BlackRock family of closed-end funds beneficially owned by the
nominees. The information provided is as of December 31, 2003. As of December
31, 2003, none of the nominees owned shares of the Fund.
Nominees who are not Dollar Range of Aggregate Dollar Range of
"interested persons" Equity Securities Equity Securities
of the Fund in the Fund in BlackRock Closed-End Funds
- --------------------------------------------------------------------------------
Andrew F. Brimmer None Over $100,000
Richard E. Cavanaugh None Over $100,000
Kent Dixon None Over $100,000
Frank J. Fabozzi None $10,001-$50,000
R. Glenn Hubbard None None
James C. LaForce, Jr None Over $100,000
Walter F. Mondale None Over $100,000
Nominees who are Dollar Range of Aggregate Dollar Range of
"interested persons" Equity Securities Equity Securities
of the Fund in the Fund in BlackRock Closed-End Funds
- --------------------------------------------------------------------------------
Robert S. Kapito None Over $100,000
Ralph L. Schlosstein None Over $100,000
Based on information furnished by each nominee who would not be an
interested person of the Fund as of December 31, 2003, neither Andrew F.
Brimmer, Richard E. Cavanaugh, Kent Dixon, Frank J. Fabozzi, R. Glenn Hubbard,
Walter F. Mondale, James Clayburn LaForce, Jr. nor any of their immediate family
members owned any securities issued by BlackRock, BlackRock Advisors, BlackRock
Financial Management or their affiliates as of that date.
Section 16(a) Beneficial Owner Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Fund's Trustees 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 ("NYSE") reports of ownership
and reports of changes in ownership of common stock and other equity securities
of the Fund. Officers, Trustees 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, Trustees and 10% shareholders were
satisfied.
The Board of Trustees of the Fund held six Board meetings during 2003.
Each Trustee attended more than 75% of the aggregate meetings of the Board and
Committees on which such Trustee served during the year. The Board has adopted a
policy that Trustees will ordinarily attend annual meetings of shareholders. At
the Fund's annual shareholders meeting held on March 22, 2004, four Trustees
attended the meeting. The Board of Trustees has three standing committees:
Audit; Contracts; and Nominating. Information on these committees is provided
below.
-12-
Audit Committee
The Fund has an Audit Committee comprised of only "Independent Trustees"
of the Fund (as defined in the regulations of the NYSE, who are also not
"interested persons" of the Fund (as defined in Section 2(a)(19) of the 1940
Act. The Audit Committee reviews the process for preparing and reviewing
financial statements and other audit-related matters as they arise throughout
the year; 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 Committee held four meetings in 2003.
In discharging its oversight responsibility as to the audit process, the
Audit Committee has reviewed and discussed with management the audited financial
statements for the last fiscal year. The Audit Committee discussed with the
independent accountants, PricewaterhouseCoopers LLP ("PWC"), 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 might impact their
objectivity and independence and satisfied itself as to the independent
accountants' independence. In addition, the Audit Committee reviewed the
non-audit services to be provided by the independent accountants of the Fund. In
reliance upon the reviews and discussions referred to above, the Audit Committee
recommended to the Board of Trustees that the audited financial statements be
included in the Fund's 2003 annual report to shareholders required by Section
30(e) of the 1940 Act and Rule 30d-1 thereunder for filing with the SEC.
Independent Accountants and Fees
For the fiscal year ended December 31, 2003, 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 review of tax returns of the
Fund and providing tax planning advice. The Audit Committee has appointed PWC as
the Fund's independent accountants for the fiscal year ending December 31, 2004.
PWC also serves as independent accountants for CIGNA.
Representatives of PWC are not expected to attend the meeting, but have
been given the opportunity to make a statement if they so desire and will be
available should any matter arise requiring their presence.
AUDIT FEES
For the audit of the Fund's annual financial statements for the fiscal
year ended December 31, 2002 and December 31, 2003, included in the Fund's
annual report to shareholders for those fiscal years, PWC billed the Fund
$35,000 and $39,000, respectively.
AUDIT-RELATED FEES
For the fiscal years ended December 31, 2002 and December 31, 2003, PWC
billed the Fund $9,800 and $11,300, respectively, for assurance or related
services related to the audit or review of the Fund's financial statements.
These services related to performing agreed upon procedures relating to the
Fund's revolving line of credit.
-13-
TAX FEES
For the fiscal years ended December 31, 2002 and December 31, 2003, PWC
billed the Fund $5,075 and $5,700, respectively, for reviewing the Fund's
federal income tax and excise tax returns and reviewing excise distribution
estimate calculations.
ALL OTHER FEES
For the fiscal years ended December 31, 2002 and December 31, 2003, PWC
did not bill the Fund for any other products and services, other than those
listed above.
For the fiscal years ended December 31, 2002 and December 31, 2003, 100%
of the PWC fees described above under the captions "Audit-Related Fees", "Tax
Fees" and "All Other Fees" were approved by the Fund's Audit Committee pursuant
to 17 CFR 210.2-01(c)(7)(i)(C).
The aggregate non-audit fees billed by PWC for services rendered to CIGNA
Advisors, the investment advisor to the Fund and an indirect, wholly owned
subsidiary of CIGNA, and other entities controlling, controlled by or under
common control with CIGNA Advisors that provide ongoing services to the Fund for
fiscal years ended December 31, 2002 and 2003, were $128,250 and $100,148,
respectively.
The Audit Committee has not developed pre-approval policies and procedures
relating to the provision of services to the Fund by the Fund's independent
accountants.
For the fiscal years ended December 31, 2002 and December 31, 2003, PWC
did not bill any fees that were required to be approved by the Fund's Audit
Committee pursuant to 17 CFR 210.2-01(c)(7)(ii)(C).
In considering PWC's independence, the Audit Committee has considered and
determined that the provision of non-audit services rendered to CIGNA Advisors
by PWC that did not require Audit Committee pre-approval was compatible with
maintaining PWC's independence.
The Board of Trustees has adopted a written charter which sets forth the
Audit Committee's structure, duties and powers, and methods of operation. 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 that Paul J. McDonald has prior accounting experience or related
financial management expertise. The current members of the Audit Committee are
Carol Ann Hayes, Marnie Wagstaff Mueller, Russell H. Jones and Paul J. McDonald
(Chairperson). All members of the Audit Committee meet the independence
standards as defined by the NYSE Listing Company Manual in Sections
303.01(B)(2)(a) and (3) and 303A.06.
Contracts Committee
The Contracts Committee reviews the performance of the investment adviser
for the Fund, and makes recommendations to the Board of Trustees concerning the
renewal of the investment advisory agreement. In performing its function, the
Committee obtains from CIGNA Advisors 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 two meetings in 2003. The
current members of the
-14-
Committee are Ms. Hayes, Ms. Mueller and Messrs. Jones (Chairperson) and
McDonald, none of whom are interested persons of the Fund.
Nominating Committee
The Nominating Committee manages the development and maintenance of the
Board's membership and organization; nominates for consideration by the
shareholders or the Board candidates to serve as Trustees of the Fund;
supervises the nomination of Trustees of the Fund and establishes and maintains
policies regarding the selection of the nominees; and reviews periodically the
compensation of Trustees paid by the Fund and recommends to the Board such
adjustments therein as it deems appropriate. The Committee will consider Trustee
nominees recommended by shareholders in accordance with the procedures set forth
in the Nominating Committee Charter. The Committee held one meeting in 2003. The
current members of the Committee are Ms. Hayes, Ms. Mueller (Chairperson) and
Messrs. Jones and McDonald, none of whom are "interested persons" as defined in
Section 2(a)(19) of the 1940 Act.
Required Vote
Each nominee for Trustee must be elected by a plurality of the shares of
the Fund voted at the meeting.
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" EACH OF THE
NOMINEES.
COMMUNICATIONS WITH THE BOARD
Shareholders wishing to communicate with the Board may do so by sending a
written communication to any Trustee c/o CIGNA Investment Advisors, Inc., 280
Trumbull Street, H16C, Hartford, CT 06103. Any shareholder communication so
received will be promptly forwarded to the Trustee(s) to whom it is addressed.
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 is set out below. The executive officers are
elected annually by the Board of Trustees. As of December 31, 2003, executive
officers of the Fund owned beneficially less than 1% of the shares of the Fund
and of CIGNA.
RICHARD H. FORDE, 51, Senior Managing Director, CIGNA Advisors; Chairman
of the Board and President of the Fund.
ALFRED A. BINGHAM III, 60, Vice President and Treasurer, CIGNA Funds
Group, CIGNA Variable Products Group, CIGNA High Income Shares and CIGNA
Investment Securities; Assistant Vice President, CIGNA Advisors.
JEFFREY S. WINER, 47, Vice President and Secretary, CIGNA Funds Group,
CIGNA Variable Products Group, CIGNA High Income Shares and CIGNA Investment
Securities; Senior Counsel, CIGNA.
If shareholders elect the proposed nominees and approve the advisory
agreement with BlackRock Advisors and sub-advisory agreement with BlackRock
Financial Management, the Board of Trustees will appoint new Fund officers.
-15-
OTHER BUSINESS
Shareholder Proposals for 2005
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 2005 annual meeting must
have been received by management of the Fund prior to November 20, 2004.
Shareholder proposals not included in the proxy material 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 February 3, 2005.
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.
Jeffrey S. Winer
Secretary
Newton, Massachusetts
January [ ], 2005
Appendix A-1
INVESTMENT ADVISORY AGREEMENT
CIGNA HIGH INCOME SHARES
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, dated [ ], between BlackRock High Income Trust (f/k/a
CIGNA High Income Shares) (the "Trust"), a Massachusetts business trust, and
BlackRock Advisors, Inc. (the "Advisor"), a Delaware corporation.
WHEREAS, Advisor has agreed to furnish investment advisory services
to the Trust, a closed-end management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, this Agreement has been approved in accordance with the
provisions of the 1940 Act, and the Advisor is willing to furnish such services
upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual premises and
covenants herein contained and other good and valuable consideration, the
receipt of which is hereby acknowledged, it is agreed by and between the parties
hereto as follows:
1. In General. The Advisor agrees, all as more fully set forth herein, to act as
investment advisor to the Trust with respect to the investment of the Trust's
assets and to supervise and arrange for the day-to-day operations of the Trust
and the purchase of securities for and the sale of securities held in the
investment portfolio of the Trust.
2. Duties and Obligations of the Advisor with Respect to Investment of Assets of
the Trust. Subject to the succeeding provisions of this section and subject to
the direction and control of the Trust's Board of Trustees, the Advisor shall
(i) act as investment advisor for and supervise and manage the investment and
reinvestment of the Trust's assets and in connection therewith have complete
discretion in purchasing and selling securities and other assets for the Trust
and in voting, exercising consents and exercising all other rights appertaining
to such securities and other assets on behalf of the Trust; (ii) supervise
continuously the investment program of the Trust and the composition of its
investment portfolio; (iii) arrange, subject to the provisions of paragraph 4
hereof, for the purchase and sale of securities and other assets held in the
investment portfolio of the Trust; and (iv) provide investment research to the
Trust.
3. Duties and Obligations of Advisor with Respect to the Administration of the
Trust. The Advisor also agrees to furnish office facilities and equipment and
clerical, bookkeeping and administrative services (other than such services, if
any, provided by the Trust's Custodian, Transfer Agent and Dividend Disbursing
Agent and other service providers) for the Trust. To the extent requested by the
Trust, the Advisor agrees to provide the following administrative services:
(a) Oversee the determination and publication of the Trust's net asset value in
accordance with the Trust's policy as adopted from time to time by the Board of
Trustees;
(b) Oversee the maintenance by the Trust's Custodian and Transfer Agent and
Dividend Disbursing Agent of certain books and records of the Trust as required
under Rule 31a-1(b)(4) of the 1940
1
Act and maintain (or oversee maintenance by such other persons as approved by
the Board of Trustees) such other books and records required by law or for the
proper operation of the Trust;
(c) Oversee the preparation and filing of the Trust's federal, state and local
income tax returns and any other required tax returns;
(d) Review the appropriateness of and arrange for payment of the Trust's
expenses;
(e) Prepare for review and approval by officers of the Trust financial
information for the Trust's semi-annual and annual reports, proxy statements and
other communications with shareholders required or otherwise to be sent to Trust
shareholders, and arrange for the printing and dissemination of such reports and
communications to shareholders;
(f) Prepare for reviews by an officer of the Trust, the Trust's periodic
financial reports required to be filed with the Securities and Exchange
Commission ("SEC") on Form N-SAR, Form N-CSR, Form N-PX, and such other reports,
forms and filings, as may be mutually agreed upon;
(g) Prepare such reports relating to the business and affairs of the Trust as
may be mutually agreed upon and not otherwise appropriately prepared by the
Trust's custodian, counsel or auditors;
(h) Prepare such information and reports as may be required by any stock
exchange or exchanges on which the Trust's shares are listed;
(i) Make such reports and recommendations to the Board of Trustees concerning
the performance of the independent accountants as the Board of Trustees may
reasonably request or deems appropriate;
(j) Make such reports and recommendations to the Board of Trustees concerning
the performance and fees of the Trust's Custodian and Transfer and Dividend
disbursing agent as the Board of Trustees may reasonably request or deems
appropriate;
(k) Oversee and review calculations of fees paid to the Trust's service
providers;
(l) Oversee the Trust's portfolio and perform necessary calculations as required
under Section 18 of the 1940 Act;
(m) Consult with the Trust's officers, independent accountants, legal counsel,
custodian, accounting agent and transfer and dividend disbursing agent in
establishing the accounting policies of the Trust and monitor financial and
shareholder accounting services;
(n) Review implementation of any share purchase programs authorized by the Board
of Trustees;
(o) Determine the amounts available for distribution as dividends and
distributions to be paid by the Trust to its shareholders; prepare and arrange
for the printing of dividend notices to shareholders; and provide the Trust's
dividend disbursing agent and custodian with such information as is
2
required for such parties to effect the payment of dividends and distributions
and to implement the Trust's dividend reinvestment plan;
(p) Prepare such information and reports as may be required by any banks from
which the Trust borrows funds;
(q) Provide such assistance to the Custodian and the Trust's counsel and
auditors as generally may be required to properly carry on the business and
operations of the Trust;
(r) Assist in the preparation and filing of Forms 3, 4, and 5 pursuant to
Section 16 of the Securities Exchange Act of 1934, as amended, and Section 30(f)
of the 1940 Act for the officers and trustees of the Trust, such filings to be
based on information provided by those persons;
(s) Respond to or refer to the Trust's officers or transfer agent, shareholder
(including any potential shareholder) inquiries relating to the Trust; and
(t) Supervise any other aspects of the Trust's administration as may be agreed
to by the Trust and the Advisor.
All services are to be furnished through the medium of any
directors, officers or employees of the Advisor or its affiliates as the Advisor
deems appropriate in order to fulfill its obligations hereunder.
The Trust will reimburse the Advisor or its affiliates for all
out-of-pocket expenses incurred by them in connection with the performance of
the administrative services described in this paragraph 3.
4. Covenants. (a) In the performance of its duties under this Agreement, the
Advisor shall at all times conform to, and act in accordance with, any
requirements imposed by: (i) the provisions of the 1940 Act and the Investment
Advisers Act of 1940, as amended, and all applicable Rules and Regulations of
the Securities and Exchange Commission; (ii) any other applicable provision of
law; (iii) the provisions of the Agreement and Declaration of Trust and By-Laws
of the Trust, as such documents are amended from time to time; (iv) the
investment objectives and policies of the Trust as set forth in its Registration
Statement on Form N-2; and (v) any policies and determinations of the Board of
Trustees of the Trust and
(b) In addition, the Advisor will:
(i) place orders either directly with the issuer or with any
broker or dealer. Subject to the other provisions of this paragraph, in
placing orders with brokers and dealers, the Advisor will attempt to
obtain the best price and the most favorable execution of its orders. In
placing orders, the Advisor will consider the experience and skill of the
firm's securities traders as well as the firm's financial responsibility
and administrative efficiency. Consistent with this obligation, the
Advisor may select brokers on the basis of the research, statistical and
pricing services they provide to the Trust and other clients of the
Advisor. Information and research received from such brokers will be in
addition to, and not in lieu of, the services required to be performed by
the Advisor hereunder. A commission paid to such brokers may be higher
than that which another qualified broker would have charged for effecting
the same transaction, provided that the Advisor determines in good faith
that such commission is reasonable in terms either of the transaction or
the overall
3
responsibility of the Advisor to the Trust and its other clients and that
the total commissions paid by the Trust will be reasonable in relation to
the benefits to the Trust over the long-term. In addition, the Advisor is
authorized to take into account the sale of shares of the Trust in
allocating purchase and sale orders for portfolio securities to brokers or
dealers (including brokers and dealers that are affiliated with the
Advisor), provided that the Advisor believes that the quality of the
transaction and the commission are comparable to what they would be with
other qualified firms. In no instance, however, will the Trust's
securities be purchased from or sold to the Advisor, or any affiliated
person thereof, except to the extent permitted by the SEC or by applicable
law;
(ii) maintain a policy and practice of conducting its
investment advisory services hereunder independently of the commercial
banking operations of its affiliates. When the Advisor makes investment
recommendations for the Trust, its investment advisory personnel will not
inquire or take into consideration whether the issuer of securities
proposed for purchase or sale for the Trust's account are customers of the
commercial department of its affiliates; and
(iii) treat confidentially and as proprietary information of
the Trust all records and other information relative to the Trust, and the
Trust's prior, current or potential shareholders, and will not use such
records and information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior notification to
and approval in writing by the Trust, which approval shall not be
unreasonably withheld and may not be withheld where the Advisor may be
exposed to civil or criminal contempt proceedings for failure to comply,
when requested to divulge such information by duly constituted
authorities, or when so requested by the Trust.
5. Services Not Exclusive. Nothing in this Agreement shall prevent the Advisor
or any officer, employee or other affiliate thereof from acting as investment
advisor for any other person, firm or corporation, or from engaging in any other
lawful activity, and shall not in any way limit or restrict the Advisor or any
of its officers, employees or agents from buying, selling or trading any
securities for its or their own accounts or for the accounts of others for whom
it or they may be acting; provided, however, that the Advisor will undertake no
activities which, in its judgment, will adversely affect the performance of its
obligations under this Agreement.
6. Books and Records. In compliance with the requirements of Rule 31a-3 under
the 1940 Act, the Advisor hereby agrees that all records which it maintains for
the Trust are the property of the Trust and further agrees to surrender promptly
to the Trust any such records upon the Trust's request. The Advisor further
agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
the records required to be maintained by Rule 31a-1 under the 1940 Act.
7. Agency Cross Transactions. From time to time, the Advisor or brokers or
dealers affiliated with it may find themselves in a position to buy for certain
of their brokerage clients (each an "Account") securities which the Advisor's
investment advisory clients wish to sell, and to sell for certain of their
brokerage clients securities which advisory clients wish to buy. Where one of
the parties is an advisory client, the Advisor or the affiliated broker or
dealer cannot participate in this type of transaction (known as a cross
transaction) on behalf of an advisory client and retain commissions from one or
both
4
parties to the transaction without the advisory client's consent. This is
because in a situation where the Advisor is making the investment decision (as
opposed to a brokerage client who makes his own investment decisions), and the
Advisor or an affiliate is receiving commissions from both sides of the
transaction, there is a potential conflicting division of loyalties and
responsibilities on the Advisor's part regarding the advisory client. The SEC
has adopted a rule under the Investment Advisers Act of 1940, as amended, which
permits the Advisor or its affiliates to participate on behalf of an Account in
agency cross transactions if the advisory client has given written consent in
advance. By execution of this Agreement, the Trust authorizes the Advisor or its
affiliates to participate in agency cross transactions involving an Account. The
Trust may revoke its consent at any time by written notice to the Advisor.
8. Expenses. During the term of this Agreement, the Advisor will bear all costs
and expenses of its employees and any overhead incurred in connection with its
duties hereunder and shall bear the costs of any salaries or trustees fees of
any officers or trustees of the Trust who are affiliated persons (as defined in
the 1940 Act) of the Advisor; provided that the Board of Trustees of the Trust
may approve reimbursement to the Advisor of the pro rata portion of the
salaries, bonuses, health insurance, retirement benefits and all similar
employment costs for the time spent on Trust operations (other than the
provision of investment advice and administrative services required to be
provided hereunder) of all personnel employed by the Advisor who devote
substantial time to Trust operations or the operations of other investment
companies advised by the Advisor.
(a) Compensation of the Advisor. The Trust agrees to pay to the Advisor and the
Advisor agrees to accept as full compensation for all services rendered by the
Advisor as such, a monthly fee (the "Investment Advisory Fee") in arrears at an
annual rate equal to 0.75% of the average weekly value of the Trust's Managed
Assets not in excess of $200,000,000 and at an annual rate of 0.50% of the
average weekly value of the Trust's Managed Assets over $200,000,000. "Managed
Assets" means the total assets of the Trust minus the sum of the accrued
liabilities (other than the aggregate indebtedness constituting financial
leverage). For any period less than a month during which this Agreement is in
effect, the fee shall be prorated according to the proportion which such period
bears to a full month of 28, 29, 30 or 31 days, as the case may be.
(b) For purposes of this Agreement, the net assets of the Trust shall be
calculated pursuant to the procedures adopted by resolutions of the Trustees of
the Trust for calculating the value of the Trust's assets or delegating such
calculations to third parties.
(c) Indemnity. The Trust may, in the discretion of the Board of Trustees of the
Trust, indemnify the Advisor, and each of the Advisor's directors, officers,
employees, agents, associates and controlling persons and the directors,
partners, members, officers, employees and agents thereof (including any
individual who serves at the Advisor's request as director, officer, partner,
member, trustee or the like of another entity) (each such person being an
"Indemnitee") against any liabilities and expenses, including amounts paid in
satisfaction of judgments, in compromise or as fines and penalties, and counsel
fees (all as provided in accordance with applicable state law) reasonably
incurred by such Indemnitee in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, before any court or
administrative or investigative body in which such Indemnitee may be or may have
been involved as a party or otherwise or with which such Indemnitee may be or
may have been threatened, while acting in any capacity set forth herein or
thereafter by reason of such Indemnitee having acted in any such capacity,
except with respect to any matter as to which such Indemnitee shall have been
adjudicated not to have acted in good faith in the reasonable belief that such
Indemnitee's action was in the best interest of the Trust
5
and furthermore, in the case of any criminal proceeding, so long as such
Indemnitee had no reasonable cause to believe that the conduct was unlawful;
provided, however, that (1) no Indemnitee shall be indemnified hereunder against
any liability to the Trust or its shareholders or any expense of such Indemnitee
arising by reason of (i) willful misfeasance, (ii) bad faith, (iii) gross
negligence or (iv) reckless disregard of the duties involved in the conduct of
such Indemnitee's position (the conduct referred to in such clauses (i) through
(iv) being sometimes referred to herein as "disabling conduct"), (2) as to any
matter disposed of by settlement or a compromise payment by such Indemnitee,
pursuant to a consent decree or otherwise, no indemnification either for said
payment or for any other expenses shall be provided unless there has been a
determination that such settlement or compromise is in the best interests of the
Trust and that such Indemnitee appears to have acted in good faith in the
reasonable belief that such Indemnitee's action was in the best interest of the
Trust and did not involve disabling conduct by such Indemnitee and (3) with
respect to any action, suit or other proceeding voluntarily prosecuted by any
Indemnitee as plaintiff, indemnification shall be mandatory only if the
prosecution of such action, suit or other proceeding by such Indemnitee was
authorized by a majority of the full Board of Trustees of the Trust.
(d) The Trust may make advance payments in connection with the expenses of
defending any action with respect to which indemnification might be sought
hereunder if the Trust receives a written affirmation of the Indemnitee's good
faith belief that the standard of conduct necessary for indemnification has been
met and a written undertaking to reimburse the Trust unless it is subsequently
determined that such Indemnitee is entitled to such indemnification and if the
trustees of the Trust determine that the facts then known to them would not
preclude indemnification. In addition, at least one of the following conditions
must be met: (A) the Indemnitee shall provide security for such
Indemnitee-undertaking, (B) the Trust shall be insured against losses arising by
reason of any unlawful advance, or (C) a majority of a quorum consisting of
trustees of the Trust who are neither "interested persons" of the Trust (as
defined in Section 2(a)(19) of the 1940 Act) nor parties to the proceeding
("Disinterested Non-Party Trustees") or an independent legal counsel in a
written opinion, shall determine, based on a review of readily available facts
(as opposed to a full trial-type inquiry), that there is reason to believe that
the Indemnitee ultimately will be found entitled to indemnification.
(e) All determinations with respect to the standards for indemnification
hereunder shall be made (1) by a final decision on the merits by a court or
other body before whom the proceeding was brought that such Indemnitee is not
liable or is not liable by reason of disabling conduct, or (2) in the absence of
such a decision, by (i) a majority vote of a quorum of the Disinterested
Non-Party Trustees of the Trust, or (ii) if such a quorum is not obtainable or,
even if obtainable, if a majority vote of such quorum so directs, independent
legal counsel in a written opinion. All determinations that advance payments in
connection with the expense of defending any proceeding shall be authorized and
shall be made in accordance with the immediately preceding clause (2) above.
The rights accruing to any Indemnitee under these provisions shall not
exclude any other right to which such Indemnitee may be lawfully entitled.
9. Limitation on Liability. (a) The Advisor will not be liable for any error of
judgment or mistake of law or for any loss suffered by Advisor or by the Trust
in connection with the performance of this Agreement, except a loss resulting
from a breach of fiduciary duty with respect to the receipt of compensation for
services or a loss resulting from willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or from reckless
disregard by it of its duties under this Agreement.
6
(b) Notwithstanding anything to the contrary contained in this Agreement,
the parties hereto acknowledge and agree that, as provided in Section 6.1 of the
Trust's Declaration of Trust, this Agreement is executed by the Trustees and/or
officers of the Trust, not individually but as such Trustees and/or officers of
the Trust, and the obligations hereunder are not binding upon any of the
Trustees or Shareholders individually but bind only the estate of the Trust.
10. Duration and Termination. This Agreement shall become effective as of the
date hereof and, unless sooner terminated with respect to the Trust as provided
herein, shall continue in effect for a period of two years. Thereafter, if not
terminated, this Agreement shall continue in effect with respect to the Trust
for successive periods of 12 months, provided such continuance is specifically
approved at least annually by both (a) the vote of a majority of the Trust's
Board of Trustees or the vote of a majority of the outstanding voting securities
of the Trust at the time outstanding and entitled to vote, and (b) by the vote
of a majority of the Trustees who are not parties to this Agreement or
interested persons of any party to this Agreement, cast in person at a meeting
called for the purpose of voting on such approval. Notwithstanding the
foregoing, this Agreement may be terminated by the Trust at any time, without
the payment of any penalty, upon giving the Advisor 60 days' notice (which
notice may be waived by the Advisor), provided that such termination by the
Trust shall be directed or approved by the vote of a majority of the Trustees of
the Trust in office at the time or by the vote of the holders of a majority of
the voting securities of the Trust at the time outstanding and entitled to vote,
or by the Advisor on 60 days' written notice (which notice may be waived by the
Trust). This Agreement will also immediately terminate in the event of its
assignment. (As used in this Agreement, the terms "majority of the outstanding
voting securities," "interested person" and "assignment" shall have the same
meanings of such terms in the 1940 Act.)
11. Notices. Any notice under this Agreement shall be in writing to the other
party at such address as the other party may designate from time to time for the
receipt of such notice and shall be deemed to be received on the earlier of the
date actually received or on the fourth day after the postmark if such notice is
mailed first class postage prepaid.
12. Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought. Any amendment of this Agreement shall be subject to
the 1940 Act.
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York for contracts to be performed
entirely therein without reference to choice of law principles thereof and in
accordance with the applicable provisions of the 1940 Act.
14. Use of the Name BlackRock. The Advisor has consented to the use by the Trust
of the name or identifying word "BlackRock" in the name of the Trust. Such
consent is conditioned upon the employment of the Advisor as the investment
advisor to the Trust. The name or identifying word "BlackRock" may be used from
time to time in other connections and for other purposes by the Advisor and any
of its affiliates. The Advisor may require the Trust to cease using "BlackRock"
in the name of the Trust if the Trust ceases to employ, for any reason, the
Advisor, any successor thereto or any affiliate thereof as investment advisor of
the Trust.
7
15. Miscellaneous. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby. This
Agreement shall be binding on, and shall inure to the benefit of the parties
hereto and their respective successors.
16. Counterparts. This Agreement may be executed in counterparts by the parties
hereto, each of which shall constitute an original counterpart, and all of
which, together, shall constitute one Agreement.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by their duly authorized officers, all as of the day
and the year first above written.
BLACKROCK HIGH INCOME TRUST
By: ____________________
Name:
Title:
BLACKROCK ADVISORS, INC.
By:____________________
Name:
Title:
Appendix A-2
Sub-Advisory Agreement
SUB-INVESTMENT ADVISORY AGREEMENT
---------------------------------
AGREEMENT dated [ ], 2005, among BlackRock High Income Trust, a
Massachusetts business trust (the "Trust"), BlackRock Advisors, Inc. a Delaware
corporation (the "Advisor"), and BlackRock Financial Management, Inc., a
Delaware corporation (the "Sub-Advisor").
WHEREAS, the Advisor has agreed to furnish investment advisory
services to the Trust, a closed-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Advisor wishes to retain the Sub-Advisor to provide it
with certain sub-advisory services as described below in connection with
Advisor's advisory activities on behalf of the Trust;
WHEREAS, the advisory agreement between the Advisor and the Trust,
dated [ ], 2005 (such agreement or the most
8
recent successor agreement between such parties relating to advisory services to
the Trust is referred to herein as the "Advisory Agreement") contemplates that
the Advisor may sub-contract investment advisory services with respect to the
Trust to a sub-advisor pursuant to a sub-advisory agreement agreeable to the
Trust and approved in accordance with the provisions of the 1940 Act; and
WHEREAS, this Agreement has been approved in accordance with the
provisions of the 1940 Act, and the Sub-Advisor is willing to furnish such
services upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual premises and
covenants herein contained and other good and valuable consideration, the
receipt of which is hereby acknowledged, it is agreed by and between the parties
hereto as follows:
17. Appointment. The Advisor hereby appoints the Sub-Advisor to act as
sub-advisor with respect to the Trust and the Sub-Advisor accepts such
appointment and agrees to render the services herein set forth for the
compensation herein provided.
2. Services of the Sub-Advisor. Subject to the succeeding provisions of this
section, the oversight and supervision of the Advisor and the direction and
control of the Trust's Board of Trustees, the Sub-Advisor will perform certain
of the day-to-day operations of the Trust, which may include one or more of the
following services, at the request of the Advisor: (a) acting as investment
advisor for and managing the investment and reinvestment of those assets of the
Trust as the Advisor may from time to time request and in connection therewith
have complete discretion in purchasing and selling such securities and other
assets for the Trust and in voting, exercising consents and exercising all other
rights appertaining to such securities and other assets on behalf of the Trust;
(b) arranging, subject to the provisions of paragraph 3 hereof, for the purchase
and sale of securities and other assets of the Trust; (c) providing investment
research and credit analysis concerning the Trust's investments, (d) assist the
Advisor in determining what portion of the Trust's assets will be invested in
cash, cash equivalents and money market instruments, (e) placing orders for all
purchases and sales of such investments made for the Trust, and (f) maintaining
the books and records as are required to support Trust investment operations. At
the request of the Advisor, the Sub-Advisor will also, subject to the oversight
and supervision of the Advisor and the direction and control of the Trust's
Board of Trustees, provide to the Advisor or the Trust any of
2
the facilities and equipment and perform any of the services described in
Section 3 of the Advisory Agreement. In addition, the Sub-Advisor will keep the
Trust and the Advisor informed of developments materially affecting the Trust
and shall, on its own initiative, furnish to the Trust from time to time
whatever information the Sub-Advisor believes appropriate for this purpose. The
Sub-Advisor will periodically communicate to the Advisor, at such times as the
Advisor may direct, information concerning the purchase and sale of securities
for the Trust, including: (a) the name of the issuer, (b) the amount of the
purchase or sale, (c) the name of the broker or dealer, if any, through which
the purchase or sale is effected, (d) the CUSIP number of the instrument, if
any, and (e) such other information as the Advisor may reasonably require for
purposes of fulfilling its obligations to the Trust under the Advisory
Agreement. The Sub-Advisor will provide the services rendered by it under this
Agreement in accordance with the Trust's investment objectives, policies and
restrictions (as currently in effect and as they may be amended or supplemented
from time to time) as stated in the Trust's Prospectus and Statement of
Additional Information and the resolutions of the Trust's Board of Trustees.
3. Covenants. (a) In the performance of its duties under this Agreement, the
Sub-Advisor shall at all times conform to, and act in accordance with, any
requirements imposed by: (i) the provisions of the 1940 Act and the Investment
Advisers Act of 1940, as amended (the "Advisers Act") and all applicable Rules
and Regulations of the Securities and Exchange Commission (the "SEC"); (ii) any
other applicable provision of law; (iii) the provisions of the Agreement and
Declaration of Trust and By-Laws of the Trust, as such documents are amended
from time to time; (iv) the investment objectives and policies of the Trust as
set forth in its Registration Statement on Form N-2; and (v) any policies and
determinations of the Board of the Trustees of the Trust.
(b) In addition, the Sub-Advisor will: (i) place orders either directly
with the issuer or with any broker or dealer. Subject to the other provisions of
this paragraph, in placing orders with brokers and dealers, the Sub-Advisor will
attempt to obtain the best price and the most favorable execution of its orders.
In placing orders, the Sub-Advisor will consider the experience and skill of the
firm's securities traders as well as the firm's financial responsibility and
administrative efficiency. Consistent with this obligation, the Sub-Advisor may
select brokers on the basis of the research, statistical and pricing services
they provide to the Trust and other clients of the Advisor or the Sub-Advisor.
Information and research received from such brokers will be in addition to, and
not in lieu of, the services required to be performed by the Sub-Advisor
3
hereunder. A commission paid to such brokers may be higher than that which
another qualified broker would have charged for effecting the same transaction,
provided that the Sub-Advisor determines in good faith that such commission is
reasonable in terms either of the transaction or the overall responsibility of
the Advisor and the Sub-Advisor to the Trust's and their other clients and that
the total commissions paid by the Trust will be reasonable in relation to the
benefits to the Trust over the long-term. In addition, the Sub-Advisor is
authorized to take into account the sale of shares of the Trust in allocating
purchase and sale orders for portfolio securities to brokers or dealers
(including brokers and dealers that are affiliated with the Advisor or the
Sub-Advisor), provided that the Sub-Advisor believes that the quality of the
transaction and the commission are comparable to what they would be with other
qualified firms. In no instance, however, will the Trust's securities be
purchased from or sold to the Advisor, the Sub-Advisor or any affiliated person
thereof, except to the extent permitted by the SEC or by applicable law;
(ii) maintain books and records with respect to the
Trust's securities transactions and will render to the Advisor and the
Trust's Board of Trustees such periodic and special reports as they may
request;
(iii) maintain a policy and practice of conducting its
investment advisory services hereunder independently of the commercial
banking operations of its affiliates. When the Sub-Advisor makes
investment recommendations for the Trust, its investment advisory
personnel will not inquire or take into consideration whether the issuer
of securities proposed for purchase or sale for the Trust's account are
customers of the commercial department of its affiliates; and
(iv) treat confidentially and as proprietary
information of the Trust all records and other information relative to the
Trust, and the Trust's prior, current or potential shareholders, and will
not use such records and information for any purpose other than
performance of its responsibilities and duties hereunder, except after
prior notification to and approval in writing by the Trust, which approval
shall not be unreasonably withheld and may not be withheld where the
Sub-Advisor may be exposed to civil or criminal contempt proceedings for
failure to comply, when
4
requested to divulge such information by duly constituted authorities, or
when so requested by the Trust.
4. Services Not Exclusive. Nothing in this Agreement shall prevent the
Sub-Advisor or any officer, employee or other affiliate thereof from acting as
investment advisor for any other person, firm or corporation, or from engaging
in any other lawful activity, and shall not in any way limit or restrict the
Sub-Advisor or any of its officers, employees or agents from buying, selling or
trading any securities for its or their own accounts or for the accounts of
others for whom it or they may be acting; provided, however, that the
Sub-Advisor will undertake no activities which, in its judgment, will adversely
affect the performance of its obligations under this Agreement.
5. Books and Records. In compliance with the requirements of Rule 31a-3 under
the 1940 Act, the Sub-Advisor hereby agrees that all records which it maintains
for the Trust are the property of the Trust and further agrees to surrender
promptly to the Trust any such records upon the Trust's request. The Sub-Advisor
further agrees to preserve for the periods prescribed by Rule 31a-2 under the
1940 Act the records required to be maintained by Rule 31a-1 under the 1940 Act
(to the extent such books and records are not maintained by the Advisor).
6. Agency Cross Transactions. From time to time, the Sub-Advisor or brokers or
dealers affiliated with it may find themselves in a position to buy for certain
of their brokerage clients (each an "Account") securities which the
Sub-Advisor's investment advisory clients wish to sell, and to sell for certain
of their brokerage clients securities which advisory clients wish to buy. Where
one of the parties is an advisory client, the Advisor or the affiliated broker
or dealer cannot participate in this type of transaction (known as a cross
transaction) on behalf of an advisory client and retain commissions from both
parties to the transaction without the advisory client's consent. This is
because in a situation where the Sub-Advisor is making the investment decision
(as opposed to a brokerage client who makes his own investment decisions), and
the Sub-Advisor or an affiliate is receiving commissions from one or both sides
of the transaction, there is a potential conflicting division of loyalties and
responsibilities on the Sub-Advisor's part regarding the advisory client. The
SEC has adopted a rule under the Advisers Act which permits the Sub-Advisor or
its affiliates to participate on behalf of an Account in agency cross
transactions if the advisory client has given written consent in advance. By
execution of this Agreement, the Trust authorizes the Sub-Advisor or its
affiliates to participate in agency cross transactions involving an Account. The
Trust may revoke its consent at any time by written notice to the Sub-Advisor.
5
7. Expenses. During the term of this Agreement, the Sub-Advisor will bear all
costs and expenses of its employees and any overhead incurred by the Sub-Advisor
in connection with its duties hereunder; provided that the Board of Trustees of
the Trust may approve reimbursement to the Sub-Advisor of the pro-rata portion
of the salaries, bonuses, health insurance, retirement benefits and all similar
employment costs for the time spent on Trust operations (other than the
provision of investment advice and administrative services required to be
provided hereunder) of all personnel employed by the Sub-Advisor who devote
substantial time to the Trust operations or the operations of other investment
companies advised or sub-advised by the Sub-Advisor.
8. Compensation.
(a) The Advisor agrees to pay to the Sub-Advisor and the Sub-Advisor agrees to
accept as full compensation for all services rendered by the Sub-Advisor as
such, a monthly fee in arrears at an annual rate equal to 0.38% of the monthly
advisory fees received by the Advisor. For any period less than a month during
which this Agreement is in effect, the fee shall be prorated according to the
proportion which such period bears to a full month of 28, 29, 30 or 31 days, as
the case may be.
(b) For purposes of this Agreement, the net assets of the Trust shall be
calculated pursuant to the procedures adopted by resolutions of the Trustees of
the Trust for calculating the value of the Trust's assets or delegating such
calculations to third parties.
9. Indemnity.
(a) The Trust may, in the discretion of the Board of Trustees of the Trust,
indemnify the Sub-Advisor and each of the Sub-Advisor's directors, officers,
employees, agents, associates and controlling persons and the directors,
partners, members, officers, employees and agents thereof (including any
individual who serves at the Sub-Advisor's request as director, officer,
partner, member, trustee or the like of another entity) (each such person being
an "Indemnitee") against any liabilities and expenses, including amounts paid in
satisfaction of judgments, in compromise or as fines and penalties, and counsel
fees (all as provided in accordance with applicable state law) reasonably
incurred by such Indemnitee in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, before any court or
administrative or
6
investigative body in which such Indemnitee may be or may have been involved as
a party or otherwise or with which such Indemnitee may be or may have been
threatened, while acting in any capacity set forth herein or thereafter by
reason of such Indemnitee having acted in any such capacity, except with respect
to any matter as to which such Indemnitee shall have been adjudicated not to
have acted in good faith in the reasonable belief that such Indemnitee's action
was in the best interest of the Trust and furthermore, in the case of any
criminal proceeding, so long as such Indemnitee had no reasonable cause to
believe that the conduct was unlawful; provided, however, that (1) no Indemnitee
shall be indemnified hereunder against any liability to the Trust or its
shareholders or any expense of such Indemnitee arising by reason of (i) willful
misfeasance, (ii) bad faith, (iii) gross negligence or (iv) reckless disregard
of the duties involved in the conduct of such Indemnitee's position (the conduct
referred to in such clauses (i) through (iv) being sometimes referred to herein
as "disabling conduct"), (2) as to any matter disposed of by settlement or a
compromise payment by such Indemnitee, pursuant to a consent decree or
otherwise, no indemnification either for said payment or for any other expenses
shall be provided unless there has been a determination that such settlement or
compromise is in the best interests of the Trust and that such Indemnitee
appears to have acted in good faith in the reasonable belief that such
Indemnitee's action was in the best interest of the Trust and did not involve
disabling conduct by such Indemnitee and (3) with respect to any action, suit or
other proceeding voluntarily prosecuted by any Indemnitee as plaintiff,
indemnification shall be mandatory only if the prosecution of such action, suit
or other proceeding by such Indemnitee was authorized by a majority of the full
Board of Trustees of the Trust.
(b) The Trust may make advance payments in connection with the expenses of
defending any action with respect to which indemnification might be sought
hereunder if the Trust receives a written affirmation of the Indemnitee's good
faith belief that the standard of conduct necessary for indemnification has been
met and a written undertaking to reimburse the Trust unless it is subsequently
determined that such Indemnitee is entitled to such indemnification and if the
trustees of the Trust determine that the facts then known to them would not
preclude indemnification. In addition, at least one of the following conditions
must be met: (A) the Indemnitee shall provide a security for such
Indemnitee-undertaking, (B) the Trust shall be insured against losses arising by
reason of any unlawful advance, or (C) a majority of a quorum consisting of
trustees of the Trust who are neither "interested persons" of the Trust (as
defined in Section 2(a)(19) of the 1940 Act) nor parties to the proceeding
("Disinterested Non-Party Trustees") or an independent legal counsel in a
written opinion, shall determine, based on a review
7
of readily available facts (as opposed to a full trial-type inquiry), that there
is reason to believe that the Indemnitee ultimately will be found entitled to
indemnification.
(c) All determinations with respect to the standards for indemnification
hereunder shall be made (1) by a final decision on the merits by a court or
other body before whom the proceeding was brought that such Indemnitee is not
liable by reason of disabling conduct, or (2) in the absence of such a decision,
by (i) a majority vote of a quorum of the Disinterested Non-Party Trustees of
the Trust, or (ii) if such a quorum is not obtainable or even, if obtainable, if
a majority vote of such quorum so directs, independent legal counsel in a
written opinion. All determinations that advance payments in connection with the
expense of defending any proceeding shall be authorized shall be made in
accordance with the immediately preceding clause (2) above. The rights accruing
to any Indemnitee under these provisions shall not` exclude any other right to
which such Indemnitee may be lawfully entitled.
10. Limitation on Liability.
(a) The Sub-Advisor will not be liable for any error of judgment or mistake of
law or for any loss suffered by the Advisor or by the Trust in connection with
the performance of this Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of its
duties under this Agreement.
(b) Notwithstanding anything to the contrary contained in this Agreement, the
parties hereto acknowledge and agree that, as provided in Section 6.1 of the
Declaration of Trust, this Agreement is executed by the Trustees and/or officers
of the Trust, not individually but as such Trustees and/or officers of the
Trust, and the obligations hereunder are not binding upon any of the Trustees or
Shareholders individually but bind only the estate of the Trust.
11. Duration and Termination. This Agreement shall become effective as of the
date hereof and, unless sooner terminated with respect to the Trust as provided
herein, shall continue in effect for a period of two years. Thereafter, if not
terminated, this Agreement shall continue in effect with respect to the Trust
for successive periods of 12 months, provided such continuance is specifically
approved at least annually by both (a) the vote of a majority of the Trust's
Board of Trustees or a vote of a majority of the outstanding voting securities
of the Trust at the time
8
outstanding and entitled to vote and (b) by the vote of a majority of the
Trustees, who are not parties to this Agreement or interested persons (as such
term is defined in the 1940 Act) of any such party, cast in person at a meeting
called for the purpose of voting on such approval. Notwithstanding the
foregoing, this Agreement may be terminated by the Trust or the Advisor at any
time, without the payment of any penalty, upon giving the Sub-Advisor 60 days'
notice (which notice may be waived by the Sub-Advisor), provided that such
termination by the Trust or the Advisor shall be directed or approved by the
vote of a majority of the Trustees of the Trust in office at the time or by the
vote of the holders of a majority of the voting securities of the Trust at the
time outstanding and entitled to vote, or by the Sub-Advisor on 60 days' written
notice (which notice may be waived by the Trust and the Advisor), and will
terminate automatically upon any termination of the Advisory Agreement between
the Trust and the Advisor. This Agreement will also immediately terminate in the
event of its assignment. (As used in this Agreement, the terms "majority of the
outstanding voting securities," "interested person" and "assignment" shall have
the same meanings of such terms in the 1940 Act.)
12. Notices. Any notice under this Agreement shall be in writing to the other
party at such address as the other party may designate from time to time for the
receipt of such notice and shall be deemed to be received on the earlier of the
date actually received or on the fourth day after the postmark if such notice is
mailed first class postage prepaid.
13. Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought. Any amendment of this Agreement shall be subject to
the 1940 Act.
14 Miscellaneous. The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby. This
Agreement shall be binding on, and shall inure to the benefit of the parties
hereto and their respective successors.
15 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York for contracts to be performed
entirely therein without reference to choice of law principles thereof and in
accordance with the applicable provisions of the 1940 Act.
9
16. Counterparts. This Agreement may be executed in counterparts by the parties
hereto, each of which shall constitute an original counterpart, and all of
which, together, shall constitute one Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be executed by their duly authorized officers designated below as of the day
and year first above written.
BLACKROCK ADVISORS, INC.
By:___________________
Name:
Title:
BLACKROCK FINANCIAL MANAGEMENT, INC.
By:___________________
Name:
Title:
BLACKROCK HIGH INCOME TRUST
By:___________________
Name:
Title:
|X| PLEASE MARK VOTES
AS IN THIS EXAMPLE
For Against Abstain
CIGNA HIGH INCOME SHARES 1. To approve an
advisory agreement |_| |_| |_|
This proxy will be voted as specified. between the Fund and
If you simply sign the proxy, it will BlackRock Advisors,
be voted in favor of the proposal. In Inc. and a
their discretion, the proxies will also sub-advisory agreement
be authorized to vote upon such other among the Fund,
matters that may properly come before BlackRock Advisors, Inc.
the meeting. and BlackRock Financial
Management, Inc.
Mark box at right if an address change For All
or comment has been noted on the 2. Election of Nominees
reverse side of this Trustees. For Withhold Except
card. |_| Messrs. Brimmer,
CONTROL NUMBER: Cavanaugh, Dixon, |_| |_| |_|
Fabozzi, Hubbard,
Please be sure to sign and date this LaForce, Mondale,
Proxy Kapito and
Schlosstein.
-----------------
Date
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If you do not wish
your shares voted
"For" a particular
nominee, mark the
Shareholder sign here "For All Nominees
- ----------------------------------------- Except" box and
Co-owner sign here strike a line
through the name(s)
of the nominee(s).
Your shares will be
voted for the
remaining
nominee(s).
RECORD DATE SHARES:
CIGNA HIGH INCOME SHARES
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES
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 a Special Meeting of
Shareholders of CIGNA High Income Shares (the "Fund'), on March 1, 2005 at
8:30 a.m., Eastern Time, at The Colony Club, Baystate West, 1500 Main Street,
Springfield, Massachusetts 01115and at any adjournment thereof, in the manner
directed herein on the matters described in the notice and accompanying proxy
statement for the meeting. The Trustees recommend that you vote "FOR" the
proposal. If no direction is made, this proxy will be voted FOR all items
described in the proxy statement. As to any other matters that may properly
come before the meeting, the proxies shall vote in accordance with their best
judgment.
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PLEASE VOTE, DATE, AND SIGN ON REVERSE SIDE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE.
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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.
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HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
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