<PAGE>
CURRENT INCOME SHARES, INC.
ANNUAL REPORT
December 31, 1999
Investment Adviser:
HIGHMARK CAPITAL
MANAGEMENT, INC.
475 Sansome St.
Suite 1400
San Francisco, CA 94111
(www.highmarkcapmgmt.com)
<PAGE>
CURRENT INCOME SHARES, INC.
- --------------------------------------------------------
February 1999
Dear Shareholders:
Current Income Shares, Inc. completed its twety-seventh year of operations
on December 31, 1999. During the year, we paid total dividends of $0.82 per
share, consisting of quarterly dividends per share of $0.20, $0.20, $0.20 and
$0.22 in the first, second, third and fourth quarters, respectively. The net
asset value per share at December 31, 1999 was $12.23, down from $13.48 at
December 31, 1998. Including dividends, the total return for Current Income
Shares based on net asset value was -3.23% for the year. The total return based
on market value was -12.44%.
U.S. Treasury yields climbed steadily throughout 1999, rising in all but
two months of the year and continuing right up through the final days of the
millennium. The 30-year Treasury ended 1999 at 6.48%, up from 5.09% at yearend
1998. Because of this steep increase, the total return for the 30-year Treasury
bond was a negative 14.9%, exceeding the previous record for negative
performance of -12.0% set in 1994. Although Current Income Shares is primarily a
portfolio of corporate bonds, it too was affected by the steep rise in interest
rates.
However, in relative terms, corporate bonds had one of their best years
ever. Investment-grade corporate bonds outperformed similar duration Treasury
bonds by 1.74 percentage points in 1999, their best relative year since 1991,
while mortgage-backed securities outperformed Treasuries by 1.13 percentage
points. In the higher risk sectors, high-yield bonds outperformed Treasuries by
4.78 percentage points, while emerging market bonds, aided by a rapidly
recovering global economy, outgained Treasuries by 22.5 percentage points.
As of December 31, 1999, 10% of the portfolio was invested in AAA-rated
securities, while 43% was invested in A-rated corporated bonds. About 39% was
invested in bonds rated BBB while 7% was invested in BB-rated bonds and the
balance, 1% was in cash. The portfolio held 39 securities with an average market
yield of 5.87% and an average maturity of 12.03 years.
The outperformance by credit-sensitive bonds is a result of a remarkable
turnaround in the global economy. In early 1999, foreign central banks
aggressively lowered interest rates in a continuing attempt to stimulate
economic growth, while the U.S. federal funds rate remained at 4.75%, its lowest
level in 4 1/2 years. As a result, the Asian economic crisis receded, while the
U.S. economy boomed.
That marked the end of the easing cycle, however, as the Consumer Price
Index for April surprised the market with its largest increase in almost nine
years, pushing bond yields to nearly 6%. By the end of June, the combination of
robust U.S. economic growth, rapid recovery in Europe and Asia, and rising
commodity prices
<PAGE>
- --------------------------------------------------------------------------------
convinced the Fed to reverse course and increase the funds rate by a quarter
percentage point, the first of three rate hikes during 1999.
The Fed has been concerned for some time because the economy has grown at a
4% rate for the last four years, which has been the longest expansion in U.S.
history. While growth is not a problem in itself, 4% exceeds the Federal Reserve
Board's estimate of non-inflationary growth potential, and Chairman Greenspan on
numerous occasions has voiced concern that the demand for labor will eventually
outpace the supply, leading to wage inflation. These concerns and the steadily
diminishing supply of available workers prompted the Fed to raise the funds rate
back to the 5.5% level that prevailed before the global financial crisis began.
A positive sign for the bond market is that despite strong growth and the
lowest unemployment rate in 29 years, inflation remains subdued. Average hourly
earnings have increased 3.7% over the last twelve months, down from a peak of
4.3% more than eighteen months ago. Higher oil prices boosted the CPI to 2.7% in
1999, but the core CPI excluding food and energy increased only 1.9%, the
slowest pace since 1965.
Rapid economic growth with little or no inflation has generated a lot of
debate over whether or not we are in a "new era" economy. A dramatic gain in
productivity, from 1.75% in the 1970's and 1980's to 3% over the past five
years, has been the key to this extraordinary expansion. Although the Fed is
sympathetic to the new paradigm argument, and has apparently revised their GDP
"speed limit" upward to around 3%, growth still remains around 4% and shows few
signs of slowing down. As of early January, 2000, the bond market was already
anticipating another hike in the fed funds rate to 6.25%, which is higher than
the 6% level in early 1995 that significantly slowed the economy later that
year. We believe that Fed action raising interest rates from 5.5% to 6.25% would
be enough to slow down the economy in 2000, causing long-term bond yields to
stabilize and the bear market in bonds to end.
On the following pages, you will find the complete portfolio of investments
held by Current Income Shares on December 31, 1999, together with the financial
statements for the year.
Thank you for investing in Current Income Shares, Inc.
Sincerely,
\s\ signature omitted
Gregory Knopf, President
<PAGE>
CURRENT INCOME SHARES, INC.
- --------------------------------------------------------
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, because they cannot distinguish between the year 2000 and the year 1900.
Although the critical January 1, 2000 date has passed largely without incident,
date-related computer problems can still occur throughout the coming year.
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. Nevertheless, 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., adviser to Current Income Shares, will
continue to review 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 Adviser
participates, on the bank's Web site: www.uboc.com/year2000.
<PAGE>
CURRENT INCOME SHARES, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
- ----------------------------------------------------------
ASSETS
Investments in securities at market value:
Bonds (Cost $45,331,671) $44,113,186
Cash 6,724
Interest receivable and other assets 880,678
-----------
Total Assets 45,000,588
-----------
LIABILITIES
Accrued expenses 72,447
-----------
NET ASSETS $44,928,141
===========
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 (511,926)
Unrealized depreciation on
investments (1,218,485)
Undistributed net investment
income 7,391
-----------
NET ASSETS $44,928,141
===========
NET ASSET VALUE PER SHARE
($44,928,141 / 3,673,334 shares
of common stock outstanding) $12.23
======
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
- ----------------------------------------------------------
INVESTMENT INCOME
Interest $3,454,352
----------
Total Investment Income $3,454,352
EXPENSES
Investment management
and advisory fees 234,955
Custodian fees 4,966
Transfer agent fees 55,389
Directors' fees and
shareholder expenses 29,581
Printing 38,427
Legal and auditing fees 48,116
Listing fees -- NYSE 5,351
Taxes 8,962
Other expenses 9,704
--------
Total Expenses 435,451
-----------
Net Investment
Income $ 3,018,901
-----------
REALIZED AND
UNREALIZED GAINS AND LOSSES
ON INVESTMENTS IN SECURITIES
Realized loss from securities transactions:
Proceeds from sales $17,437,096
Cost of securities
sold (17,643,373)
----------
Net realized loss on
investments sold (206,277)
Unrealized depreciation
of investments:
Beginning of period 3,161,979
End of period (1,218,485)
----------
Net unrealized
depreciation during
the period (4,380,464)
------------
Net realized and
unrealized loss on
investments (4,586,741)
------------
Net decrease in net assets
resulting from operations ($1,567,840)
============
The accompanying notes are an integral part of these financial statements.
- 1 -
<PAGE>
CURRENT INCOME SHARES, INC.
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------
FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
---------- -------------
FROM INVESTMENT ACTIVITIES
<S> <C> <C>
Net investment income $ 3,018,901 $ 3,050,100
Net realized gain/(loss) on investments sold (206,277) 212,657
Net unrealized appreciation/(depreciation) of investments
during the period (4,380,464) 67,598
----------- -----------
Net increase/(decrease) in net assets resulting from operations (1,567,840) 3,330,355
Dividends to shareholders from net investment income (3,012,134) (3,048,868)
----------- -----------
Increase/(decrease) in net assets (4,579,974) 281,487
NET ASSETS
Beginning of period 49,508,115 49,226,628
----------- -----------
End of period [including underdistributed net investment
income of $7,391 and $624, respectively] $44,928,141 $49,508,115
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 2 -
<PAGE>
CURRENT INCOME SHARES, INC.
PORTFOLIO OF INVESTMENTS IN SECURITIES
<TABLE>
<CAPTION>
DECEMBER 31, 1999
- ----------------------------------------------------------------------------------------------------------------------
Standard & Poor's Principal Market
Security Rating Amount Value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. TREASURY OBLIGATION -- (2.4% OF NET ASSETS)
U.S. Treasury Bond 6.375%, 08/15/27 AAA $1,140,000 $ 1,094,206
- -----------------------------------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATION (Cost $1,171,452) 1,094,206
- -----------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
OBLIGATION -- (6.7% OF NET ASSETS)
GNMA Pool# 439463 8.000%, 12/15/26 AAA 2,959,397 2,988,991
- -----------------------------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
OBLIGATION (Cost $3,015,160) 2,988,991
- -----------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS -- (88.1% OF NET ASSETS)
- -----------------------------------------------------------------------------------------------------------------------
AIR TRANSPORTATION (1.9% OF NET ASSETS)
Continental Airlines 6.748%, 03/15/17 A+ 938,705 840,685
- -----------------------------------------------------------------------------------------------------------------------
TOTAL AIR TRANSPORTATION 840,685
- -----------------------------------------------------------------------------------------------------------------------
ASSET BACKED (0.5% OF NET ASSETS)
Chase Manhattan 6.610%, 09/15/02 AAA 217,882 218,084
- -----------------------------------------------------------------------------------------------------------------------
TOTAL ASSET BACKED 218,084
- -----------------------------------------------------------------------------------------------------------------------
AUTO RENT & LEASE (2.0% OF NET ASSETS)
Hertz Corp. 7.000%, 01/15/28 A- 1,000,000 882,500
- -----------------------------------------------------------------------------------------------------------------------
TOTAL AUTO RENT & LEASE 882,500
- -----------------------------------------------------------------------------------------------------------------------
BANKS (10.7% OF NET ASSETS)
Bankers Trust 7.250%, 01/15/03 A+ 1,500,000 1,490,625
Fleet Financial 7.125%, 04/15/06 A- 1,500,000 1,462,500
Golden State Escrow 7.000%, 08/01/03 BB+ 1,000,000 937,500
Wells Fargo Capital 7.960%, 12/15/26 A- 1,000,000 940,000
- -----------------------------------------------------------------------------------------------------------------------
TOTAL BANKS 4,830,625
- -----------------------------------------------------------------------------------------------------------------------
BROADCASTING, NEWSPAPERS & ADVERTISING
(3.3% OF NET ASSETS)
Continental Cablevision 9.500%, 08/01/13 BBB 500,000 552,500
News America Holdings 7.750%, 02/01/24 BBB- 1,000,000 940,000
- -----------------------------------------------------------------------------------------------------------------------
TOTAL BROADCASTING, NEWSPAPERS & ADVERTISING 1,492,500
- -----------------------------------------------------------------------------------------------------------------------
ELECTRICAL UTILITIES (14.2% OF NET ASSETS)
Chugach Electric 9.140%, 03/15/22 A 1,000,000 1,048,750
Cleveland Electric 7.670%, 07/01/04 BB+ 1,000,000 985,000
Houston Industries 9.375%, 06/01/01 BBB+ 2,000,000 2,057,500
Nevada Power 6.200%, 04/15/04 BBB 1,250,000 1,179,687
Orange & Rockland 7.000%, 03/01/29 A+ 1,250,000 1,096,875
- -----------------------------------------------------------------------------------------------------------------------
TOTAL ELECTRICAL UTILITIES 6,367,812
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 3 -
<PAGE>
<TABLE>
<CAPTION>
CURRENT INCOME SHARES, INC.
PORTFOLIO OF INVESTMENTS IN SECURITIES (CONTINUED)
DECEMBER 31, 1999
- -----------------------------------------------------------------------------------------------------------------------
Standard & Poor's Principal Market
Security Rating Amount Value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ENERGY (7.5% OF NET ASSETS)
Phillips Petroleum 7.125%, 03/15/28 A- $1,000,000 $ 886,250
Union Oil of California 9.125%, 02/15/06 BBB+ 1,000,000 1,061,250
Union Pacific 7.000%, 10/15/06 BBB- 1,500,000 1,426,875
- -----------------------------------------------------------------------------------------------------------------------
TOTAL ENERGY 3,374,375
- -----------------------------------------------------------------------------------------------------------------------
GAS (4.5% OF NET ASSETS)
Coastal 9.625%, 05/15/12 BBB 1,000,000 1,128,750
KN Energy 7.250%, 03/01/28 BBB- 1,000,000 895,000
- -----------------------------------------------------------------------------------------------------------------------
TOTAL GAS 2,023,750
- -----------------------------------------------------------------------------------------------------------------------
INSURANCE (2.3% OF NET ASSETS)
Conseco 9.000%, 10/15/06 BBB+ 1,000,000 1,026,250
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INSURANCE 1,026,250
- -----------------------------------------------------------------------------------------------------------------------
MANUFACTURING (8.2% OF NET ASSETS)
Lockheed Martin 7.700%, 06/15/08 BBB- 1,500,000 1,443,750
Owens-Illinois 8.100%, 05/15/07 BB+ 1,250,000 1,195,313
Westvaco 10.125%, 06/01/19 A- 1,000,000 1,052,500
- -----------------------------------------------------------------------------------------------------------------------
TOTAL MANUFACTURING 3,691,563
- -----------------------------------------------------------------------------------------------------------------------
MORTGAGE BANKERS (2.0% OF NET ASSETS)
Prudential Home Mortgage 7.000%, 02/25/26 A 957,591 899,150
- -----------------------------------------------------------------------------------------------------------------------
TOTAL MORTGAGE BANKERS 899,150
- -----------------------------------------------------------------------------------------------------------------------
PRINTING & PUBLISHING (1.3% OF NET ASSETS)
Time Warner 7.480%, 01/15/08 BBB 600,000 591,750
- -----------------------------------------------------------------------------------------------------------------------
TOTAL PRINTING & PUBLISHING 591,750
- -----------------------------------------------------------------------------------------------------------------------
RETAIL (5.3% OF NET ASSETS)
Safeway 7.450%, 09/15/27 BBB 1,000,000 933,750
Staples 7.125%, 08/15/07 BBB- 1,500,000 1,436,250
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETAIL 2,370,000
- -----------------------------------------------------------------------------------------------------------------------
SECURITIES BROKER/DEALER (2.3% OF NET ASSETS)
Lehman Brothers 8.750%, 05/15/02 A 1,000,000 1,030,000
- -----------------------------------------------------------------------------------------------------------------------
TOTAL SECURITIES BROKER/DEALER 1,030,000
- -----------------------------------------------------------------------------------------------------------------------
SOVEREIGN & SUPRANATIONAL (5.3% OF NET ASSETS)
Province of Nova Scotia 8.750%, 04/01/22 A- 1,100,000 1,215,500
Province of Saskatchewan 9.375%, 12/15/20 A 1,000,000 1,172,500
- -----------------------------------------------------------------------------------------------------------------------
TOTAL SOVEREIGN & SUPRANATIONAL 2,388,000
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 4 -
<PAGE>
CURRENT INCOME SHARES, INC.
PORTFOLIO OF INVESTMENTS IN SECURITIES (CONCLUDED)
<TABLE>
<CAPTION>
DECEMBER 31, 1999
- ----------------------------------------------------------------------------------------------------------------------
Standard & Poor's Principal Market
Security Rating Amount Value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TELECOMMUNICATIONS (7.4% OF NET ASSETS)
Cable and Wireless 6.625%, 03/06/05 A- $1,000,000 $ 985,000
TCI Communications 7.125%, 02/15/28 AA- 900,000 825,750
WorldCom 7.750%, 04/01/07 A- 1,500,000 1,524,375
- ------------------------------------------------------------------------------------------------------------------------
TOTAL TELECOMMUNICATIONS 3,335,125
- ------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION (9.4% OF NET ASSETS)
AMR 10.000%, 04/15/21 BBB- 1,500,000 1,715,625
General Motors 8.950%, 07/02/09 A 1,500,000 1,515,105
Norfolk Southern 7.050%, 05/01/37 BBB+ 1,000,000 981,250
- ------------------------------------------------------------------------------------------------------------------------
TOTAL TRANSPORTATION 4,211,980
- ------------------------------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (COST $40,689,219) 39,574,149
- ------------------------------------------------------------------------------------------------------------------------
CASH EQUIVALENT -- (1.0%)
- ------------------------------------------------------------------------------------------------------------------------
Federated Prime Money Market 5.590% NR 455,840 455,840
- ------------------------------------------------------------------------------------------------------------------------
TOTAL CASH EQUIVALENT (Cost $455,840) 455,840
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (98.2% OF NET ASSETS)
(COST $45,331,671) 44,113,186
- ------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES, NET
(1.8% of Net Assets) 814,955
- ------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS (100.0% OF NET ASSETS) 44,928,141
========================================================================================================================
The accompanying notes are an integral part of these financial statements.
- 5 -
</TABLE>
<PAGE>
CURRENT INCOME SHARES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
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 $8,534,380 and $6,719,569,
respectively. Purchases and sales of U.S. Government obligations aggregated $0
and $2,087,621, respectively.
As of December 31, 1999, unrealized depreciation for Federal income tax
purposes aggregated $1,218,485 of which $663,808 related to appreciated
securities and $1,882,293 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, 1999, that can be
used to offset future capital gains.
CAPITAL LOSS CAPITAL LOSS CAPITAL LOSS
CARRYOVERS CARRYOVERS CARRYOVERS
EXPIRING 2004 EXPIRING 2005 EXPIRING 2007
-------------- -------------- --------------
$208,907 $96,836 $206,276
- 6 -
<PAGE>
CURRENT INCOME SHARES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
3. Transactions with Affiliates
HighMark Capital Management, Inc., (the "Adviser") a subsidiary of
UnionBanCal Corp., provides investment management and advisory services to the
Company. For the period ending December 31, 1999, investment management/advisory
fees totaling $234,955 were paid to the Adviser. The fee is based on an annual
rate of 0.5% of the Company's average net assets.
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>
01/01/99 TO 01/01/98 to 01/01/97 to 01/01/96 to 01/01/95 to
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
---------- ---------- ---------- ---------- ----------
PER SHARE OPERATING PERFORMANCE
<S> <C> <C> <C> <C> <C>
Investment Income $ 0.94 $ 0.95 $ (0.97 $ 0.95 $ 1.00
Expenses (0.12) (0.12) (0.12) (0.12) (0.12)
------- ------- ------- ------- -------
Net Investment Income 0.82 0.83 0.85 0.83 0.88
Dividends distributed from net
Investment Income (0.82) (0.83) (0.85) (0.88) (1.48)
Net realized and unrealized gain/
(loss) on investments (1.25) 0.08 0.35 (0.54) 1.79
------- ------- ------- ------- -------
Net increase (decrease) in
net asset value (1.25) 0.08 0.35 (0.59) 1.19
Net asset value:
Beginning of period 13.48 13.40 13.05 13.64 12.45
------- ------- ------- ------- -------
End of period $ 12.23 $ 13.48 $ 13.40 $ 13.05 $ 13.64
======= ======= ======= ======= =======
Per share market value:
End of period $10.000 $12.313 $12.188 $11.375 $11.875
Total investment return*+ (12.44)% 8.05% 15.33% 3.54% 22.25%
RATIOS AND SUPPLEMENTAL DATA
Ratio of expenses to average
net assets 0.93% 0.91% 0.95% 1.00% 0.90%
Ratio of net investment income to
average net assets 6.4% 6.2% 6.5% 6.3% 6.6%
Portfolio turnover rate 18.82% 13.23% 52.10% 62.86% 118.52%
Net assets, end of period (000) $44,928 $49,508 $49,227 $47,943 $50,120
*Does not reflect the brokerage commission.
+Total return based on market value.
</TABLE>
- 7 -
<PAGE>
CURRENT INCOME SHARES, INC.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
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> <C> <C>
March 31, 1999 $751,233 $734,667 $0.20 $(1,574,150) $(0.43)
June 30, 1999 749,565 734,667 0.20 (1,498,065) (0.41)
September 30, 1999 758,851 734,667 0.20 (570,902) (0.15)
December 31, 1999 759,252 808,133 0.22 (943,624) (0.26)
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)
</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, or calling
(877) 588-4147.
- 8 -
<PAGE>
CURRENT INCOME SHARES, INC.
INDEPENDENT AUDITORS' REPORT
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
investment in securities, as of December 31, 1999, and the related statements
of operations for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended, and the selected per share
data and ratios for each of the three years in the period then ended. 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 per selected share data and ratios
based on our audits. The Company's selected per share data and ratios for each
of the two years in the period 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. Our procedures included confirmation of securities
owned as of December 31, 1999, 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, 1999, the results of its
operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the selected per share data and
ratios for each of the three years in the period then ended in conformity with
generally accepted accounting principles.
/s/signature omitted
Deloitte & Touche LLP
San Francisco, CA
February 4, 2000
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DIRECTORS
Willard H. Altman*
Clark R. Gates
Kathie Kellogg
Michael L. Noel
Robert M. Whitler
OFFICERS
MICHAEL L. NOEL CHAIRMAN
GREGORY KNOPF PRESIDENT
JACK MONTGOMERY VICE PRESIDENT AND
PORTFOLIO MANAGER
RICHARD H. EARNEST VICE PRESIDENT
KEVIN A. ROGERS VICE PRESIDENT
JOHN V. SKIDMORE VICE PRESIDENT
JOHN J. KING SECRETARY
MILTON M. FUKUDA TREASURER
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
COMPANY MAILING ADDRESS
Current Income Shares, Inc.
445 South Figueroa St., Suite 306
Los Angeles, CA 90071
COMPANY TELEPHONE
(888) 465-2825
NYSE SYMBOL
"CUR"
