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Excelsior
Income Shares, Inc.
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held April 9, 1997
The Annual Meeting of Shareholders of Excelsior Income Shares, Inc. (the
"Company") will be held in Conference Room 8A, at 114 West 47 Street, New York,
N.Y. 10036, on Wednesday, April 9, 1997, at 11:00 a.m., New York City time, for
the following purposes:
(1) To elect seven directors to hold office until the next Annual
Meeting and until their respective successors shall have been duly elected
and qualified;
(2) To consider and act upon renewing the Investment Advisory Agreement
between the Company and United States Trust Company of New York;
(3) To consider and act upon the selection by the Board of Directors of
Coopers & Lybrand LLP as the independent certified public accountants of the
Company for the fiscal year ending December 31, 1997;
(4) To consider and act upon the recommendation of the Board of
Directors to permit the Company to invest in other mutual funds;
(5) To transact such other business as may properly come before the
Meeting or any adjournments thereof.
The Board of Directors of the Company recommends that you vote in favor of
all items.
Shareholders of record as of the close of business on February 21, 1997, are
entitled to vote at the Meeting or any adjournment thereof.
Robert D. Cummings
Secretary
New York, New York
February 28, 1997
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU INTEND TO ATTEND THE MEETING, PLEASE
FILL IN, DATE, SIGN AND RETURN THE ENCLOSED FORM OF PROXY IN THE ENCLOSED
PREPAID ENVELOPE.
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<PAGE>
EXCELSIOR INCOME SHARES, INC.
114 West 47th Street
New York, New York 10036
PROXY STATEMENT
GENERAL
This Proxy Statement and Notice of Annual Meeting with accompanying form of
proxy are being furnished by the Board of Directors of Excelsior Income Shares,
Inc. (the "Company"), in connection with the solicitation of proxies by the
Board of Directors of the Company for use at the Annual Meeting of its
shareholders, or any adjournment thereof, to be held in Conference Room 8A, at
114 West 47th Street, New York, N.Y. 10036, on Wednesday, April 9, 1997, at
11:00 a.m., New York City time. The proxy statement and proxy are being mailed
to shareholders on approximately February 28, 1997.
The Company is a registered investment company organized as a corporation
under the Business Corporation Law of the State of New York pursuant to a
Certificate of Incorporation dated March 14, 1973. The mailing address of the
Company is 114 West 47th Street, New York, New York 10036.
The Fund commenced operations on May 15, 1973. The Annual Report for the
Fund for the year ended December 31, 1996, including audited financial
statements is enclosed.
Manner of Voting Proxies and Vote Required
If the accompanying form of proxy is executed properly and returned, shares
represented by it will be voted at the Annual Meeting in accordance with the
instructions on the proxy. If no instructions are specified, shares will be
voted for proposed Items 1, 2, 3 and 4. If the enclosed form of proxy is
executed and returned, it may nevertheless be revoked prior to its exercise by a
signed writing delivered at the Annual Meeting or filed with the Secretary of
the Trust.
If sufficient votes to approve the proposed Items 1, 2, 3 and 4 are not
received, the persons named as proxies may propose one or more adjournments of
the Annual Meeting to permit further solicitation of proxies. Any such
adjournment will require the affirmative vote of a majority of those shares
voted at the Annual Meeting. When voting on a proposed adjournment, the persons
named as proxies will vote all shares that they are entitled to vote with
respect to each Item for the proposed adjournment, unless directed to disapprove
the Item, in which case such shares will be voted against the proposed
adjournment.
The cost of solicitation, including postage, printing and handling and the
expenses incurred by brokerage houses, custodians, nominees and fiduciaries in
forwarding proxy material to beneficial owners, will be borne by the Company.
The solicitation is to be made primarily by mail, but may be supplemented by
telephone calls made by regular personnel of the Company who will be paid no
additional compensation in connection therewith.
As of the close of business on February 21, 1997, the record date for the
determination of shareholders entitled to notice of and to vote at the Annual
Meeting or any adjournment thereof, 2,188,391 shares of Common Stock, par value
$.01 per share, of the Company were outstanding. Each share is entitled to one
vote at the Annual Meeting. To the knowledge of the Company, no person is the
beneficial owner of more than 5% of the Company's outstanding shares.
1
<PAGE>
ITEM 1-TO ELECT SEVEN DIRECTORS TO HOLD OFFICE UNTIL THE NEXT ANNUAL MEETING AND
UNTIL THEIR RESPECTIVE SUCCESSORS SHALL HAVE BEEN DULY ELECTED AND QUALIFIED.
It is the intention of the persons named as proxies in the accompanying form
of proxy to vote at the Annual Meeting for the election of the nominees named
below as directors of the Company to serve until the next Annual Meeting and
until their successors are duly elected and qualified. If any such nominee
should be unable to serve, an event not now anticipated, the persons named as
proxies will vote for such other nominee as may be proposed by management. Each
of the nominees was previously elected as Director of the Company by the
Company's shareholders at the meeting of shareholders held on April 4, 1996.
Information Concerning Nominees
The following table sets forth the ages, positions and offices with the
Company, principal occupation or employment during the past five years and other
directorships, if any, of each nominee.
<TABLE>
<CAPTION>
Positions and Offices Principal Occupation
Name Age with the Company or Employment; other Directorships
---- --- ---------------- ----------------------------------
<S> <C> <C> <C>
Townsend Brown, II* 66 Chairman since 1992 President and CEO of the Company since 1992.
Attorney. Senior Vice President of United
States Trust Company of New York 1978 to 1992.
Edwin A. Heard 70 Director since 1989 President and CEO of the Company 1989 to 1992,
Director, Royal Life Insurance Company of New
York since 1988; Vice Chairman and Treasurer,
United States Trust Company of New York, 1976
to 1988.
James J. O'Leary 82 Director since 1973 Economic Consultant to United States Trust
Company of New York from 1979 to 1991.
Director: Guardian Life Insurance Company of
America, National Bureau of Economic Research.
John H. Reilly 69 Director since 1996 Attorney. Member of Dickerson & Reilly.
Perry W. Skjelbred 49 Director since 1993 Founder, CEO, Enterprise Capital Inc. 1993.
Founder, CEO, American Infrastructure, Inc.
1989 to 1993. Senior Vice President and Chief
Investment Officer NATIONAR, Inc. 1986 to
1989. Director: Enterprise Capital, Inc.,
Medical Marketing Group, Inc.
Philip J. Tilearcio 43 Director since 1993 Investor.
Kenneth G. Walsh* 48 Director since 1993 Attorney. Executive Vice President United
States Trust Company of New York.
</TABLE>
For purposes of describing the business experience of Messrs. Brown, Heard
and Walsh, United States Trust Company of New York and U.S. Trust Corporation
may be deemed to be "affiliates" of the Company by virtue of the contractual
relationships with the Company. See "Advisory Agreement".
- ----------
*Such director is an "interested person" of the Company within the meaning
of the Investment Company Act of 1940.
2
<PAGE>
The Board of Directors has a standing Audit Committee consisting of Dr.
James J. O'Leary, Mr. John H. Reilly, Mr. Perry W. Skjelbred and Mr. Philip J.
Tilearcio, none of whom is an "interested person" of the Company within the
meaning of the Investment Company Act of 1940. The Audit Committee held one
meeting during the year ended December 31, 1996. The functions performed by the
Audit Committee include making recommendations with respect to engaging and
discharging the Company's independent auditors, reviewing with the Company's
independent auditors the plan and results of the annual examination of the
Company's financial statements, reviewing the scope and results of the Company's
procedures for internal auditing, reviewing the independence of the Company's
auditors, considering the range of audit fees and reviewing the adequacy of the
Company's system of internal accounting controls.
The Company's Board of Directors held five meetings during the year ended
December 31, 1996.
The By-Laws of the Company provide that the Company will indemnify its
officers and directors on the terms, to the extent and subject to the conditions
prescribed by the Business Corporation Law of the State of New York, the
Investment Company Act of 1940, and the rules and regulations thereunder, and
subject to such other conditions as the Board of Directors may in its discretion
impose.
To the extent permitted by the Business Corporation Law of the State of New
York, the Investment Company Act of 1940, and the rules and regulations
thereunder, the Company may purchase and maintain on behalf of any person who
may be indemnified under the By-Laws, insurance covering any risks in respect of
which he may be indemnified by the Company.
Information Concerning Executive Officers
The following table sets forth the ages, positions and offices with the
Company and principal occupation or employment during the past five years of
each of the Company's executive officers.
<TABLE>
<CAPTION>
Positions and Offices Principal Occupation
Name Age with the Company or Employment
---- --- ---------------- -------------
<S> <C> <C> <C>
Townsend Brown II 66 Chairman, President and Chairman, President and Chief Executive
Chief Executive Officer Officer of the Company.
since April 9, 1992
Robert D. Cummings 52 Secretary and Treasurer Manager of the Common Trust Fund Department of
since April 9, 1992 United States Trust Company of New York since
1980, Vice President since April 1987.
Henry M. Milkewicz 57 Vice President since Senior Vice President of the Fixed Income
April 5, 1990 Investment Division of United States Trust
Company of New York since April, 1990, Vice
President from February, 1985, to April, 1990.
</TABLE>
For purposes of describing the business experience of Messrs. Cummings and
Milkewicz, United States Trust Company of New York may be deemed to be an
"affiliate" of the Company by virtue of the contractual relationships with the
Company described below. See "Advisory Agreement".
The Company's executive officers were re-elected by the Board of Directors
on April 4, 1996, to serve until the meeting of the Board of Directors scheduled
to take place immediately after the Annual Meeting of the Company's shareholders
on April 9, 1997, and until their successors are duly elected and qualified.
Compensation of and Transactions with Executive Officers and Directors
The following table describes the compensation paid during the last fiscal
year to each Director and nominee.
3
<PAGE>
COMPENSATION TABLE
Pension or
Retirement
Benefits Estimated
Accrued as Annual
Total Part of Benefits
Compensation Company Upon
Name of Person from Company Expenses Retirement
-------------- ------------ -------- ----------
Townsend Brown, II .......... $48,912 None None
Edwin A. Heard .............. $ 6,600 None None
James J. O'Leary ............ $ 6,300 None None
John H. Reilly .............. $ 4,650 None None
Perry W. Skjelbred .......... $ 6,600 None None
Philip J. Tilearcio ......... $ 6,600 None None
Kenneth G. Walsh ............ $ -0- None None
Security Ownership of Officers and Directors and Nominees
The following table sets forth information as of December 31, 1996, with
respect to beneficial ownership of the Company's Common Stock, par value $.01
per share, by directors individually and officers and directors as a group.
<TABLE>
<CAPTION>
Percentage
Number of Shares of Total
Name of Individual and Nature of Outstanding
or Number of Beneficial Shares of
Persons in Group Ownership Common Stock
---------------- --------- ------------
<S> <C> <C>
Townsend Brown II 1,100(1)(2) (3)
Edwin A. Heard 1,800(1)(2) (3)
James J. O'Leary 100(1)(2) (3)
John H. Reilly 100(1)(2) (3)
Perry W. Skjelbred 1,000(1)(2) (3)
Philip J. Tilearcio 100(1)(2) (3)
Kenneth G. Walsh 100(1)(2) (3)
Robert D. Cummings -0- (3)
Henry M. Milkewicz -0- (3)
All Officers and Directors of the Company
as a group (nine) 4,300 (of record)(1) (3)
</TABLE>
- ----------
(1) None of these shares is beneficially owned based upon a right to acquire
beneficial ownership within 60 days.
(2) Sole voting and sole investment power.
(3) Amount does not exceed 1%.
Election of each nominee as a Director of the Company will require the vote
of a majority of the outstanding voting securities of the Company present in
person or represented by proxy at the Annual Meeting.
The Board of Directors unanimously recommend that you vote for election of
the nominees as Directors of the Company.
4
<PAGE>
ITEM 2-TO CONSIDER AND ACT UPON RENEWING THE INVESTMENT ADVISORY AGREEMENT
BETWEEN THE COMPANY AND UNITED STATES TRUST COMPANY OF NEW YORK.
Background
United States Trust Company of New York (the "Adviser") has provided
investment advisory and administrative services to the Company since the
Company's commencement of operations on May 15, 1973. The Advisory Agreement has
been approved by the Directors and shareholders of the Company. Upon review of
the Company's records regarding these approvals, and to avoid any doubt as to
such approvals, Board of Directors of the Company, including all the directors
who are not "interested persons" (as defined in the Investment Company Act of
1940) of the Company, at a meeting held on February 10, 1997, approved renewing
the Investment Advisory agreement and voted that the Advisory Agreement be
submitted for approval to the shareholders of the Company. The terms and
provisions of the Advisory Agreement (including the investment advisory fee) are
identical to those of the Advisory Agreement which shareholders of the Company
last approved on April 4, 1996.
Description of the Advisory Agreement
Under the Advisory Agreement, the Adviser would formulate a continuing
program for the management of the assets and resources of the Company, provide a
full range of advice and recommendations, including recommendations regarding
specific securities to be purchased or sold by the Company, and obtain and
evaluate statistical, economic and other research information with respect to
the economy, businesses, securities markets and types of securities, all in
conformity with the Company's investment objectives and policies. In addition to
providing investment advisory services, the Adviser, at its own expense, would
provide portfolio trading facilities and make available to the Company
appropriate executive, investment, clerical and other personnel as well as
computer and other services for the conduct of its investment business and the
administration of its affairs. The Adviser would compensate all Company
personnel and officers (other than the President) and those Company directors
who are officers or employees of the Adviser. The Adviser at its expense would
also provide the Company with office space and facilities and business equipment
and pay the cost of keeping the Company's books and records.
For the services rendered and the expenses assumed by the Adviser under the
Advisory Agreement, the Company would pay the Adviser an annual fee at the rate
of 0.5% of the Company's net asset value up to and including $100,000,000, 0.4%
of such net asset value over $100,000,000 up to and including $200,000,000 and
0.3% of such net asset value over $200,000,000. The investment advisory fee
would be computed quarterly on the basis of the net asset value as of last day
of each quarter. During the year ended December 31, 1996, the Company paid
investment advisory fees in the total amount of $203,007 to the Adviser. The
Company's net asset value as of December 31, 1996, was $39,887,035.
The Company would be responsible for the payment of all its expenses which
are not specifically assumed by the Adviser under the Advisory Agreement.
However, in the event in any year the sum of the Company's expenses (including
the Adviser's investment advisory fee but excluding interest, taxes and
brokerage commissions relating to the purchase or sale of portfolio securities,
the Company's expenses of future public offerings of its shares and
extraordinary expenses beyond the control of the Adviser) were to exceed 1-1/2%
of the average value of the Company's net assets during such year up to
$30,000,000, plus 1% of the average value of the Company's net assets during
such year in excess of $30,000,000, the Adviser would be obligated to reimburse
the Company promptly for such excess expenses. In addition, under the Advisory
Agreement, the Adviser would not be responsible for any mistake in judgment or
in any event whatsoever except for lack of good faith or for any conduct on the
part of the Adviser
5
<PAGE>
constituting a breach of fiduciary duty involving personal misconduct in respect
of the Company, so long as such judgment or other event does not constitute
wilful malfeasance, bad faith, gross negligence in the performance of the
Adviser's duties or reckless disregard of its obligations and duties under the
Advisory Agreement.
The Advisory Agreement would continue in effect for two years from the date
of its approval by shareholders and thereafter would continue from year to year
provided such continuance is specifically approved at least annually (i) by the
vote of a majority of the Company's outstanding voting securities, as defined in
the Investment Company Act of 1940, entitled to vote at the Annual Meeting or by
its Board of Directors and (ii) by the vote of a majority of the directors of
the Company who are not parties to the contract or "interested persons" (as
defined in the Investment Company Act of 1940) of the Company, or the Adviser.
The Advisory Agreement is terminable on 60 days' written notice by any party
thereto and will terminate automatically if assigned.
The Advisory Agreement would reserve to the Adviser all rights to the use of
the term "Excelsior" and the symbol used by the Company, which appears on the
Notice of Annual Meeting. The Advisory Agreement further provides that if the
Adviser (or an organization which has succeeded to the business of the Adviser)
ceases to be the investment adviser to the Company, the Company will cease to
use in its name the term 'Excelsior', or any name suggesting that the Company is
or has been advised by the Adviser, and the use of such symbol.
The foregoing description of the Advisory Agreement does not purport to be
complete but contains a summary of the material provisions thereof.
Shareholder approval of the Advisory Agreement requires the affirmative vote
of the holders of (i) 67% of the Company's voting securities, as defined in the
Investment Company Act of 1940, present and entitled to vote at the Annual
Meeting, if the holders of more than 50% of the Company's outstanding voting
securities are present or represented by proxy at the Annual Meeting or (ii) a
majority of the Company's outstanding voting securities. whichever is less.
The Board of Directors of the Company recommends that you vote for approval
of the Advisory Agreement.
Information Regarding Investment Adviser
The Adviser provides a variety of specialized financial and fiduciary
services to high net worth individuals, institutions and corporations. On
December 31, 1996, the United States Trust Company of New York (the "Trust
Company") had total assets of $2,870 million, total deposits of $2,340 million,
and capital of $157 million. The Trust Company had responsibility for the
investment management of clients' assets having a market value of approximately
$27.2 billion on December 31, 1996. The trustees of the Adviser, who are also
Board members of U.S. Trust Corporation, and their principal occupations are as
follows:
<TABLE>
<CAPTION>
Name Principal Occupation
- ---- --------------------
<S> <C>
Eleanor Baum Dean of Engineering at The Cooper Union for the Advancement of Science
& Art
Samuel C. Butler Partner in Cravath, Swaine & Moore.
Peter L. Crisp General Partner of Venrock Associates
Daniel P. Davison Retired Chairman of the Board of Christie, Manson & Woods International,
Inc.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Name Principal Occupation
- ---- --------------------
<S> <C>
Philippe de Montebello Director of the Metropolitan Museum of Art.
Paul W. Douglas Retired Chairman of the Board and Chief Executive Officer of The Pittston
Company.
Antonia M. Grumbach Partner in Patterson, Belknap, Webb & Tyler.
Frederic C. Hamilton Chairman of the Board, President and Chief Executive Officer of Hamilton Oil
Corporation.
Peter L. Malkin Chairman of Wien, Malkin & Beltex.
Jeffrey S. Maurer President of the Adviser.
Orson D. Munn Chairman and Director of Munn, Bernhard & Associates, Inc.
H. Marshall Schwarz Chairman of the Board and Chief Executive Officer of the Adviser.
Philip L. Smith Corporate Director and Trustee.
John H. Stookey Chairman of the Board and President of Quantum Chemical Corporation.
Frederick B. Taylor Vice Chairman and Chief Investment Officer of the Adviser.
Richard F. Tucker Retired Vice Chairman of the Board of Mobil Corporation.
Carroll L. Wainwright, Jr. Of Counsel to Milbank, Tweed, Hadley & McCloy.
Robert N. Wilson Vice Chairman of the Board of Johnson & Johnson.
Ruth A. Wooden President & Chief Executive Officer of The Advertising Council, Inc.
</TABLE>
The address of the Adviser and all its trustees is 114 West 47th Street, New
York, NY 10036. Kenneth G. Walsh, a Director of the Company, Robert D. Cummings,
Secretary and Treasurer of the Company, Henry M. Milkewicz, Vice President of
the Company and Robert R. Johnson, Assistant Secretary and Assistant Treasurer
of the Company, are each officers of the Adviser. Dr. O'Leary, a director of the
Company, is the beneficial owner of 1,639 common shares, and Mr. Heard, a
director of the Company, is the beneficial owner of 7,948 common shares of that
company. No other officer or Director of the company is an officer, employee or
shareholder of the Adviser or owns securities or has any other material direct
or indirect interest in the Adviser or any other person controlling, controlled
by or under common control with the Adviser. The Adviser renders investment
advisory and related services to clients other than the Company, including other
investment companies, with similar or different investment objectives and
policies.
The Adviser is a wholly-owned subsidiary of U.S. Trust Corporation which was
incorporated on December 5, 1977 and which is located at 114 West 47th Street,
New York, N.Y. 10036.
The Evaluation By the Board of Directors
At a meeting on February 10, 1997, the Directors of the Company considered
information with respect to whether the Advisory Agreement with the Adviser was
in the best interests of the Company and its shareholders. The Board of
Directors of the Company considered, as they have in the past, the nature and
quality of services expected to be provided by the Adviser and information
regarding fees, expense ratios and performance. In evaluating the Adviser's
ability to provide services to the Company, the Directors considered information
as to the Adviser's business organization, financial resources and personnel and
other matters.
Based upon its review, the Board of Directors of the Company concluded that
the Advisory Agreement with the Adviser is reasonable, fair and in the best
interests of the Company and its shareholders, and that the fees provided in the
Advisory Agreement are fair and reasonable in light of the usual and customary
charges made by others for services of the same nature and quality.
7
<PAGE>
ITEM 3-TO CONSIDER AND ACT UPON THE SELECTION BY TlIE BOARD OF DIRECTORS OF
COOPERS & LYBRAND LLP AS THE INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS OF
THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997.
The Audit Committee of the Board of Directors has recommended and the Board
of Directors of the Company, including a majority of those directors who are not
"interested persons" of the Company, has selected Coopers & Lybrand LLP to act
as the independent certified public accountants of the Company for the fiscal
year ending December 31, 1997. Coopers & Lybrand LLP has no material direct or
indirect financial interest in the Company. This selection is subject to the
approval of the shareholders of the Company at the Annual Meeting. Management
expects that representatives of Coopers & Lybrand LLP will be present at the
Annual Meeting with the opportunity to make a statement if they desire to do so
and to respond to appropriate questions.
During the year ended December 31, 1996 Coopers & Lybrand LLP was engaged by
the Company: (1) to examine its financial statements as of December 31, 1996;
(2) to assist and consult with the Company in connection with the preparation of
the Company's reports on Forms N-SAR and N-2 for filing with the Securities and
Exchange Commission; and (3) to assist and consult with the Company on tax
matters.
The ratification of Coopers & Lybrand LLP as auditors of the Company
requires the affirmative vote of the holders of (i) 67% of the Company's voting
securities, as defined in the Investment Company Act of 1940, present and
entitled to vote at the Annual Meeting, if the holders of more than 50% of the
Company's outstanding voting securities are present or represented by proxy at
the Annual Meeting or (ii) a majority of the Company's outstanding voting
securities, whichever is less.
The Board of Directors recommends that you vote for ratification of Coopers
& Lybrand LLP as the independent certified public accountants of the Company.
ITEM 4-TO CONSIDER AND ACT UPON THE RECOMMENDATION OF THE BOARD OF DIRECTORS
TO PERMIT THE COMPANY TO INVEST IN OTHER MUTUAL FUNDS.
Currently, the By-Laws of the Company include a fundamental restriction
which provides as follows:
The Company shall not:
. . . .
(n) Purchase the securities of any other investment company, except (a) in
connection with a merger, consolidation, acquisition of assets or other
reorganization approved by the Company's shareholders and (b), in the case of
securities of closed-end investment companies only, in the open market where no
commission other than ordinary broker's commission is paid; provided, however,
that in no event may investments in securities of other investment companies
exceed 10% of the Company's total assets, taken at market value at time of
purchase.
The Company has requested the approval of its shareholders to remove
investment restriction (n) from the By-Laws. If Item 4 is so approved, the
Company will be able to invest in other mutual funds to the extent permitted by
the Company's other investment restrictions and the provisions of the Investment
Company Act of 1940. That Act currently requires that, as determined immediately
after a purchase is made, (i) not more than 5% of the value of the Company's
total assets will be invested in the securities of any one investment company,
(ii) not more than 10% of the value of its total assets will be invested in the
aggregate in securities of investment companies as a group, and (iii) not more
than 3% of the outstanding voting stock of any one investment company will be
owned by the Company.
As a shareholder of another investment company, the Company would bear,
along with other shareholders, its pro rata portion of the other investment
company's expenses, including advisory fees. These expenses would be in addition
to the advisory and other expenses that the Company bears directly in connection
with its own operations
8
<PAGE>
The Directors of the Company believe that the proposed removal of investment
restriction (n) would benefit the Company by providing increased flexibility to
the Company's current management program. For example the Company will be able
to invest excess cash in money market mutual funds, which were not widely known
or available when the restriction was adopted in 1973. As noted above, the
Company's investment management activities will continue to be subject to (i)
all of the Company's other investment restrictions and (ii) all of the
provisions of the Investment Company Act of 1940.
Shareholder approval of the recommendation of the Board of Directors to
permit the Company to invest in other mutual funds would require the affirmative
vote of the holders of (i) 67% of the Company's voting securities, as defined in
the Investment Company Act of 1940, present and entitled to vote at the Annual
Meeting, if the holders of more than 50% of the Company's outstanding voting
securities are present or represented by proxy at the Annual Meeting or (ii) a
majority of the Company's outstanding voting securities, whichever is less.
The Board of Directors of the Company recommends that you vote for approval
of Item 4, to permit the Company to invest in other mutual funds.
OTHER MATTERS
The management knows of no business to be brought before the Annual Meeting
except as mentioned above. If, however, any other matters properly come before
the Annual Meeting, the persons named in the enclosed form of proxy intend to
vote on such matters in accordance with their best judgment.
ADDITIONAL INFORMATION
Brokerage Commissions on Portfolio Transactions
In accordance with the Company's investment policies, its investments are in
debt securities, which are generally traded through dealers acting for their own
account as principals and not as brokers; no brokerage commissions are payable
in such transactions. During 1996, all portfolio transactions were with
principals. During 1996 the Company's portfolio turnover rate was 5.50%.
DEADLINE FOR SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the Company's Annual
Meeting of Shareholders to be held in April 1998, must be received by the
Company, at its principal executive offices, by December 2, 1997, for inclusion
in the Company's Proxy Statement and form of proxy relating to that meeting.
YOU ARE URGED TO FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY.
By Order of the Board of Directors,
Robert D. Cummings, Secretary
February 28, 1997
