<PAGE> 1
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:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
CNA Income Shares, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
CNA Income Shares, Inc.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
CNA PLAZA
CHICAGO, ILLINOIS 60685
February 26, 1997
TO THE STOCKHOLDERS OF
CNA INCOME SHARES, INC.
An Annual Meeting of Stockholders of CNA Income Shares, Inc., a Maryland
corporation (the "Company"), will be held on April 17, 1997, at 2:30 P.M.,
Chicago Time, in Room 305, CNA Plaza, 333 South Wabash Avenue, Chicago, Illinois
60685, for the following purposes and for the transaction of such other business
as may properly come before the meeting:
(1) the election of six directors;
(2) the approval of the continuation of the Investment Advisory Agreement,
as amended, between the Company and Continental Assurance Company;
(3) the ratification of the selection made by the Board of Directors of
Deloitte & Touche LLP as independent auditors for the Company for the
year ending December 31, 1997.
The subjects referred to above are discussed in detail in the Proxy
Statement attached to this notice. The Board of Directors has established the
close of business on February 21, 1997 as the record date for the determination
of stockholders entitled to notice of and to vote at the meeting. Each
stockholder is invited to attend the Annual Meeting of Stockholders in person.
If you cannot be present at the meeting we urge you to fill in, sign and
promptly return the enclosed proxy in the envelope provided for that purpose.
By Order of the Board of Directors
LYNNE GUGENHEIM
Secretary
<PAGE> 3
CNA Income Shares, Inc.
CNA PLAZA
CHICAGO, ILLINOIS 60685
(312) 822-4181
PROXY STATEMENT
INTRODUCTION
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of CNA Income Shares, Inc., a Maryland
corporation (the "Company"), for use at the Annual Meeting of Stockholders (the
"Annual Meeting") to be held on April 17, 1997, at 2:30 P.M., Chicago Time, in
Room 305, CNA Plaza, 333 South Wabash Avenue, Chicago, Illinois 60685 and at any
and all adjournments thereof.
The proxy statement and form of proxy were first sent to the Company's
stockholders on or about February 26, 1997. Proxies may be solicited by mail,
telephone, telecopier and personal interview by a few regular employees of the
Company. The Company may also request brokers, custodians, nominees and
fiduciaries to forward proxy material to the beneficial owners of stock held of
record by such institutions. The cost of soliciting proxies will be paid by the
Company.
PROXIES WILL BE VOTED AS SPECIFIED. HOWEVER, IF NO CONTRARY SPECIFICATIONS
ARE MADE IN A PROXY, IT WILL BE VOTED FOR PROPOSALS 1, 2 AND 3 HEREINAFTER SET
FORTH. Abstentions are considered as shares present and entitled to vote at the
meeting, but are not counted as votes cast with respect to the Proposal to which
the abstention relates. A broker or nominee holding shares registered in its
name, or in the name of its nominee, which are beneficially owned by another
person, and for which the broker has not received instructions as to voting from
the beneficial owner, has the discretion to vote the beneficial owner's shares
with respect to Proposals 1, 2 and 3 hereinafter set forth. The enclosed proxy
is revocable by you at any time. Signing and mailing the proxy will not affect
your right to revoke the proxy, to give a later proxy or to attend the meeting
and to vote your shares in person. Stockholders should send proxies to the
following address:
The Bank of New York
CNA Income Shares, Inc.
Proxy Department
P.O. Box 11058
New York, NY 10203-0058
At the close of business on February 21, 1997, the date of determination of
stockholders entitled to receive notice of and to vote at the Annual Meeting or
any adjournment thereof, there were issued and outstanding 8,715,525 shares of
common stock of the Company, each entitling its holder to one
1
<PAGE> 4
noncumulative vote, constituting all of the Company's then outstanding
securities which entitle their holders to vote at the Annual Meeting. The only
other then outstanding securities of the Company were $28,050,000 in principal
amount of its Five Year Convertible Extendible Notes, which were convertible
into 2,391,304 shares of common stock.
To the best of the Company's knowledge, as of February 6, 1997 no person or
group owned 5% or more of the Company's outstanding shares of common stock. As
of that date, the Company's 9 directors and officers, as a group, beneficially
owned 1,294 shares, constituting .015% of the Company's outstanding shares of
common stock, all of such shares being owned with sole voting power and sole
investment power, except for 200 shares owned by Franklin A. Cole, a director of
the Company, in joint tenancy with his spouse (Mr. Cole's voting power and
investment power with respect to such 200 shares being shared with his spouse).
The Company's 1996 annual report is being mailed together with this proxy
statement. Any stockholder who desires additional copies may obtain them upon
request by writing to The Bank of New York, Shareholder Relations
Department -- 11E, P.O. Box 11258, Church Street Station, New York, NY 10286.
STOCKHOLDER PROPOSALS
Stockholder proposals for inclusion in proxy materials for the 1998 Annual
Meeting of Stockholders should be addressed to the Company's Secretary, CNA
Plaza, 23S, Chicago, Illinois 60685, and must be received not later than October
29, 1997.
1. ELECTION OF DIRECTORS
Six directors are to be elected at the Annual Meeting to hold office until
the next Annual Meeting of Stockholders and until their successors are elected
and qualified. To be elected, they must receive the affirmative votes of the
holders of at least a majority of the shares of the Company's outstanding common
stock present at the Annual Meeting in person or by proxy. The nominees listed
below have been nominated by the nominating committee of the Board of Directors.
If any of the nominees are unable to serve as directors, the persons named in
the proxy will vote the proxies for such other persons as the nominating
committee may select. All of the nominees listed below have agreed to serve as
directors if elected. The Company presently knows of no reason why any of the
nominees listed
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<PAGE> 5
below will be unable to serve if elected. All nominees are presently directors
of the Company whose terms expire at the Annual Meeting or, if later, when their
successors are elected and qualified.
<TABLE>
<CAPTION>
NUMBER OF
WHOLE SHARES
OWNED
BENEFICIALLY
PRINCIPAL OCCUPATION FOR THE LAST DIRECTOR AS OF FEBRUARY 6,
FIVE YEARS AND OTHER DIRECTORSHIPS HELD AGE SINCE 1997(1)
NOMINEE --------------------------------------- --- -------- -----------------
<S> <C> <C> <C> <C>
Franklin A. Cole......... Chairman of the Board, Croesus Corporation 70 1985 1,100(2)
(financial services, investments and
investment management); Director, American
National Bank and Trust Company of Chicago,
Aon Corporation, American National Corpora-
tion, GATX Corporation, and Duff & Phelps
Utilities Income Inc. (closed-end
investment company).
Sidney Davidson.......... Ernst & Young Distinguished Service Professor 77 1973 194
of Accounting and Director of Business
Research at the Graduate School of Business
of the University of Chicago.
Richard W. Dubberke*..... Vice President and Treasurer of the Company; 59 1975 None
Committee Member of Continental Assurance
Company Separate Account (B) (open-end
investment company); Vice President and
Manager of Corporate Bond Investments of
Continental Assurance Company ("Adviser")
and Continental Casualty Company
("Casualty") (3).
Lew H. Nathan*........... Chairman of the Board of Directors and 47 1996 None
President of the Company since October
1996; Group Vice President of Adviser and
Casualty since January 1996. Committee
Member and Chairman of Committee of
Continental Assurance Company Separate
Account (B) since October 1996 (open-end
investment company). Prior thereto, Vice
President of Adviser and Casualty.
A. Dean Swift............ President, Executive Service Corps of 78 1986 None
Chicago; formerly President, Sears, Roebuck
& Co.; Director, Chicago-Tokyo Bank.
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
NUMBER OF
WHOLE SHARES
OWNED
BENEFICIALLY
PRINCIPAL OCCUPATION FOR THE LAST DIRECTOR AS OF FEBRUARY 6,
FIVE YEARS AND OTHER DIRECTORSHIPS HELD AGE SINCE 1997(1)
NOMINEE --------------------------------------- --- -------- -----------------
<S> <C> <C> <C> <C>
David G. Taylor.......... Retired; formerly Managing Director, Chemical 67 1995 None
Bank.
</TABLE>
- ---------------
* An "interested person", as defined in Section 2(a)(19) of the Investment
Company Act of 1940 ("1940 Act"), of the Company and of the Adviser, by
virtue of being an officer of the Company and an officer of the Adviser.
(1) The shares listed are owned with sole voting power and sole investment
power, except as otherwise indicated. As of February 6, 1997, the shares
owned by all six nominees, in the aggregate, represented .015% of the
outstanding shares of the Company's common stock.
(2) 200 of these shares are beneficially owned by Mr. Cole and his spouse in
joint tenancy. Mr. Cole shares voting power and investment power with
respect to such 200 shares with his spouse.
(3) CNA Financial Corporation, a Delaware corporation ("CNA Financial"), CNA
Plaza, Chicago, Illinois 60685, owns all of the stock of Casualty which, in
turn, owns all of the stock of the Adviser. See "Approval of the
Continuation of the Investment Advisory Agreement, As Amended".
ADDITIONAL INFORMATION REGARDING THE BOARD OF DIRECTORS AND OFFICERS
Standing Committees
The Board of Directors annually elects certain of its members to standing
audit and nominating committees. Messrs. Cole, Davidson (Chairman), Swift and
Taylor are currently members of the audit committee. The audit committee makes
recommendations to the Board of Directors regarding the engagement of the
independent auditors; reviews and approves the scope of the audit and the fees
and other arrangements regarding such services; reviews the independence of the
auditors; reviews with the independent auditors the plan and results of the
audit engagement; and generally reviews the adequacy of the Company's accounting
systems and internal accounting controls. Messrs. Cole (Chairman), Davidson,
Swift and Taylor are currently members of the nominating committee. The
nominating committee reviews the performance of incumbent directors and
officers; considers candidates for the Board of Directors and offices of the
Company; and makes recommendations to the Board of Directors regarding retention
of incumbent directors, selection of nominees for election as directors and
election as officers of the Company, and membership on the standing and ad hoc
committees of the Board of Directors. The nominating committee will consider
nominees recommended by the stockholders for election as directors at the 1998
Annual Meeting of Stockholders. Such recommendations should be submitted in
writing to the Secretary of the Company, CNA Plaza, Chicago, Illinois 60685, not
later than December 31, 1997, so that the nominating committee will have ample
time to evaluate the recommendations. The Board of Directors does not have a
standing compensation committee.
Meetings
The Board of Directors held four meetings in 1996. In addition, the audit
committee held two meetings and the nominating committee held two meetings in
1996. Each director attended all of the meetings of the Board of Directors
except Mr. Nathan, who attended all meetings held by the Board of
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<PAGE> 7
Directors since his election on October 1, 1996 to fill the vacancy caused by
the retirement of Donald C. Rycroft. Each member of the audit and nominating
committees attended all of the meetings thereof held while he was serving as a
member thereof.
Certain Material Relationships of Nominees for Director
No director or nominee for director of the Company has served as an officer
of the Company or the Adviser or had any other material interest in or
relationship with the Company, the Adviser or any of their respective affiliates
during the past five years, except as noted above in the table listing the
nominees for election as directors of the Company.
Remuneration of Directors and Officers
The Company pays each of its directors a director's fee and reimburses
directors for expenses incurred in attending meetings of the Company's Board of
Directors and committees thereof, except that no payments are made to any
directors who are officers or employees of or special consultants to the
Adviser, CNA Financial or any of their affiliated companies. Therefore, neither
Mr. Dubberke nor Mr. Nathan has received or will receive any such payments. The
director's fee is currently $10,000 per annum. Directors who are not "interested
persons" (as defined in the 1940 Act) received an aggregate of $3,359 in
reimbursement for expenses in 1996. The Company pays no other compensation to
its directors or officers for their services.
The following table sets forth information regarding the compensation of
all directors of the Company for services rendered in 1996 to the Company and to
funds deemed to be included in the same fund complex as the Company. A "fund
complex" for this purpose means any two or more funds that hold themselves out
to investors as related companies or that have a common or related investment
adviser.
COMPENSATION TABLE
<TABLE>
<CAPTION>
AGGREGATE PENSION OR RETIREMENT ESTIMATED ANNUAL TOTAL COMPENSATION FROM
COMPENSATION BENEFITS ACCRUED AS PART BENEFITS UPON FUND AND FUND COMPLEX
NAME OF PERSON, POSITION FROM FUND OF FUND EXPENSES RETIREMENT PAID TO DIRECTORS
------------------------ ------------ ------------------------ ---------------- -----------------------
<S> <C> <C> <C> <C>
Franklin A. Cole,
Director.................. $10,000 None None $10,000
Sidney A. Davidson,
Director.................. $10,000 None None $10,000
Richard W. Dubberke,
Director*................. None None None None
Lew H. Nathan,
Director*................. None None None None
A. Dean Swift,
Director.................. $10,000 None None $10,000
David G. Taylor
Director.................. $10,000 None None $10,000
</TABLE>
- ---------------
* An "interested person" (as defined in Section 2(a)(19) of the 1940 Act).
5
<PAGE> 8
Executive Officers
The Company has five executive officers: Richard W. Dubberke, Lynne
Gugenheim, Rachelle B. Hendele, Marilou R. McGirr and Lew H. Nathan. Ms.
Gugenheim is 37 years old and has been Secretary of the Company and Continental
Assurance Company Separate Account (B) since April 1995. Since January 1996, Ms.
Gugenheim has been a Vice President and Associate General Counsel of the Adviser
and Casualty. From November 1994 to December 1995, she was an Assistant Vice
President and Assistant General Counsel of the Adviser and Casualty. From 1991
to November 1994, Ms. Gugenheim was Counsel of the Adviser and Casualty. Mrs.
McGirr is 43 years old and has been a Vice President of the Company since 1992,
Vice President of the Adviser and Casualty since January 1997, Assistant Vice
President of the Adviser and Casualty from January 1995 until January 1997, and
Director, Money Desk, of the Adviser and Casualty from September 1993 until
January 1995. From 1991 to September 1993, she was a Fixed Income Trader of the
Adviser and Casualty. For more than five years she has also been owner/president
of Holiday Saks, a gourmet craft and floral business. Mrs. Hendele is 46 years
old and has been a Vice President of the Company since 1991 and a Director of
the Adviser and Casualty since March 1996. Prior thereto she was a Portfolio
Manager of Adviser and Casualty. Information regarding Messrs. Dubberke and
Nathan is contained in the table on pages 3 and 4 of this Proxy Statement. All
officers are elected annually to serve for terms of one year and until their
respective successors are elected and qualified.
2. APPROVAL OF THE CONTINUATION OF THE INVESTMENT
ADVISORY AGREEMENT, AS AMENDED
At a meeting held for such purpose on February 5, 1997, the Board of
Directors, including a majority of the directors who are not "interested
persons" (as defined in the 1940 Act) of the Adviser or the Company, by votes
cast in person, approved the continuation of the Investment Advisory Agreement
dated March 21, 1975, as amended, between the Company and the Adviser,
Continental Assurance Company, CNA Plaza, Chicago, Illinois 60685 (the "Advisory
Agreement"), and decided, as a matter of policy, to submit such continuation for
approval by a vote of the stockholders. The continuation of the Advisory
Agreement was last approved by the stockholders at the 1996 Annual Meeting of
Stockholders held on April 26, 1996.
Pursuant to the 1940 Act, in order for the Advisory Agreement to remain in
effect, it must be approved by a majority of the outstanding voting securities
of the Company. A majority, for such purposes, means the lesser of (a) 67% of
the Company's outstanding voting securities present at a meeting if the holders
of more than 50% of the outstanding voting securities of the Company are present
in person or by proxy, or (b) more than 50% of the outstanding voting securities
of the Company. The Company's only outstanding voting securities are the
outstanding shares of its common stock.
If approved by a majority (as defined above) of the stockholders at the
Annual Meeting, the Advisory Agreement will continue from year to year
thereafter so long as such continuance is specifically approved at least
annually by (1) the Board of Directors of the Company or the vote of the holders
of a majority (as defined above) of the outstanding voting securities of the
Company and (2) the vote of a majority of the directors of the Company who are
not interested persons of the Adviser or the Company cast in person at a meeting
called for the purpose of voting upon such approval. The Advisory Agreement
provides that the Adviser shall have no liability to the Company or any
stockholder of the Company for any error of judgment, mistake of law or any loss
arising out of any
6
<PAGE> 9
investment, or for any other act or omission in the performance by the Adviser
of its duties under such Agreement, except for liability resulting from willful
misfeasance, bad faith or gross negligence on the Adviser's part or from
reckless disregard by the Adviser of its obligations and duties under such
Agreement. The Advisory Agreement also provides that it will terminate
automatically in the event of its assignment and that, additionally, it is
terminable at any time, without penalty, by the Board of Directors of the
Company on 60 days' written notice to the Adviser or by the Adviser on 60 days'
written notice to the Company.
The Adviser is a wholly owned subsidiary of Casualty, which, in turn, is a
wholly owned subsidiary of CNA Financial. (As of February 6, 1997, Casualty also
owned 91,953 shares of common stock of the Company, constituting 1.0% of the
outstanding shares of the Company's common stock.) The Adviser is a stock life
insurance company organized under the Illinois Insurance Code in 1911 and is an
investment adviser registered under the Investment Advisers Act of 1940. As of
December 31, 1996, it had total assets of approximately $13.9 billion and equity
of approximately $2.0 billion. The Adviser operates five "separate accounts"
which had total assets aggregating approximately $6.1 billion as of December 31,
1996.
Loews Corporation, a Delaware corporation ("Loews"), 667 Madison Avenue,
New York, New York 10021-8087, with interests in insurance, hotels, watches and
other timing devices, drilling rigs and tobacco, owned approximately 84% of the
outstanding voting stock of CNA Financial as of December 31, 1996. As of
December 31, 1996, Laurence A. Tisch and Preston R. Tisch owned approximately
32% of the outstanding common stock of Loews and may therefore be deemed to be
parents of Loews, and thus of CNA Financial and the Adviser, within the meaning
of the federal securities laws. Laurence A. Tisch and Preston R. Tisch are
brothers.
Pursuant to the Advisory Agreement, a copy of which is attached hereto as
Exhibit A, the Adviser provides the Company with an investment program complying
with the investment objectives, policies and restrictions of the Company and, in
carrying out such program, makes the investment decisions and is responsible for
the investment and reinvestment of the Company's assets. The Adviser performs
research, statistical analysis and continuous supervision of the Company's
investment portfolio. The Adviser bears the cost of fees, salaries or other
remuneration of directors and officers of the Company who also serve as officers
or employees of, or special consultants to, the Adviser, CNA Financial or any of
their affiliated companies. The Adviser also pays for office space, facilities
and business equipment. In return for its advisory services, the Company pays
the Adviser a monthly fee at an annual rate of 1/2 of 1% of the average weekly
net assets of the Company. Fees totaling $426,773, $397,443 and $398,731,
respectively, were paid by the Company to the Adviser during 1996, 1995 and
1994. The Company's net assets on December 31, 1996, December 31, 1995 and
December 31, 1994 were $88,723,067, $82,751,924 and $74,312,101, respectively.
The Advisory Agreement does not require employees of the Adviser to devote their
exclusive efforts to the Company's account, and it is expected that they will
provide investment management services for the Adviser's other accounts and for
CNA Financial and its affiliates.
The Company pays all its other costs and expenses, including directors'
fees not borne by the Adviser, custodian expenses, legal fees, costs of keeping
the Company's books and records, fees and expenses of independent accountants,
costs of acquiring and disposing of portfolio securities, interest, taxes, stock
exchange listing expenses and fees, costs and fees of registration with and
reporting to the Securities and Exchange Commission, costs of the Company's
automatic dividend investment plan, and fees and expenses of the Company's
transfer agent, registrar, custodian and dividend disbursing agent.
7
<PAGE> 10
However, if such costs and expenses (excluding interest, amortization of
deferred finance expense, taxes, brokerage commissions and extraordinary
expenses) borne by the Company in any fiscal year exceed 1 1/2% of average net
assets up to $30,000,000 plus 1% of average net assets over $30,000,000, the
Adviser is obligated to reimburse the Company for any excess pursuant to the
Advisory Agreement, as amended. The determination of whether such reimbursement
is due is made monthly, on an accrual basis, and to the extent that such
reimbursement is due it serves as an offset against the investment advisory fee
payable monthly by the Company to the Adviser. If, at the end of the Company's
fiscal year, full reimbursement has not been accomplished by such monthly
offsetting, the balance due must be paid by the Adviser to the Company. There
was no reimbursement for expenses made by the Adviser to the Company in 1996,
1995 and 1994. Expenses of the nature described in the first sentence of this
paragraph (excluding interest, amortization of deferred finance expense, taxes,
brokerage commissions and extraordinary expenses) borne by the Company in those
years were $743,839, $755,569 and $767,421, respectively.
The directors of the Adviser are Dennis H. Chookaszian, Philip L. Engel,
Michael C. Garner, Peter E. Jokiel, Donald M. Lowry and William H. Sharkey, Jr.,
CNA Plaza, Chicago, Illinois 60685. Mr. Chookaszian is Chairman and Chief
Executive Officer of the Adviser and Casualty, Mr. Engel is President of the
Adviser and Casualty, Mr. Garner is Senior Vice President of the Adviser and
Casualty, Mr. Jokiel is Senior Vice President and Chief Financial Officer of the
Adviser and Casualty, Mr. Lowry is Senior Vice President, Secretary and General
Counsel of the Adviser and Casualty, and Mr. Sharkey is Senior Vice President of
the Adviser and Casualty.
The Adviser has an affiliate, CNA Investor Services, Inc. ("Investor
Services"), which is a registered broker-dealer. The Company had no transactions
with Investor Services during 1996, 1995 or 1994. The Company paid $3,840 in
brokerage commissions to broker-dealers in 1996 and no brokerage commissions to
any broker-dealer in 1995 or 1994. The rate of portfolio turnover for the
Company during 1996, 1995 and 1994 was 66%, 39% and 38%, respectively.
BOARD OF DIRECTORS REVIEW OF THE INVESTMENT ADVISORY AGREEMENT
Before approving the continuation of the Advisory Agreement, the Board of
Directors of the Company reviewed the material factors relating to its
evaluation of the Adviser and the Advisory Agreement. The directors examined the
performance of the Company in relation to its stock price, net asset value and
dividend history over various periods of time and in comparison to other
closed-end bond funds. They noted that Mr. Dubberke has been the portfolio
manager of the Company since its inception. In addition, the Board of Directors
reviewed the list of and cost for services provided by the Adviser and compared
them to services and costs of investment advisors of other closed-end bond funds
of various sizes. The directors also noted that the Adviser receives research
services from brokerage firms at no additional cost to the Adviser or the
Company. These services are available to be used by the Adviser in its
management of the Company's portfolio as well as the Adviser's other accounts.
At the conclusion of its review of these factors, the Board of Directors
approved the continuation of the Advisory Agreement on its present terms and
conditions. The Board of Directors recommends a vote FOR approval of this
proposal.
8
<PAGE> 11
MISCELLANEOUS INFORMATION
The Bank of New York acts as transfer agent, registrar and dividend
disbursing agent for the Company and as trustee under the Indenture pursuant to
which the Company's Five Year Convertible Extendible Notes were issued.
The Chase Manhattan Bank, N.A. acts as custodian for the Company.
Edith Wulach provides certain accounting and bookkeeping services to the
Company.
Neither The Bank of New York, nor The Chase Manhattan Bank, N.A. nor Edith
Wulach performs any managerial or policy making functions for the Company.
3. RATIFICATION OF APPOINTMENT OF AUDITORS
Deloitte & Touche LLP served as the Company's auditor for the fiscal year
ended December 31, 1996, with responsibilities including auditing the books and
records of the Company and reporting from time to time on the financial
statements of the Company. At a meeting held on February 5, 1997, the Board of
Directors, including a majority of the directors who are not "interested
persons" (as defined in the 1940 Act) of the Adviser or the Company, upon
recommendation of the Company's audit committee, selected Deloitte & Touche LLP
as auditors for the Company for the fiscal year ending December 31, 1997.
Pursuant to the 1940 Act, such selection must be submitted to the stockholders
for ratification or rejection at the Annual Meeting. Ratification requires the
affirmative votes of the holders of at least a majority of the shares of the
Company's outstanding common stock present at the Annual Meeting in person or by
proxy, and the Board of Directors recommends a vote FOR ratification. To the
best knowledge of the Company, Deloitte & Touche LLP has no direct or material
indirect financial interest in the Company. Representatives of Deloitte & Touche
LLP are expected to be present at the Annual Meeting with the opportunity to
make a statement if they desire to do so, and such representatives will be
available to respond to appropriate questions.
OTHER MATTERS
The Board of Directors does not know of any other matters to be presented
at the Annual Meeting other than those mentioned in this proxy statement. If any
other business should come before the meeting, the persons named in the proxy
will vote thereon in accordance with their best judgment.
By Order of the Board of Directors
LYNNE GUGENHEIM
Secretary
February 26, 1997
9
<PAGE> 12
EXHIBIT A
Set forth below is a composite copy of the Investment Advisory Agreement
between the Company and the Adviser, dated March 21, 1975, incorporating all
amendments thereto made to the date of this Proxy Statement.
WITNESSETH:
WHEREAS, the Company engages in business as a closed-end management
investment company and is registered as such under the Investment Company Act of
1940 ("1940 Act"); and
WHEREAS, the Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, and is engaged in the business of providing
investment advice; and
WHEREAS, the Company desires to retain the Adviser to render such services
in the manner and on the terms and conditions hereinafter set forth; and
WHEREAS, the Adviser desires to perform such services in the manner and on
the terms and conditions hereinafter set forth;
NOW, THEREFORE, the Company and the Adviser agree as follows:
1. The Company hereby employs the Adviser to provide investment advisory
and statistical services and research facilities and services, to supervise the
composition of the Company's portfolio continuously, and to determine the nature
and timing of changes therein and the manner of effectuating such changes,
subject to supervision by the Company's Board of Directors and for the period
and on the terms set forth in this Agreement. The Adviser hereby accepts such
employment and agrees to render the services and to assume the obligations
herein set forth, for the compensation herein provided. The Adviser shall for
all purposes herein be deemed an independent contractor.
2. The Adviser shall furnish to the Company, at the Adviser's expense:
(a) research and statistical and other factual information and reports
with respect to securities held by the Company or which the Company might
purchase. It will also furnish to the Company such information as may be
appropriate concerning developments which may effect issuers of securities
held by the Company or which the Company might purchase or the businesses
in which such issuers may be engaged. Such statistical and other factual
information and reports shall include information and reports on
industries, businesses, corporations and all types of securities, whether
or not the Company has at any time any holdings in such industries,
businesses, corporations or securities.
(b) from time to time, advice, information and recommendations with
respect to the acquisition, holding, or disposition by the Company of
securities in which the Company is permitted to invest in accordance with
its investment objectives, policies and limitations.
(c) necessary assistance in:
(i) The preparation of all reports now or hereafter required by
federal or other laws.
(ii) The preparation of prospectuses, registration statements and
amendments thereto that may be required by federal or other laws or by
the rules or regulations of any duly
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authorized commission or administrative body. However, the Adviser shall
not be obligated to pay the costs of preparation, printing, or mailing
of prospectuses used in connection with sales of the Company's shares or
otherwise provided herein.
(d) office space at such place as may be agreed upon from time to
time, and all necessary office facilities, simple business equipment,
supplies, utilities and telephone service for managing the affairs and
investments of the Company.
3. Except as otherwise expressly provided herein, the Company assumes and
shall pay or cause to be paid all costs and expenses of the Company, including
without limitation:
(a) officers', directors' and employees' compensation and expenses,
except that the Adviser shall pay all fees, salaries or other remuneration
of directors and officers of the Company who also serve as directors and
officers or employees of or special consultants to the Adviser, CNA
Financial Corporation, or any subsidiary or affiliate of CNA Financial
Corporation or the Adviser;
(b) all costs and expenses incident to any public offering of stock of
the Company, for cash or otherwise, including those relating to the
registration of shares under the Securities Act of 1933, as amended, the
qualification of shares of the Company under state securities laws, the
printing or other reproduction and distribution of any registration
statement (and all amendments thereto) under the Securities Act of 1933,
the preliminary and final prospectuses included therein, and any other
necessary documents including underwriting documents incident to any public
offering, the advertising of shares of the Company and review by the
National Association of Securities Dealers, Inc. of any underwriting
arrangement;
(c) the charges and expenses of any registrar or any custodian
appointed by the Company for the safekeeping of its cash, portfolio
securities and other property;
(d) the charges and expenses of auditors;
(e) the charges and expenses of any stock transfer or dividend
disbursing agent or agents appointed by the Company;
(f) brokers' charges and expenses, including without limitation,
brokers' commissions and fees, dealer mark-ups and other charges and
expenses incurred in the acquisition or disposition of portfolio
securities;
(g) all taxes, including securities issuance and transfer taxes, and
corporate fees payable by the Company to federal, state or other
governmental agencies;
(h) the cost and expense of engraving or printing of stock
certificates representing shares of the Company;
(i) fees involved in registering and maintaining registrations of the
Company and of its shares with the Securities and Exchange Commission under
the 1940 Act and with various states and other jurisdictions;
(j) all expenses of stockholders' and directors' meetings and of
preparing, printing and mailing proxy statements and quarterly, semi-annual
and annual reports to stockholders;
(k) all fees and expenses incident to any dividend or distribution
program, including without limitation, the Company's Automatic Dividend
Investment Plan;
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(l) charges and expenses of legal counsel in connection with matters
relating to the Company including without limitation, legal services
rendered in connection with the Company's corporate and financial structure
and relations with its stockholders, issuance of Company shares, and
registrations and qualifications of securities under federal, state and
other laws;
(m) association dues;
(n) interest payable on Company borrowings;
(o) fees and expenses incident to the listing of the Company shares on
any stock exchange and continued compliance with listing requirements;
(p) the expense of keeping the general accounts and records of the
Company;
(q) postage; and
(r) extraordinary costs and expenses.
4. In return for its advisory services, the Company will pay the Adviser a
monthly fee at an annual rate of 0.5% of the average weekly net assets of the
Company. If this Agreement becomes effective subsequent to the first day of a
month or shall terminate before the last day of a month, compensation for such
month shall be computed in a manner consistent with the calculation of the fees
payable on a monthly basis. Subject to the provisions of paragraph 5 hereof, the
accrued fees will be payable monthly as promptly as possible after the end of
each month during which this Agreement is in effect.
5. If costs and expenses borne by the Company, including amounts payable to
the Adviser pursuant to paragraph 4 hereof (but excluding interest, taxes,
brokers' charges and expenses, extraordinary costs and expenses, and if payable
by the Company, the following costs and expenses incident to the public offering
of shares of the Company [except for costs and expenses incident to the public
offering of Company shares registered under the Securities Act of 1933 which may
from time to time be issued by the Company, including without limitation, under
the Automatic Dividend Investment Plan, which costs and expenses shall be
included in the expense limitation contemplated by this paragraph 5]: filing and
legal fees incident to the registration and qualification of the Company's
shares under the Securities Act of 1933 and the securities laws of various
states, legal and auditing fees and expenses incurred in the preparation or
filing of all documents incident to such registration and qualification, the
costs of printing a registration statement, the preliminary and final
prospectuses forming a part thereof, or any blue sky surveys or memoranda
incident to an offering to be made pursuant to such a registration statement and
the preliminary and final prospectuses forming a part thereof, and fees payable
to the National Association of Securities Dealers, Inc. incident to its review
of such offering), for any fiscal year ending on a date on which this Agreement
is in effect exceed one and one-half per cent (1 1/2%) of the first thirty
million dollars ($30,000,000) of the average net assets of the Company, plus one
per cent (1%) of the average net assets of the Company in excess of $30,000,000,
in each case computed by dividing (i) the sum of the net asset values of the
Company as of the last business day of each week of such fiscal year or of each
week during such fiscal year during which this Agreement was in effect, as the
case may be, by (ii) the number of weeks of such fiscal year or the number of
weeks (including a partial week) during which this Agreement is in effect during
such year, as the case may be, the Adviser will pay to the Company the amount of
such excess as soon as is practicable at the end of a fiscal year of the
Company; provided, however, that although payment shall be made by the Adviser
as soon as is practicable at the end of a fiscal year of the Company, the
determination of whether reimbursement for such costs and expenses is due the
Company from the Adviser will be made on an accrual basis once monthly, and if
it is so determined that such
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reimbursement is due, the accrued amount of such reimbursement which is due
shall serve as an offset to the investment advisory fee payable monthly by the
Company to the Adviser pursuant to paragraph 4 hereof, and the amount to be paid
by the Adviser to the Company as soon as is practicable at the end of a fiscal
year of the Company shall be equal to the difference between the aggregate
reimbursement due the Company from the Adviser for that fiscal year and the
aggregate offsets made by the Company against the aggregate investment advisory
fees payable to the Adviser pursuant to paragraph 4 hereof for that fiscal year
by virtue of such aggregate reimbursement.
6. The services of the Adviser to the Company are not to be deemed
exclusive, and the Adviser shall be free to engage in any other business or to
render investment advisory, or management services of any kind to any other
corporation, partnership, trust, individual or association, including any other
investment company, so long as its services hereunder are not impaired thereby.
Nothing in this Agreement shall limit or restrict the right of any director,
officer or employee of the Adviser to engage in any other business or to devote
his time and attention in part to the management or other aspects of any other
business, whether of a similar or dissimilar nature.
7. Neither the Adviser nor any of its officers or directors nor any
affiliate of the Adviser nor any of the officers or directors of such affiliate
shall take a long or short position in the stock of the Company, except that
they may purchase shares of such stock for investment purposes at the same price
as that available to the public at the time of purchase or, if prior to the
initial public offering, at the contemplated public offering price less
contemplated underwriting discount.
8. The Adviser assumes no responsibility under this Agreement other than to
render the services called for hereunder in good faith. The Adviser shall not be
responsible for any action of the Board of Directors of the Company or any
committee thereof in following or declining to follow any advice or
recommendation of the Adviser. The Adviser shall be entitled to rely on written
instructions of the President or any Vice President of the Company or of a
majority of the Board of Directors of the Company.
9. Neither the Adviser, nor any director, officer, agent or employee of the
Adviser shall be liable or responsible to the Company or its stockholders for
any error of judgment, mistake of law or any loss arising out of any investment,
or for any other act or omission in the performance by the Adviser of its duties
under this Agreement, except for liability resulting from willful misfeasance,
bad faith or gross negligence on the Adviser's part or from reckless disregard
by the Adviser of its obligations and duties under this Agreement. The Company
will hold the Adviser harmless against judgments rendered against the Adviser,
together with settlements paid by the Adviser and expenses of defense incurred
by the Adviser which (a) result from specific actions or omissions by the
Adviser in respect of the performance of its obligations hereunder, which
specific acts or omissions occur as a result of express written instructions of
the President or any Vice President of the Company or of a majority of the Board
of Directors of the Company, and (b) arise in actions in which there is an
express finding that such specific acts or omissions did not constitute willful
misfeasance, bad faith, gross negligence, or reckless disregard of its duty.
10. This Agreement has been approved by the Board of Directors of the
Company, including all of the Directors who are not "interested persons" (as
defined in the 1940 Act) of the Adviser or the Company on January 31, 1975, and
by a majority of the outstanding voting securities of the Company on the date
hereof, and shall continue in effect from year to year thereafter (unless sooner
terminated as hereinafter provided), provided its continuance is specifically
approved at least annually by (1) the
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Board of Directors of the Company or the vote of a majority of the outstanding
voting securities of the Company and (2) the vote of a majority of the Directors
of the Company who are not "interested persons" (as defined in the 1940 Act) of
the Adviser or the Company cast in person at a meeting called for the purpose of
voting upon such approval, provided, however, that (a) the Company may, at any
time and without the payment of any penalty, terminate this Agreement upon sixty
days' written notice to the Adviser either by majority vote of the Board of
Directors of the Company or by the vote of a majority of the outstanding voting
securities of the Company; (b) this Agreement shall immediately terminate in the
event of its assignment (within the meaning of the 1940 Act) unless such
automatic termination shall be prevented by an exemptive order of the Securities
and Exchange Commission; provided, however, (i) that the Company shall be under
no obligation to apply for or render assistance to any other person who applies
for such exemptive order in the event of such assignment and (ii) that in the
event that such exemptive order is obtained, this Agreement may nevertheless be
immediately terminated, without penalty, by the Board of Directors of the
Company or by a vote of the majority of the outstanding voting securities of the
Company; and (c) the Adviser may terminate this Agreement without payment of
penalty on sixty days' written notice to the Company.
11. All notices or communications hereunder shall be in writing and, if
sent to the Adviser shall be mailed by first class mail, or delivered, or
telegraphed and confirmed in writing to the Adviser at CNA Plaza, Chicago,
Illinois 60685, Attention: Corporate Secretary, and if to the Company shall be
mailed by first class mail or delivered, or telegraphed and confirmed in writing
to the Company at CNA Plaza, Chicago, Illinois 60685, Attention: Secretary.
12. This Agreement may be amended. Any amendment hereto shall become
effective when approved by the Adviser and by a majority of (a) the outstanding
voting securities of the Company and (b) the Directors of the Company who are
not parties to this Agreement or "interested persons" (as defined in the 1940
Act) of any such party, whichever occurs later.
13. For purposes of this Agreement, a "majority of the outstanding voting
securities of the Company" shall be determined in accordance with the applicable
provisions of the 1940 Act.
14. This Agreement shall be construed in accordance with the laws of the
State of Maryland and the applicable provisions of the 1940 Act. To the extent
applicable law of the State of Maryland, or any of the provisions herein,
conflict with applicable provisions of the 1940 Act, the latter shall control.
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<TABLE>
<S><C>
_________
| |
|________|
1. Election of Directors FOR all nominees /X/ WITHHOLD AUTHORITY to vote /X/ *EXCEPTIONS /X/
listed below for all nominees listed below
Nominees: F. Cole, S. Davidson, R. Dubberke, L. Nathan, A. Swift and D. Taylor
(INSTRUCTION: To withhold authority to vote for any individual nominee, mark the "Exceptions" box and write that nominee's name
on the line provided below.)
*Exceptions _______________________________________________________________________________________________________________________
2. Approval of the continuation of the Investment Advisory 3. Ratification of the selection of Deloitte & Touche LLP as
Agreement, as amended between the Company and Continental independent auditors for the Company.
Assurance Company.
FOR /X/ AGAINST /X/ ABSTAIN /X/ FOR /X/ AGAINST /X/ ABSTAIN /X/
4. In their discretion, the Proxies are authorized to vote
upon such other business as may properly come before the
meeting.
Change of Address and /X/
or Comments Mark Here
Please sign exactly as name appears at left. When
shares are held by joint tenants, both should sign.
When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
If a corporation, please sign in full corporate
name by President or other authorized officer. If
a partnership, please sign in partnership name by
authorized person.
Dated:_____________________________________, 1997
_________________________________________________
Signature
|
| _________________________________________________
______| Signature, if held jointly
VOTES MUST BE INDICATED /X/
SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. (X) IN BLACK OR BLUE INK.
</TABLE>
CNA INCOME SHARES, INC.
Proxy Solicited by the Board of Directors
For the Annual Meeting of Stockholders, April 17, 1997
Richard W. Dubberke, Lynne Gugenheim and Lew H. Nathan or any of
them, with full power of substitution, are hereby authorized to represent and to
vote the shares of the undersigned as fully as the undersigned could do if
personally present at the Annual Meeting of Stockholders of CNA Income Shares,
Inc. (the "Company") to be held April 17, 1997, at CNA Plaza, 333 South Wabash
Avenue, Chicago, Illinois, in Room 305, at 2:30 P.M. Chicago Time and at any and
all adjournments on the matters indicated on the reverse hereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1,2 AND 3.
Continued and to be signed and dated on the reverse side.
CNA INCOME SHARES, INC.
P.O. BOX 11058
NEW YORK, N.Y. 10203-0058
