<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
EXCELSIOR INCOME SHARES, INC.
...............................................................................
(Name of Registrant as Specified In Its Charter)
...............................................................................
(Name of Person(s) Filing Proxy Statement if Other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11.*
4) Proposed maximum aggregate value of transaction:
*Set forth the amount on which the filing fee is calculated and
state how it was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
1) Amount previously paid:
......................................................................
2) Form, schedule or registration statement no.:
......................................................................
3) Filing party:
......................................................................
4) Date Filed:
......................................................................
<PAGE>
- --------------------------------------------------------------------------------
Excelsior
Income Shares, Inc.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 5, 1999
The Annual Meeting of Shareholders of Excelsior Income Shares, Inc. (the
"Company") will be held in Conference Room 14B, at 114 West 47th Street, New
York, N.Y. 10036, on Monday, April 5, 1999, 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 PricewaterhouseCoopers LLP as the independent certified public
accountants of the Company for the fiscal year ending December 31, 1999;
(4) 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 19, 1999,
are entitled to vote at the Meeting or any adjournment thereof.
ROBERT D. CUMMINGS
Secretary
New York, New York
February 26, 1999
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.
<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 14B, at
114 West 47th Street, New York, N.Y. 10036, on Monday, April 5, 1999, at 11:00
a.m., New York City time. The proxy statement and proxy are being mailed to
shareholders on approximately February 27, 1999.
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, 1998, 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 and 3. 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 Company.
If sufficient votes to approve the proposed Items 1, 2 and 3 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 19, 1999, the record date for the
determination of shareholders entitled to notice of and to vote at the Annual
Meeting or any adjournment thereof, 2,186,391 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 8, 1998.
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*.... 68 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*........ 72 Director since 1989 President and CEO of the Company 1989 to
1992. Vice Chairman and Treasurer,
United States Trust Company of New York,
1976 to 1988.
JAMES J. O'LEARY....... 84 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......... 71 Director since 1996 Attorney. Member of Dickerson & Reilly.
PERRY W. SKJELBRED..... 51 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.... 45 Director since 1993 Investor.
KENNETH G. WALSH*...... 50 Director since 1993 Attorney. Executive Vice President
United States Trust Company of New York.
<FN>
------------
*Such director is an "interested person" of the Company within the meaning
of the Investment Company Act of 1940.
</FN>
</TABLE>
2
<PAGE>
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".
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, 1998. 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, 1998.
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..... 68 Chairman, President Chairman, President and Chief Executive
and Chief Executive Officer of the Company.
Officer since April
9, 1992
Robert D. Cummings..... 54 Secretary and Treas- Manager of the Common Trust Fund
urer since April 9, Department of United States Trust
1992 Company of New York since 1980, Vice
President since April 1987.
</TABLE>
For purposes of describing the business experience of Mr. Cummings, 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."
3
<PAGE>
The Company's executive officers were re-elected by the Board of Directors
on April 8, 1998, 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 5, 1999, 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.
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT
BENEFITS
TOTAL ACCRUED AS PART ESTIMATED
COMPENSATION OF COMPANY ANNUAL BENEFIT
NAME OF PERSON FROM COMPANY EXPENSES UPON RETIREMENT
- ------------------------------------- --------------- --------------- ---------------
<S> <C> <C> <C>
Townsend Brown, II................... $ 54,758 None None
Edwin A. Heard....................... $ 6,600 None None
James J. O'Leary..................... $ 6,600 None None
John H. Reilly....................... $ 6,600 None None
Perry W. Skjelbred................... $ 6,600 None None
Philip J. Tilearcio.................. $ 6,600 None None
Kenneth G. Walsh..................... $ -0- None None
</TABLE>
Townsend Brown II has an employment agreement (the "Employment Agreement")
with the Company which took effect on May 4, 1994, continuing through May 3,
2004. Pursuant to the Employment Agreement, Mr. Brown acts as President and
Chief Executive Officer of the Company, and has such duties as are assigned to
him by the Company. The Employment Agreement provides that Mr. Brown is not
required to spend any specific amount of time on the business of the Company,
subject to the performance of his duties to the Company.
The Employment Agreement provides Mr. Brown with an annual base salary,
payable in equal monthly installments at an annual rate of not less than
$40,000, subject to adjustments on each January 1 to reflect increases in the
Urban Consumer Price Index for the New York Metropolitan Area from the prior
January 1. The Employment Agreement may be terminated by the Company or Brown
upon proper notice, pursuant to the terms of the Employment Agreement.
Under the Employment Agreement, in the event of a termination of Mr. Brown
by the Company without "Cause," or by Mr. Brown for "Good Reason" (as each such
term is defined in the Employment Agreement), the Company must pay Mr. Brown a
lump sum payment equal to his current salary for the remainder of the employment
term and an annualized 3% compound interest on such amount. In the event of a
termination of Mr. Brown's employment by reason of his death or disability, or
termination by the Company for Cause or voluntary termination by Mr. Brown
without Good Reason, the Company must pay Mr. Brown (or, in the case of his
death, to his estate), all accrued but unpaid salary as of the termination date.
The Employment Agreement provides that the Company will make Mr. Brown whole for
any excise taxes imposed upon him under Section 4999 of the Internal Revenue
Code due to payments made to him in connection with his termination.
SECURITY OWNERSHIP OF OFFICERS AND DIRECTORS AND NOMINEES
The following table sets forth information as of December 31, 1998, 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.
4
<PAGE>
<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)
All Officers and Directors of the
Company as a group (eight)......... 4,300 (of record)(1) (3)
<FN>
- ------------
(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%.
</FN>
</TABLE>
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.
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 "Advisor") 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 8, 1998, 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 8, 1998.
5
<PAGE>
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, business, 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 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, 1998, the Company paid investment
advisory fees in the total amount of $202,009 to the Adviser. The Company's net
asset value as of December 31, 1998, was $41,069,098.
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 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
6
<PAGE>
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, 1998, the United States Trust Company of New York (the "Trust
Company") had total assets of $3,117 million, total deposits of $2,618 million,
and capital of $182 million. The Trust Company had responsibility for the
investment management of clients' assets having a market value of approximately
$42.2 billion on December 31, 1998. 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 O. Crisp......... Retired Chairman of Venrock, Inc.
Philippe de Director of the Metropolitan Museum of Art.
Montebello.............
Robert E. Denham....... Partner in Munger, Tolles & Olson LLP.
Antonia M. Grumbach.... Partner in Patterson, Belknap, Webb & Tyler, LLP.
Frederic C. Hamilton... Chairman of the Board of The Hamilton Companies.
Peter L. Malkin........ Chairman of Wien & Malkin LLP.
Jeffrey S. Maurer...... President and Chief Operating Officer of the Adviser.
David A. Olsen......... Retired Chairman of the Board of Johnson & Higgins.
Carl H. Pforzheimer Managing Partner in Carl H. Pforzheimer & Co.
III....................
Maribeth S. Rahe....... Vice Chairman of the Adviser.
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 Suburban Propane Pts.
Frederick B. Taylor.... Vice Chairman and Chief Investment Officer of the Adviser.
Robert N. Wilson....... Vice Chairman of the Board of Johnson & Johnson.
Ruth A. Wooden......... President and Chief Executive Officer of The Advertising Council,
Inc.
</TABLE>
7
<PAGE>
The address of the Adviser and all its directors 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, 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 9,871 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 8, 1999, 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.
ITEM 3--TO CONSIDER AND ACT UPON THE SELECTION BY THE BOARD OF DIRECTORS OF
PRICEWATERHOUSECOOPERS LLP AS THE INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS OF
THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 1999.
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 PricewaterhouseCoopers LLP to
act as the independent certified public accountants of the Company for the
fiscal year ending December 31, 1999. PricewaterhouseCoopers 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 PricewaterhouseCoopers 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, 1998 PricewaterhouseCoopers LLP was
engaged by the Company: (1) to examine its financial statements as of December
31, 1998; (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 PricewaterhouseCoopers 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
8
<PAGE>
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
PRICEWATERHOUSECOOPERS LLP AS THE INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS OF
THE COMPANY.
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 1998, all portfolio transactions were with
principals. During 1998 the Company's portfolio turnover rate was 15.88%.
9
<PAGE>
DEADLINE FOR SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the Company's Annual
Meeting of Shareholders to be held in April 2000, must be received by the
Company, at its principal executive offices, by January 5, 2000, 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 26, 1999
10
