<PAGE>
CURRENT INCOME SHARES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 13, 1998
To the Shareholders of
Current Income Shares, Inc.
The Annual Meeting of Shareholders (the "Meeting") of Current Income Shares,
Inc., a Delaware corporation (the "Company"), will be held in the Board Room on
the 38th floor of the Union Bank of California Building at 445 South Figueroa
Street, Los Angeles, California 90071, on Thursday, August 13, 1998 at 11:30
a.m. California time, for the following purposes:
(1) To elect the Board of Directors of the Company;
(2) To approve or disapprove the selection of Deloitte & Touche LLP as
the independent public accountants for the Company for the fiscal year
ending December 31, 1998;
(3) To approve or disapprove the adoption of the Management and
Investment Advisory Agreement between the Company and HighMark Capital
Management, Inc., the proposed investment management affiliate of Union Bank
of California, N.A., the Company's current adviser; and
(4) To transact such other business as may properly come before the
Meeting.
The Meeting may be adjourned from time to time and, at any adjourned
meeting, action with respect to the matters specified in this notice may be
taken with such further notice to shareholders, if any, as may be required by
the By-Laws.
Only shareholders of the Company of record at the close of business on June
30, 1998 are entitled to notice of and to vote at the Meeting and any
adjournments thereof. A list of such shareholders will be open to examination by
any shareholder for any purpose germane to the Meeting, at the time and place of
the Meeting and, during the ten days prior to the Meeting, at the office of
Harris Trust Company of California, 601 South Figueroa Street, 49th Floor, Los
Angeles, California 90017.
Your attention is directed to the attached Proxy Statement. YOU ARE
REQUESTED TO DATE, SIGN AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED
POSTAGE PREPAID ENVELOPE WITHOUT DELAY. PLEASE DO SO WHETHER OR NOT YOU EXPECT
TO ATTEND THE MEETING IN PERSON. You are invited to attend and your proxy will
not be used if you are present and prefer to vote in person.
By order of the Board of Directors
Jonathan A. Wright, Secretary
July 10, 1998
<PAGE>
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD AUGUST 13, 1998
CURRENT INCOME SHARES, INC.
445 SOUTH FIGUEROA STREET
LOS ANGELES, CALIFORNIA 90071
PROXY STATEMENT
This Proxy Statement is being sent on or about July 10, 1998 in connection
with the solicitation by the Board of Directors of Current Income Shares, Inc.,
a Delaware corporation (the "Company"), of proxies, on the form enclosed with
this Proxy Statement, for use at the Annual Meeting of Shareholders of the
Company (the "Meeting") to be held on Thursday, August 13, 1998, at 11:30 a.m.
California time, in the 38th floor Conference Room of the Union Bank of
California Building at 445 South Figueroa Street, Los Angeles, California 90071,
and at any adjournments of the Meeting. All proxies which are properly
completed, signed and returned to the Company prior to the Meeting will be voted
in accordance with the instructions given therein. Any proxy given by a
shareholder may be revoked at any time before it is exercised by filing with the
Secretary of the Company an instrument revoking it, by a duly executed proxy
bearing a later date, or by any shareholder voting in person at the Meeting.
The Company has fixed the close of business on June 30, 1998 as the record
date for the determination of shareholders entitled to notice of, and to vote
at, the Meeting or any adjournments thereof. On that date the Company had
outstanding 3,673,334 shares of common stock, par value $1.00 per share (the
"Common Stock"), constituting the only voting securities of the Company. The
presence in person or by proxy of more than one-half of the outstanding shares
entitled to vote at the Meeting will constitute a quorum. If a quorum is not
present at the Meeting, sufficient votes in favor of a proposal are not received
by the time scheduled for the Meeting, or the holders of shares present, in
person or by proxy, determine to adjourn the Meeting for any other reason, the
shareholders present, in person or by proxy, may adjourn the Meeting from time
to time. No notice of an adjourned meeting date will be given, other than
announcement at the Meeting, unless the adjournment is for more than 30 days or
a new record date is set for the adjourned meeting. Any such adjournment will
require the affirmative vote of shareholders holding a majority of the shares
present, in person or by proxy, at the Meeting. The persons named in the Proxy
will vote in favor of such adjournment those shares which they are entitled to
vote
1
<PAGE>
that voted in favor of all proposals; they will vote against any such
adjournment those shares that they are entitled to vote that voted against any
proposal. Business may be conducted once a quorum is present and may continue
until adjournment of the Meeting notwithstanding the withdrawal or temporary
absence of sufficient shares to reduce the number present to less than a quorum.
Each shareholder is entitled to one vote for each share of Common Stock then
standing in his or her name. Shareholders are not entitled to cumulate their
votes for the election of Directors, which means that the holders of a majority
of the shares represented can elect the entire Board of Directors.
Abstentions 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 shares on a particular matter
with respect to which the brokers or nominees do not have discretionary power)
will not be counted for or against any proposal to which they relate, but will
be counted for purposes of determining whether a quorum is present and will be
counted as votes present for purposes of determining a "majority of the
outstanding shares" present at the Meeting, as defined in the Investment Company
Act of 1940. For this reason, abstentions and broker non-votes will have the
effect of a "no" vote for purposes of obtaining the requisite approval of
Proposals 2 and 3.
The Company will furnish without charge a copy of its most recent Annual
Report and Semi-Annual Report to a shareholder upon request. Such request may be
made by calling the Company during business hours at (888) 465-2825, or by
writing to the Company at the address set forth above.
The cost of preparing, assembling, printing and mailing this Proxy Statement
and the enclosed proxy form and the cost of soliciting proxies relating to the
Meeting will be borne by the Company and Union Bank of California, N.A. (the
"Current Adviser"), the Company's present investment adviser. The Company will
request banks and brokers to solicit their customers who are beneficial owners
of Common Stock listed of record in names of nominees, and will reimburse such
banks and brokers for the reasonable out-of-pocket expenses of such
solicitations. The original solicitations of proxies by mail may be supplemented
by telephone, telegram and personal solicitation by officers and other regular
employees of the Company or of Union Bank of California, N.A. but no additional
compensation will be paid to such individuals, or the Current Adviser, on
account of such activities.
2
<PAGE>
STOCK OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth as of March 31, 1998 certain information as
to the Common Stock owned beneficially by each person who is known to the
Company to own more than 5% of the outstanding Common Stock and all executive
officers and Directors as a group.
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENTAGE OF
NAME AND ADDRESS BENEFICIALLY OUTSTANDING
OF BENEFICIAL OWNER OWNED SHARES
- -------------------------- ------------ -------------
<S> <C> <C>
All executive officers and 10,030 0.27%
Directors as a group
</TABLE>
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
At the Meeting, five members of the Board of Directors are to be elected, to
serve until the Company's next annual meeting of shareholders and until their
successors are elected and qualified. It is the intention of the persons named
in the accompanying proxy to vote the shares represented thereby for the
election of the persons listed below unless a shareholder specifically indicates
in his proxy his desire to withhold authority to vote for any of those persons.
A plurality of votes cast is required to elect directors.
At a meeting held on May 14, 1998, the Company's Board of Directors
nominated the following slate of Directors. All of these nominees have indicated
that they are willing to serve as Directors and that they are able to do so. If,
however, any nominee should refuse or be unable to serve, the Board of
Directors' proxy holders will vote the proxies for such other person as the
Board of Directors may recommend.
Directors of the Company serve terms of office which expire on the election
of their successors or upon their earlier resignation or removal.
3
<PAGE>
According to information furnished to the Company by the nominees listed
below, their principal occupations and affiliations during at least the past
five years, their current directorships with other companies, and their
beneficial ownership of shares of Common Stock of the Company at June 30, 1998,
are as follows:
<TABLE>
<CAPTION>
NUMBER
OF
PRINCIPAL OCCUPATIONS, HAS SERVED AS SHARES
NAME AGE EMPLOYMENT AND DIRECTORSHIPS DIRECTOR SINCE OWNED+
- ----------------- --- --------------------------------------------- --------------- -----------
<S> <C> <C> <C> <C>
Willard H. 62 Partner of Ernst & Young (formerly Ernst & August 1997 656
Altman(1) Whinney) from 1969 to retirement in 1995.
Director of Source Capital, Inc., a
closed-end investment company not affiliated
with the Current Advisor or New Advisor, from
May 1998.
Morris A. 75 President, Weingart Foundation (a charitable May 1980 500
Densmore foundation) from 1983 to 1988; Executive Vice
(1)(2) President, Union Bank, from 1971 until
retirement in 1983.
Clark R. 49 President, Pacific Alliance Capital May 1991 --
Gates*(2) Management, a division of Union Bank of
California, N.A., from October 1990; Senior
Vice President, Union Bank of California,
N.A., from October 1991; Managing Director,
Pacific Century Advisors, from 1986 to 1989.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
NUMBER
OF
PRINCIPAL OCCUPATIONS, HAS SERVED AS SHARES
NAME AGE EMPLOYMENT AND DIRECTORSHIPS DIRECTOR SINCE OWNED+
- ----------------- --- --------------------------------------------- --------------- -----------
<S> <C> <C> <C> <C>
Michael L. 56 Independent financial consultant from January May 1981 300
Noel(1)(3) 1995; Executive Vice President, Mission Land
Company, from January 1994 until retirement
in December 1994; Senior Vice President,
Chief Financial Officer and Director, Mission
Energy Company, from February 1992 to January
1994; Senior Vice President, Southern
California Edison Company, from April 1991 to
February 1992; Vice President, Treasurer and
Chief Financial Officer, Southern California
Edison Company, from October 1990 to April
1991; Director, Hancock Savings Bank, from
1986; Director, Software Toolworks, Inc.,
from 1989 to April 1994; Member of Advisory
Board, HighMark Funds, from April 1997;
Member of Board of Trustees, Stepstone Funds,
from 1990 to April 1997.
Robert M. 60 Executive Vice President and head of -- 300
Whitler Financial Management and Trust Services
Group, Union Bank, from March 1991 until
retirement in April 1996. President, Chief
Operating Officer, and Director, Trust
Services of America, from 1988 to October
1990. Member of Advisory Board, HighMark
Funds, from April 1997.
</TABLE>
- ------------------------
+ As of June 30, 1998, no Director or nominee beneficially owned 1% or more of
the outstanding Common Stock. As of June 30, 1998, all Directors and
officers as a group
5
<PAGE>
beneficially owned a total of 10,030 shares of Common Stock of the Company,
or less than 1% of the outstanding shares.
* Mr. Gates is an "interested person" of the Company within the meaning of the
Investment Company Act of 1940, because he is an officer of Union Bank of
California, N.A., which is the Company's current investment adviser and
which provides other services to the Company (see "Approval of Adoption of
the Management and Investment Advisory Agreement"). Mr. Gates is also
President of the Company.
(1) Member of the Audit Committee. The function of the Audit Committee, which
met two times in 1997, is to review the Company's financial statements and
control procedures with the officers of the Company and the independent
accountants, with a view to assessing and improving the Company's control
procedures, determining the adequacy of the audit and understanding the
factors which influenced the Company's performance. Results of these reviews
are reported to the Board of Directors of the Company. The Audit Committee
also has the responsibility of recommending independent public accountants
for selection by the Board of Directors. Willard H. Altman is Chairman of
the Audit Committee.
(2) Member of the Executive Committee, which has the powers of the Board of
Directors in the management of the business and affairs of the Company
except the power to recommend to shareholders any action requiring
shareholder approval. Mr. Gates is Chairman of the Executive Committee.
(3) Member of the Nominating Committee, which has the responsibility to nominate
candidates for directorships, when vacancies due to resignation or
retirement occur. Michael L. Noel is Chairman of the Nominating Committee.
During 1997, the Board of Directors met four times, and all Directors
attended at least 75% of the meetings. Stephen J. Dunn and William R. Howell,
who were last elected Directors in 1997, are not standing for reelection.
6
<PAGE>
Set forth below is a table indicating the names and ages of the principal
officers of the Company who are not also Directors of the Company.
<TABLE>
<CAPTION>
POSITION WITH POSITION WITH
NAME AGE THE COMPANY UNION BANK OF CALIFORNIA
- ----------------------------------------- --- ---------------------- -------------------------
<S> <C> <C> <C>
E. Jack Montgomery....................... 48 Vice President and Vice President
Portfolio Manager
Richard H. Earnest....................... 60 Vice President Senior Vice President
Paul Mastin.............................. 41 Treasurer Vice President
Kevin Rogers............................. 38 Vice President Senior Vice President
Jonathan A. Wright....................... 50 Secretary Vice President and
Associate General Counsel
</TABLE>
The principal business address of Mr. Rogers is Union Bank of California,
N.A. 18300 Von Karman Avenue, Irvine, California 92715. The principal business
address of Messrs. Earnest and Wright is Union Bank of California, N.A. 445
South Figueroa Street, Los Angeles, California 90071. The principal business
address of Messrs. Montgomery and Mastin is Union Bank of California, N.A. 475
Sansome Street, San Francisco, California 94111.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Each Director who is not a director, officer or employee of the Adviser or
of a corporation affiliated with the Adviser receives a Director's fee of $6,000
per year for his services, which includes fees for attending regular meetings.
In addition, such Directors receive $250 for each special meeting attended.
7
<PAGE>
The following table sets forth the aggregate compensation paid by the
Company for the fiscal year ended December 31, 1997, to the Directors who are
not affiliated with the Adviser, as well as the aggregate compensation paid to
such Directors for service on the Boards of all other registered investment
companies advised by the Adviser or its affiliates (the "Adviser Complex"):
<TABLE>
<CAPTION>
PENSION OR TOTAL
RETIREMENT ESTIMATED COMPENSATION
BENEFITS ANNUAL FROM COMPANY
AGGRETATE ACCRUED AS BENEFITS AND ADVISER
COMPENSATION PART OF COMPANY UPON COMPLEX PAID
NAME FROM COMPANY EXPENSES RETIREMENT TO DIRECTOR
- -------------------------------- --------------- --------------------- --------------- ---------------
<S> <C> <C> <C> <C>
W. H. Altman.................... $ 3,000 -0- -0- $ 3,000*
M. A. Densmore.................. $ 6,000 -0- -0- $ 6,000*
S. J. Dunn...................... $ 6,000 -0- -0- $ 6,000*
W. R. Howell.................... $ 6,000 -0- -0- $ 23,500(33**)
M. L. Noel...................... $ 6,000 -0- -0- $ 23,000(33**)
R.M. Whitler.................... -0- -0- -0- $ 12,750(33**)
</TABLE>
- ------------------------
* Indicates the Company only.
** Indicates total number of funds in Adviser Complex, including the Company.
The Company does not compensate its officers or employees for their services
to the Company, which expenses are borne by the Adviser. Reference is made to
information under the heading "The Agreement and Compensation of the Adviser"
for a discussion of fees paid by the Company to the Adviser.
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
(PROPOSAL NO. 2)
At a meeting held on May 14, 1998, a majority of the independent Directors
who are not "interested persons" of the Company (as defined in the Investment
Company Act of 1940) selected the firm of Deloitte & Touche LLP as the Company's
independent public accountants for the fiscal year ending December 31, 1998. The
Company is submitting such selection to the shareholders for approval or
disapproval. To the best knowledge of the Board of Directors, such firm has no
direct or material indirect financial interest in the Company, nor has it served
the Company in any capacity other than as independent public accountants.
A majority of votes cast is required to approve the independent public
accountants. Unless otherwise instructed, the Board of Directors' proxy holders
will vote to approve the selection of Deloitte & Touche LLP.
8
<PAGE>
APPROVAL OF ADOPTION OF THE
MANAGEMENT AND INVESTMENT ADVISORY AGREEMENT
(PROPOSAL NO. 3)
At a meeting held on May 27, 1998, the Board of Directors of Union Bank of
California, N.A., the Current Adviser, approved the reorganization of the
investment advisory division of the bank as a separate wholly owned subsidiary
of UnionBanCal Corporation (the holding company for Union Bank of California,
N.A.). The subsidiary will be named HighMark Capital Management, Inc. (the "New
Adviser") and will continue to be controlled by UnionBanCal Corporation. The
Board of Directors of the Company has reviewed the reorganization of the Current
Adviser and has determined that no significant changes will be made as a result
of the reorganization in the management of the Company's portfolio, the
personnel handling the Company's affairs, or the fees and expenses charged.
Accordingly, at the Meeting, the shareholders will be asked to approve the
adoption of a Management and Investment Advisory Agreement (the "Agreement")
between the Company and the New Adviser, as set forth in Appendix "A." The
Agreement was originally approved by the Board of Directors and the directors
who are not "interested persons" of the Company on May 14, 1998. The Company's
agreement with the Current Adviser was last approved by the Board of Directors
on May 14, 1998, and by the shareholders on August 14, 1997.
THE AGREEMENT AND COMPENSATION OF THE ADVISER
By its terms, the Agreement continues from year to year so long as its
continuance is approved at least annually by vote of a majority of the
outstanding voting securities of the Company or by vote of the Board of
Directors of the Company and, in either event, by the vote cast in person of a
majority of Directors who are not parties to the Agreement or "interested
persons" of any party to the Agreement, at a meeting called for the purpose of
voting on such approval. The Agreement may be terminated on sixty days' notice
by the Adviser, by the Board of Directors of the Company or by a vote of a
majority of the outstanding voting securities of the Company, in each instance
without the payment of any penalty. It will automatically terminate upon any
assignment. For purposes of the Investment Company Act of 1940, a "majority of
the outstanding voting securities" of the Company means the lesser of (i) 67% of
the shares represented at a meeting at which more than 50% of the outstanding
shares are represented, or (ii) more than 50% of the outstanding shares.
9
<PAGE>
The Agreement requires the Adviser to provide investment management and
advisory services to the Company. Under the Agreement, the Adviser advises the
Company on the composition of its portfolio and provides and bears the costs of
research and continuous supervision of the portfolio. The Adviser is authorized,
subject to control by the Company's Board of Directors, to determine which
securities are to be bought or sold and in what amounts. The Adviser is required
by the Agreement to pay for office space, facilities, business equipment and the
costs of keeping the Company's accounting records.
For providing these services, the Adviser receives a management fee which on
an annual basis will amount to 0.50% of the average net asset value of the
Company. This fee is computed and accrued weekly and is payable monthly. At
December 31, 1997, the Company's total net asset value was $49,226,628,
equivalent to $13.40 per share.
All costs and expenses incurred in the operation of the Company, other than
the expenses specifically assumed by the Adviser under the Agreement, are borne
by the Company. These costs and expenses include brokerage commissions on
portfolio transactions, fees and expenses of directors, interest, taxes, various
corporate fees and expenses, auditing and legal fees and expenses incident to
any public offering of the shares of the Company.
The Agreement is substantially the same as the Company's agreement with the
Current Advisor, except it eliminates the requirement that if costs and expenses
(including the management fee but excluding interest, taxes, brokerage fees and
the expenses of any offering of the Company's securities) borne by the Company
in any fiscal year exceed 1 1/2% of the first $30 million of the average net
asset value of the Company plus 1% of the average net asset value of the Company
in excess of $30 million, the Current Adviser will pay such excess to the
Company on a monthly basis as provided in the Agreement. No such payment under
the Company's Agreement has been required since at least 1981, and the provision
reflected requirements of the California Department of Corporations that are no
longer in effect.
The Company paid $240,710 for management and investment advisory services in
1997 to the Current Adviser, Union Bank of California, N.A.
PORTFOLIO TRANSACTIONS AND RATE OF TURNOVER
The Company's investment adviser, subject to the supervision of the Board of
Directors of the Company, purchases and sells securities for the Company's
portfolio through those brokers or dealers who execute such orders promptly and
at prices and under conditions believed to be most favorable to the Company.
Certain dealers may be selected
10
<PAGE>
for the research, statistical or other services they provide, but best execution
and price are the primary considerations in all cases. Purchases and sales of
securities traded in the over-the-counter market will be transacted with those
persons who, in the opinion of the Company's investment adviser, provide the
best prices and executions.
During 1997, the Company paid no brokerage commissions in connection with
the purchase and sale of portfolio securities.
The rate of the Company's portfolio turnover for 1997 was 52.1%.
CUSTODIAL SERVICES
Bankers Trust Company provided custodial services for the Company up to
December 18, 1997. On December 18, 1997, Union Bank of California, N.A. began
providing custodial services for the Company. Total custody fees paid by the
Company in 1997 were $9,924.
FURTHER INFORMATION CONCERNING THE PROPOSED NEW ADVISER
The New Adviser, HighMark Capital Management, Inc., is incorporated in
California and is a newly organized wholly owned subsidiary of UnionBanCal
Corporation, the owner of 94% of the outstanding stock of Union Bank of
California, N.A., the Current Adviser. Both the New Adviser and the Current
Adviser are subsidiaries of UnionBanCal Corporation, a registered bank holding
company which is regulated by the Federal Reserve Board of San Francisco. The
Current Adviser is a federally-chartered national banking association originally
chartered in 1864, and is subject to oversight by the Office of the Comptroller
of the Currency. The New Adviser is registered as an investment adviser under
the Investment Advisers Act of 1940 and is subject to oversight by the
Securities and Exchange Commission. UnionBanCal Corporation had total assets of
approximately $30.59 billion and shareholder equity of approximately $2.68
billion at December 31, 1997.
The Bank of Tokyo-Mitsubishi, Ltd. owns approximately 81% of the outstanding
common stock of UnionBanCal Corporation. As a consequence, both UnionBanCal
Corporation and The Bank of Tokyo-Mitsubishi, Ltd. are deemed to control the New
Adviser for purposes of the Investment Company Act of 1940. The Bank of
Tokyo-Mitsubishi, Ltd. is the result of the merger of The Mitsubishi Bank,
Limited and The Bank of Tokyo, Ltd., which was consummated on April 1, 1996. The
Bank of Tokyo-Mitsubishi, Ltd. has more than $700 billion in assets and offices
in more than 40 countries.
The New Adviser is subject to the Glass-Steagall Act. The Glass-Steagall
Act, among other things, prohibits, with certain exceptions, banks and bank
holding companies from
11
<PAGE>
engaging in the business of issuing, underwriting, selling or distributing
securities and from affiliating with companies engaged in those activities.
Subsequent to the decision of the United States Supreme Court in INVESTMENT
COMPANY INSTITUTE V. CAMP, the Board of Governors of the Federal Reserve System
issued regulations forbidding a bank holding company or subsidiary thereof from
organizing, sponsoring or controlling a registered open-end investment company
continuously engaged in distributing its shares but permitting a subsidiary of a
bank holding company to serve as investment adviser to a registered investment
company, such as the Company, subject to a number of terms and conditions. In
the event the New Adviser is prohibited from acting as the investment adviser
for the Company, it is expected that the Board of Directors would recommend to
the shareholders the selection of another qualified adviser.
The New Adviser also acts as the investment adviser to the HighMark Funds, a
family of registered mutual funds. As of June 30, 1998, the HighMark Funds
included the following funds with investment objectives similar to that of the
Company:
<TABLE>
<CAPTION>
RATIO OF
ASSET VALUE ADVISORY FEE
(000 OMITTED) TO NET ASSETS*
------------- -----------------
<S> <C> <C>
HighMark Intermediate-Term Bond Fund..................... $ 258,568 0.50%
HighMark Government Securities Fund...................... $ 119,126 0.50%
HighMark Bond Fund....................................... $ 205,060 0.50%
</TABLE>
- ------------------------
* Excluding fee waivers.
12
<PAGE>
DIRECTORS AND OFFICERS OF THE NEW ADVISER
The following are the directors and principal executive officers of HighMark
Capital Management, Inc., the New Adviser:
<TABLE>
<CAPTION>
POSITION WITH
NAME THE NEW ADVISER BUSINESS BACKGROUND
- ---------------------------- ---------------------------- ---------------------------------------
<S> <C> <C>
Susumu Hanada Director, Chairman of the Senior Inspector, Inspection Division,
Board, and Chief Executive The Bank of Tokyo- Mitsubishi, Ltd.,
Officer from May 1997; Deputy General Manager,
Capital Markets Group, Bank of Tokyo-
Mitsubishi, from April 1996 to April
1997; CEO and President,
Tokyo-Mitsubishi Derivative Products
(USA), Inc., from April 1996 to April
1997; CEO and President, Mitsubishi
Capital Market Securities, Inc., from
1991 to May 1996; various offices with
The Bank of Tokyo-Mitsubishi, Ltd.,
from 1974 to April 1996.
Clark R. Gates Director, President, and President, Pacific Alliance Capital
Chief Operating Officer Management, a division of Union Bank of
California, N.A., from 1990; Senior
Vice President, Union Bank of
California, N.A., from 1991; Managing
Director, Pacific Century Advisors,
from 1986 to 1989.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH
NAME THE NEW ADVISER BUSINESS BACKGROUND
- ---------------------------- ---------------------------- ---------------------------------------
<S> <C> <C>
Yoshihiko Someya Director Deputy Chairman, Credit and
Administration, Union Bank of
California, N.A., from July 1998;
Director, UnionBanCal Corporation, from
July 1998; Executive Vice President,
Credit Administration Support and
Liaison, Union Bank of California,
N.A., from March 1998 to July 1998;
Deputy General Manager, Osaka Branch,
The Bank of Tokyo-Mitsubishi, Ltd.,
from June 1996 to May 1998; various
offices with The Bank of Tokyo-
Mitsubishi, Ltd., from 1971 to June
1996.
Tsutomu Nakagawa Director Executive Vice President and Manager,
Office of the President, Union Bank of
California, N.A., from March 1998;
Senior Vice President, International
Banking Group, Union Bank of
California, N.A., from December 1996 to
March 1998; various offices with The
Bank of Tokyo-Mitsubishi, Ltd., from
1973 to December 1996.
Patrick G. Dodson Director and Chief Financial Senior Vice President, Strategic
Officer Planning, Trust & Private Financial
Services Group, Union Bank of
California, N.A., from February 1997;
Vice President, Institutional Services,
Union Bank of California, N.A., from
1988 to February 1997.
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH
NAME THE NEW ADVISER BUSINESS BACKGROUND
- ---------------------------- ---------------------------- ---------------------------------------
<S> <C> <C>
Luke C. Mazur Managing Director - Chief Chief Investment Officer, Pacific
Investment Officer Alliance Capital Management, a division
of Union Bank of California, N.A., from
June 1990; Senior Vice President, Union
Bank of California, N.A., from June
1990; Chief Investment Officer,
Northern Trust Company, from 1964 to
June 1990.
Olga J. Sanchez Secretary Vice President and Senior Counsel,
Union Bank of California, N.A., from
1979.
</TABLE>
15
<PAGE>
REQUIRED VOTE FOR APPROVAL OF THE ADOPTION OF THE AGREEMENT
The Board of Directors of the Company recommends that the shareholders vote
in favor of the adoption of the Agreement previously described. The favorable
vote of the lesser of (i) a majority of the outstanding shares of Common Stock
of the Company, or (ii) 67% or more of the shares represented at the Meeting if
the holders of more than 50% of the outstanding shares of Common Stock of the
Company are present or represented by proxy at the Meeting, is required for such
approval. The Board of Directors' proxy holders will vote to approve the
Agreement unless otherwise instructed.
If the shareholders do not approve the adoption of the Agreement, the Board
of Directors of the Company will attempt to negotiate a new agreement with some
other party and submit it for approval to the Company's shareholders.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented at the
Meeting other than those mentioned in this Proxy Statement. If any other
business should come before the Meeting, the proxies will vote thereon in
accordance with their best judgment.
Shareholders wishing to submit proposals for inclusion in the proxy
statement for the 1999 Shareholders' meeting should send their written proposals
to the Secretary of the Company by December 31, 1998 at 445 South Figueroa
Street, Los Angeles California 90071. Any such proposal must satisfy all
applicable federal and state requirements.
Please complete and sign the enclosed proxy and return it in the envelope
provided so that the Meeting may be held and action taken on the matters
described herein with the greatest possible number of shares participating. You
may nevertheless vote in person if you attend the Meeting.
By Order of the Board of Directors
JONATHAN A. WRIGHT, Secretary
July 10, 1998
<PAGE>
APPENDIX A
MANAGEMENT AND INVESTMENT
ADVISORY AGREEMENT
THIS MANAGEMENT AND INVESTMENT ADVISORY AGREEMENT is made as of the day
of , 1998 by and between CURRENT INCOME SHARES, INC., a Delaware
corporation (hereinafter called the "Fund"), and HIGHMARK CAPITAL MANAGEMENT,
INC. (hereinafter called the "Manager").
RECITALS
A. The Fund is engaged in business as a closed-end management investment
company and is registered as such under the Investment Company Act of 1940.
B. The Manager is registered as an investment adviser under the Investment
Advisers Act of 1940, as amended.
C. The Fund wishes to retain the Manager to serve as investment adviser and
manager to the Fund, and the Manager wishes to provide such services to the
Fund.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the covenants
hereinafter contained, the Fund and the Manager hereby agree as follows:
1. The Fund hereby employs the Manager to serve as investment adviser and
manager of the Fund, subject to supervision of the Fund's Board of Directors and
for the period and on the terms set forth in this Agreement. The Manager hereby
accepts such employment and agrees to render the services and to assume the
obligations herein set forth, for the compensation herein provided.
2. Subject to the supervision of the Fund's Board of Directors, the Manager
shall:
(a) Manage the composition of the Fund's investment portfolio, and
determine the nature and timing of changes therein and the manner of
effectuating such changes, in accordance with the Fund's investment
objectives, policies and restrictions.
(b) Furnish to the Fund research and statistical and other factual
information and reports with respect to securities held by the Fund or which
the Fund might purchase, the issuers of such securities, and developments
which may affect issuers of securities held by the Fund or which the Fund
might purchase or the businesses in which such issuers may be engaged.
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(c) Conform with all applicable rules and regulations of the Securities
and Exchange Commission and conduct its activities under this Agreement in
accordance with other applicable laws.
(d) Place all orders for the purchase and sale of portfolio securities
for the account of each Fund with brokers or dealers selected by the
Manager. In executing portfolio transactions and selecting brokers or
dealers, the Manager shall use its best efforts to seek on behalf of the
Fund the best available price and execution. In assessing the best overall
terms available for any transaction, the Manager shall consider all factors
it deems relevant, including the breadth of the market in the security, the
price of the security, the size of the order, the difficulty and risk of
execution, the financial condition and execution capability of the broker or
dealer, and the reasonableness of the commission, if any, both for the
specific transaction and on a continuing basis.
In executing portfolio transactions for the Fund, the Manager may, but shall
not be obligated to, aggregate the securities to be sold or purchased with those
of other clients where such aggregation is consistent with the policies of the
Fund, to the extent permitted by applicable laws and regulations. In such event,
the Manager shall allocate the securities so purchased or sold, and the expenses
incurred in the transaction, in the manner it considers to be the most equitable
and consistent with its fiduciary obligations to the Fund and such other
clients.
(e) Maintain all books and records with respect to the securities
transactions of the Fund, keep books of account with respect to the Fund and
furnish the Fund's Board of Directors with such periodic and special reports
as the Board may request.
(f) Furnish to the Fund necessary assistance in: (i) the preparation of
all reports now or hereafter required by federal or other laws; and (ii) the
preparation of prospectuses, registration statements and amendments thereto
and proxy statements that may be required by federal or other laws or by the
rules or regulations of any duly authorized commission or administrative
body. However, nothing herein shall obligate the Manager to pay the costs of
preparation, printing, or mailing of such prospectuses, registration
statements and amendments or proxy statements.
(g) Furnish to the Fund, at the Manager's expense, office space in the
offices of the Manager or in such other place or places as may be agreed
upon from time to time, and all office facilities, business equipment,
supplies, utilities and telephone service necessary for managing the affairs
and investments and keeping the general accounts and records of the Fund
(exclusive of the necessary records of transfer agents, registrars and
custodians), and arrange, if desired by the Fund, for members
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of the Manager's organization to serve, without compensation from the Fund,
as officers, directors or employees of the Fund.
3. The Manager shall pay all expenses incurred by it in connection with its
activities under this Agreement. Except as otherwise expressly provided in this
Agreement, the Fund assumes and shall pay or cause to be paid all expenses of
the Fund, including without limitation: (a) all costs and expenses incident to
any public offering of shares of the Fund, for cash or otherwise, including
those related to the registration of shares under the Securities Act of 1933, as
amended, the qualification of shares of the Fund 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 incident to any public offering, the advertising of shares of the
Fund, the services rendered by any securities dealers or brokers, and the review
by the National Association of Securities Dealers, Inc. of any underwriting
arrangements; (b) the charges and expenses of any registrar and any custodian or
depository appointed by the Fund for the safekeeping of its cash, portfolio
securities and other property; (c) the charges and expenses of the Fund's
independent public accountants; (d) the charges and expenses of any stock
transfer or dividend agents appointed by the Fund; (e) brokers' commissions
chargeable to the Fund in connection with portfolio securities transactions to
which the Fund is a party; (f) all taxes, including securities issuance and
transfer taxes, and corporate fees payable by the Fund to federal, state or
other governmental agencies; (g) the cost and expense of engraving or printing
of stock certificates representing shares of the Fund; (h) fees involved in
registering and maintaining registrations of the Fund and of its shares with the
Securities and Exchange Commission and with various states and other
jurisdictions; (i) all expenses of shareholders' and directors' meetings and of
preparing, printing and mailing proxy statements and quarterly, semi-annual and
annual reports to shareholders; (j) fees and travel expenses of directors who
are not also officers, directors or employees of the Manager or affiliated
companies of the Manager; (k) all expenses incident to any dividend reinvestment
program; (l) charges and expenses of legal counsel in connection with matters
relating to the Fund, including without limitation, legal services rendered in
connection with the Fund's corporate and financial structure and relations with
its shareholders, issuance of Fund shares, and registrations and qualifications
of securities under federal, state and other laws; (m) association dues; (n)
interest payable on Fund borrowings; (o) fees and expenses incident to the
listing of the Fund shares in any stock exchange; and (p) postage.
4. For the services to be rendered, the Fund shall pay to the Manager
compensation at the annual rate (the "Annual Rate") of one-half of one percent
(0.50%) of the value of the average net assets of the Fund, calculated as
hereinafter set forth. Compensation under
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this Agreement shall be calculated and accrued weekly commencing on the day
following effectiveness hereof, by applying the Annual Rate to the net assets of
the Fund as of the close of the last business day of the calendar week for which
the fee is being calculated and dividing the sum so computed by the number of
calendar weeks ending within the fiscal year. For the purposes of this
provision, a week ends within a fiscal year or calendar month when the last
business day of that week falls within that year or calendar month. If the
contract becomes effective subsequent to the first business day of a week or
terminates before the last business day of a week, compensation for such week
shall be computed on a pro rata basis for the number of business days it is in
effect in relation to the number of business days in that week. The fees accrued
for the weeks ending within each calendar month shall be payable as promptly as
possible after the end of such calendar month.
5. In compliance with the requirements of Rule 31a-3 under the Investment
Company Act of 1940, the Manager agrees that all records which it maintains for
the Fund are the property of the Fund and further agrees to surrender promptly
to the Fund any such records upon the Fund's request. In addition, the Manager
agrees to preserve for the periods prescribed in Rule 31a-2 under such Act the
records required to be maintained by Rule 31a-3 under such Act.
6. The services of the Manager to the Fund are not to be deemed exclusive,
and the Manager shall be free to engage in any other business or to render
similar services to others so long as its services hereunder are not impaired
thereby. The Manager assumes no responsibility under this Agreement other than
to render the services called for hereunder in good faith, and shall not be
responsible for any action of the Board of Directors of the Fund, or any
committee thereof, in following or declining to follow any advice or
recommendation of the Manager. Nothing in this Agreement shall limit or restrict
the right of any director, officer or employee of the Manager 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. This Agreement shall remain in effect until May 31, 1999, unless sooner
terminated as hereinafter provided. This Agreement shall continue in effect from
year-to-year thereafter provided it is approved annually, within ninety days of
its termination date, by vote of a majority of the outstanding voting securities
of the Fund or by vote of the Board of Directors of the Fund and by a majority
of the Directors of the Fund who are not parties to this Agreement or
"interested persons" (as defined in the Investment Company Act of 1940) of any
party to this Agreement, which vote shall be cast in person at a meeting called
for the purpose of voting on approval of the terms of this Agreement and its
continuance; provided, however, that (a) the Fund may, at any time and without
the payment of any
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penalty, terminate this Agreement upon sixty days written notice to the Manager
either by majority vote of the Board of Directors of the Fund or by the vote of
a majority of the outstanding voting securities of the Fund; (b) this Agreement
shall immediately terminate in the event of its assignment (within the meaning
of the Investment Company Act of 1940) unless such automatic termination shall
be prevented by an exemptive order of the Securities and Exchange Commission;
and (c) the Manager may terminate this Agreement without payment or penalty on
sixty days written notice to the Fund. Any notice under this Agreement shall be
given in writing, addressed and delivered, or mailed postpaid, to the other
party at the principal office of such party.
8. This Agreement shall become effective as soon as it has been approved by
a majority of (a) the outstanding voting securities of the Fund and (b) the
Directors of the Fund including those Directors who are not parties to this
Agreement or "interested persons" (as defined in the Investment Company Act of
1940) of any such party.
9. For purposes of this Agreement, a "majority of the outstanding voting
securities of the Fund" shall be determined in accordance with the applicable
provisions of the Investment Company Act of 1940.
10. This Agreement constitutes the entire agreement and understanding
between the parties hereto, and supersedes all prior agreements and
understandings related to the subject matter hereof.
11. This Agreement shall be construed in accordance with the laws of the
State of California and the applicable provisions of the Investment Company Act
of 1940. To the extent applicable law of the State of California, or any of the
provisions herein, conflict with applicable provisions of the Investment Company
Act of 1940, the latter shall control.
In WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written in Los Angeles, California.
<TABLE>
<S> <C> <C>
CURRENT INCOME SHARES, INC.
By:
---------------------------------------
HIGHMARK CAPITAL MANAGEMENT, INC.
By:
---------------------------------------
</TABLE>
5
<PAGE>
PROXY PROXY
CURRENT INCOME SHARES, INC.
445 SOUTH FIGUEROA STREET, LOS ANGELES, CALIFORNIA 90071
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned shareholder of Current Income Shares, Inc., a Delaware
corporation, hereby constitutes and appoints Morris A. Densmore, Michael L.
Noel, and Clark R. Gates, and each of them, the attorneys and proxies of the
undersigned, each with full power of substitution, to attend and act for the
undersigned at the Annual Meeting of Shareholders of said corporation to be
held on Thursday, August 13, 1998, at 11:30 A.M. California time, in the
Conference Room on the 38th floor of the Union Bank of California Building
at 445 South Figueroa Street, Los Angeles, California 90071, and at any
adjournments thereof, and in connection therewith to vote and represent all of
the shares of Common Stock of said corporation which the undersigned is
entitled to vote as directed on the reverse side.
Such attorneys and proxies, and each of them, shall have all the powers
which the undersigned would have if acting in person. The undersigned hereby
revokes any other proxy to vote at such Meeting and hereby ratifies and
confirms all that said attorneys and proxies, and each of them, may lawfully
do by virtue hereof. With respect to matters not known at the time of the
solicitation hereof, said proxies are authorized to vote in accordance with
their best judgment.
PLEASE MARK THIS PROXY AND SIGN AND DATE IT ON THE REVERSE SIDE HEREOF AND
RETURN IT IN THE ENCLOSED ENVELOPE.
<PAGE>
PLEASE MARK IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY /X/
<TABLE>
<CAPTION>
<S> <C>
FOR all WITHHOLD
nominees listed below AUTHORITY 3. ADOPTION OF THE MANAGEMENT
(except as marked to to vote for all nomi- AND INVESTMENT ADVISORY For Against Abstain
the contrary) nees listed at left. AGREEMENT BETWEEN THE COMPANY / / / / / /
1. Election of Directors / / / / AND HIGHMARK CAPITAL MANAGEMENT,
(INSTRUCTION: To withhold INC.,THE PROPOSED INVESTMENT
authority to vote for any MANAGEMENT AFFILIATE OF UNION
individual nominee, strike BANK OF CALIFORNIA, N.A.,
a line through the nominee's THE COMPANY'S CURRENT ADVISER.
name in the list below.) A majority of the above-named proxies present at said
Willard H. Altman, Morris A. Meeting, either in person or by substitute (or if only
Densmore, Clark R. Gates, one thereof shall be present and act, then that one),
Michael L. Noel, and shall have and exercise all powers of said proxies
Robert M. Whitler. hereunder. This proxy will be voted in as specified.
If no instructions to the contrary are indicated
2. SELECTION OF DELOITTE & For Against Abstain hereon, this proxy will be voted FOR items 1, 2,
TOUCHE LLP AS THE / / / / / / and 3, shown on this proxy.
INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE COMPANY The undersigned acknowledges receipt of a copy of the
FOR THE FISCAL YEAR ENDING Notice of Annual Meeting and Proxy Statement to the
DECEMBER 31, 1998. Meeting
Dated___________________, 1998
_________________________________________________________
Signature(s)
_________________________________________________________
IMPORTANT: In signing this proxy, please sign your name
or names on the signature lines in the same way as it
appears on the proxy. When signing as an attorney,
executor, administrator, trustee or guardian, please give
your full title as such. EACH JOINT TENANT SHOULD SIGN.
PLEASE SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE
POSTAGE PREPAID ENVELOPE PROVIDED.
</TABLE>
