CURRENT INCOME SHARES, INC.
83352-98
DIRECTORS
Willard H. Altman* Clark R. Gates
Morris A. Densmore* Michael L. Noel*
Robert M. Whitler*
*Serve as members of the Audit Committee
OFFICERS
Morris A. Densmore Chairman
Clark R. Gates President
Jack Montgomery Vice President and
Portfolio Manager
Richard H. Earnest Vice President
Kevin A. Rogers Vice President
Paul Mastin Treasurer
Jonathan A. Wright Secretary
AUDITORS
Deloitte & Touche LLP
50 Fremont St.
San Francisco, CA 94105
CUSTODIAN
Union Bank of California
475 Sansome St. (15th Floor)
San Francisco, CA 94111
TRANSFER & DIVIDEND
REINVESTMENT PLAN AGENT
Harris Trust Company of California
311 West Monroe St. (11th Floor)
Chicago, IL 60606
(800) 554-3406
COMPANY MAILING ADDRESS
Current Income Shares, Inc.
445 South Figueroa St., (Suite 306)
Los Angeles, California 90071
COMPANY TELEPHONE
(888) 465-2825
NYSE SYMBOL
"CUR"
83352-98
ANNUAL REPORT
DECEMBER 31, 1998
Investment Advisor:
HighMark Capital Management, Inc.
475 Sansome St.
Suite 1400
San Francisco, CA 94111
(www.highmarkcapmgmt.com)
<PAGE>
CURRENT INCOME SHARES, INC.
HIGHMARK CAPITAL MANAGEMENT, INC.
January 29, 1999
Dear Shareholders:
We are pleased to report your company's financial results for the year
ended December 31, 1998. During the year, we paid total dividends of $0.83 per
share, consisting of quarterly dividends per share of 20 cents (1Q), 20 cents
(2Q), 21 cents (3Q) and 22 cents (4Q), respectively. The net asset value per
share at December 31, 1998 was $13.48, up from $13.40 at December 31, 1997.
Including dividends, the total return for Current Income Shares based on net
asset value was 6.98% for the year. The total return based on market value was
8.05%.
During 1998, interest rates continued to fall, which affected Current
Income Shares' dividend and total return. For example, the 1998 dividend of
$0.83 was slightly less than 1997's dividend of $0.85. As bonds with higher
yields in the portfolio matured, they were replaced with lower-yielding bonds,
reflecting the lower interest rate environment. On the plus side, the total
return, which includes capital appreciation of the portfolio's bonds, generally
benefited from declining interest rates.
In general, yields on longer-maturing bonds did not fall as much as yields
on shorter bonds. The benchmark 30-year bond yield fell from 5.92% on December
31, 1997 to 5.09% on December 31, 1998, a drop of 83 basis points (a basis point
equals 0.01%). The ten-year Treasury note fell from 5.74% to 4.65%, a 109 basis
point drop, while the five-year note fell from 5.71% to 4.54%, a 117 basis point
decline. Meanwhile, the Federal Reserve Board cut the federal funds rate, the
amount charged to member banks for overnight loans, from 5.50% to 4.75%.
The Federal Reserve, which lowered rates three times between September 29th
and November 17th, acted to stave off a U.S. economic recession that appeared
likely after Russia devalued its currency in August. The global economy appeared
to be slowing, as economic problems in Asia continued to mount. The absence of
inflation, and the concern about deflation, exerted downward pressure on
interest rates. During that period, investors around the world became concerned
about credit risk, and a flight to quality ensued, boosting Treasury securities
and deflating corporate bonds. That was a difficult period for Current Income
Shares, which is primarily a corporate bond portfolio.
As investors sought high quality, yields on the 30-year Treasury bond fell
to 4.7%, while the yield spread between corporate bonds and Treasury securities
grew to their widest level in years. Triple B-rated bonds, the lowest investment
grade, widened from about 100 basis points over comparably maturing Treasury
bonds to about 200 basis points. Since yield and bond price move inversely, a
wider spread means a lower bond price. As one might expect, spreads on
higher-quality corporate bonds did not widen as much.
The portfolio's duration (a measure of sensitivity to interest rates) rose
from about 5.5 years on December 31, 1997 to 6.1 years at December 31, 1998.
Typically, a longer duration would be beneficial in a year of falling interest
rates. However, the benefit of lower interest rates was offset by the volatility
in the corporate bond market.
<PAGE>
Our outlook is for the U.S. economy to grow at about a 2% rate in 1999,
down from an average of nearly 4% in the past several years. Although the U.S.
consumer continues to spend, the manufacturing sector is still losing jobs as
exports to formerly robust economies throughout the world slow down. However,
because we're not forecasting a recession in the U.S., we will continue to focus
on quality corporate bonds, taking advantage of their unusually high yields in
relation to government bonds.
On the following pages, you will find the complete portfolio of investments
held by Current Income Shares on December 31, 1998, together with the financial
statements for the year.
Thank you for investing in Current Income Shares, Inc.
Sincerely,
/s/Signature Omitted
Clark R. Gates
President
CURRENT INCOME SHARES, INC. --
YEAR 2000 DISCLOSURE STATEMENT
This is a disclosure document within the meaning of the Information and
Readiness Disclosure Act of 1998. Current Income Shares, Inc. depends on the
smooth functioning of computer systems in almost every aspect of its business.
Like other investment companies, businesses and individuals around the world,
Current Income Shares could be adversely affected if the computer systems used
by its service providers do not properly process dates on and after January 1,
2000 and distinguish between the year 2000 and the year 1900.
Current Income Shares has made inquiry of its service providers to
determine whether they expect to have their computer systems adjusted for the
year 2000 transition, and is reviewing the year 2000 status of each critical
service provider in an attempt to ensure that there will be no material adverse
consequences to Current Income Shares. Never- theless, Current Income Shares and
its shareholders may experience losses as a result of year 2000 computer
difficulties experienced by issuers of portfolio securities or custodians,
banks, broker-dealers or others with which Current Income Shares does business.
With regards to the portfolio securities held in Current Income Shares,
HighMark Capital Management, Inc., advisor to Current Income Shares, will be
reviewing selected publicly available sources for Y2K-readiness information
published by the issuers of assets which are held in material amounts in the
Fund. Such Y2K disclosure information will be one of many factors considered by
HighMark Capital Management in making investment decisions on behalf of the
Fund.
See the Union Bank of California, N.A. Y2K Readiness Disclosure, which
gives updated information about the Y2K readiness program in which the
Advisor participates, available on the bank's Web site: www.uboc.com/year2000.
<PAGE>
CURRENT INCOME SHARES, INC.
STATEMENT OF ASSETS AND LIABILITIES STATEMENT OF OPERATIONS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
ASSETS
Investments in securities at
market value:
Bonds (Cost $45,571,888) $48,733,867
Interest receivable and other
assets 853,519
-----------
Total Assets 49,587,386
-----------
LIABILITIES
Accrued expenses 79,271
-----------
NET ASSETS $49,508,115
===========
Net assets are represented by:
Capital stock, $1 par, 25,000,000
shares authorized 3,673,334
shares issued and outstanding $ 3,673,334
Paid-in capital in excess of par
value 42,977,827
Accumulated net realized losses (305,649)
Unrealized appreciation on
investments 3,161,979
Undistributed net investment
income 624
-----------
NET ASSETS $49,508,115
===========
NET ASSET VALUE PER SHARE
($49,508,115 / 3,673,334 shares
of common stock outstanding) $13.48
======
FOR THE YEAR ENDED DECEMBER 31, 1998
NVESTMENT INCOME
Interest $ 3,502,172
-----------
Total Investment Income. $ 3,502,172
EXPENSES
Investment management
and advisory fees 248,056
Custodian fees 6,268
Transfer agent fees 56,637
Directors' fees
and shareholder expenses 30,121
Printing 39,531
Legal and auditing fees 41,774
Listing fees-- NYSE 5,015
Taxes 8,963
Other expenses 15,707
-----------
Total Expenses 452,072
----------
Net Investment
Income $3,050,100
----------
REALIZED AND
UNREALIZED GAINS AND LOSSES
ON INVESTMENTS IN SECURITIES
Realized gain from
securities transactions:
Proceeds from sales $19,388,730
Cost of securities
sold (19,176,073)
----------
Net realized gain on
investments sold 212,657
Unrealized appreciation
of investments:
Beginning of period 3,094,381
End of period 3,161,979
----------
Net unrealized
appreciation during
the period 67,598
----------
Net realized and
unrealized gain on
investments $ 280,255
----------
Net increase in net assets
resulting from operations $3,330,355
----------
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
CURRENT INCOME SHARES, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------------------------------------------------------------------------------
1998 1997
---------- -------------
FROM INVESTMENT ACTIVITIES
<S> <C> <C>
Net investment income $ 3,050,100 $ 3,119,049
Net realized gain (loss) on investments sold 212,657 (269,024)
Net unrealized appreciation of investments
during the period 67,598 1,556,326
----------- -----------
Net increase in net assets resulting from operations 3,330,355 4,406,351
Dividends to shareholders from net investment income (3,048,868) (3,122,336)
----------- -----------
Increase in net assets 281,487 1,284,015
NET ASSETS
Beginning of year 49,226,628 47,942,613
----------- -----------
End of year [including under/(over)distributed net investment
income of $624 and ($608) respectively] $49,508,115 $49,226,628
=========== ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
3
<PAGE>
CURRENT INCOME SHARES, INC.
PORTFOLIO OF INVESTMENTS IN SECURITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Standard & Poor's Principal Market
Security Rating Amount Value
- ---------------------------------------------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- (4.01% OF NET ASSETS)
<S> <C> <C> <C>
U.S. Treasury Bond 6.375%, 08/15/27 AAA $1,140,000 $1,307,546
U.S. Treasury Note 6.625%, 05/15/07 AAA 6,000,000 676,026
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS (COST $1,790,973) 1,983,572
- ---------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS -- (94.17%)
- ---------------------------------------------------------------------------------------------------------------------------
Asset Backed (1.03% of Net Assets)
Chase Manhattan 6.610%, 09/15/02 AAA 505,062 511,284
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL ASSET BACKED (COST $504,981) 511,284
- ---------------------------------------------------------------------------------------------------------------------------
Auto rent & lease (2.05% of Net Assets)
Hertz Corp. 7.000%, 01/15/28 BBB+ 1,000,000 1,015,000
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL AUTO RENT & LEASE (COST $999,954) 1,015,000
- ---------------------------------------------------------------------------------------------------------------------------
BANKS (10.66% OF NET ASSETS)
Bankers Trust 7.250%, 01/15/03 BBB+ 1,500,000 1,558,125
Fleet Financial 7.125%, 04/15/06 A- 1,500,000 1,618,125
Golden State Escrow 7.000%, 08/01/03 BB+ 1,000,000 998,750
Wells Fargo Capital 7.960%, 12/15/26 A- 1,000,000 1,103,750
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL BANKS (COST $5,059,059) 5,278,750
- ---------------------------------------------------------------------------------------------------------------------------
ELECTRICAL UTILITIES (9.80% OF NET ASSETS)
Chugach Electric 9.140%, 03/15/22 A 1,000,000 1,158,750
Houston Industries 9.375%, 06/01/01 BBB+ 2,000,000 2,152,500
UtiliCorp United 8.450%, 11/15/99 BBB 1,500,000 1,537,500
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL ELECTRICAL UTILITIES (COST $4,597,390) 4,848,750
- ---------------------------------------------------------------------------------------------------------------------------
ENERGY (7.70% OF NET ASSETS)
Union Oil of California 9.125%, 02/15/06 BBB+ 2,000,000 2,295,000
Union Pacific 7.000%, 10/15/06 BBB 1,500,000 1,518,750
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL ENERGY (COST $3,622,484) 3,813,750
- ---------------------------------------------------------------------------------------------------------------------------
GAS (11.70% OF NET ASSETS)
Coastal Corp. 9.625%, 05/15/12 BBB- 2,000,000 2,640,000
KN Energy 7.250%, 03/01/28 BBB- 1,000,000 993,750
Panhandle Eastern 7.875%, 08/15/04 A 1,000,000 1,117,500
Phillips Pete 7.125%, 03/15/28 A- 1,000,000 1,041,250
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL GAS (COST $5,061,508) 5,792,500
- ---------------------------------------------------------------------------------------------------------------------------
MANUFACTURING (8.28% OF NET ASSETS)
Lockheed Martin 7.700%, 06/15/08 BBB+ 1,500,000 1,689,375
Owens-Illinois 8.100%, 05/15/07 BB+ 1,250,000 1,339,062
Westvaco 10.125%, 06/01/19 A 1,000,000 1,068,750
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL MANUFACTURING (COST $3,805,783) 4,097,187
- ---------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
OBLIGATIONS (9.29% of Net Assets)
GNMA Pool# 439463 8.000%, 12/15/26 AAA 4,426,487 4,598,013
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
OBLIGATIONS (Cost $4,510,764) 4,598,013
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
CURRENT INCOME SHARES, INC.
PORTFOLIO OF INVESTMENTS IN SECURITIES (Continued)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Standard & Poor's Principal Market
Security Rating Amount Value
- ---------------------------------------------------------------------------------------------------------------------------
PUBLISHING & PRINT (2.18% OF NET ASSETS)
<S> <C> <C> <C>
News America Holdings 7.750%, 02/01/24 BBB- $1,000,000 $ 1,081,250
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL PUBLISHING & PRINT (COST $1,038,384) 1,081,250
- ---------------------------------------------------------------------------------------------------------------------------
RETAIL (5.34% OF NET ASSETS)
Safeway Corporation 7.450%, 09/15/27 BBB 1,000,000 1,071,250
Staples 7.125%, 08/15/07 BBB- 1,500,000 1,573,125
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL PUBLISHING & PRINT (COST $2,513,150) 2,644,375
- ---------------------------------------------------------------------------------------------------------------------------
SECURITIES BROKER/DEALER (2.15% OF NET ASSETS)
Lehman Brothers 8.750%, 05/15/02 A 1,000,000 1,066,250
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL SECURITIES BROKER/DEALER (COST $1,051,501) 1,066,250
- ---------------------------------------------------------------------------------------------------------------------------
SERVICE (2.54% OF NET ASSETS)
Loewen Group 8.250%, 04/15/03 BB 1,500,000 1,256,250
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL SERVICE (COST $1,498,662) 1,256,250
- ---------------------------------------------------------------------------------------------------------------------------
SOVEREIGN & SUPRANATIONAL (5.64% OF NET ASSETS)
Province of Nova Scotia 8.750%, 04/01/22 A- 1,100,000 1,419,000
Province of Saskatchewan 9.375%, 12/15/20 A 1,000,000 1,371,250
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL SOVEREIGN & SUPRANATIONAL (COST $2,184,103) 2,790,250
- ---------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS (6.47% OF NET ASSETS)
TCI Communications 7.125%, 02/15/28 BBB- 900,000 976,500
WorldCom 9.375%, 01/15/04 BBB+ 522,000 540,923
WorldCom 7.750%, 04/01/07 BBB+ 1,500,000 1,685,625
- ---------------------------------------------------------------------------------------------------------------------------
Total Telecommunications (Cost $3,132,783) 3,203,048
- ---------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION (9.34% OF NET ASSETS)
AMR Corporation 10.000%, 04/15/21 BBB- 1,500,000 1,912,500
General Motors 8.950%, 07/02/09 A 1,500,000 1,621,515
Norfolk Southern 7.050%, 05/01/37 BBB+ 1,000,000 1,088,750
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL TRANSPORTATION (COST $4,069,536) 4,622,765
- ---------------------------------------------------------------------------------------------------------------------------
CASH EQUIVALENT -- (0.26% of Net Assets)
- ---------------------------------------------------------------------------------------------------------------------------
Federated Prime Money Market 5.091% NR 130,873 130,873
- ---------------------------------------------------------------------------------------------------------------------------
Total CASH EQUIVALENT
(Cost $130,873) 130,873
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.44% OF NET ASSETS)
(Cost $45,571,888) 48,733,867
- ---------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET
(1.56% of Net Assets) 774,248
NET ASSETS (100.0% of Net Assets) $49,508,115
============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
CURRENT INCOME SHARES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
Current Income Shares, Inc. (the "Company") is registered under the
Investment Company Act of 1940, as amended, as a diversified, closed-end
management investment company. The Company was incorporated on November 15,
1972, and commenced operations on March 27, 1973. The primary investment
objective of the Company is to seek a high level of current income for its
shareholders consistent with investment in a diversified portfolio in which
marketable debt securities considered by management to be of high quality will
predominate. To a lesser extent the Company may also invest in other debt
securities and in certain equities.
The following is a summary of significant accounting policies followed by the
Company in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles.
(a) Security valuation -- Portfolio securities listed or traded on a national
securities exchange are valued at the last reported sales price; securities
traded in the over-the-counter market and listed securities for which no sales
were reported on that date are valued at the most recent bid price.
(b) Federal income taxes -- It is the Company's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income and net capital gains to
its shareholders. Accordingly, no Federal income tax provision is required.
(c) Estimates --The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of income and expenses during the reporting
period. Actual results could differ from those estimates.
(d) Other -- Security transactions are accounted for on the trade date the
securities are purchased or sold. Purchased discounts and premiums on securities
held are accreted or amortized to interest income over the life of each security
using a method which approximates the effective interest method. Interest income
is recognized on the accrual basis of accounting. Realized gains and losses are
computed using the specific cost of the securities sold.
2. Purchases and Sales of Securities
Purchases and sales of investment securities other than short-term securities
and U.S. Government obligations aggregated $8,113,257 and $979,380,
respectively. Purchases and sales of U.S. Government obligations aggregated $0
and $5,216,369, respectively.
As of December 31, 1998, unrealized appreciation for Federal income tax
purposes aggregated $3,161,979 of which $3,455,783 related to appreciated
securities and $293,804 related to depreciated securities. The aggregate cost
for Federal income tax purposes was not materially different from amounts
reported for financial reporting purposes.
The Company had capital loss carryforwards at December 31, 1998, that can be
used to offset future capital gains.
Capital Loss Capital Loss
Carryovers Carryovers
Expiring 2004 Expiring 2005
-------------- --------------
$208,907 $96,836
6
<PAGE>
CURRENT INCOME SHARES, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 1998
3. Transactions with Affiliates
Until September 1, 1998, Pacific Alliance Capital Management, the investment
management division of Union Bank of California, N.A., provided investment
management and advisory services to the Company. As of September 1, 1998, this
function was taken over by HighMark Capital Management, Inc., a subsidiary of
UnionBanCal, of which Union Bank of California, N.A. is a subsidiary. For the
period ending December 31, 1998, investment management/advisory fees totaling
$248,056 were paid to Pacific Alliance and HighMark Capital Management, Inc.
(together the "Advisor"). The fee is based on an annual rate of 0.5% of the
Company's average net assets.
The Advisory Agreement requires that the Advisor reimburse the Company for
expenses (excluding interest, taxes, and the expenses of any offering of the
Company's securities and brokers commissions) incurred by the Company in excess
of one and one-half percent (1 1/2%) per year of the first $30 million of
average net assets of the Company and one percent (1%) of average net assets in
excess of $30 million. The expenses incurred by the Company for the twelve
months ended December 31, 1998 did not exceed the limitation established by the
Advisory Agreement.
Union Bank of California, N.A. acts as custodian ("the Custodian") for
the Company. Fees of the Custodian are being paid on the basis of net assets of
the Company.
4. Agreements with Service Providers
Harris Trust Company of California provides Transfer Agent and Dividend
Reinvestment Plan services.
5. Financial Highlights
Selected data for each share of capital stock outstanding throughout each
period follows:
<TABLE>
<CAPTION>
01/01/98 to 01/01/97 to 01/01/96 to 01/01/95 to 01/01/94 to
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
----------- ----------- ----------- ----------- ----------
PER SHARE OPERATING PERFORMANCE
<S> <C> <C> <C> <C> <C>
Investment Income $ 0.95 $ (0.97 $ 0.95 $ 1.00 $ 1.06
Expenses (0.12) (0.12) (0.12) (0.12) (0.12)
----------- ----------- ----------- ----------- ----------
Net Investment Income 0.83 0.85 0.83 0.88 0.94
Dividends distributed from net
Investment Income (0.83) (0.85) (0.88) (1.48) (0.94)
Net realized and unrealized gain
(loss) on investments 0.08 0.35 (0.54) 1.79 (1.74)
----------- ----------- ----------- ----------- ----------
Net increase (decrease) in
net asset value 0.08 0.35 (0.59) 1.19 (1.74)
Net asset value:
Beginning of period 13.40 13.05 13.64 12.45 14.19
----------- ----------- ----------- ----------- ----------
End of period $ 13.48 $ 13.40 $ 13.05 $ 13.64 $ 12.45
=========== =========== =========== =========== ==========
Per share market value:
End of period $ 12.313 $ 12.188 $ 11.375 $ 11.875 $11.000
Total investment return*+ 8.05% 15.33% 3.54% 22.25% (8.33)%
RATIOS AND SUPPLEMENTAL DATA
Ratio of expenses to average
net assets 0.91% 0.95% 1.00% 0.90% 0.90%
Ratio of net investment income to
average net assets 6.2% 6.5% 6.3% 6.6% 7.2%
Portfolio turnover rate 13.23% 52.10% 62.86% 118.52% 42.21%
Net assets, end of period (000) $ 49,508 $ 49,227 $ 47,943 $ 50,120 $ 45,739
*Does not reflect the brokerage commission.
+Total return based on market value.
</TABLE>
7
<PAGE>
CURRENT INCOME SHARES, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 1998
6. Unaudited Quarterly Results of Operations
The following is a summary of unaudited quarterly results of operations:
<TABLE>
<CAPTION>
Net Realized and
Distributed Net Unrealized Gain (Loss)
Investment Investment Income on Investments
----------- ------------------------ --------------------
Income Amount Per Share Amount Per Share
----------- --------- -------- --------- ---------
Three months ended:
<S> <C> <C> <C> <C> <C>
March 31, 1998 $862,370 $734,667 $0.20 $ (50,337) $(0.01)
June 30, 1998 871,040 734,667 0.20 400,293 0.11
September 30, 1998 885,570 771,400 0.21 1,204,096 0.33
December 31, 1998 883,192 808,134 0.22 (1,273,797) (0.35)
March 31, 1997 $877,206 $734,667 $0.20 $(1,163,210) $(0.31)
June 30, 1997 898,633 753,034 0.21 891,395 0.24
September 30, 1997 908,688 789,768 0.21 880,366 0.24
December 31, 1997 891,447 844,867 0.23 678,751 0.18
</TABLE>
7. Dividend Reinvestment Plan
The Company maintains a Dividend Reinvestment Plan (the "Plan") in which
shareholders may participate. The Plan is offered through Harris Trust Company
of California (the "Agent"). Under the Plan, the Agent uses dividends and other
cash distributions from the Company to purchase additional shares of Company
common stock in the open market for Plan participants. Participants may also
make certain cash contributions to the Plan. Further information regarding the
Plan may be obtained by writing to the Agent at: Harris Trust Company of
California, 311 West Monroe Street (11th Floor), Chicago, IL 60606.
8
<PAGE>
CURRENT INCOME SHARES, INC.
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders
of Current Income Shares, Inc.:
We have audited the accompanying statement of assets and liabilities of
Current Income Shares, Inc. (the "Company"), including the portfolio of
investments in securities, as of December 31, 1998, and the related statement of
operations for the year then ended, the statements of changes in net assets and
the selected per share data and ratios for the years ended December 31, 1998 and
1997. These financial statements and selected per share data and ratios are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and selected per share data and ratios
based on our audits. The Company's selected per share data and ratios for each
of the four years ended December 31, 1996, were audited by other auditors whose
report dated January 31, 1997, expressed an unqualified opinion.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and selected per
share data and ratios are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and selected per share data and ratios. Our procedures
included confirmation of securities owned as of December 31, 1998, by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and selected per share data and
ratios present fairly, in all material respects, the financial position of
Current Income Shares, Inc. as of December 31, 1998, the related statement of
operations for the year then ended, statement of changes in net assets, and
selected per share data and ratios for the years ended December 31, 1998 and
1997 in conformity with generally accepted accounting principles.
/S/Signature Omitted
Deloitte & Touche LLP
San Francisco, CA
January 29, 1999
